2024 Commentaries

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TABLE OF CONTENTS b. Local Initiative; Voter Requirements 28

c. Where to File ......................................... 28
CONSTITUTIONAL LAW 1 ................................ 2 d. Limitations on Local Initiative ........... 28
POWERS AND STRUCTURES OF e. Classes of Referendum......................... 28
GOVERNMENT ........................................... 1 h. Is the power to hold a referendum
plenary? – NO ............................................ 28
I. PRELIMINARY CONCEPTS ................... 1 B. House of Congress; Compositions and
A. Nature of Constitution.................................... 1 Qualifications ....................................................... 28
1. Parts ........................................................... 1 1. Senate ........................................................... 29
2. Manner of Interpretation (Self- 2. House of Representatives ......................... 29
Executing and Non-Executing Character) ... 1 a. District Representatives and Questions
3. Process of Change (Amendments and of Apportionment ...................................... 29
Revisions)........................................................... 2 b. Party-List System ................................... 30
a. Amendment ......................................... 2 1. Sectoral Representatives ................... 30
b. Revision ................................................ 2 2. Disqualified Parties ........................... 30
c. Difference ............................................ 2 3. Qualified Sectors ............................... 31
d. The Lambino Tests [Lambino v. C. Legislative Privileges, Inhibitions, and
Commission on Elections, supra]. .................... 2 Qualifications ....................................................... 32
e. Procedure to Amend or Revise the 1. Privileges ...................................................... 32
Constitution .................................................. 3 a. Salaries...................................................... 32
1. Proposal ........................................... 3 b. Freedom From Arrest ........................... 32
2. Submission (Doctrine of Proper c. Speech and Debate Clause.................... 33
Submission) .............................................. 3 2. Inhibitions and Disqualifications ............. 33
3. Ratification ...................................... 3 a. May not hold any office or employment
4. Judicial Review of Amendments.. 3 in the government during his term without
B. The Philippines as a State ............................... 3 forfeiting his seat [Section 3, Article VI] 33
1. Elements/Requisites for Statehood ..... 3 b. May not be appointed to any office
a. Permanent Population ....................... 4 created or whose emoluments were
b. Defined Territory................................ 5 increased during the term for which he
c. Government ........................................ 5 was elected [Section 13, Article VI] ......... 33
d. Capacity to Enter into Relations with c. Shall not be financially interested,
Other States/Independence ....................... 5 directly or indirectly, in any contract with,
2. Distinction Between Internal and or franchise or special privilege granted by
External Self-Determination........................... 5 the government during his term of office
C. Fundamental Powers of the State.................. 6 [Section 14, Article VI, 1987 Constitution]
1. Police Power ............................................ 6 ....................................................................... 33
2. Eminent Domain..................................... 8 d. Shall not intervene in any matter before
3. Taxation .................................................. 10 any office of the government when it is
E. Dynamics Among the Branches of for his pecuniary benefit or where he may
Government......................................................... 16 be called upon to act on account of his
1. Separation of Powers ............................ 16 office [Section 14, Article VI, 1987
2. System of Checks and Balances .......... 17 Constitution] ............................................... 33
3. Delegation of Powers ........................... 18 e. Shall not intervene in any matter before
F. State Immunity ............................................... 19 any office of the government when it is
G. National Territory ......................................... 23 for his pecuniary benefit or where he may
1. Scope ....................................................... 23 be called upon to act on account of his
II. LEGISLATIVE DEPARTMENT .......... 25 office [Section 14, Article VI, 1987
A. Nature of Legislative Power......................... 25 Constitution] ............................................... 34
1. Derivative and Delegated Power ........... 25 3. Duty to Disclose ......................................... 34
2. Plenary Character ..................................... 26 a. Statements of Assets, Liabilities, and
3. Limitations ................................................ 26 Net Worth (SALN) .................................... 34
4. Exceptions to Non-Delegability ............ 26 b. Financial and Business Interests;
a. Principle ................................................. 26 Political Conflicts of Interest.................... 34
b. Rationale ................................................ 26 c. Amounts Paid To/Expenses Incurred
c. General Rule; Exceptions .................... 26 by Each Member ........................................ 34
5. Legislative Power of the People Through D. Quorum and Voting Majorities ................... 34
Initiative and Referendum............................. 27 1. Quorum........................................................ 34
a. R.A. No. 6735......................................... 28 2. Voting Majorities ........................................ 35
a. Doctrine of Shifting Majority............... 35 C. Concept of Executive Privilege.................... 48

b. Exceptions .............................................. 35 1. Types ............................................................ 48
E. Discipline of Members .................................. 36 2. Who May Invoke ........................................ 49
F. Process of Law-Making ................................. 37 D. Qualifications, Election, Term of the
1. Function of the Bicameral Conference President and Vice-President, and Rules on
Committee ....................................................... 37 Succession............................................................. 49
2. Requirement as to Bills.............................. 37 1. Qualifications .............................................. 49
a. As to titles of bills .................................. 37 2. Election ........................................................ 50
b. As to certain laws .................................. 37 3. Jurisprudence on Canvassing.................... 50
3. Limitations on Legislative Power ............ 38 4. The Supreme Court as Presidential
4. Procedure for Passage of Bills.................. 38 Electoral Tribunal ........................................... 50
5. The President’s Veto Power ..................... 40 5. Term of Office............................................ 50
6. Doctrine of Inappropriate Provision ...... 40 6. Rules on Succession ................................... 50
7. Effectivity of Laws ..................................... 41 a. Who shall act as or become President 50
8. Limitations on Legislative Power ............ 41 b. What if the Senate President and
G. Appropriation and Re-alignment ................ 41 Speaker are also not capable to act as
H. Legislative Inquiries and Oversight President? .................................................... 51
Functions .............................................................. 42 c. Vacancy in the Office of the President
1. Requisites of Legislative Inquiries ........... 42 ....................................................................... 51
2. Legislative Inquiries v. Question Hour ... 42 d. Vacancy in the Office of the Vice-
3. Additional Limitation: Executive Privilege President ...................................................... 54
........................................................................... 43 E. Other Privileges, Inhibitions, and
4. Elements of Presidential Communications Disqualifications .................................................. 54
Privilege ............................................................ 43 1. Official residence ........................................ 54
5. Contempt Power ........................................ 44 2. Salary............................................................. 54
6. Contempt of Congressional Oversight ... 44 3. Presidential Privilege ............................. 54
7. Categories of Congressional Oversight 4. The Vice President ..................................... 54
Functions ......................................................... 44 5. Prohibitions on the Executive Department
a. Scrutiny ................................................... 44 ........................................................................... 54
b. Congressional Investigation................ 44 6. Multiple Offices and Double
c. Legislative supervision (legislative veto) Compensation ................................................. 54
...................................................................... 44 a. President’s spouse and relatives ........... 55
I. Power of Impeachment .................................. 45 b. Exceptions to the rule prohibiting
1. Initiation: Regular Procedure [Section 3(2) executive officials from holding additional
& (3), Article XI, 1987 Constitution] .......... 45 positions....................................................... 55
2. Notes on Initiation [Gutierrez v. HOR F. Powers of the President................................. 55
Committee on Justice, G.R. No. 193459 (2011)] 1. Executive and Administrative Powers .... 55
........................................................................... 45 a. Executive Power..................................... 55
3. Trial .............................................................. 45 b. Summary of Presidential Powers......... 55
4. Periods Rule ................................................ 45 2. Power of Appointment.............................. 57
a. Process of Confirmation by the
III. EXECUTIVE DEPARTMENT............ 46
Commission ................................................ 59
A. Nature of Executive Power .......................... 46
b. By-Passed Appointments and their
1. In Relation to the Implementation of
Effects .......................................................... 59
Laws (Including Delegated Powers) ............ 46
c. Appointments by Acting President ..... 59
a. Principle ................................................ 46
d. Scope of Midnight Appointments ...... 59
b. Emergency Powers [Section 23, Article
e. Recess of Ad Interim appointments ... 60
VI, 1987 Constitution] .............................. 46
f. Power of Removal .................................. 60
c. Commander-in-Chief powers vs.
3. Power of Control and Supervision .......... 60
Emergency Powers .................................... 46
a. Doctrine of Qualified Political Agency
d. When emergency powers cease ........... 46
....................................................................... 61
2. Express or Implied (Including the Faithful
b. Executive Departments and Offices . 61
Execution of Laws and Residual Powers) .. 47
c. General Supervision over Local
B. Concept of Presidential Immunity .............. 47
Government Units ..................................... 62
1. Conduct Covered ....................................... 47
4. Emergency Powers ..................................... 62
2. Waiver and Exceptions ............................. 47
a. Emergency Powers ............................... 62
a. May be invoked only by the President
b. Nature of Grant .................................... 62
...................................................................... 48
b. Limitations .............................................. 48
c. Requisites of Grant of Emergency c. Administrative supervision over .......... 81

Powers ......................................................... 62 d. Period for deciding cases ...................... 81
d. Concept of Emergency........................ 62 e. Original and appellate jurisdiction ....... 82
5. Commander-In-Chief Powers .................. 63 f. Original jurisdiction [Section 5(1),
a. Calling Out Powers .............................. 64 Article VIII, 1987 Constitution] .............. 82
b. Declaration of Martial Law and the g. Appellate jurisdiction [Section 5(2),
Suspension of the Privilege of the Writ of Article VIII, 1987 Constitution] .............. 82
Habeas Corpus (Including Extension of h. Doctrine of judicial stability or
Period) ......................................................... 64 noninterference........................................... 82
6. Pardoning Powers ...................................... 67 i. Finality of judgments ..............................82
a. Scope and Limitations: When clemency j. Requirements for decisions and
may not be extended by the President:... 67 resolutions ................................................... 83
b. Forms of Executive Clemency ........... 67
V. CONSTITUTIONAL COMMISSIONS
7. Foreign Relations Powers ......................... 69
(COMELEC, COA, CSC) ............................ 83
a. In General .............................................. 69
A. Constitutional Safeguards to Ensure
b. To Contract or Guarantee Foreign
Independence of Commissions......................... 83
Loans............................................................ 69
B. Common Provisions ...................................... 83
c. Entry into Treaties or International
1. Promotional Appointment of
Agreements ................................................. 69
Commissioner to Chairman [Funa v. Villar,
8. Tariff-Setting Power .................................. 71
supra] ................................................................ 84
9. Veto Powers ................................................ 72
2. Jurisprudence on Section 1(2), Article IX-
IV. JUDICIAL DEPARTMENT ................. 72 D [Funa v. Villar, supra] ................................. 84
A. Concept of Judicial Power............................ 72 3. Term of Office of Commission Members
B. Judicial Review................................................ 73 ........................................................................... 84
1. Requisites ..................................................... 73 C. Powers, Functions, and Jurisdiction ............ 85
a. Actual case or controversy ................... 73 1. Civil Service Commission ......................... 85
b. Locus standi .............................................. 74 a. Functions ................................................. 85
1. Associational or third-party standing b. Scope of Civil Service ........................... 85
.................................................................. 74 c. Jurisdiction .............................................. 86
2. Citizen standing ................................. 74 d. Appellate Jurisdiction ............................ 86
3. Environmental standing .............. 74
CITIZEN IN RELATION TO THE STATE
4. Governmental standing ............... 74
...................................................................... 92
5. Legislative standing ...................... 74
6. Taxpayer’s standing...................... 74 I. CITIZENSHIP......................................... 92
7. Voter’s standing ............................ 74 A. Who are Filipino Citizens ............................. 92
c. Earliest Possible Opportunity .............. 75 1. Classification of Citizens ........................... 93
d. Lis Mota ................................................... 75 a. Natural-born Citizens ............................ 93
2. Political Questions Doctrine .................... 75 b. Naturalized Citizens .............................. 93
3. Moot Questions.......................................... 76 2. Foundlings ................................................... 95
4. Operative Fact Doctrine ........................... 76 B. Modes of Acquiring Citizenship .................. 95
C. Judicial Independence and Fiscal Autonomy 1. By Birth ........................................................ 95
............................................................................... 77 2. By Naturalization ........................................ 95
1. Concepts ...................................................... 77 3. Derivative Naturalization .......................... 96
2. Safeguards of Judicial Independence ...... 77 4. Election of Filipino Citizenship ............... 96
D. Appointments to the Judiciary .................... 78 5. Reglementary Period .................................. 96
1. Qualifications of members ....................... 78 6. Eligibility under the Administrative
2. Judicial and Bar Council ............................ 79 Naturalization Law; Rationale....................... 96
a. Composition ........................................... 79 7. Qualifications Prescribed Under Act 473
b. Powers ..................................................... 79 NOT APPLICABLE to R.A. No. 9139...... 96
E. The Supreme Court (Composition, Powers, C. Loss and Re-Acquisition of Philippine
and Functions) ..................................................... 80 Citizenship ............................................................ 97
1. Composition ............................................... 80 1. Grounds for Loss of Philippine
a. En banc instances .................................... 80 Citizenship ....................................................... 97
b. Requirements and procedures in 2. General Rule ............................................. 97
divisions ....................................................... 80 3. Exception .................................................. 97
2. Powers and Functions ............................... 81 4. Reacquisition ............................................. 97
a. Procedural rule-making ......................... 81 a. Naturalization [CA 63 and CA 473] .... 97
b. Limitations .............................................. 81 b. Repatriation ............................................ 98
c. Legislative Act ....................................... 98 CONSTITUTIONAL LAW 2 ............................ 115

5. R.A. No. 9225 (CITIZENSHIP
I. BILL OF RIGHTS .............................. 116
RETENTION AND REACQUISITION
A. Private Acts and the Bill of Rights ........116
ACT OF 2003) ................................................ 98
B. Due Process ..............................................117
6. Repatriation under R.A. No. 8171........... 99
1. Procedural and Substantive ................117
D. Dual Citizenship and Dual Allegiance ....... 99
a. Substantive Due Process................117
1. Dual Citizenship ......................................... 99
b. Procedural Due Process .................118
2. Dual Allegiance........................................... 99
2. Void-for-Vagueness ............................118
3. Dual citizenship vs. dual allegiance
3. Judicial and Administrative Due
[Mercado v. Manzano, 307 SCRA 630 (1999)].
Process............................................................119
......................................................................... 100
a. Due Process in Judicial Proceedings
II. SOCIAL JUSTICE AND HUMAN 119
RIGHTS ...................................................... 100 b. Due Process in Administrative
A. Concept of Social Justice ............................ 100 Proceedings ...............................................119
B. Economic, Social and Cultural Rights ...... 101 C. Equal Protection ......................................121
1. Economic and Social ............................... 101 1. Requisites for Valid Classification
2. Agrarian and Natural Resources Reform [SGEC] ...........................................................121
......................................................................... 101 2. Standards of Judicial Review..............121
3. Urban Land Reform and Housing ........ 102 a. Rational Basis Test ..........................121
4. Health......................................................... 103 b. Strict Scrutiny Test ..........................121
5. Women ...................................................... 103 c. Intermediate Scrutiny Test ............121
6. Role and Rights of People’s Organization 3. Examples of Valid Classification.......122
......................................................................... 104 a. Filipino Female Domestics Working
7. Cultural ...................................................... 104 Abroad .......................................................122
C. Commission on Human Rights ................. 104 b. Land-Based v. Sea-based Filipino
1. Powers........................................................ 104 Overseas Workers ....................................122
2. Composition and Qualification of c. Office of the Ombudsman ............122
Members ........................................................ 105 D. Arrests, Searches, and Seizures ..............122
1. Requisites of a Valid Warrant ............122
III. EDUCATION, SCIENCE,
a. Arrest Warrant .................................123
TECHNOLOGY, ARTS, CULTURE, AND
b. Search Warrant ................................123
SPORTS....................................................... 105
2. Warrantless Arrests and Detention...124
A. Academic Freedom...................................... 105
a. In Flagrante Delicto ........................124
B. Constitutional Tax Exemptions for Certain
b. Hot Pursuit.......................................124
Educational Institutions ................................... 106
c. Escaped Prisoners ...........................124
NATIONAL ECONOMY AND d. Additional Exceptions ....................124
PATRIMONY ............................................. 106 3. Valid Warrantless Searches ................125
a. Warrantless Search Incidental to a
I. REGALIAN DOCTRINE ....................... 106
Lawful Arrest ............................................125
II. PUBLIC TRUST DOCTRINE.............. 109 b. Plain View Doctrine .......................125
c. Search of a Moving Vehicle...........126
III. EXPLORATION, DEVELOPMENT,
d. Consented Warrantless Search ......126
AND UTILIZATION OF NATURAL e. Customs Search (Enforcement of
RESOURCES .............................................. 110 Fishing, Customs, and Immigration Law)
1. La Bugal-B’laan Tribal Assn. v. Ramos
126
[G.R. No. 127882, (2004)]........................... 110
f. Routine Security Checks ................127
2. FTAA v. Service Contract ...................... 111
g. Stop and Frisk..................................127
3. Service Contracts Not Prohibited ......... 111 h. Exigent and Emergency
IV. ACQUISITION, OWNERSHIP, AND Circumstances ...........................................127
TRANSFER OF PUBLICAND PRIVATE 4. Exclusionary Rule ................................127
LANDS ........................................................ 112 E. Privacy of Communications and
A. Lands of Public Domain ............................ 112 Correspondence.................................................128
B. Private Lands ................................................ 112 1. Private and Public Communications 128
2. When Intrusion is Allowed ................129
VI. CONCEPT OF ANCESTRAL DOMAIN
3. Exclusionary Rule ................................130
(INCLUDING ANCESTRAL LANDS) ..... 113
F. Freedom of Speech and Expression .....130
VII. PRACTICE OF PROFESSIONS ........ 114 1. Prior Restraint and Subsequent
Punishment ....................................................131
a. Prior Restraint ................................. 131 2. Right to Counsel .........................153

b. Subsequent Punishment ................ 132 3. Rights to Visitation and
2. Content-Based and Content-Neutral Conference............................................154
Regulations .................................................... 132 3. Requisites of a Valid Waiver ..............154
3. Facial Challenges and Overbreadth 4. Exclusionary Doctrine ........................154
Doctrine ......................................................... 133 O. Rights of the Accused .........................155
4. Tests to Determine the Validity of 1. Criminal Due Process .........................155
Governmental Regulation ........................... 134 2. Bail .........................................................156
a. Clear and Present Danger Test ..... 134 3. Presumption of Innocence.................158
b. Balancing of Interests Test ............ 134 4. Right to be Heard ................................159
c. Dangerous Tendency Test ............ 134 5. Right to Counsel ..................................159
d. O’brien Test..................................... 135 6. Right to be Informed of the Nature and
5. State Regulation of Different Types of Cause of Accusation .....................................160
Mass Media .................................................... 135 7. Right to Speedy, Impartial and Public
6. Commercial Speech ............................ 135 Trial 160
7. Unprotected Speech............................ 136 8. Right of Confrontation .......................160
a. Hate Speech ..................................... 136 9. Right to Compulsory Processes ........160
b. Defamation and Libel .................... 136 10. Trial in Absentia ..............................160
c. Sedition and Speech in Relation to P. Right to Speedy Trial and Speedy
Rebellion.................................................... 136 Disposition of Cases .........................................160
d. Obscenity/Pornography ................ 137 Q. Right Against Self-Incrimination ......161
G. Freedom of Religion................................ 138 1. Scope and Limitations ........................162
1. Non-Establishment Clause ................ 138 2. Immunity Statutes................................163
2. Benevolent Neutrality and R. Right Against Double Jeopardy .............164
Conscientious Objector ............................... 140 1. Requisites and Limitations .................164
3. Tests to Determine the Validity of S. Right Against Involuntary Servitude .....166
Governmental Regulation ........................... 141 T. Right Against Excessive Fines, and Cruel
a. Clear and Present Danger.............. 141 and Inhuman Punishments ..............................167
b. Compelling State Interest .............. 141 U. Non-Imprisonment for Debts ...............168
H. Liberty of Abode and Right to Travel .. 142 V. Ex Post Facto Laws and Bill of Attainder
1. Scope and Limitations ........................ 142 168
2. Watch-List and Hold Departure Orders W. Writ of Habeas Corpus, Kalikasan,
143 Habeas Data, and Amparo...............................170
I. Right to Information ............................... 144 1. Writ of Habeas Corpus .......................170
1. Scope and Limitations ........................ 144 2. Writ of Kalikasan .................................171
J. Eminent Domain ..................................... 145 3. Writ of Habeas Data [A.M. No. 08-1-16-
1. Concept ................................................. 145 SC (2008)] ......................................................172
2. Public Use ............................................. 147 4. Writ of Amparo .....................................172
3. Just Compensation .............................. 147
LAW ON PUBLIC OFFICERS ......................... 175
a. Definition ......................................... 147
b. Determination of Just Compensation I. GENERAL PRINCIPLES .................. 176
147 A. Public Office .................................................176
c. Effect of Delay ................................ 148 1. Definition, Purpose, Nature ...................176
4. Expropriation by Local Government 2. Characteristics ...........................................176
Units ............................................................... 148 a. Public office is a Public Trust .......176
K. Right to Association ................................ 148 b. Not a Property Right ......................176
1. Scope and Limitations ........................ 149 c. Not a Contract.................................176
L. Non-Impairment of Contracts .............. 149 d. Public Office is Personal................176
1. Scope and Limitations ........................ 149 e. Right to Public Office Is Not a
M. Free Access to Courts and Adequate Natural Right ............................................176
Legal Assistance ................................................ 151 f. There Is No Such Thing as a Vested
N. Custodial Investigation ....................... 152 Interest or an Estate in an Office, or Even
1. Meaning of Custodial Investigation . 152 an Absolute Right to Hold It. ................176
2. Rights of a Person Under Custodial 3. Elements ....................................................177
Investigation .................................................. 152 4. Creation modification, abolition ............177
a. Availability ....................................... 152 a. Modes of Creation ..........................177
b. Requisites ......................................... 153 b. Modification/Abolition .................177
1. Right to Remain Silent............... 153 B. Public Officer................................................177
II. MODES OF ACQUIRING TITLE TO X. DISTINGUISH: DE FACTO AND DE

PUBLIC OFFICE ....................................... 178 JURE OFFICERS ........................................ 197
A. Appointment ................................................ 178 A. De Facto Officers...........................................197
B. Election.......................................................... 179 Definition .......................................................197
C. Succession ..................................................... 179 Elements of De Facto Officership ...............197
D. Operation of Law ........................................ 179 Entitlement to Salary of De Facto Officer .198
B. De Facto v. De Jure Officers .....................198
III. MODES AND KINDS OF
APPOINTMENT ....................................... 179 XI. TERMINATION OF OFFICIAL
A. As to term ..................................................... 180 RELATION ................................................ 199
1. Permanent ................................................. 180 A. Involuntary Retirement ...............................199
2. Temporary ................................................. 180 B. Death or Permanent Disability ..................199
B. Regular or Ad Interim Appointment ........ 182 C. Abolition of Office ......................................200
1. Ad Interim Appointment and D. Expiration of Term or Tenure ..................200
Appointment in an Acting Capacity .......... 182 E. Resignation ....................................................200
2. Disapproval vs. Bypass............................ 182 F. Abandonment of Office ..............................201
C. Midnight Appointments ............................. 183 G. Acceptance of Incompatible Office .........202
H. Recall..............................................................202
IV. ELIGIBILITY AND
I. Criminal Conviction ......................................202
QUALIFICATION REQUIREMENTS .... 183
J. Impeachment..................................................202
V. DISABILITIES AND INHIBITIONS K. Removal through Quo Warranto/Prescription
OF PUBLIC OFFICERS ............................ 186 of Right to Office ..............................................202
L. Dismissal as Penalty of Disciplinary Action
VI. POWERS AND DUTIES OF PUBLIC
..............................................................................202
OFFICERS .................................................. 189
A. Scope of Power of a Public Officer .......... 189 XII. THE CIVIL SERVICE ................... 203
B. Classification of Powers and Duties ......... 190 A. Scope ..............................................................203
1. As to Nature.............................................. 190 B. Appointments to the Civil Service.............203
a. Ministerial......................................... 190 1. Career Service............................................204
b. Discretionary ................................... 190 2. Non-Career Service ..................................204
2. As to the Obligation of the Officers to C. Personnel Actions ........................................204
Perform Their Powers and Duties............. 191 1. Original Appointment or Appointment
a. Mandatory ........................................ 191 through Certification ....................................205
b. Permissive ........................................ 191 2. Promotion..................................................205
3. As to the Relationship of the Officers to 3. Transfer ......................................................205
Their Subordinates ....................................... 191 4. Reinstatement............................................206
C. Duties of Public Officers ............................ 191 5. Reemployment ..........................................206
1. General (Constitutional) Duties ............. 192 6. Detail ..........................................................206
2. Duties of Public Officers as Trustees for 7. Reassignment ............................................206
the Public ....................................................... 192 8. Secondment ...............................................207
a. In General ........................................ 192 9. Demotion...................................................207
b. Ethical Duties .................................. 192 10. Reappointment .......................................207
3. Specific Duties under the Code of 11. Reclassification .......................................207
Conduct and Ethical Standards for Public
XIII. ACCOUNTABILITY OF PUBLIC
Officials and Employees ............................. 192
OFFICERS ..................................................207
VII. RIGHTS OF PUBLIC OFFICERS . 193 A. Types of Accountability ..............................207
A. To Office....................................................... 193 1. Administrative ...........................................207
B. Security of Tenure ........................................ 193 2. Criminal......................................................208
C. Compensation............................................... 193 B. Discipline .......................................................208
D. Different/Applicable Leaves ..................... 194 1. Grounds .....................................................208
E. Self-Organization ......................................... 194 2. Jurisdiction.................................................210
F. Retirement Pay.............................................. 194 3. Dismissal, Preventive Suspension,
Reinstatement and Back Salaries ................211
VIII. LIABILITIES OF PUBLIC
4. Condonation Doctrine ............................215
OFFICERS .................................................. 194
C. Impeachment vs. Quo Warranto ...............216
IX. IMMUNITY OF PUBLIC OFFICERS 1. Impeachment ............................................216
196 a. Concept ............................................216
b. Impeachable Officers .....................216
c. Grounds for Impeachment ...........216
d. Effects of Impeachment ................ 216 a. Supplementary Legislation ..................232

e. Extent of Judgment in Impeachment b. Interpretative Legislation ....................232
216 2. Requisites for Validity ..............................233
f. Process of Impeachment ............... 216 a. Within the Scope or Authority of Law
g. One-Year Limit Rule ...................... 217 .....................................................................233
2. Quo Warranto........................................... 218 b. Authorized by Law ..............................233
a. Concept ............................................ 218 c. Reasonable Relation to the purposes 233
b. Who May File? ................................ 218 d. Promulgated in Accordance with
c. Prescriptive Period ......................... 218 Prescribed Procedure...............................233
d. Effects When Petition is Granted 218 B. Quasi-Judicial (Adjudicatory) Power .........233
3. Impeachment vs. Quo Warranto .............. 218 1. Administrative Due Process ...................234
D. The Ombudsman and the Office of the a. Notice and Hearing..............................237
Special Prosecutor [Sections 5 to 14, Article XI b. Application of Rules of Evidence in
of the 1987 Constitution in relation to RA No. Administrative Proceedings ....................238
6770, otherwise known as “The Ombudsman 2. Administrative Appeal and Review .......239
Act of 1989”] ..................................................... 219 3. Administrative Res Judicata.......................240
1. Functions of the Office of the C. Fact-Finding, Investigative, Licensing, and
Ombudsman.................................................. 221 Rate-Fixing Powers ...........................................242
2. Judicial Review in Administrative 1. Ascertainment of Fact .............................242
Proceedings ................................................... 223 2. Investigative Powers ................................242
3. Judicial Review in Penal Proceedings.... 224 3. Licensing Function ...................................242
E. The Sandiganbayan ...................................... 224 4. Fixing of Rates, Wages, and Prices ........243
1. Nature and Composition ........................ 224
IV. JUDICIAL RECOURSE AND REVIEW
2. Jurisdiction ................................................ 224
.....................................................................245
a. Exclusive Original Jurisdiction ..... 224
A. Doctrine of Primary Administrative
b. Exclusive Appellate Jurisdiction ... 225
Jurisdiction (or Prior Resort) ...........................246
c. Jurisdiction Over Private Individuals
B. Doctrine of Exhaustion of Administrative
225
Remedies .............................................................248
XIV. TERM LIMITS............................... 226 1. Legal Reason .............................................249
A. Legislative Department ............................... 226 2. Practical Reason ........................................249
1. Senators ..................................................... 226 3. Reasons of Comity ...................................249
2. Members of the House of Representatives 4. Separation of Powers ...............................249
......................................................................... 226 C. Doctrine of Finality of Administrative
B. Executive Department ................................ 226 Action ..................................................................251
1. President and Vice-President ................. 226
ELECTION LAW ............................................... 253
2. Supreme Court Justices and Judges of
Lower Courts ................................................ 226 I. SUFFRAGE .............................................254
C. Constitutional Commissions ...................... 226 A. Concept .........................................................254
1. Civil Service Commission ....................... 226 1. Definition...................................................254
2. Commission on Elections ....................... 226 2. Scope ..........................................................254
3. Commission on Audit ............................. 227 a. Election ..................................................254
D. The Office of the Ombudsman ................ 227 b. Plebiscite ...............................................254
E. Local Governments ..................................... 227 c. Initiative .................................................254
d. Referendum ..........................................254
ADMINISTRATIVE LAW ................................ 228
B. Qualification and Disqualification of Voters
I. GENERAL PRINCIPLES ..................... 229 ..............................................................................255
A. Definition of Administrative Law ............. 229 1. Under Sec. 1, Art. V, 1987 Constitution
B. Separation of Powers and Administrative .........................................................................255
Functions ............................................................ 229 2. Qualifications in General ........................255
a. Filipino citizen by birth or naturalization
II. ADMINISTRATIVE AGENCIES........ 229
.....................................................................255
A. Definition of Administrative Agency ....... 229
b. At least 18 years of age at the time of
B. Historical Considerations............................ 229
the election ................................................255
III. POWERS OF ADMINISTRATIVE c. Resident of the Philippines for at least
AGENCIES ................................................ 230 one (1) year ................................................255
A. Quasi-Legislative (Rule-Making Power) ... 230 d. Resident of the place wherein they
1. Kinds of Administrative Rules and propose to vote for at least six (6) months
Regulations .................................................... 232 immediately preceding the election .......255
e. Not otherwise disqualified by law ..... 256 2. Regulations ................................................275

3. Disqualifications in General ................... 256 3. Prohibitions ...............................................275
C. Registration and Deactivation .................... 256 4. Period .........................................................275
1. Registration of Voters ............................. 256 5. Equal Access to Media, Time, and Space
a. Election Registration Board (ERB)... 257 .........................................................................275
b. System of Continuing Registration of a. Print advertisements [Sec. 6.1, R.A.
Voters ........................................................ 257 No. 9006] ...................................................275
c. Validation .............................................. 257 b. TV advertisements [Sec. 6.2, R.A.
d. Manner of Registration for Illiterate or No. 9006] ...................................................275
Disabled Voters [Sec. 14, R.A. No. 8189] c. Radio advertisements [Sec. 6.2, R.A.
.................................................................... 258 No. 9006] ...................................................276
e. When the List of Voters will be Altered 6. Right to Reply ...........................................276
.................................................................... 258 7. Required Submissions to the COMELEC
1. Deactivation ..................................... 258 [Sec. 6.2 and 6.3, R.A. No. 9006] ...............276
2. Reactivation [Sec. 28, R.A. 8189] .. 258 8. Application for Rallies, Meetings and
3. Cancellation of Registration .......... 259 Other Political Activity ................................277
4. Annulment of Book of Voters ...... 260 B. Premature Campaigning ..............................277
5. New Voters ...................................... 260 C. Contributions ................................................277
6. Transfer of Residence .................... 260 1. Prohibited Contributions ........................277
D. Inclusion and Exclusion Proceedings ...... 261 2. Prohibited Fund-Raising Activities [Sec.
1. Jurisdiction in Inclusion and Exclusion 97, B.P. Blg. 881]...........................................278
Case [Sec. 33, R.A. No. 8189].................... 261 3. Prohibited Donations [Sec. 104. B.P. Blg.
2. Petition for Inclusion and Exclusion of 881]..................................................................278
Voters in the List [Secs. 34-35, R.A. No. D. Lawful and Prohibited Election Propaganda
8189] ............................................................... 261 ..............................................................................279
3. Special Rules on Overseas Absentee 1. Lawful Election Propaganda ..................279
Voters [Sec. 9.3, R.A. No. 9189 as inserted 2. Prohibited Acts .........................................279
by R.A. 10590; Sec. 9.1, R.A. 9189 as a. For any foreigner: [Sec. 81, B.P. Blg.
inserted by R.A. 10590] ............................... 262 881] 279
E. Local and Overseas Absentee Voting [Sec. b. For any person during the campaign
3(a), R.A. No. 9189, The Overseas Absentee period: [Sec. 83, B.P. Blg. 881] ...............279
Voting Act, as amended by R.A. No. 10590, c. For any candidate, political party,
The Overseas Voting Act of 2013] ................ 263 organization or any person: [Sec. 89, B.P.
1. General Rule ............................................. 263 Blg. 881] .....................................................279
2. Exceptions ................................................. 263 E. Limitations on Expenses.............................279
3. Qualifications ............................................ 264 1. Lawful Expenditures ................................279
4. Disqualifications ....................................... 264 2. For Candidates [Sec. 13, R.A. No. 7166]
F. Detainee Voting............................................ 264 .........................................................................280
G. Escorted Voting........................................... 265 3. For Political Parties ..................................280
F. Statement of Contributions and Expenses
II. CANDIDACY ........................................ 265
(SOCE) [Sec. 14, R.A. No. 7166]....................280
A. Qualifications and Disqualifications of
Candidates .......................................................... 265 IV. REMEDIES AND JURISDICTION ... 281
1. Qualifications ............................................ 265 A. Petition to Deny Due Course or Cancel a
2. Disqualifications ....................................... 266 Certificate of Candidacy ...................................281
B. Filing of Certificates of Candidacy ............ 268 1. For any False Material Representation
1. Effect of Filing ......................................... 269 [Sec. 78, OEC] ...............................................281
a. Appointive Officials ............................ 269 2. For Nuisance Candidates [Sec. 69, OEC]
b. Elective Officials ................................. 269 .........................................................................281
2. Substitution and Withdrawal of B. Petition for Disqualification .......................281
Candidates ..................................................... 270 1. Grounds under Par. 1, Sec. 68, OEC ....281
3. Nuisance Candidates................................ 270 2. Grounds under Par. 2, Sec. 68, OEC ....281
4. Effect of Disqualification ....................... 272 3. Grounds under Sec. 12, OEC ................281
5. Duties of the Commission on Elections 4. Grounds under Sec. 40, LGC for Local
(COMELEC) ................................................ 273 Elective Positions .........................................282
C. Failure of Election, Call for Special Election
III. CAMPAIGN......................................... 274
..............................................................................283
A. Concept ......................................................... 274
1. Failure of Election ....................................283
1. Definition .................................................. 274
2. Annulment of Election Results ..............284
D. Pre-Proclamation Controversy .................. 285 (9) Autonomous Regions

1. Illegal Composition of the Board of (Muslim Mindanao and the
Canvassers ..................................................... 287 Cordilleras) ..................................305
2. Illegal Proceedings of the Board of (10) Beginning of Corporate
Canvassers ..................................................... 287 Existence ......................................306
3. When and Where to File Pre-
II. PRINCIPLES OF LOCAL
Proclamation Controversy .......................... 287
AUTONOMY..............................................306
4. Effect of Filing of Pre- Proclamation
A. Autonomy and Decentralization; Devolution
Controversy ................................................... 288
..............................................................................306
E. Election Contest .......................................... 289
Decentralization v. Devolution ..................306
1. Election Protest ........................................ 289
Local Autonomy and National
2. Quo Warranto.............................................. 289
Accountability ...............................................307
F. Recall .............................................................. 291
Local Autonomy and Decision Making ....307
V. PROSECUTION OF ELECTION B. Local Fiscal Autonomy................................308
OFFENSES ................................................ 293 Sources of LGU Funds ................................309
A. Jurisdiction over Election Offenses .......... 293 a. Internal Revenue Allotments ........309
B. Preferential Disposition of Election b. Automatic Release...........................309
Offenses ............................................................. 293 c. Consultation .....................................309
1. Election Offenses..................................... 293 Accountability ...............................................310
2. Penalties ..................................................... 295 a. Basic Principles ................................310
C. Arrests in Connection with Election 1. Under the 1987 Constitution ....310
Campaign............................................................ 295 2. Under the LGC ...........................310
D. Prescription .................................................. 295
III. AUTONOMOUS REGIONS AND
E. Grant of Transactional Immunity ............. 296
THEIR RELATION TO THE NATIONAL
F. Prohibited Acts under R.A. 9369 ............... 296
GOVERNMENT ........................................ 311
LOCAL GOVERNMENTS ................................ 297
IV. LOCAL GOVERNMENT UNIT
I. PUBLIC CORPORATIONS .............. 298 (LGU) 313
A. Concept; Distinguished from Government- A. Powers ...........................................................313
Owned or Controlled Corporations .............. 298 1. Police Power..............................................313
B. Classifications ............................................... 298 2. Eminent Domain ......................................315
Quasi-Corporations...................................... 298 a. Nature ...............................................315
Municipal Corporations............................... 299 b. Requisites for the Exercise of
a. Elements .......................................... 299 Eminent Domain by an LGU ................316
1. Legal Corporation or c. Jurisdiction .......................................316
Incorporation ....................................... 299 d. Ultimate Right of Sovereign Power
2. A Corporate Name by Which the 316
Artificial Personality Is Known and in e. Public Use, Purpose, or Welfare ...316
Which All Corporate Acts Are Done f. Ordinance Requirement .................317
299 g. Just Compensation ..........................317
3. Inhabitants Constituting the h. Writ of Execution and Expropriation
Population ............................................ 299 Suit 317
4. Territory Within Which Local i. Valid and Definite Offer ................317
Civil Government/Corporate j. Requisites for the Immediate Entry
Functions Are Exercised .................... 299 by the LGU ...............................................318
b. Dual Nature and Functions .......... 300 k. Returning the Property...................318
c. Requisites for Creation, Conversion, 3. Taxing Power .......................................319
Division, Merger or Dissolution............ 300 a. Fundamental Principles of Local and
1. Creation and Conversion .......... 300 Real Property Taxation............................319
(1) Barangay ............................ 302 1. Power to Create Revenues ........319
(2) Municipality....................... 303 2. Local Taxing Authority [Sec. 132,
(3) City ..................................... 303 LGC] ......................................................319
(4) Highly Urbanized City ..... 303 3. Fundamental Principles [Sec. 130,
(5) Province ............................. 304 LGC] ......................................................319
(6) Merger and Division ........ 304 4. Common Limitations on the
(7) Substantial Alteration of Taxing Power of the LGU .................319
Boundaries................................... 304 5. Persons Exempted from LGU’s
(8) Abolition............................ 305 Taxing Power .......................................320
6. Requirements for a Valid Tax C. Settlement of Boundary Disputes..............335

Ordinance ............................................. 320 Amicable Settlement.....................................335
7. Procedure for Approval and Formal Trial ...................................................336
Effectivity of Tax Ordinances ........... 321 a. Trial by Sanggunian ........................336
8. Withdrawal of Local Tax b. Trial by RTC ....................................336
Exemption Privileges .......................... 321 Appeal.............................................................336
9. Exemptions from Real Property Evidence Given More Weight ....................336
Taxes ..................................................... 322 D. Vacancies and Succession...........................336
10. Franchise Tax ......................... 322 Permanent Vacancy ......................................336
4. Closure and Opening of Roads [Sec. 21, a. Permanent Vacancy in the Local
LGC]............................................................... 322 Chief Executive [Sec. 44, LGC] .............336
a. Scope of LGU’s Power to Close b. Permanent Vacancies in the
Road, Alley, Park or Square.................... 323 Sanggunian [Fariñas v. Barba, G.R. No.
b. Requisites For Temporary Closure 116763 (1996); Sec. 45, LGC] ................337
323 c. Resignation of Elective Officials ..338
c. Requisites For Permanent Closure d. Abandonment ..................................339
323 Temporary Vacancy .....................................339
d. Public Roads Are Outside The Leaves of Absence [Sec. 47(a), LGC] ........340
Commerce of Man ................................... 323 E. Recall ..............................................................340
5. Legislative Power ..................................... 323 Grounds .........................................................340
a. Ordinance vs. Resolution .............. 323 Signature Requirement .................................341
b. Requisites for Valid Ordinance .... 324 Procedure [Sec. 70, LGC, as amended by
c. Internal Rules of Procedure .......... 325 R.A. No. 9244] ..............................................341
d. Sangguniang Sessions ..................... 326 Limitations .....................................................341
1. Regular Sessions ......................... 326 F. Term Limits ...................................................342
2. Special Sessions .......................... 326 Length of Term .............................................342
e. Publication and Effectivity of Limitation of Consecutive Terms ..............342
Ordinances ................................................ 327
PUBLIC INTERNATIONAL LAW ................. 344
f. Review of Ordinances & Resolutions
327 I. SOURCES OF OBLIGATIONS ......... 345
g. Review of Tax Ordinances by the A. Treaties ..........................................................345
Secretary of Justice [Sec. 187, LGC] ..... 328 a. Definition of Treaty ........................345
h. Local Initiative and Referendum .. 328 b. Requisites (General) ........................345
6. Corporate Powers .................................... 331 c. Requisites (Valid Treaty) ................345
a. To Sue and Be Sued ....................... 331 d. Treaty-Making Process ...................345
b. To Acquire and Sell Property ....... 331 1. Authorization ..............................345
1. In Its Public and Governmental 2. Negotiation ..................................346
Capacity................................................. 331 3. Adoption ......................................346
2. In Its Private or Proprietary 4. Authentication ............................346
Capacity................................................. 331 5. Expression of consent ...............346
c. To Enter into Contracts ................ 331 6. Registration..................................346
7. Ultra Vires Acts ........................................ 332 e. Basic Principles of Treaties............346
B. Liability of Local Government Units ........ 333 1. Vienna Convention on the Law of
Statutory Liability ......................................... 333 Treaties ..................................................346
Liability Under the Civil Code.................... 333 2. Pacta Tertiis Nec Nocent Nec
Liability Under Art. 2189 Based on Control Prosunt ..................................................346
or Supervision ............................................... 333 3. Pacta Sunt Servanda ...................346
Contractual Liability ..................................... 334 4. Generally Not Binding on Third
Torts Liability ................................................ 334 States, i.e. Non-Contracting Parties ..346
a. If in the Performance of a 5. Treaties are Non-Retroactive....346
Governmental Function ......................... 334 6. Interpretations.............................346
b. If in the Performance of a 1. Concept of Jus Cogens (Peremptory Norms
Proprietary Function ............................... 334 of International Law) ...................................347
c. Liability for Back Pay of Employees 2. Reservations, Withdrawal, Termination,
334 and Rebus Sic Stantibus ...............................348
Personal Liability of the Public Official .... 334 a. Reservations .....................................348
Refunding of Amounts Disallowed by the 1. General Principles on
COA ............................................................... 334 Reservations .........................................349
b. Withdrawal and Termination ........ 350 d. Exclusive Rights of the Coastal State
1. Invalid Treaties ........................... 350 in the Continental Shelf...........................361
2. Other Grounds for Termination D. Jurisdiction Over Persons and Economic
of Treaty ............................................... 350 Activity ................................................................362
3. Suspension of Treaties .............. 351 1. Criminal Jurisdiction ................................362
B. Customary International Law..................... 351 a. General Theory ...............................362
1. Elements .................................................... 351 b. Extradition .......................................362
2. Obligations Erga Omnes ................... 353 1. Definition.....................................362
C. General Principles of Law .......................... 353 2. The General Rule on Standard of
D. Application of International Law by Treatment..............................................362
Domestic Courts ............................................... 354 3. Requisites For Extradition to Be
1. Monism ...................................................... 354 Exercised [Gov. of Hong Kong v. Olalia,
2. Dualism ...................................................... 354 Jr., supra] ...............................................362
3. Inverted Monism ...................................... 354 4. Fundamental Principles on
4. Harmonization.......................................... 354 Extradition ............................................363
2. Civil Jurisdiction .......................................364
II. INTERNATIONAL LEGAL PERSON
3. Immunity From Jurisdiction ...................364
354
a. Sovereign Immunity .......................364
A. States .............................................................. 354
1. Two Theories of Sovereign
1. Elements .................................................... 354
Immunity [US v. Ruiz, G.R. No. L-
a. Permanent Population ................... 354
35645 (1985)] ........................................364
b. Defined Territory............................ 354
2. Suits Against the State ...............364
1. Modes of Acquiring Territory .. 355
b. Diplomatic and Consular Immunity
c. Government .................................... 355
365
1. Types of Government ............... 355
4. Areas Not Subject to Jurisdiction of
d. Capacity to Enter into Relations .. 356
Individual States ............................................366
2. Recognition of States and Governments
a. High Seas ..........................................366
......................................................................... 356
b. Deep Seabed ....................................366
a. Recognition ...................................... 356
c. Outer Space......................................367
b. Failed States ..................................... 356
c. Secession .......................................... 356 IV. INTERNATIONAL
B. Non-State Entities ....................................... 357 RESPONSIBILITY .................................... 367
C. International Organizations........................ 357 A. Concept of Imputability of Internationally
D. Status of Individuals and Corporations ... 357 Wrongful Act or Omission ..............................367
1. Conduct of Organs of a State [Article 4,
III. JURISDICTION............................. 358
ARSIWA] .......................................................368
A. Basis of Jurisdiction ..................................... 358
2. Conduct of Persons or Entities Exercising
1. Territoriality Principle.............................. 358
Elements of Governmental Authority
2. Nationality Principle ................................ 358
[Article 5, ARSIWA].....................................368
3. Protective Principle .................................. 358
3. Conduct of Organs Placed at the Disposal
4. Passive Personality Principle .................. 358
of a State by Another State [Article 6,
3. Universality Principle .......................... 358
ARSIWA] .......................................................368
B. Title to Territory........................................... 358
4. Excess of Authority or Contravention of
C. Adjacent Maritime Seas ............................... 358
Instructions [Article 7, ARSIWA] ..............368
1. Territorial Sea............................................ 358
5. Conduct Directed or Controlled by a State
2. Contiguous Zone ..................................... 360
[Article 8, ARSIWA].....................................368
3. Exclusive Economic Zone ................ 360
a. Effective Control ............................368
a. The Extent of the State’s Rights in
b. Overall Control ...............................368
the EEZ..................................................... 360
6. Conduct Carried Out in the Absence or
b. Rights of the Coastal State in the
Default of the Official Authorities [Article 9,
EEZ360
ARSIWA] .......................................................369
c. Rights of the Non-Coastal State ... 360
7. Conduct of an Insurrectional or Other
d. The Right of Geographically
Movement [Art. 10, ARSIWA] ...................369
Disadvantaged States or Landlocked
8. Conduct Acknowledged and Adopted by a
States .......................................................... 361
State as its Own [Art. 11, ARSIWA]..........369
4. Continental Shelf ................................. 361
9. Responsibility of a State in Connection
a. Extended Continental Shelf .......... 361
with the Acts of Another State ...................369
b. Continental Margin ......................... 361
10. Circumstances Precluding Wrongfulness
c. Continental Shelf ............................ 361
(Defenses) ......................................................369
a. Consent [Art. 20, ARSIWA] ......... 370 d. The Convention shall NOT Apply
b. Self-Defense [Art. 21, ARSIWA] . 370 to: [1951 Convention]..............................376
c. Countermeasures [Article 22, e. General Obligations of Refugees..376
ARSIWA] .................................................. 370 f. Non-Discrimination .......................376
1. Conditions for Countermeasures g. Personal Status ................................376
[Art. 52, ARSIWA] .............................. 370 h. Rights of a Refugee .........................376
2. Limitations of Countermeasures: i. Principle of Non-Refoulment .......377
[Art. 49, ARSIWA] .............................. 370 3. Statelessness ..............................................377
d. Force Majeure [Art. 23, ARSIWA] 4. Remedies Under Treaty-Based
370 Mechanisms ...................................................378
e. Distress [Art. 24, ARSIWA] .......... 370 D. International Minimum Standard and
f. Necessity [Art. 25, ARSIWA] ....... 370 National Treatment (Including Expropriation
g. Other Principles .............................. 371 of Foreign-Owned Properties) ........................378
11. Consequences Of an Internationally 1. Fair and Equitable Treatment ................379
Wrongful Act ................................................ 371 2. Protection Against the Denial of Justice
B. Reparation ..................................................... 371 .........................................................................379
1. Forms of Reparation................................ 371 3. Expropriation of Foreign Property .......379
a. Restitution [Art. 35, ARSIWA] ..... 371 E. Environmental Harm ..................................380
b. Compensation [Art. 36, ARSIWA] 1. Precautionary Principle ............................380
372 2. Polluter-Pays Principle.............................380
c. Satisfaction [Art. 37, ARSIWA] .... 372 3. Common but Differentiated
d. Other Principles .............................. 372 Responsibilities..............................................380
C. International Protection of Human Rights 4. Sustainable Development ........................380
(Including Refugees and Stateless Persons) .. 372 5. Sic Utere Tuo Ut Alienum Non Laedas or
1. Basic Principles of International Human the No-Harm Principle ................................380
Rights Law ..................................................... 372 F. International Claims .....................................381
a. The Universal Declaration of Human 1. International Human Rights Law ..........381
Rights (UDHR) ........................................ 373 2. International Economic Law ..................381
b. The International Covenant on Civil 3. Immunities.................................................381
and Political Rights (ICCPR) ................. 374
V. DISPUTE RESOLUTION ............. 381
c. The International Covenant on
A. Legality of the Use of Force .......................381
Economic, Social and Cultural Rights
B. Concept of International and Non-
(ICESCR) .................................................. 374
International Armed Conflicts ........................382
2. Refugees..................................................... 375
1. The Role of the International Criminal
a. General Principles........................... 375
Court ...............................................................382
b. Definition ......................................... 375
C. Judicial and Arbitral Settlement .................382
c. The Following are Refugees Not
1. International Court of Justice .................382
Covered by the Convention: .................. 375
Permanent Court of Arbitration.................384
CONSTITUTIONAL LAW 1
POLITICAL AND PUBLIC
INTERNATIONAL LAW
CONSTITUTIONAL LAW 1 POLITICAL LAW
Self-Executing Character: The general rule
and presumption is that the provisions in the
CONSTITUTIONAL Constitution are self-executing in character.
LAW 1 Self-executing clauses refer to those in the

Constitution that are effective without the
need for an enabling statute.
POWERS AND
STRUCTURES OF A provision which is complete in itself and
becomes operative without the aid of
GOVERNMENT supplementary or enabling legislation, or that
which supplies sufficient rule by means of
I. PRELIMINARY which the right it grants may be enjoyed or
protected, is self-executing. Thus a
CONCEPTS constitutional provision is self-executing if the
nature and extent of the right conferred and
A. Nature of Constitution the liability imposed are fixed by the
constitution itself, so that they can be
1. Parts determined by an examination and
construction of its terms, and there is no
The Philippine Constitution is divided into language indicating that the subject is referred
eighteen (18) Articles: to the legislature for action. [Manila Prince
Hotel v. GSIS, G.R. No. 122156 (1997)].
1. ARTICLE I National Territory
2. ARTICLE II Declaration of Principles and Certain provisions in Art. XIII (on Health) and
State Policies Art. XVI (on protection from hazardous
3. ARTICLE III Bill of Rights products) have been held as self-executing
4. ARTICLE IV Citizenship [Imbong v. Ochoa, G.R. No. 204819 (2014)].
5. ARTICLE V Suffrage
6. ARTICLE VI Legislative Department Non-Executing Character: As an exception,
7. ARTICLE VII Executive Department the Supreme Court has ruled that certain
8. ARTICLE VIII Judicial Department provisions in the Constitution are non-
9. ARTICLE IX Constitutional Commissions executing in character.
10. ARTICLE X Local Government
11. ARTICLE XI Accountability of Public 1. Art. II: A provision which lays down a
Officers general principle, such as those found in Art.
12. ARTICLE XII National Economy and II of the 1987 Constitution, is usually not self-
Patrimony executing [Manila Prince Hotel v. GSIS,
13. ARTICLE XIII Social Justice and Human supra].
Rights
These principles in Art. II are not intended to
14. ARTICLE XIV Education, Science and
Technology, Arts, Culture and Sports be self-executing principles ready for
enforcement through the courts. They are
15. ARTICLE XV The Family
used by the judiciary as aids or guides in the
16. ARTICLE XVI General Provisions
exercise of its power of judicial review, and by
17. ARTICLE XVII Amendments or Revisions
the legislature in its enactment of laws
18. ARTICLE XVIII Transitory Provisions
[Tañada v. Angara, G.R. No. 118295 (1997)].
2. Manner of Interpretation (Self-
2. Art. XIII: Time and again, we have ruled
Executing and Non-Executing that the social justice provisions of the
Character) Constitution are not self-executing principles
ready for enforcement throu2gh the courts.
They are merely statements of principles and
Page 1 of 384
UP Law Bar Operations Commission 2023
policies. To give them effect, legislative a. Amendment
enactment is required. (BFAR Employees
Union, Regional Office No. VII, Cebu City v. Amendment broadly refers to a change that
Commission on Audit, G.R. No. 169815 adds, reduces, or deletes without altering the
(2008)]. basic principle involved. (Lambino v.
Commission on Elections, G.R. Nos. 174153
As an exception, Section 15 and Section 16 & 174299 (2006)].
[Right to a Balanced and Healthful Ecology] of
Article II of the Constitution are self-executing An addition or change within the lines of the
and judicially enforceable even in their original instrument as will effect an
present form. (Oposa v. Factoran, Jr., G.R. improvement, or better carry out the purpose
No. 101083 (1993)]. for which it was framed. [Lambino v.
Commission on Elections, supra].
3. Process of Change (Amendments
and Revisions) b. Revision
1987 Constitution Revision broadly implies a change that alters a

basic principle in the constitution, like altering
ARTICLE XVII, SECTION 1. Any amendment to, or the principle of separation of powers or the
revision of, this Constitution may be proposed by: system of checks-and-balances. There is also
(1) The Congress, upon a vote of three-fourths of all revision if the change alters the substantial
its Members; or
entirety of the constitution, as when the change
(2) A constitutional convention.
affects substantial provisions of the
ARTICLE XVII, SECTION 2. Amendments to this constitution. [Lambino v. Commission on
Constitution may likewise be directly proposed by Elections, supra].
the people through initiative upon a petition of at
least twelve per centum of the total number of c. Difference
registered voters, of which every legislative district
must be represented by at least three per centum of
the registered voters therein. No amendment under An amendment to the Constitution may be
this section shall be authorized within five years proposed by (1) initiative, (2) a Constitutional
following the ratification of this Constitution nor Convention, or (3) Congress (acting as a
oftener than once every five years thereafter. Constituent Assembly).
The Congress shall provide for the implementation
of the exercise of this right.
A revision may only be proposed by a
Constitutional Convention or Congress. It
ARTICLE XVII, SECTION 3. The Congress may, by cannot be proposed via initiative [Lambino v.
a vote of two-thirds of all its Members, call a COMELEC, supra].
constitutional convention, or by a majority vote of all
its Members, submit to the electorate the question of
d. The Lambino Tests [Lambino v.
calling such a convention.
Commission on Elections, supra].
ARTICLE XVII, SECTION 4. Any amendment to, or
revision of, this Constitution under Section 1 hereof The prevailing view is that a proposed change
shall be valid when ratified by a majority of the votes that meets either test must be considered a
cast in a plebiscite which shall be held not earlier
revision of the Constitution, instead of a mere
than sixty days nor later than ninety days after the
approval of such amendment or revision. amendment.
Any amendment under Section 2 hereof shall be Quantitative Test -- whether the proposed
valid when ratified by a majority of the votes cast in change is "so extensive in its provisions as to
a plebiscite which shall be held not earlier than sixty change directly the 'substantial entirety' of the
days nor later than ninety days after the certification
constitution by the deletion or alteration of
by the Commission on Elections of the sufficiency of
the petition. numerous existing provisions." The court
examines only the number of provisions
Page 2 of 384
affected and does not consider the degree of The entire Constitution must be submitted
the change. for ratification at one plebiscite only. The
people must have a proper “frame of
Qualitative Test -- whether the change will reference” [Tolentino v. COMELEC, G.R.
"accomplish such far reaching changes in the No. L-34150 (1971)].
nature of our basic governmental plan as to
amount to a revision." No “piecemeal submission” is allowed; e.g.,
submission of age amendment ahead of
e. Procedure to Amend or Revise the other proposed amendments [Lambino v.
Constitution COMELEC, supra].
1. Proposal 3. Ratification
This refers to the adoption of the suggested The Proposed Amendments shall be
change in the Constitution. submitted to the people and shall be
deemed ratified by the majority of the votes
a. Congress (as a Constituent Assembly) cast in a plebiscite, held not earlier than 60
– a vote of 3/4 of ALL its members. days nor later than 90 days:
b. Constitutional Convention (ConCon) – i. After approval of the proposal by
Called into existence by (i) 2/3 of all Congress or ConCon;
members of Congress OR (ii) the ii. If proposal by initiative, after certification
electorate, in a referendum called for by a by the COMELEC of sufficiency of
majority of all members of Congress petition of the people.
[Section 3, Article XVII]
c. People (through a People’s Initiative) – 4. Judicial Review of Amendments
Petition of at least 12% of the total number The validity of the process of amendment is
of registered voters; every legislative not a political question because the Court
district must be represented by at least 3% must review if constitutional processes were
of the registered voters therein followed [Lambino v. COMELEC, supra].
i. Limitation on Initiative: No
amendment in this manner shall be B. The Philippines as a State
authorized (1) within 5 years following
the ratification of the 1987 Const. nor 1. Elements/Requisites for Statehood
(2) more often than once every 5
years thereafter.
ii. Enabling Law: Constitutional Montevideo Convention, Article 1
provision on amendments via The state as a person of international law should
People’s Initiative are not self- possess the following qualifications:
executory [Defensor-Santiago v. (a) A permanent population;
COMELEC, G.R. No. 127325 (1997)] (b) A defined territory;
(c) Government; and
2. Submission (Doctrine of Proper (d) Capacity to enter into relations with the other
States.
Submission)
The proposal must be submitted to the
people. [cited in Province of North Cotabato v. GRP,
G.R. No. 183591 (2008)].
Provided there is sufficient prior
dissemination of the proposed changes to 1987 Constitution, Article IV.
the Constitution, a plebiscite may be held on
the same day as a regular election SECTION 1. The following are citizens of the
[Gonzales v. COMELEC, G.R. No. L-28196 Philippines:
(1967)].
(1) Those who are citizens of the Philippines at the
time of the adoption of this Constitution;
Page 3 of 384
(3) Those born before January 17, 1973, of Filipino

(2) Those whose fathers or mothers are citizens of mothers, who elect Philippine citizenship upon
the Philippines; reaching the age of majority; and
(3) Those born before January 17, 1973, of Filipino (4) Those who are naturalized in accordance with
mothers, who elect Philippine citizenship upon law.
reaching the age of majority; and
SECTION 2. Natural-born citizens are those who are
(4) Those who are naturalized in accordance with citizens of the Philippines from birth without having
law. to perform any act to acquire or perfect their
Philippine citizenship. Those who elect Philippine
SECTION 2. Natural-born citizens are those who are citizenship in accordance with paragraph (3),
citizens of the Philippines from birth without having Section 1 hereof shall be deemed natural-born
to perform any act to acquire or perfect their citizens.
Philippine citizenship. Those who elect Philippine
citizenship in accordance with paragraph (3), SECTION 3. Philippine citizenship may be lost or
Section 1 hereof shall be deemed natural-born reacquired in the manner provided by law.
citizens.
SECTION 4. Citizens of the Philippines who marry
SECTION 3. Philippine citizenship may be lost or aliens shall retain their citizenship, unless by their
reacquired in the manner provided by law. act or omission they are deemed, under the law, to
have renounced it.
SECTION 4. Citizens of the Philippines who marry
aliens shall retain their citizenship, unless by their SECTION 5. Dual allegiance of citizens is inimical to
act or omission they are deemed, under the law, to the national interest and shall be dealt with by law.
have renounced it.
SECTION 5. Dual allegiance of citizens is inimical to The constitution provides that the following
the national interest and shall be dealt with by law. people are considered citizens of the
Philippines:
1. Those who are citizens of the Philippines
a. Permanent Population at the time of the adoption of this
It refers to a permanent population and Constitution;
intended to be used in association with that of ● Includes those who were citizens
territory, and connotes a stable community. under the 1973 and 1935
Constitution.
Citizenship is personal and more or less 2. Those whose fathers or mothers are
permanent membership in a political citizens of the Philippines;
community. It denotes possession within that ● Jus sanguinis (“Right by Blood”) - a
particular political community of full civil and person's nationality follows that of his
political rights subject to special natural parents.
disqualifications such as minority. Reciprocally, 3. Those born before January 17, 1973, of
it imposes the duty of allegiance to the political Filipino mothers, who elect Philippine
community. (Bernas, Constitutional Law citizenship upon reaching the age of
Primer). majority; and
4. Those who are naturalized in accordance
1987 Constitution, Article IV. with law.
SECTION 1. The following are citizens of the Renunciation of Citizenship

Philippines:
(1) Those who are citizens of the Philippines at the In Board of Immigration Commissioners vs. Go
time of the adoption of this Constitution; Gallano, express renunciation was held to
mean a renunciation that is made known
(2) Those whose fathers or mothers are citizens of distinctly and explicitly and not left to inference
the Philippines; or implication. Petitioner, with full knowledge,
and legal capacity, after having renounced
Portuguese citizenship upon naturalization as
Page 4 of 384
a Philippine citizen resumed or reacquired his The existence of effective government, with
prior status as a Portuguese citizen, applied for centralized administrative and legislative
a renewal of his Portuguese passport and organs, is the best evidence of a stable political
represented himself as such in official community. It is a centralized structure capable
documents even after he had become a of exercising effective control over a human
naturalized Philippine citizen. Such resumption community living in a given territory.
or reacquisition of Portuguese citizenship is
grossly inconsistent with his maintenance of State practice suggests that the requirement of
Philippine citizenship. [In re: Yu v. Defensor- a “stable political organization” in control of the
Santiago, G.R. No. 83882 (1989)]. territory does not apply during a civil war or
where there is a collapse of law and order in a
b. Defined Territory state that already exists.
The national territory comprises the Philippine
archipelago, with all the islands and waters The Philippines is a democratic and republican
embraced therein, and all other territories over state. Government authority emanates from its
which the Philippines has sovereignty or people.
jurisdiction, consisting of its terrestrial, fluvial,
and aerial domains, including its territorial sea, d. Capacity to Enter into Relations with
the seabed, the subsoil, the insular shelves, Other States/Independence
and other submarine areas. The waters
around, between, and connecting the islands of 1987 Constitution
the archipelago, regardless of their breadth ARTICLE II, SECTION 7. The State shall pursue an
and dimensions, form part of the internal independent foreign policy. In its relations with other
states the paramount consideration shall be national
waters of the Philippines. [Article 1, 1987
sovereignty, territorial integrity, national interest,
Constitution] and the right to self-determination.
State territory is that defined portion of the A State must be free from outside control in
surface of the globe, which is subjected to the conducting foreign and internal affairs, i.e.,
sovereignty of the State [Oppenheim]. sovereign and independent.
A State must exercise control over a certain The State is the sole executive and legislative
area. It need not be exactly defined by metes authority. It must be independent of other state
and bounds, so long as there exists a legal orders, and any interference by such legal
reasonable certainty of identifying it. No orders, or by an international agency, must be
minimum land area is required. based on a title of international law.
c. Government Independence is the decisive criterion of

statehood. This concept of independence is
Definition - institution or aggregate of represented by the requirement of capacity to
institutions by which an independent society enter into relations with other States.
makes and carries out those rules of action
which are necessary to enable men to live in a 2. Distinction Between Internal and
social state, or which are imposed upon the
External Self-Determination
people forming that society by those who
possess the power or authority of prescribing
The recognized sources of international law
them. Government is the aggregate of
establish that the right to self-determination of
authorities which rule a society. [U.S. v. Dorr,
a people is normally fulfilled through internal
G.R. No. 1051 (1903)].
self-determination — a people's pursuit of its
political, economic, social and cultural
Denotes a “stable political community
development within the framework of an
supporting a legal order to the exclusion of
existing state.
another in a given area”.
Page 5 of 384
External self-determination can be defined The moment greater authority is conferred
as in the following statement from the upon the government, logically so much is
Declaration on Friendly Relations, supra, as withdrawn from the residuum of liberty which
resides in the people. The paradox lies in the
“The establishment of a sovereign and fact that the apparent curtailment of liberty is
independent State, the free association or precisely the very means of insuring its
integration with an independent State or the preservation. [Calalang v. Williams, G.R. No.
emergence into any other political status freely 47800 (1940)].
determined by a people constitute modes of
implementing the right of self-determination by Scope and Limitations
that people.” [See Province of North Cotabato “The State in order to promote the general
v. Government of the Republic of the welfare, may interfere with personal liberty,
Philippines Peace Panel on Ancestral Domain, with property, and with business and
G.R. Nos. 183591, 183752, 183893, 183951 & occupations. Persons may be subjected to all
183962 (2008)]. kinds of restraints and burdens, in order to
secure the general comfort, health and
A right to external self-determination (which prosperity of the state and to this fundamental
in this case potentially takes the form of the aim of our Government, the rights of the
assertion of a right to unilateral secession) individual are subordinated” [Ortigas and Co.,
arises in only the most extreme of cases and, Limited Partnership v. Feati Bank and Trust
even then, under carefully defined Co., G.R. No. L- 24670 (1979)].
circumstances.
As police power derives its existence from the
C. Fundamental Powers of the very existence of the State itself, it does not
need to be expressed or defined in its scope.
State xxx So it is that Constitutions do not define the
scope or extent of the police power of the State;
1. Police Power what they do is to set forth the limitations
It is the inherent and plenary power of the State thereof. The most important of these are the
which enables it to prohibit all that is hurtful to due process clause and the equal protection
the comfort, safety and welfare of society clause [Ichong v. Hernandez, G.R. No. L-7995
[Ermita-Malate Hotel and Motel Operators (1957)].
Association, Inc. v. Mayor of Manila, G.R. No.
L-24693 (1967)]. Police power has been characterized as the
most essential, insistent, and the least limitable
It is a power coextensive with self-protection, of powers, extending as it does to all the great
and is not inaptly termed the “law of the public needs [Ermita-Malate Hotel and Motel
overruling necessity” [Rubi v. Provincial Board Operators Association, Inc. v. Mayor of Manila,
of Mindoro, G.R. No. L-14078 (1919)]. supra].
Police power, while incapable of an exact Taxation and Eminent Domain as

definition, has been purposely veiled in general Implements on Police Power
terms to underscore its comprehensiveness to Taxation may be used as an implement of
meet all exigencies and provide enough room police power [Lutz v. Araneta, G.R. No. L-7859
for an efficient and flexible response as the (1955)].
conditions warrant. [White Light Corporation v.
City of Manila, G.R. No. 122846 (2009)]. Eminent domain may be used as an implement
to attain the police objective [Association of
Liberty is a blessing without which life is a Small Landowners v. Secretary of Agrarian
misery, but liberty should not be made to Reform, G.R. No. 78742 (1989)].
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. […]
Page 6 of 384
Specific Coverage Examples of Legitimate Exercise
1. Public Health The PWD mandatory discount on the purchase
2. Public Safety of medicine is supported by a valid objective or
3. Public Morals purpose as aforementioned. It has a valid
4. General Welfare [Abe v. Foster Wheeler subject considering that the concept of public
Corporation, G.R. No. L-14785 & L-14923 use is no longer confined to the traditional
(1960)] notion of use by the public, but held
synonymous with public interest, public benefit,
Who may Exercise Police Power public welfare, and public convenience.
Generally: Legislature
Delegated: As in the case of senior citizens, the discount
1. The President (and executive agencies) privilege to which the PWDs are entitled is
2. Administrative bodies (including the actually a benefit enjoyed by the general public
constitutional commissions) to which these citizens belong. The means
3. Law-making bodies of LGUs employed in invoking the active participation of
the private sector, in order to achieve the
Limitations on Delegation of Police Power purpose or objective of the law, is reasonably
1. It must be made through an express grant and directly related. Also, the means employed
by law; to provide a fair, just and quality health care to
2. It must be exercised within the territorial PWDs are reasonably related to its
jurisdiction of the LGU or the statutory accomplishment, and are not oppressive,
mandate of the delegate; and considering that as a form of reimbursement,
3. The delegate’s exercise must not be the discount extended to PWDs in the
contrary to law. purchase of medicine can be claimed by the
establishments as allowable tax deductions
TEST OF VALID EXERCISE pursuant to Section 32 of R.A. No. 9442 as
A. Means Purpose Test implemented in Section 4 of DOF Revenue
Regulations No. 1-2009. Otherwise stated, the
1. Lawful Subject - The interests of the public, discount reduces taxable income upon which
generally, as distinguished from those of a the tax liability of the establishments is
particular class, require such interference and computed [Drugstores Association of the
that the subject of the measure is within the Philippines, Inc. v. National Council on
scope of the police power [Ichong v. Disability Affairs, G.R. No. 194561 (2016)].
Hernandez, supra]
R.A. No. 9257, the Expanded Senior Citizens
2. Lawful Means - The means employed are Act of 2003, is a legitimate exercise of police
reasonably necessary for the accomplishment power. Administrative Order No. 177 issued by
of the purpose and not unduly oppressive upon the Department of Health, providing that the
individuals [National Development Company v. 20% discount privilege of senior citizens shall
Philippine Veterans Bank, G.R. Nos. 84132-33 not be limited to the purchase of unbranded
(1990)]. generic medicine but shall extend to both
prescription and non-prescription medicine,
B. Reasonability Test whether branded or generic, is valid [Carlos
The limit to police power is reasonability. The Superdrug Corporation v. DSWC, G.R. No.
Court looks at the test of reasonability to decide 166494 (2007)].
whether it encroaches on the right of an
individual. So long as legitimate means can Exercise of Police Power is subject to
reasonably lead to create that end, it is judicial inquiry
reasonable [Morfe v. Mutuc, G.R. No. L-20387 The Legislature’s determination as to what is a
(1968)]. proper exercise of its police powers is not final
or conclusive, but it is subject to the supervision
of the courts [US v. Toribio, G.R. No. L-5060
(1910)].
Page 7 of 384
However, courts cannot delimit beforehand the Requisites for the Valid Exercise of Eminent
extent or scope of the police power, since they Domain
cannot foresee the needs and demands of 1. Necessity
public interest and welfare. So it is that 2. Private Property
Constitutions do not define the scope or extent 3. Public Use
of the police power of the State; what they do 4. Taking
is to set forth the limitations thereof. The most 5. Just Compensation
important of these are the due process clause 6. Due Process
and the equal protection clause [Ichong v.
Hernandez, supra]. 1. Necessity
There must be a necessity which must be of
2. Eminent Domain public character [Manapat v. CA, supra].
The power of eminent domain is the inherent
right of the State to condemn private property Difference as to the direction to expropriate
to public use upon payment of just [Manapat v. CA, supra].
compensation. If directed by Nature of necessity
The right of eminent domain is the ultimate right Congress Political question
of the sovereign power to appropriate, not only
the public but the private property of all citizens A delegate under Justiciable question
within the territorial sovereignty, to public general authority
purpose [Republic v. Heirs of Borbon, G.R. No. (e.g., LGUs)
165354 (2015)].
Example: In Manabat, the expropriation
Two mandatory requirements should
proceedings were initiated by the National
underlie the Government’s exercise of the
Housing Authority (NHA). Although a delegate,
power of eminent domain:
the NHA was acting under P.D. 1072, which
a. It is for a particular public purpose; and
concerned the expropriation of a specific piece
b. Just compensation should be paid to the
of property (there, Grace Park). This was
property owner [Mactan-Cebu
therefore an expropriation directed by the
International Airport Authority v. Lozada,
legislator, and its necessity a political question.
Sr., G.R. No. 176625 (2010)]
2. Private Property
It is well settled that eminent domain is an
General Rule: All private property capable of
inherent power of the State that need not be
ownership may be expropriated
granted even by the fundamental law. Sec. 9,
Art. III merely imposes a limit on the
Exceptions
government’s exercise of this power [Republic
a. Money
v. Tagle, G.R. No. 129079 (1998)].
b. Choses in Action
Who may Exercise Eminent Domain
Chose in Action
Generally: Legislature
It is a personal right not reduced into
Delegated (through charter):
possession such as debts owed by another
1. LGUs
person. It is the right to recover a debt,
2. Other government entities
demand, or damages on a cause of action ex
contractu or for a tort or omission of a duty
The repository of eminent domain powers is
[Black’s Law Dictionary].
the legislature, i.e. exercised through the
enactment of laws. But power may be
3. Public Use
delegated to LGUs and other government
“Public use” has been liberalized not just to
entities (via charter); still, the delegation must
cover cases of actual use by the government
be by law [Manapat v. CA, G.R. No. 110478
for traditional public services (e.g., roads) but
(2007)].
Page 8 of 384
to redistributive purposes (e.g., agrarian Determination of Just Compensation
reform, urban land reform). General Rule: It is computed at the time of the
filing of the complaint for expropriation [Section
Public use includes not only use directly 4, Rule 67, ROC].
available to the public but also those which
redound to their indirect benefit [Heirs of Exceptions:
Ardona v. Reyes, G.R. Nos. L-60549, 60553- • At the time of actual taking, when
55 (1983)]. taking precedes filing of the complaint.
• At the time of payment, after an
As long as the public has the right of use, inequitable lapse of time since the
whether exercised by one or many members of actual taking and the government’s
public, a public advantage or public benefit offer to pay [Heirs of Tria v. Landbank,
accrues sufficient to constitute a public use G.R. No. 170245 (2013)].
[Manosca v. CA, G.R. No. 106440 (1995)].
Inflation will not be considered in determining
4. Taking what the value of a property is for purposes of
There is taking of property when the following computing just compensation [Nepomuceno v.
are present [Republic v. Castellvi, G.R. No. L- CA, G.R. No. 166246 (2008)].
20620 (1974)]:
a. The expropriator must enter a private Determination of Just Compensation is a
property; Judicial Function
b. The entrance into private property must be
for more than a momentary period; The determination of just compensation is a
c. The entry into the property should be judicial function. The executive or legislature
under warrant or color of legal authority; may make the initial determination but when a
d. The property must be devoted to a public party claims a violation in the Bill of Rights, no
use; statute, decree, or executive order can
e. The utilization of the property ousts the mandate that its own determination shall
owner and deprives him of all beneficial prevail over the court’s mandate [EPZA v.
enjoyment of the property. Dulay, G.R. No. L-59603 (1987)].
Not an instance of taking Possessory Taking vs. Regulatory Taking

Imposition of restrictions on the use of property
to protect the public health safety or morals
Possessory Taking Regulatory Taking
from danger is not taking as there is no
dedication to public use [Association of Small
The government The government
Landowners in the Philippines, Inc. v. Sec. of
confiscates or passes a regulation,
Agrarian Reform, G.R. No. 78742 (1989)].
physically occupies but the regulation
property. leaves no
5. Just Compensation
reasonable
Just compensation is defined as the full and fair
economically viable
equivalent of the property taken from its owner
use of the property.
by the expropriator. The measure is not the
taker's gain, but the owner's loss. The word
"just" is used to intensify the meaning of the Generally, and in contrast to expropriation,
word "compensation" and to convey thereby regulation is a species of police power and is
the idea that the equivalent to be rendered for thus non-compensable.
the property to be taken shall be real,
substantial, full, and ample [National However, when the regulation goes “too far”
Transmission Corporation v. Oroville and amounts to a regulatory taking, it will be
Development Corporation, G.R. No. 223366 considered as taking in the eminent domain
(2017)]. sense [City of Manila v. Laguio, G.R. No. 11812
(2005)].
Page 9 of 384
Two stages of Eminent Domain balance, if any, shall be transferred to the
1. Condemnation Stage: Determination of general funds of the Government [Section
the authority of the expropriator to 29(3), Article VI, 1987 Constitution].
exercise the power of eminent domain and
the propriety of its exercise. Requisites [Section 28(1), Article VI]
2. Just Compensation Stage: a. Uniform and Equitable
Determination by the court of the just Taxes should be (a) uniform (persons or things
compensation [Municipality of Biñan v. belonging to the same class shall be taxed at
Garcia, G.R. No. 69260 (1989)]. the same rate) and (b) equitable (taxes should
be apportioned among the people according to
Note: Expropriation proceedings are generally their ability to pay).
initiated by the government, which seeks the
approval of a court for an intended taking. b. Progressive system of taxation
The rate increases as the tax base increases,
When actual taking (occupation) precedes an with social justice as basis. Taxation here is an
expropriation proceeding, the affected private instrument for a more equitable distribution of
individual may file a complaint for just wealth.
compensation (also known as “inverse
expropriation”) [DPWH v. Manalo, G.R. No. The requirement is for Congress to evolve a
217656 (2020)]. progressive system of taxation. Hence, while
the VAT is regressive (as an indirect tax whose
3. Taxation rate does not consider the tax base of the
It is the power by which the State raises consumer to whom it is passed), its imposition
revenue to defray the necessary expenses of is not in violation of this requirement [Tolentino
the Government. It is the enforced proportional v. Secretary of Finance, G.R. No. 115455
contributions from persons and property, levied (1994)].
by the State, for the support of the government
and for all public needs. It is as broad as the c. Delegated tax legislation
purpose for which it is given. Congress may delegate law-making authority
only when the Constitution itself specifically
Purpose: authorizes it.
a. To raise revenue
b. Tool for regulation Scope and Limitation
c. Protection/power to keep alive General Limitations
a. The power to tax exists for the general
Lifeblood theory welfare. It should be exercised only for a
Taxes are the lifeblood of the government, for public purpose.
without taxes, the government can neither exist b. Might be justified as for public purpose
nor endure. A principal attribute of sovereignty, even if the immediate beneficiaries are
the exercise of taxing power derives its source private individuals.
from the very existence of the state whose c. Tax should not be confiscatory. If a tax
social contract with its citizens obliges it to measure is so unconscionable as to
promote public interest and common good. The amount to confiscation of property, the
theory behind the exercise of the power to tax Court will invalidate it. But invalidating a
emanates from necessity; without taxes, tax measure must be exercised with
government cannot fulfill its mandate of utmost caution, otherwise, the State’s
promoting the general welfare and well-being power to legislate for the public welfare
of the people [NPC v. Cabanatuan, G.R. No. might be seriously curtailed.
149110 (2003)]. d. Taxes should be uniform and equitable
[Section 28(1), Article VI, 1987
Tax for special purpose Constitution].
Treated as a special fund and paid out for such
purpose only; when the purpose is fulfilled, the
Page 10 of 384
Judicial review for unconscionable and its constitution and by-laws, the methods of
unjust tax amounting to confiscation of administration, the nature of the actual work
property performed, the character of the services
The legislature has discretion to determine the rendered, the indefiniteness of the
nature, object, extent, coverage, and situs of beneficiaries, and the use and occupation of
taxation. But where a tax measure becomes so the properties. [Lung Center of the Philippines
unconscionable and unjust as to amount to v. Quezon City, G.R. No. 144104 (2004)].
confiscation of property, courts will not hesitate
to strike it down; the power to tax cannot Exception: those portions of its real property
override constitutional prescriptions [Tan v. del that are leased to private entities are not
Rosario, G.R. No. 109289 (1994)]. exempt from real property taxes as these are
not actually, directly and exclusively used for
Specific Limitations charitable purposes. [Lung Center of the
a. Uniformity of taxation Philippines v. Quezon City, supra]
Simply geographical uniformity, meaning it
operates with the same force and effect in 2. If statutory, it has to have been passed by
every place where the subject of it is found majority of all the members of Congress
[Section 28(4), Article VI, 1987 Constitution]
sRule does not prohibit classification for
purposes of taxation, provided the requisites
for valid classification are met [Ormoc Sugar v. D. Relevance of the Declaration
Treasurer of Ormoc, G.R. No. L-237934 of Principles and State Policies
(1968)].
Article II, 1987 Constitution: Declaration of
b. Tax Exemptions Principles and State Policies
No law granting any tax exemption shall be
passed without the concurrence of a majority of Principles (Sections 1-6) – Binding rules
all the Members of Congress [Section 28(4), which must be observed in the conduct of
Article VI, 1987 Constitution]. government [Bernas].
There is no vested right in a tax exemption. State Policies (Sections 7-28) – Guidelines
Being a mere statutory privilege, a tax for the Orientation of the State [Bernas]
exemption may be modified or withdrawn at will
by the granting authority [Republic v. Caguioa, General Rule: Article II of the Constitution is
G.R. No. 168584 (2007)]. not intended to be self-executing principles
ready for enforcement through courts [Tanada
Exemptions may either be constitutional or v. Angara, G.R. No. 118295 (1997)].
statutory:
1. Constitutional exemptions [Section 28(3), Exceptions:
Article VI, 1987 Constitution] The right to a balanced and healthful ecology
[Sec. 16, 1987 Consti.; Oposa v. Factoran, G.R
Charitable institutions, churches and No. 101083 (1993)].
parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands, The right to health [Sec. 15, 1987 Consti.;
buildings, and improvements, actually, directly, Imbong v. Ochoa, G.R. No. 204819 (2014)].
and exclusively used for religious, charitable,
or educational purposes shall be exempt from The State policy of full public disclosure of all
taxation. its transactions involving public interest [Sec.
28, 1987 Consti.; Legaspi v. Civil Service
To determine whether an enterprise is a Commission, G.R. No. 72119 (1987)].
charitable institution/entity or not, the elements
which should be considered include the statute
creating the enterprise, its corporate purposes,
Page 11 of 384
PRINCIPLES 2. The principle of sovereign immunity;
3. A person's right to life, liberty and due
The Philippines is a Democratic and process, and
Republican State
International customary rules are accepted as
Section 1, Article II. The Philippines is a democratic
binding as a result from the combination of two
and republican State. Sovereignty resides in the
people and all government authority emanates from elements:
them. 1. The established, widespread, and
consistent practice on the part of States; and
2. A psychological element known as the
The Philippines, under the 1987 Constitution, opinio juris sive necessitates (opinion as to
is not just a representative government but also law or necessity) [Poe-Llamanzares v.
shares some aspects of direct democracy such COMELEC, G.R. No. 221697 (2016)].
as, for instance, the “initiative and referendum”
under Section 32, Article VI [Bernas]. Civilian Supremacy
Renunciation of War
Section 3, Article II. Civilian authority is, at all times,
Section 2, Article II. The Philippines renounces war supreme over the military. The Armed Forces of the
as an instrument of national policy, adopts the Philippines is the protector of the people and the
generally accepted principles of international law as State. Its goal is to secure the sovereignty of the
part of the law of the land and adheres to the policy State and the integrity of the national territory.
of peace, equality, justice, freedom, cooperation,
and amity with all nations.
The supremacy of civilian authority over the
Only refers to wars of aggression, not
military is implemented under the 1987
defensive war.
Constitution with the President as
Commander-in-Chief of the Armed Forces of
Adoption of Generally Accepted Principles
the Philippines.
of International Law
Generally accepted principles of international
Civilian authority (Section 3, Article II) is not
law (GAPIL), by virtue of the incorporation
defeated in a joint task force between the PNP
clause of the Constitution, form part of the laws
and Marines for the enforcement of law and
of the land even if they do not derive from treaty
order in Metro Manila as long as control is left
obligations.
to the PNP [IBP v. Zamora, G.R. No. 141284
(2000)].
Incorporation: When, by mere constitutional
declaration, international law is deemed to
Role of the Armed Forces
have the force of domestic law [Pharmaceutical
a. Protector of the people and the State
and Health Care Assoc. Of the Philippines v.
b. Secure the sovereignty of the State and the
Duque III, G.R. No. 173034 (2007)].
integrity of the national territory
Compare Transformation: Requires that an
Compulsory Military and Civil Service
international law be transformed into a
domestic law through a constitutional Section 4, Article II. The prime duty of the
mechanism such as local legislation [Id.] Government is to serve and protect the people. The
Government may call upon the people to defend the
Allows an international principle, even if not
State and, in the fulfillment thereof, all citizens may
GAPIL, to have the force and effect of domestic be required, under conditions provided by law, to
law. render personal military or civil service.
"Generally accepted principles of

international law" - norms of general or The phrase "under conditions provided by law"
customary international law which are binding was placed in lieu of "with due regard for
on all states, e.g., objections of conscience" and was intended to
1. Renunciation of war as an instrument of give to Congress a flexible guideline for dealing
national policy; with conscientious objectors, e.g., persons who
Page 12 of 384
refuse the military draft for reasons of Freedom from Nuclear Weapons
conscience [Bernas].
Section 8, Article II. The Philippines, consistent
Maintenance of Peace and Order, with the national interest, adopts and pursues a
Promotion of General Welfare policy of freedom from nuclear weapons in its
territory.
Section 5, Article II. The maintenance of peace and
order, the protection of life, liberty, and property, and The ban on nuclear arms includes not only
the promotion of the general welfare are essential for possessing, controlling and manufacturing
the enjoyment by all the people of the blessings of
democracy.
nuclear but also nuclear tests in our territory,
as well as the use of our territory as dumping
ground for radioactive wastes [Bernas].
Recognition of Hierarchy of Rights [Bernas;
Section 5, supra] There is no ban on nuclear energy, which has
a. Life been recognized by the other branches of
b. Liberty government (Congress through the Phil.
c. Property Nuclear Energy Act of 1957; the Executive as
recent as 2022 through the E.O. on the
Separation of Church and State National Position for a Nuclear Energy
Program).
Section 6, Article II. The separation of Church and
State shall be inviolable. Promote Just and Dynamic Social Order
The fact that R.A. No. 3350 grants a privilege Section 9, Article II. The State shall promote a just
to members of said religious sects cannot by and dynamic social order that will ensure the
prosperity and independence of the nation and free
itself render the Act unconstitutional, for the Act the people from poverty through policies that provide
only restores to them their freedom of adequate social services, promote full employment,
association which closed shop agreements a rising standard of living, and an improved quality
have taken away and puts them in the same of life for all.
plane as the other workers who are not
prohibited by their religion from joining labor
Promote Social Justice in All Phases of
unions [Victoriano v. Elizalde Rope Workers,
National Development
G.R. No. L-25246 (1974)].
See also discussion on Establishment Clause Section 10, Article II. The State shall promote
in Constitutional Law II. social justice in all phases of national development.
STATE POLICIES Personal Dignity and Human Rights
Independent Foreign Policy Section 11, Article II. The State values the dignity
of every human person and guarantees full respect
Section 7, Article II. The State shall pursue an for human rights.
independent foreign policy. In its relations with other
states the paramount consideration shall be national
sovereignty, territorial integrity, national interest, and Family as Basic Social Institution and
the right to self-determination. Natural and Primary Right and Duty of
Parents in the Rearing of the Youth
Paramount considerations: national
sovereignty, territorial integrity, national Section 12, Article II. The State recognizes the
sanctity of family life and shall protect and
interest, and the right to self-determination. strengthen the family as a basic autonomous social
institution. It shall equally protect the life of the
mother and the life of the unborn from conception.
Page 13 of 384
The natural and primary right and duty of parents in well-being is likewise imperiled as minor
the rearing of the youth for civic efficiency and the children are prone to making detrimental
development of moral character shall receive the decisions” [SPARK v. Quezon City, G.R. No.
support of the Government. 225442 (2017)].
The right and duty referred to here is primary, Protection of the Life of the Mother and the
not exclusive. Life of the Unborn from Conception
Doctrine of Parens Patriae The question of when life begins is a scientific

Parens patriae holds the State under obligation and medical issue that should not be decided
to provide protection and look after the welfare (in the RH petitions) without proper hearing and
of its people especially those who cannot tend evidence [Imbong v. Ochoa, supra].
to themselves. Parens patriae means parent of
his or her country, and refers to the State in its N.B. Discussions in the RH cases on when life
role as "sovereign", or the State in its capacity begins are all personal opinions of the justices.
as a provider of protection to those unable to The discussion in the main opinion was
care for themselves [Southern Luzon Drug expressly cautioned as the personal opinion of
Corporation v. DSWD, G.R. No. 199669 the ponente and is thus, at best, obiter dictum.
(2017)].
Vital Role of Youth in Nation-Building
The State, as parens patriae, has an inherent
right to aid parents in the moral development of Section 13, Article II. The State recognizes the vital
the youth. Hence, the provision in the RH Law role of the youth in nation-building and shall promote
mandating the teaching of age- and and protect their physical, moral, spiritual,
intellectual, and social well-being. It shall inculcate
development-appropriate reproductive health in the youth patriotism and nationalism, and
education is not per se unconstitutional; a encourage their involvement in public and civic
ruling on its constitutionality would be affairs.
premature absent an actual curriculum
formulated by the Department of Education
Role of Women in Nation Building
[Imbong v. Ochoa, G.R. No. 204819 (2014)].
Fundamental Equality Before the Law of
Women and Men
Quezon City’s imposed curfew does not violate
Section 12, Article II of the Constitution
because the curfew was done within the role of Section 14, Article II. The State recognizes the role
the State as parens patriae. While parents of women in nation-building, and shall ensure the
fundamental equality before the law of women and
have a primary role in raising a child, “when
men.
actions concerning the child have a relation to
the public welfare or the well-being of the child,
the State may act to promote these legitimate Right to Health
interests”, especially in cases that may bring
harm to a child or to public safety. This Section 15, Article II. The State shall protect and
overrides a parent’s right to control upbringing promote the right to health of the people and instill
of a child. The State is mandated to support health consciousness among them.
parents in exercise of rights and duties, and
state authority is therefore, not exclusive of, but
Right to a Balanced and Healthful Ecology
rather complementary to parental supervision.
The Curfew Ordinances merely serve as legal Section 16, ArticlE II. The State shall protect and
restrictions designed to aid parents in advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and
promoting their child’s welfare. Though these harmony of nature.
are inherently limiting on the part of the minor,
this is necessary because the youth is
vulnerable and inexperienced, and “their moral
Page 14 of 384
Citizens have a public right to a balanced and communities within the framework of national unity
healthful ecology, the right of which need not and development.
be written in the Constitution for it is assumed
to be an issue of transcendental importance
with intergenerational implications. Such right Community-Based, Sectoral Organizations
carries with it the correlative duty to refrain from
impairing the environment [Oposa v. Factoran, Section 23, Article II. The State shall encourage
G.R. No. 101083 (1993)]. non-governmental, community-based, or sectoral
organizations that promote the welfare of the nation.
Priority to Education, Science, and
Technology, Arts, Culture, and Sports Rule of Communication and Information in
Nation-Building
Section 17, Article II. The State shall give priority to
education, science and technology, arts, culture, Section 24, Article II. The State recognizes the vital
and sports to foster patriotism and nationalism, role of communication and information in nation-
accelerate social progress, and promote total human building.
liberation and development.
Autonomy of Local Governments

Labor as a Primary Social Economic Force
Section 25, Article II. The State shall ensure the

Section 18, Article II. The State affirms labor as a autonomy of local governments.
primary social economic force. It shall protect the
rights of workers and promote their welfare.
Equal Access for Public Service and
Prohibition of Political Dynasties
Self-Reliant and Independent National
Economy
Section 26, Article II. The State shall guarantee
equal access to opportunities for public service, and
Section 19, Article II. The State shall develop a self- prohibit political dynasties as may be defined by law.
reliant and independent national economy
effectively controlled by Filipinos. The state policy against political dynasties is
not self-executing. It does not provide a
judicially enforceable constitutional right but
Role of Private Sector
merely specifies a guideline for legislative or
executive action [Belgica v. Ochoa, G.R. No.
Section 20, Article II. The State recognizes the 208566 (2013)].
indispensable role of the private sector, encourages
private enterprise, and provides incentives to
Honesty and Integrity in Public Service
needed investments.
Section 27, Article II. The State shall maintain

Comprehensive Rural Development and honesty and integrity in the public service and take
Agrarian Reform positive and effective measures against graft and
corruption.
Section 21, Article II. The State shall promote

comprehensive rural development and agrarian Policy of Full Public Disclosure
reform.
Section 28, Article II. Subject to reasonable

Recognition and Promotion of Rights of conditions prescribed by law, the State adopts and
Indigenous Cultural Communities implements a policy of full public disclosure of all its
transactions involving public interest.
Section 22, Article II. The State recognizes and

promotes the rights of indigenous cultural
Page 15 of 384
E. Dynamics Among the government cannot be decided upon by the
Courts.
Branches of Government
The determination of a truly political question
1. Separation of Powers from a non-justiciable political question lies in
Separation of powers is a fundamental the answer to the question of whether there are
principle in our system of government and is constitutionally imposed limits on powers or
founded on the belief that, by establishing functions conferred upon political bodies. If
equilibrium among the three (3) power holders, there are, then our courts are duty-bound to
harmony will result and power will not be examine whether the branch or instrumentality
concentrated and tyranny will be avoided of the government properly acted within such
[Bernas]. Any system that is violative of the limits. [Francisco, Jr. v. House of
principle of separation of powers is Representatives, G.R. No. 160261 (2003)].
unconstitutional and void [Belgica v. Ochoa,
supra]. Application
A. Belgica v. Ochoa, supra
Each of the three branches of government has The Pork Barrel System violates the separation
exclusive cognizance of and is supreme in of powers because it is a form of post
matters falling within its constitutionally enactment authority in the implementation or
allocated sphere; each branch cannot invade enforcement of the budget.
the domain of others. Powers of the 1. The system permits legislative
government are separated to avoid encroachment upon the executive
concentration of powers in any one branch prerogative of implementing the law, by
[Gatmaytan]. giving individual legislators: (a) The power
to determine projects after the General
Three (3) branches of the Philippine Appropriations Act (GAA) is passed; and
government: (b) through congressional committees,
1. Legislative authority in the areas of fund release and
2. Executive realignment, the system encroaches on
3. Judiciary the Executive’s power to implement the
law.
The principle of separation of powers ordains 2. Furthermore, identification of a project by
that each of the three government branches a legislator being a mandatory
has exclusive cognizance of and is supreme in requirement before his PDAF can be
concerns falling within its own constitutionally tapped as a source of funds, his act
allocated sphere. It intends to secure action, to becomes indispensable in the entire
forestall over-action, to prevent despotism, and budget execution process.
to promote efficiency.
B. Ocampo v. Enriquez, G.R. No. 225973
While the separation of powers is not expressly (2016)
provided for in the Constitution [currently found In allowing the internment of Marcos at the
in Sec. 1 of Articles VI, VII, and VIII], it obtains LNMB, which is a land of the public domain
from actual division in the Constitution. Each devoted for national military cemetery and
department has exclusive cognizance of military shrine purposes, President Duterte
matters within its jurisdiction and is supreme decided a question of policy based on his
within its own sphere [Angara v. Electoral wisdom that it shall promote national healing
Commission, G.R. No. L-45081 (1936)]. and forgiveness. There being no taint of grave
abuse of discretion, as discussed below,
Political Question Doctrine President Duterte’s decision on that political
A question in which resolution has been vested question is outside the ambit of judicial review.
by the Constitution exclusively in the people, or
in which full discretionary authority has been
delegated to a co-equal political branch of the
Page 16 of 384
C. Forietrans Manufacturing Corporation v. PDAF are determined by the
Davidoff Et Cie. SA, G.R. No. 197482 (2017) congressman only after the GAA is
The task of determining probable cause is passed. The president then would not be
lodged with the public prosecutor and able to discern whether or not he should
ultimately, the Secretary of Justice. Under the veto the appropriation.
doctrine of separation of powers, courts have 2. It has a detrimental effect on
no right to directly decide matters over which Congressional Oversight. Because
full discretionary authority has been delegated legislators effectively intervene in project
to the Executive Branch of the Government. implementation, it becomes difficult for
them to exercise their (valid) post
D. OCA v. Reyes, A.M. No. P-08- 2535 (2010) enactment role of scrutinizing,
Legislative power cannot limit the Court’s investigating, or monitoring the
power to impose disciplinary actions against implementation of the law, when they are
erring justices, judges and court personnel. no longer disinterested observers [Belgica
Neither should such policy be used to restrict v. Ochoa, supra].
the Court’s power to preserve and maintain the
Judiciary’s honor, dignity and integrity and B. Gonzales v. Aguinaldo, G.R. No. 74769
public confidence that can only be achieved by (1990)
imposing strict and rigid standards of decency Section 8(2) of R.A. No. 6770, providing that
and propriety governing the conduct of justices, the President may remove a Deputy
judges and court employees. Ombudsman, is unconstitutional. Subjecting
the Deputy Ombudsman to discipline and
E. Angara v. Electoral Commission, supra removal by the President, whose own alter
The separation of powers is a fundamental egos and officials in the Executive department
principle in our system of government. It are subject to the Ombudsman’s disciplinary
obtains not through express provision but by authority, cannot but ser0069ously place at risk
actual division in our Constitution. Each the independence of the Office of the
department of the government has exclusive Ombudsman itself. Section 8(2) of R.A. No.
cognizance of matters within its jurisdiction, 6770 intruded upon the constitutionally-granted
and is supreme within its own sphere. But it independence of the Office of the
does not follow from the fact that the three Ombudsman. By so doing, the law directly
powers are to be kept separate and distinct that collided not only with the independence that
the Constitution intended them to be absolutely the Constitution guarantees to the Office of the
unrestrained and independent of each other. Ombudsman, but inevitably with the principle of
The Constitution has provided for an elaborate checks and balances that the creation of an
system of checks and balances to secure Ombudsman office seeks to revitalize. What is
coordination in the workings of the various true for the Ombudsman must equally and
departments of the government. necessarily be true for her Deputies who act as
agents of the Ombudsman in the performance
2. System of Checks and Balances of their duties. The Ombudsman can hardly be
Corollary to Separation of Powers: Prevents expected to place her complete trust in her
authority from being concentrated in one subordinate officials who are not as
branch. Each branch is supreme within their independent as she is, if only because they are
own sphere. subject to pressures and controls external to
her Office [Gonzales III v. Office of the
Application President, G.R. No. 196231 (2014)].
A. Belgica v. Ochoa, supra
The Pork Barrel system is unconstitutional, C. Legislative Veto
among others, because it violates the system
of checks and balances. Congressional oversight is not per se violative,
1. It deprives the president of his item-veto but is integral to separation of powers.
power. As lump-sum appropriations, the However, for a post-enactment congressional
actual projects under each congressman’s measure to be valid, it must be limited to:
Page 17 of 384
1. Scrutiny: Congress’ power of Provincial Board of Mindoro, G.R. No. L-14078
appropriation, i.e., budget hearings, and (1919) cited in Belgica v. Ochoa, supra.
power of confirmation
This is an express exception under the 1987
2. Investigation and monitoring of Constitution. See Article X, Sec. 9 of the 1987
implementation of laws: Using its power Constitution, explicitly mentioning “legislative
to conduct inquiries in aid of legislation bodies of local governments;” and Section 20
[Abakada Guro Partylist v. Purisima, G.R. providing for the coverage of legislative powers
No. 166715 (2008)]. delegated to autonomous regions via the
latter’s organic acts].
A legislative veto, i.e., statutory provision
(which may take the form of a congressional b. Constitutionally-grafted Presidential
oversight committee) that requires the Exceptions
President or an agency to submit the proposed i. Emergency power delegated to the Executive
implementing rules and regulations of a law to during the State of War or National Emergency
Congress for approval, is unconstitutional. It [Section 23(2), Article VI, 1987 Constitution];
encroaches on: and
1. The Executive: For it allows Congress to ii. Certain taxing powers of the President
take a direct role in the enforcement of its [Section 28(2), Article VI, 1987 Constitution].
laws;
The Congress may authorize the President to
2. The Judiciary: Administrative issuances fix, within specified limits, and subject to such
enjoy a presumption of validity, and only limitations and restrictions as it may impose,
the courts may decide whether or not they tariff rates, import and export quotas, tonnage
conform to statutes or the Constitution and wharfage dues, and other duties or
[Abakada Guro Partylist v. Purisima, imposts within the framework of the national
supra] development program of the Government.
3. Delegation of Powers c. The extent reserved to the people by the

provision on initiative and referendum
Rule of Non-Delegation of Legislative [Section 1, Article VI, 1987 Constitution].
Power
Principle: Delegata potestas non potest Subordinate legislation made by
delegari – What has been delegated can no administrative agencies
longer be delegated. The principle of non-delegability should not be
confused with the delegated rule-making
Rationale: Since the powers of the authority of implementing agencies [Belgica v.
government have been delegated to them by Ochoa, supra]. Strictly speaking, what is
the people, who possess original sovereignty, delegated is not “law-making” power, but rule-
these powers cannot be further delegated by making power, limited to (a) filling up the details
the different government departments to some of the law; or (b) ascertaining facts to bring the
other branch or instrumentality of the law into actual operation.
government.
While there are two views on the nature of
General Rule: Only Congress (as a body) may administrative rulemaking and subordinate
exercise legislative power. legislation (i.e., as a species of delegated
legislative power or as an exercise of the
Exceptions executive power to implement the law), the
a. Delegated legislative power to local traditional enumeration of the exceptions (see
governments: Local governments, as an below) include subordinate legislation.
immemorial practice, may be allowed to
legislate on purely local matters [See Rubi v.
Page 18 of 384
Traditional/Simplified Formulation: the law [Pelaez v. Auditor General, G.R. No. L-
23825 (1965)]; and
Who may exercise legislative powers:
b. Sufficient Standard Test: The standard is
General Rule: Congress only. sufficient if it defines legislative policy, marks
its limits, maps out its boundaries and specifies
Exceptions: PLATE the public agency to apply it. It indicates the
circumstances under which the legislative
1. Delegation to the People (by initiative and
command is to be effected [Edu v. Ericta, G.R.
referendum)
No. L-32096 (1970)].
2. Delegation to the Local governments
3. Delegation to the Administrative bodies The standard must specify the limits of the
a. Increasing complexity of the task of delegates authority, announce the legislative
government policy and identify the conditions under which it
b. Lack of technical competence of is to be implemented, e.g.,
● Public interest
Congress
● Justice and equity
c. Administrative bodies may fill up ● Simplicity, sufficiency, and economy
details of statute for implementation
d. Legislature may pass “contingent F. State Immunity
legislation”, which leaves to another
body the business of ascertaining Summary of Rule
facts General Rule: The State cannot be sued.
4. Delegation of Tariff powers to the
President under Constitution [Article 6, Constitutional Basis: Section 3, Article XVI.
The State may not be sued without its consent.
Section 28(2), 1987 Constitution]
5. Delegation of Emergency powers to the International Law Basis: Par in parem non
President under Constitution [Article 6, habet imperium.
Section 23(2), 1987 Constitution] • “An equal does not have power over an
equal”
There is neither an express prohibition nor an
express grant of authority in the Constitution for Basis in Jurisprudence
Congress to delegate to regional or local • Positivist Theory – There can be no
legislative bodies the power to create local legal right as against the authority that
government units. However, under its plenary makes the laws on which the right
legislative powers, Congress can delegate to depends. Also called the doctrine of
local legislative bodies the power to create Royal Prerogative of Dishonesty
local government units, subject to reasonable [Department of Agriculture v. NLRC,
standards and provided no conflict arises with G.R. No. 104269 (1993)].
any provision of the Constitution [Sema v. • Sociological Theory – If the State is
COMELEC, G.R. No. 177597 (2008)]. amenable to suits, all its time would be
spent defending itself from suits and
Test for Valid Delegation this would prevent it from performing its
Rule: There is a valid delegation of legislative other functions [Republic v. Villasor,
power when it passes the following tests – G.R. No. L-30671 (1973)].
a. Completeness test: The law sets forth the Exception: When the State consents to be
policy to be executed, carried out, or sued.
implemented by the delegate [Abakada Guro
Partylist v. Purisima, supra], such that there is How consent is given:
nothing left for the delegate to do but to enforce 1. Express
a. Through general law; or
Page 19 of 384
b. Through special law 4. Even when the suit, on its face, is against
2. Implied an officer but liability will belong to/fall on
a. When the State enter into business the government.
contracts with individuals (performing
proprietary functions); When is a suit NOT against the State?
b. When the State commences litigation 1. When it partakes of the nature of ordinary
and becomes vulnerable to business rather than functions of a
counterclaim; governmental or political character;
c. When it would be inequitable for the 2. When the purpose of the suit is to compel
State to invoke immunity; and an officer charged with the duty of making
d. In eminent domain cases. payments pursuant to an appropriation
made by law in favor of the plaintiff to
a. Two Theories of Sovereign Immunity make such payment, since the suit is
[US v. Ruiz, G.R. No. L-35645 (1985)] intended to compel performance of a
ministerial duty [Begosa v. Philippine
1. Absolute or Classical Theory — A Veterans Association, G.R. No. L-25916
sovereign cannot, without its consent, be made (1970)];
a respondent in the courts of another 3. When it is clear that the respondent is a
sovereign. public officer sued in a private capacity;
4. When the action is not in personam with
This derives from the principle of sovereign the government as the named defendant,
equality found in Article 2(1) of the UN Charter but an action in rem that does not name
as well as generally accepted principles of the government in particular.
international law. 5. When the officer sued acted beyond his
official capacity (i.e., ultra vires)
2. Restrictive Theory — The immunity of the
sovereign is recognized only with regard to Official Capacity vs. Personal Capacity
public acts or acts (jure imperii) of state, but not The doctrine of non-suability applies only in
regard to private acts or acts (jure gestionis) cases wherein the complaint is against officials
of state for acts performed in discharge of
The Philippines follows the restrictive theory. duties or his official capacity. When officials
abuse this authority gravely (like discriminatory
The restrictive theory came about because of behavior), this is no longer an official state act
the entry of sovereign states into purely and the official may now be sued in his
commercial activities remotely connected with personal capacity [Shauf v. CA, G.R. No.
the discharge of governmental functions. This 90314 (1990)].
is particularly true with respect to the
Communist states which took control of Beyond Scope of Authority
nationalized business activities and When officials, while discharging their official
international trading. (The Holy See v. Rosario, functions, commit acts that are beyond their
Jr., G.R. No. 101949 (1994)]. scope of authority (i.e., police forces firing upon
civilians and killing them, mistakenly believing
b. Suits Against the State they were Communists), they will be liable in
their personally capacity and thus will not be
When is a suit considered a suit against the covered by state immunity [Republic v.
State? Sandoval, G.R. No. 84607 (1993)].
1. If it produces adverse consequences to
public treasury in terms of disbursement c. Consent To Be Sued
as well as loss of government property,
regardless of the defense; (1) Express Consent
2. When the Republic is sued in its name;
3. When the suit is against an unincorporated Effected only by the will of the legislature
government agency; and through the medium of a duly enacted statute;
Page 20 of 384
may be embodied either in a general law or a SECTION 5. When the Government of the
special law. Philippines is plaintiff in an action instituted in any
court of original jurisdiction, the defendant shall have
The exclusion of existing private rights from the the right to assert therein, by way of set-off or
reservation established by Proclamation No. counterclaim in a similar action between private
parties.
90 can not be construed as a waiver of the
immunity of the State from suit. Waiver of
immunity, being a derogation of sovereignty, b. Torts
will not be inferred lightly, but must be
construed in strictissimi juris. Moreover, the 1. Liability of local government units
Proclamation is not a legislative act. The Provinces, cities and municipalities shall be
consent of the State to be sued must emanate liable for damages for the death or injuries
from statutory authority. Waiver of State suffered by any person by reason of the
immunity can only be made by an act of the defective conditions of roads, streets, public
legislative body. (Republic v. Feliciano, G.R. buildings and other public works under their
No. 70853 (1987)]. control and supervision [Article 2189, CC].
When the State expressly states their consent 2. Vicarious liability for special agents
to be sued through legislation (including The Government is only liable for the acts of its
treaties), it waives its immunity from suit. agents, officers and employees, when they act
However, this waiver of immunity may be as special agents within the meaning of the
limited to certain legal actions (i.e., under the provision [Article 2180(6), CC].
VFA, there is a waiver of immunity by the US
under criminal jurisdiction but not to civil Special Agent — One who receives a definite
actions) [Arigo v. Swift, G.R. No. 206510 and fixed order or commission, foreign to the
(2014)]. exercise of the duties of his regular office [See
Merritt v. Government of the Philippine Islands,
(i) General Law G.R. No. L-11154 (1916)].
Authorizes any person who meets the One who performs his regular functions, even
conditions stated in the law to sue the if he is called a “special agent”, is not a special
government in accordance with the procedure agent within the context of Government liability
in the law; e.g., [USA v. Guinto, G.R. No. 76607 (1990)].
a. Money claims arising from contract 3. Liability under the Local Government
express or implied Code
Local government units and their officials are
Act No. 3083: An Act Defining the Conditions not exempt from liability for death or injury to
under which the Government of the Philippines persons or damage to property [Section 24,
may be sued. LGC].
SECTION 1. Complaint against Government. — (ii) Special Law — May come in the
Subject to the provisions of this Act, the Government
of the Philippines hereby consents and submits to
form of a private bill authorizing a
be sued upon any moneyed claim involving liability named individual to bring suit on a
arising from contract, express or implied, which special claim.
could serve as a basis of civil action between private
parties. By consenting to be sued a state simply waives
its immunity from suit. It does not thereby
SECTION 2. A person desiring to avail himself of the
privilege herein conferred must show that he has
concede its liability to plaintiff, or create any
presented his claim to the Insular Auditor [now the cause of action in his favor, or extend its liability
Commission on Audit] and that the latter did not to any cause not previously recognized. It
decide the same within two months from the date of merely gives a remedy to enforce a pre-
its presentation. existing liability and submits itself to the
Page 21 of 384
jurisdiction of the court, subject to its right to express consent [SSS v. Court of Appeals,
interpose any lawful defense [Merritt v. G.R. No. L-41299 (1983)].
Government of the Philippine Islands, supra]
b. Unincorporated: There must be an
(2) Implied Consent inquiry into the principal functions of
government.
a. In instances when the State takes private
property for public use or purpose i. If governmental: No suit without its
(eminent domain). consent [Bureau of Printing v. Bureau
b. When the State enters into a business of Printing Employees Association,
contract (in jure gestionis or proprietary G.R. No. L-15751 (1961)].
functions).
c. When it would be inequitable for the State ii. If proprietary: The suit will lie
to invoke its immunity. because when the State engages in
d. If the government files a complaint and principally proprietary functions, it
seeks affirmative relief, the defendant may descends to the level of a private
file a counterclaim against it. individual, and may, therefore be
e. When the State directs a compensate vulnerable to suit [Civil Aeronautics
taking (e.g., appropriation) for just Administration v. Court of Appeals,
compensation of the plaintiff. G.R. No. L-51806 (1988)].
Note: When the DOTC constructed the The State may only be liable for
encroaching structures and subsequently proprietary acts (jure gestionis) and
entered into the FLA with Digitel for their not for sovereign acts (jure imperii).
maintenance, it was carrying out a sovereign
function. Therefore, these are acts jure imperii
Types Function Role
that fall within the cloak of state immunity.
However, the doctrine of state immunity cannot Incorporated Governmental CAN be sued
serve as an instrument for perpetrating an or proprietary ONLY IF
injustice to a citizen. The SC, citing Ministerio charter allows
v. CFI (1971), held that when the government
takes any property for public use, which is Unincorpora Governmental CANNOT be
conditioned upon the payment of just ted sued unless
compensation, to be judicially ascertained, it consent is
makes manifest that it submits to the given
jurisdiction of a court. The Department's entry
into and taking of possession of the Proprietary CAN be sued
respondents' property amounted to an implied
waiver of its governmental immunity from suit
[DOTC v. Sps. Abecina, G.R. No. 206484 Note: The State's immunity from suit did not
(2016)]. extend to the NHA despite its being a
government owned and controlled corporation.
d. Specific Rules Under Section 6(i) of PD No. 757, which was
its charter, the NHA could sue and be sued.
Suits against Government Agencies: There is no question that the NHA could sue or
be sued, and thus could be held liable under
Suability depends on whether the agency is the judgment rendered against it. But the
incorporated (i.e., there is a separate charter) universal rule remains to be that the State,
or unincorporated (i.e., no separate although it gives its consent to be sued either
personality). by general or special law, may limit the
claimant's action only up to the completion of
a. Incorporated: If the charter provides that proceedings anterior to the stage of execution.
the agency can sue, then the suit will lie. The power of the court ends when the
The provision in the charter constitutes
Page 22 of 384
judgment is rendered because government f. Scope of Consent (Consent to Liability,
funds and property may not be seized pursuant Independently Required)
to writs of execution or writs of garnishment to
satisfy such judgments. The functions and When a money judgment is given against the
public services of the State cannot be allowed government, the ordinary rule for execution
to be paralyzed or disrupted by the diversion of would not apply, for the consent of the
public funds from their legitimate and specific government to be sued is only up to the point
objects, and as appropriated by law. The rule of judgment. If it does not pay, it cannot be
is based on obvious considerations of public compelled to pay by attachment or otherwise.
policy [National Housing Authority v. Roxas,
G.R. No. 171953 (2015)]. Consent to be sued is not a concession of
liability. Suability depends on the consent of
Suits against Public Officers the State to be sued, and liability on the
General Rule: The doctrine of state immunity applicable law and the established facts. The
also applies to complaints filed against officials circumstance that a State is suable does not
of the State for acts performed by them in the necessarily mean that it is liable, but it can
discharge of their duties within the scope of never be held liable if it does not first consent
their authority. to be sued. When the State does waive its
sovereign immunity, it is only giving the plaintiff
Exception: The doctrine of immunity from suit the chance to prove that it is liable [USA v.
will not apply and may not be invoked where Guinto, G.R. No. 76607 (1990)].
the public official is being sued in his (1) private
and personal capacity as an ordinary citizen, g. Estoppel
for (2) acts without authority or in excess of the General Rule: The State cannot be put in
powers vested in him [Lansang v. CA, G.R. No. estoppel by the mistakes or errors of its officials
102667 (2000)]. or agents [Republic v. Galeno, G.R. No.
215009 (2017)].
Note: Acts done without authority are not acts
of the State (see Beyond Scope of Authority). Exception: Estoppel may not be invoked
where they would operate to defeat the
e. Exceptions to Prior Consent Rule effective operation of a policy adopted to
Jurisprudence provides these exceptions, protect the public, or in those special cases
when the State or public officer may be sued where the interest of justice clearly required it.
without prior consent: Respondent had already acquired a vested
1. To compel the State or public officer to do right on the tax classification of its San Mig
an act required by law; Light as a new brand. To allow petitioner to
2. To restrain the State or public officer from change its position will result in deficiency
enforcing an act claimed to be assessments in substantial amounts against
unconstitutional; respondent to the latter's prejudice
3. To compel the payment of damages from [Commissioner of Internal Revenue v. San
an already appropriated assurance fund or Miguel Corporation, G.R. Nos. 205045 &
to refund tax over-payments from a fund 205723 (2017)].
already available for the purpose;
4. To secure a judgment that the officer G. National Territory
impleaded may satisfy by himself without
1. Scope
the State having to do a positive act to
assist him; 1987 Constitution
5. Where the government itself has violated
Article I. The national territory comprises the
its own laws [Sanders v. Veridiano II, G.R. Philippine archipelago, with all the islands and
No. L-46930 (1988)]. waters embraced therein, and all other territories
over which the Philippines has sovereignty or
jurisdiction, consisting of its terrestrial, fluvial, and
aerial domains, including its territorial sea, the
Page 23 of 384
seabed, the subsoil, the insular shelves, and other the Turtle and Mangsee Islands [Bernas
submarine areas. The waters around, between, and (2003), cited in Justice Velasco’s
connecting the islands of the archipelago, concurring opinion in Magallona v. Ermita,
regardless of their breadth and dimensions, form G.R. No. 187167 (2011)].
part of the internal waters of the Philippines.
Methods of Baseline Determination
The national territory is comprised of — Baselines laws such as R.A. No. 9522 are
1. Philippine archipelago, with all the islands enacted by United Nations Convention on the
and waters embraced therein, including Law of the Seas III (UNCLOS III) State parties
internal waters; and to mark-out specific basepoints along their
2. All other territories over which the coasts from which baselines are drawn, either
Philippines has sovereignty or jurisdiction. straight or contoured, to serve as geographic
It consists of — starting points to measure the breadth of the
a. Territorial sea, seabed, subsoil, insular maritime zones and continental shelf.
shelves, and other submarine areas UNCLOS III and its ancillary baselines laws
b. Terrestrial, fluvial, and aerial domains play no role in the acquisition, enlargement or,
[Article I, 1987 Constitution] as petitioners claim, diminution of territory.
Internal Waters: The waters around, between, UNCLOS III has nothing to do with the
and connecting the islands of the archipelago, acquisition (or loss) of territory. It is a
regardless of their breadth and dimensions, multilateral treaty regulating, among others,
form part of the internal waters of the sea-use rights over maritime zones (i.e., the
Philippines [Article I, 1987 Constitution]. territorial waters [12 nautical miles from the
baselines], contiguous zone [24 nautical miles
Archipelagic Doctrine - The Philippine from the baselines], exclusive economic zone
Archipelago is one single unit. Hence, all [200 nautical miles from the baselines]), and
waters within the Philippines’ baselines – continental shelves that UNCLOS III delimits.
regardless of their breadth and distance from
the nearest island coastline – are archipelagic UNCLOS III was the culmination of decades
waters.” long negotiations among United Nations
members to codify norms regulating the
Within the archipelago, the Philippines conduct of States in the world's oceans and
exercises territorial sovereignty, limited only by submarine areas, recognizing coastal and
the freedom of navigation and overflight in the archipelagic States' graduated authority over a
UNCLOS. limited span of waters and submarine lands
along their coasts. XXX Under traditional
Treaty limits of the Philippine archipelago international law typology, States acquire (or
1. Treaty of Paris of 10 December 1898: conversely, lose) territory through occupation,
“Spain cedes to the United States the accretion, cession and prescription, not by
archipelago known as the Philippines executing multilateral treaties on the
Islands, and comprehending the islands regulations of sea-use rights or enacting
lying within the following line” xxx statutes to comply with the treaty's terms to
delimit maritime zones and continental
Article 3 defines the metes and bounds of shelves. Territorial claims to land features are
the archipelago by longitude and latitude, outside UNCLOS III and are instead governed
degrees and seconds. by the rules on general international law
[Magallona v. Ermita, G.R. No. 187167 (2011)].
2. Treaty of Washington of 7 November
1900 between the United States and R.A. No. 9522 (March 10, 2009) - The current
Spain: Ceding Cagayan, Sibuto and Sulu. baselines law created 101 base points around
the Philippines to determine the baseline. This
3. Treaty of 12 January 1930 between the aims to demarcate the country's maritime zone
United States and Great Britain: Ceding and continental shelf in accordance with
Page 24 of 384
UNCLOS III and is not meant to delineate
Philippine territory. Under the Treaty of Paris,
II. LEGISLATIVE
baselines cannot be drawn from the DEPARTMENT
boundaries or other portions of the rectangular
area but the outermost islands and drying reefs A. Nature of Legislative Power
of the archipelago.
1. Derivative and Delegated Power
R.A. No. 9522 is not unconstitutional: (1) It
is a statutory tool to demarcate the maritime
zone and continental shelf of the Philippines SECTION 1, ARTICLE VI. The legislative power
under UNCLOS III and does not alter the shall be vested in the Congress of the Philippines
which shall consist of a Senate and a House of
national territory. (2) While UNCLOS III does
Representatives, except to the extent reserved to
not bind the Philippines to pass a baselines the people by the provision on initiative and
law, Congress may do so. (3) The law also referendum.
does not abandon the country's claim to
Sabah, as it does not expressly repeal the
entirety of R.A. No. 5446. Derivative legislative power is that which has
been delegated by the sovereign people to
R.A. No. 9522 uses the framework of regime of legislative bodies such as the Congress and is
islands in determining the maritime zones of subordinate to the original power of the people.
the Kalayaan Island Group (KIG) and [Garcia v. COMELEC, G.R. No. 111230
Scarborough Shoal. Regime of islands refers (1994)].
to any natural formed area of land surrounded
by water that generate their own applicable “[E]xcept to the extent reserved to the
maritime zone [UNCLOS III]. people by the provision on initiative and
referendum”
Straight baseline method — Consists of
drawing straight lines connecting appropriate This clause pertains to the original power of
points on the coast without departing to any legislation which the sovereign people have
appreciable extent from the general direction of reserved for their exercise in matters they
the coast, in order to delineate the internal consider fit. Considering that derivative
waters from the territorial waters of an legislative power is merely delegated by the
archipelago. (Note: This is the method sovereign people to its elected representatives,
prescribed under the UNCLOS) it is deemed subordinate to the original power
of the people. [Marmeto v. COMELEC, G.R.
R.A. No. 9522 amends R.A. No. 3046 (as No. 213953 (2017)].
amended by R.A. No. 5446). R.A. No. 3046
determined appropriate points of the outermost Tests for Valid Delegation
islands of the archipelago, then connected Rule: There is a valid delegation of legislative
them by means of a straight line until all islands power when it passes the following tests –
were surrounded or enclosed by the imaginary
lines. R.A. No. 5446 states that the definition of 1. Completeness Test
the baselines of the territorial sea of the The law sets forth the policy to be executed,
Philippine Archipelago is without prejudice to carried out, or implemented by the delegate
the delineation of the baselines of the territorial [Abakada Guro Partylist v. Purisima, supra],
sea around the territory of Sabah, situated in such that there is nothing left for the delegate
North Borneo, over which the Republic of the to do but to enforce the law [Pelaez v. Auditor
Philippines has acquired dominion and General, G.R. No. L-23825 (1965)]; and
sovereignty.
2. Sufficient Standard Test
The standard defines legislative policy, marks
its limits, maps out its boundaries and specifies
the public agency to apply it. It indicates the
circumstances under which the legislative
Page 25 of 384
command is to be effected [Edu v. Ericta, G.R. which shall be expressed in the title [Section
No. L-32096 (1970)]. 26(1), Article VI, 1987 Constitution].
Note: Acts which are purely legislative in 2. The title is not required to be an index of
character (e.g., making of laws) cannot be the contents of the bill. It is sufficient
delegated to an administrative body (in compliance if the title expresses:
contrast to the ascertainment of facts or the (a) the general subject; and
filing of details which can be delegated to (b) all the provisions of the statute are
administrative agencies). germane to that subject [Tio v. Videogram
Regulatory Commission, G.R. No. L-
2. Plenary Character 75697 (1987)].
The grant of legislative power to Congress is 3. No bill passed by either house shall become
broad, general, and comprehensive. The law unless it has passed three (3) readings on
legislative body possesses plenary power for separate days [Section 26(2), Article VI, 1987
all purposes of civil government. Any power, Constitution].
deemed to be legislative by usage and
tradition, is necessarily possessed by 4. Printed copies in its final form must have
Congress, unless the Constitution has lodged been distributed.
it somewhere.
Exception: When the President certifies the
Except as limited by the Constitution, either necessity of its immediate enactment to meet
expressly or impliedly, legislative power a public calamity or emergency.
embraces all subjects and extends to all
matters of general concern or common interest Presidential certification dispenses with (1) the
[Kida v. Senate of the Philippines, G.R. No. printing requirement; and (2) the requirement
196271 (2011)]. for readings on separate days [Kida v. Senate,
G.R. No. 196271 (2011), citing Tolentino v.
3. Limitations Secretary of Finance, supra].
4. Exceptions to Non-Delegability
SECTION 26 (2), ARTICLE VI. No bill passed by
either House shall become a law unless it has
passed three readings on separate days, and a. Principle
printed copies thereof in its final form have been Delegata potestas non potest delegari –
distributed to its Members three days before its What has been delegated cannot be further
passage, except when the President certifies to delegated.
the necessity of its immediate enactment to meet
a public calamity or emergency. Upon the last
reading of a bill, no amendment thereto shall be b. Rationale
allowed and the vote thereon shall be taken Since the powers of the government have
immediately thereafter, and the yeas and nays been delegated to them by the people, who
entered in the journal. possess original sovereignty, these powers
cannot be further delegated by the different
Substantive Limitations government departments to some other
Circumscribe both the exercise of the power branch or instrumentality of the government.
itself and the allowable subject of legislation
(i.e., non-delegation). c. General Rule; Exceptions
Formal/Procedural Limitations General Rule: Only Congress (as a body)

1. Prescribes the manner of passing bills and may exercise legislative power.
the form they should take.
Exceptions:
Rider clause: Every bill passed by the 1. Delegated legislative power
Congress shall embrace only one subject, to local governments;
Page 26 of 384
2. Constitutionally-grafted exceptions Exercise of Legislative Powers by Local
a. Emergency power delegated Government
to the Executive during State
of War or National Requirements of a valid ordinance (CUPPU-
Emergency [Section 23(2), GC):
Article VI, 1987 Constitution] a. It must not CONTRAVENE the
b. Certain taxing powers of the Constitution or any statute;
President [Section 28(2), b. It must not be UNFAIR or oppressive;
Article VI, 1987 Constitution] c. It must not be PARTIAL or
c. The extent reserved to the discriminatory;
people by the provision on d. It must not PROHIBIT but may
initiative and referendum regulate trade;
[Section 1, Article VI, 1987 e. It must not be UNREASONABLE;
Constitution] f. It must be GENERAL and
CONSISTENT with public policy
Note: Subordinate legislation made [Magtajas v. Pryce Properties, G.R.
by administrative agencies – The principle of No. 111097 (1994)].
non-delegability should not be confused with
the delegated rule-making authority of Presidential Power under Martial Law or in
implementing agencies [Belgica v. Ochoa, a Revolutionary Government
supra].
SECTION 23(2), ARTICLE VI. In times of war or
Strictly speaking, what is delegated is not other national emergency, the Congress may, by
“lawmaking” power, but rule-making power, law, authorize the President, for a limited period
limited to (a) filling up the details of the law; or and subject to such restrictions as it may
(b) ascertaining facts to bring the law into prescribe, to exercise powers necessary and
actual operation. proper to carry out a declared national policy.
Unless sooner withdrawn by resolution of the
Congress, such powers shall cease upon the next
The President did not proclaim a national adjournment thereof.
emergency, only a state of emergency in the
three places in ARMM. And she did not act
pursuant to any law enacted by Congress that Congress may delegate legislative powers to
authorized her to exercise extraordinary the president in times of war or in other national
powers. emergencies [David v. Macapagal-Arroyo,
G.R. No. 171396 (2006)].
The calling out of the armed forces to prevent
or suppress lawless violence in such places is 5. Legislative Power of the People
a power that the Constitution directly vests in Through Initiative and Referendum
the President. She did not need congressional
authority to exercise the same [Ampatuan v. People’s Initiative on Statutes. Legislative
Puno, G.R. No. 190259 (2011)]. power is also vested in the people by the
system of initiative and referendum [Section 1,
Under its plenary legislative powers, Congress Article VI, 1987 Constitution]. The power of
can delegate to local legislative bodies the initiative and referendum is the power of the
power to create local government units, people directly to “propose and enact laws or
subject to reasonable standards and provided approve or reject any act or law or part thereof
no conflict arises with any provision of the passed by the Congress or local legislative
Constitution [Sema v. COMELEC, G.R. No. body” [Section 32, Article VI, 1987
177597 (2008)]. Constitution].
The provision is not self-executing [Defensor-

Santiago v. COMELEC, G.R. No. 127325
(1997)].
Page 27 of 384
a. R.A. No. 6735 of the LGUs may approve, amend, or
An Act Providing for a System of Initiative and reject any ordinance enacted by the
Referendum and Appropriating Funds Sanggunian [LGC, Sec. 26].
Therefor
h. Is the power to hold a referendum
This is valid for (a) laws, (b) ordinances, and plenary? – NO
(c) resolutions, but not amendments to the
Constitution [Defensor-Santiago, supra]. Limitations:
1. No petition embracing more than one
b. Local Initiative; Voter Requirements subject shall be submitted to the
electorate; and
2. Statutes involving emergency
Region Not less than x
measures, the enactment of which is
registered voters
specifically vested in Congress by the
Autonomous 2000 Constitution, cannot be subject to
regions referendum until 90 days after their
effectivity [Section 10, R.A. No. 6735].
Provinces 1000
B. House of Congress;
Municipalities 100 Compositions and
Qualifications
Barangays 50
Senate House of
Represent
c. Where to File atives
Regional Assembly or local legislative body,
Provision Sections 2- Sections 5-8,
as the case may be [Section 13, R.A. No. Article VI
14, Article VI
6735].
d. Limitations on Local Initiative

Cannot be exercised more than once a year; Compositi 24 senators Not more
extends only to subjects or matters which are on elected at than 250
within the legal powers of the local legislative large members,
bodies to enact; and if at any time before the unless
initiative is held, the local legislative body otherwise
should adopt in toto the proposition provided by
presented, the initiative shall be canceled law,
[Section 15, R.A. No. 6735]. consisting of;
Referendum a. District
Representativ
This refers to the power of the electorate to
es;
approve or reject legislation through an
election called for that purpose [Section 3(c),
b. Party-List
R.A. No. 6735].
Representativ
es
e. Classes of Referendum
1. Referendum on Statutes: Petition to Qualificati a. Natural- a. Natural-
approve or reject an act or law, or part on born citizen born citizen
thereof, passed by Congress; b. At least b. At least 25
2. Referendum on Local Laws: Legal 35 years old years old on
process whereby the registered voters
Page 28 of 384
Senate House of 2. House of Representatives

Represent
atives a. District Representatives and
Questions of Apportionment
on the day of the day of
the election the election District Representatives - Elected from
c. Able c. Able legislative districts apportioned among the
to read to read
provinces, cities, and Metro Manila area.
and write and write
d. A d. A
Rules on Apportionment of Legislative
registered registered
Districts
voter voter in the
district he
Resident of seeks to
i. Apportionment of legislative districts
the represent must be by law which could be a:
Philippines for a. General Apportionment Law; or
at least 2 A resident of b. Special Law (i.e., creation of new
years the said provinces)
immediately district for at
preceding the least 1 year Note: The power to apportion legislative
day of the immediately districts is textually committed to Congress by
election preceding the the Constitution. Thus, it cannot be validly
day of the delegated to the ARMM Regional Assembly
election
[Sema v. COMELEC, G.R. No. 177597 (2008)].
Term of 6 years 3 years
Office Under the Constitution and the LGC,
apportionment and reapportionment do not
require a plebiscite [Bagabuyo v. COMELEC,
Term of 2 3 consecutive G.R. No. 176970 (2008)].
Limits consecutive terms
terms ii. Proportional representation based on
number of inhabitants:
Note: Citizenship must be Filipino at the time a. Each city with a population of at least
of assumption of office [Frivaldo v. COMELEC, 250,000 shall have at least 1
G.R. No. 120295 (1996)]. representative.
b. Each province, irrespective of the
1. Senate number of inhabitants, shall have at
The Senate of each Congress acts separately least 1 representative.
and independently of the Senate of the
Congress before it. Due to the termination of There is no fixed 250,000:1 ratio. 250,000 is
the business of the Senate during the simply the “minimum population requirement”
expiration of one (1) Congress, all pending and a city with 450,000 may have two (2)
matters and proceedings, such as unpassed congressional districts. [Mariano v. COMELEC,
bills and even legislative investigations, of the G.R. No. 118577 (1995)].
Senate are considered terminated upon the
expiration of that Congress and it is merely iii. Each legislative district shall comprise,
optional on the Senate of the succeeding as far as practicable, contiguous, compact,
Congress to take up such unfinished matters, and adjacent territory (Anti-gerrymandering
not in the same status, but as if presented for provision).
the first time [Balag v. Senate of the
Philippines, G.R. 234608 (2018)]. iv. Re-apportionment by Congress within
3 years after the return of each census.
Page 29 of 384
Note: “Apportionment” refers to the i. A party that participates in the
determination of the number of representatives legislative district elections
which a State, county, or other subdivision may may still participate in the party-
send to a legislative body, while list through a sectoral wing.
“reapportionment” refers to the realignment or ii. The sectoral wing can be part
change in legislative districts brought about by of the political party’s coalition,
changes in population and mandated by the
but the former must be
constitutional requirement of equality of
registered independently in the
representation [Bagabuyo v. COMELEC,
supra]. party-list system.
b. Party-List System 4. Sectoral parties or organizations may either

be (a) “marginalized or underrepresented”
(e.g., labor, peasant, fisherfolk); or (b) “lacking
ii. Party-List Representatives
in well-defined political constituencies” (e.g.,
They shall constitute 20% of the total number
professionals, women, elderly, youth);
of representatives, elected through a party-list
system of registered national, regional, and
sectoral parties or organizations. 5. The nominees of sectoral parties or
organizations, of either type, must (a) belong
1. Sectoral Representatives to their respective sectors, or (b) have a track
For 3 consecutive terms from 2 February 1987, record of advocacy for their respective
1⁄2 of the party-list seats shall be allotted to sectors. Majority of the members of a sectoral
sectoral representatives to be chosen by party, of either type, must belong to the sector
appointment or election, as may be provided they represent;
by law. Until a law is passed, they are
appointed by the President from a list of 6. National, regional, or sectoral parties or
nominees by the respective sectors [Section 7, orgs shall not be disqualified if some of their
Article XVIII, 1987 Constitution]. nominees are disqualified, provided they
have at least 1 nominee who remains
Note: The party-list system is not synonymous qualified [Atong Paglaum, supra].
with sectoral representation [Atong Paglaum v.
COMELEC, G.R. No. 203766 (2013), citing the iv. Disqualifications and Qualifications
1986 Constitutional Commission Records]. See R.A. No. 7941: An Act Providing for The
Election Of Party-List Representatives
iii. Atong Paglaum Guidelines: Through The Party-List System, and
1. Three different parties or organizations may Appropriating Funds Therefor
participate in the party-list system:
1. National; 2. Disqualified Parties
2. Regional; or 1. Religious sects;
3. Sectoral; 2. Foreign organizations;
3. Advocating violence or unlawful
2. National and regional parties or means;
organizations do not need to (a) organize 4. Receiving support from any foreign
along sectoral lines, or (b) represent any government, foreign political party,
“marginalized or underrepresented” sector; foundation, organization, whether
directly or through any of its officers
3. Political parties may participate in the party- or members or indirectly through third
list system provided: parties for partisan election purposes;
a. they register under the party-list 5. Violating or failing to comply with
system; laws, rules or regulations relating to
b. they do not field candidates in elections;
legislative district elections. 6. Declaring untruthful statements in its
petition;
Page 30 of 384
7. Ceased to exist for at least one (1) list system. There is no violation of the
year; or Constitution because the 1987 Constitution
8. Failing to participate in the last two (2) does not require absolute proportionality for
preceding elections or fails to obtain the party-list system [BANAT v. COMELEC,
at least 2 per centum of the votes cast G.R. No. 179271 (2009)].
under the party-list system in the two
(2) preceding elections for the vi. Rules on Computation of Seats: Two-
constituency in which it has Round Allocation
registered.
Step 1: Compute total number of seats
3. Qualified Sectors allocated for party-list representatives.
Note: This qualification applies only to
sectoral parties. Participating national or Step 2: Rank all party-list candidates from
regional parties need not fall under any of highest to lowest based on the number of
these sectors [Atong Paglaum, supra]. votes they garnered.
1. Labor
2. Peasant Step 3: Compute for each party-list
3. Fisherfolk candidate’s percentage of votes garnered in
relation to the total number of votes cast for
4. Urban Poor
party-list candidates.
5. Indigenous Cultural Communities
6. Elderly Step 4: Round 1 – Allocate one (1) seat each
7. Handicapped for a party-list that garnered at least 2% of the
8. Women total number of votes.
9. Youth
10. Veterans Step 5: Round 2 – Assign additional seats
11. Overseas Workers from the balance (i.e., total number of party-list
12. Professionals seats minus Round 1 allocations) by:
v. Four parameters of the party-list system a. Allocating one (1) seat for every whole
integer (e.g., if a party garners 2.73% of the
1. 20% Allocation - 20% of the total number vote, assign it two (2) more seats; if 1.80%,
of the membership of the House of assign it one (1) more seat); then
Representatives is the maximum number of
seats available to party-list organizations. b. Allocating the remaining seats (i.e., total
seats minus Round 1 and Round 2a
2. 2% Threshold - Garnering 2% of the total allocations) to those next in rank until all seats
votes cast in the party-list elections guarantees are completely distributed.
a party-list organization one (1) seat.
Step 6: Apply the 3-Seat Cap, if necessary [see
3. Additional Seats - The additional seats, BANAT v. COMELEC, supra].
that is, the remaining seats after allocation of
the guaranteed seats, shall be distributed to vii. ARARO v. COMELEC, G.R. No. 192803,
the party-list organizations including those that December 10, 2013
received less than two percent of the total The Supreme Court further modified the
votes. This distribution will continue until all the formula used and interpreted in BANAT v.
seats have been filled. COMELEC. Thus, the formula to determine
the proportion garnered by the party-list
4. 3-Seat Cap - The three-seat cap is group would now henceforth be:
constitutional.
(Number of votes of party list)/(Total number of
Note: It is intended by the Legislature to valid votes for party-list candidates) =
prevent any party from dominating the party-
Page 31 of 384
Proportion or percentage of votes garnered by expiration of the terms of both houses
party-list who passed the law increasing said
salary. This means that even if the House of
viii. Formula for additional seats Representatives term has already expired but
(Total number of Party-list seats available) - the senate has not, the salary increase
(Number of seats allocated in the first round) cannot yet take effect even if the increase is
x (Proportion or Percentage of votes different for each house [PHILCONSA v.
garnered by the Party) = Additional seats Mathay, G.R. No. L-25554 (1966)].
awarded
This prohibition also applies to the benefits a
Under this modified formula, the divisor: member of Congress will attain upon
• Includes votes for party-lists with retirement. Thus, a member of Congress may
pending disqualification cases as of the not compute his retirement benefits based on
date of the election. the salary increase which he was not able to
• Excludes votes for party-lists that have reach because his term has already expired
been disqualified with finality before the before said increase took effect [Ligot v.
election, if such disqualification was Mathay, G.R. No. L-34676 (1974)].
reasonably made known to the public.
• Excludes spoiled or invalid ballots. b. Freedom From Arrest
C. Legislative Privileges, A Senator or Member of the House of

Representatives shall, in all offenses
Inhibitions, and Qualifications punishable by not more than six years
imprisonment, be privileged from arrest while
1. Privileges the Congress is in session [Section 11, Article
VI, 1987 Constitution].
a. Salaries
Regardless of the whereabouts of a Senator or
ARTICLE VI, SECTION 10. The salaries of
Member of the House, freedom from arrest
Senators and Members of the House of holds, so long as Congress is in session.
Representatives shall be determined by law. No
increase in said compensation shall take effect Applicability: Freedom from arrest applies
until after the expiration of the full term of all the only to offenses punishable by not more than
Members of the Senate and the House of six years imprisonment.
Representatives approving such increase.
Preventive suspension is not a penalty. Order

of suspension under R.A. No. 3019 (Anti-Graft
ARTICLE XVIII, SECTION 17. Until the Congress
provides otherwise, the President shall receive an and Corrupt Practices Act) is distinct from the
annual salary of three hundred thousand pesos; power of Congress to discipline its own
the Vice-President, the President of the Senate, members and did not exclude members of
the Speaker of the House of Representatives, and Congress from its operation [Defensor-
the Chief Justice of the Supreme Court, two Santiago v. Sandiganbayan, G.R. No. 128055
hundred forty thousand pesos each; the Senators,
(2001)].
the Members of the House of Representatives, the
Associate Justices of the Supreme Court, and the
Chairmen of the Constitutional Commissions, two In People v. Jalosjos [G.R. No. 132875
hundred four thousand pesos each; and the (2000)], the Court denied the request of Cong.
Members of the Constitutional Commissions, one Jalosjos that he be allowed to attend legislative
hundred eighty thousand pesos each. sessions. The denial was premised on the
following: (a) membership in Congress does
“Expiration of the full term of all Members of not exempt an accused from statutes and rules
the Senate and the House of which apply to validly incarcerated persons; (b)
Representatives” is singular and means that one rationale behind confinement is public
the increase may only take effect upon the self- defense; (c) it would amount to creation
Page 32 of 384
of a privileged class, without justification in terms of the 1973 Constitution, when a
reason; and (d) he was provided with an office governor-elect was elected to the Batasang
in the New Bilibid Prison. Pambansa and he could not hold both the
offices of governor and MP [Adaza v. Pacana,
c. Speech and Debate Clause G.R. No. L-68159 (1985)].
No Member shall be questioned nor be held Note: The office of the Philippine National Red
liable in any other place for any speech or Cross (PNRC) Chairman is not a government
debate in the Congress or in any committee office or an office in a government-owned or -
thereof [Section 11, Article VI, 1987 controlled corporation for purposes of the
Constitution]. prohibition in Section 13, Article VI [Liban v.
Gordon, G.R. No. 175352 (2009 & 2011)]; but
This means the Senator or Member of the note that the structure of the PNRC is sui
House can still be questioned and held liable in generis , being neither strictly private nor public
Congress. in nature.
To come under the guarantee, the speech or b. May not be appointed to any office
debate must be one made "in Congress or in created or whose emoluments were
any committee thereof." Publication of an increased during the term for which he
allegedly libelous letter is not covered by the was elected [Section 13, Article VI]
privilege [Jimenez v. Cabangbang, G.R. No. L-
15905 (1966)]. Forbidden Office — One to which a member
cannot be appointed even if he is willing to give
What is covered under this provision? up his seat in Congress. The effect of his
Anything a member of Congress says in line resignation from the Congress is the loss of his
with his legislative functions [Jimenez v. seat therein but his disqualification for the
Cabangbang, supra] forbidden office nevertheless remains.
a. Speeches
b. Utterances c. Shall not be financially interested,
c. Bills signed directly or indirectly, in any contract
d. Votes passed with, or franchise or special privilege
granted by the government during his
While the immunity of a Member of Congress term of office [Section 14, Article VI,
is absolute and thus even the Supreme Court
1987 Constitution]
cannot discipline a lawyer-senator for remarks
made against the court during a privilege
speech, it does not shield said member from d. Shall not intervene in any matter
the authority of Congress to discipline its own before any office of the government
members [Defensor-Santiago v. Pobre, A.C. when it is for his pecuniary benefit or
No. 7399 (2009)]. where he may be called upon to act on
account of his office [Section 14, Article
2. Inhibitions and Disqualifications VI, 1987 Constitution]
a. May not hold any office or The Pork Barrel System “runs afoul” of Section
employment in the government during 14, Article VI, because in “allowing legislators
his term without forfeiting his seat to intervene in the various phases of project
implementation – a matter before another
[Section 3, Article VI]
office of government – [Pork Barrel] renders
them susceptible to taking undue advantage of
Incompatible Office — The forfeiture of the
their own office” [Belgica v. Ochoa, supra].
seat in Congress shall be automatic upon a
member’s assumption of such office deemed
incompatible, e.g., under the non-synchronized
Page 33 of 384
e. Shall not intervene in any matter b. Financial and Business Interests;
before any office of the government Political Conflicts of Interest
when it is for his pecuniary benefit or
where he may be called upon to act on SECTION 12, ARTICLE VI. All Members of the
account of his office [Section 14, Article Senate and the House of Representatives shall,
VI, 1987 Constitution] upon assumption of office, make a full disclosure
of their financial and business interests. xxx
This prohibition is absolute. Thus, when an
assemblyman acting as counsel for one group
c. Amounts Paid To/Expenses Incurred
in an internal dispute in a company was denied
leave to intervene, the court held that his by Each Member
action of buying 10 stocks in order to be able
to intervene in the company’s dispute as a SECTION 20, ARTICLE VI. The records and
stockholder was an indirect violation of this books of accounts of the Congress shall be
rule and still unconstitutional [Puyat v. De preserved and be open to the public in
Guzman Jr., G.R. No. L-51122 (1982)]. accordance with law, and such books shall be
audited by the Commission on Audit which shall
publish annually an itemized list of amounts paid
3. Duty to Disclose to and expenses incurred for each Member.
a. Statements of Assets, Liabilities, and

Net Worth (SALN) D. Quorum and Voting Majorities
1. Quorum
SECTION 17, ARTICLE XI. A public officer or
employee shall, upon assumption of office and as
often thereafter as may be required by law, submit SECTION 16(2), ARTICLE VI. A majority of each
a declaration under oath of his assets, liabilities, House shall constitute a quorum to do business,
and net worth. In the case of the President, the but a smaller number may adjourn from day to day
Vice-President, the Members of the Cabinet, the and may compel the attendance of absent
Congress, the Supreme Court, the Constitutional Members in such manner, and under such
Commissions and other constitutional offices, and penalties, as such House may provide.
officers of the armed forces with general or flag
rank, the declaration shall be disclosed to the
public in the manner provided by law. In computing a quorum, members who are
outside the country, thus outside of each
House’s coercive jurisdiction, are not included.
When to disclose:
• Within 30 days after assuming office
“Majority” shall take into consideration the
• On or before April 15 after the closing
number of members within the “jurisdiction” of
of the calendar year
the Congress (those it can order arrested for
• Upon expiration of term of office,
the purpose of questioning).
resignation or separation from office
In Avelino v. Cuenco [G.R. No. L-2821 (1949)],
Who must declare:
one Senator was out of the Philippines and
• President another Senator abroad was not within the
• Vice President “jurisdiction” of the Senate, so that the working
• Members of the Cabinet majority was 23 Senators (inclusive of the
• Members of Congress hospitalized Senator).
• Members of the SC
• Members of the Constitutional There is a difference between a majority of "all
Commission and other Constitutional members of the House" and a majority of "the
Offices House," the latter requiring less number than
• Officers of the Armed Forces with the first. Therefore, an absolute majority (12) of
general or flag rank [Section 17, Article all members of the Senate less one (23)
XI, 1987 Constitution]
Page 34 of 384
constitutes a constitutional majority of the b. Exceptions
Senate for the purpose of the quorum.
Votes where requirement is based on “all
2. Voting Majorities the members of Congress”: Requirement is
based on the entire composition of a House or
a. Doctrine of Shifting Majority Congress (in its entirety), regardless of the
number of Members present or absent
For each House of Congress to pass a bill, only
the votes of the majority of those present in the
session, there being a quorum, is required.
Action Votes Required House Voting Basis

(All Members)
Senate shall elect its Majority Separately; All Section 16(1), Article VI
President and the Speaker respective members
of the House
Punish for disorderly 2/3 Separately; All Section 16(3), Article VI

behavior and may respective members
SUSPEND or EXPEL
Override 2/3 Separately (House Section 27(1), Article VI

Presidential Veto where the bill
originated votes
first)
Grant Tax Exemption Majority Silent Section 28(4), Article VII
Elect President in case of Majority Separately Section 4(5), Article VII

tie
Confirm appointment of VP Majority Separately Section 9, Article VII
Congress affirming that 2/3 Congress

the President is unable to
discharge powers and
duties
Revoke or extend (a) Majority Jointly Section 18, Article VII

Martial Law or (b) the
suspension of the
privilege of the writ of
Habeas Corpus
Amnesty Grant Majority Silent Section 19(2), Article VII
Page 35 of 384
Action Votes Required House Voting Basis

(All Members)
Submit a question calling Majority (Silent) Section 3, Article XVII

a Const. Convention to
the electorate Prevailing view; by
default, houses vote
separately (because
Congress is
bicameral)
Call for Constitutional 2/3 Section 3, Article XVII

Convention
Propose amendments as 3/4 Section 1(1), Article XVII

Constitutional Assembly
Other Cases (not out of all members)
Action Votes Required (All Basis

Members)
Determine President’s ⅔ of both houses, voting Section 11(4), Article VII

disability separately
Declaring a State of War ⅔ of both houses (in joint Section 23(1), Article VI
session) voting separately
Validity of ⅔ members of Senate Section 21, Article VII

Treaty/International
Agreement
E. Discipline of Members
Other measures (not necessarily requiring
Each House may determine the rules of its 2/3, and depending on voting thresholds
proceedings, punish its Members for determined by the respective houses):
disorderly behavior, and, with the concurrence ● Deletion of unparliamentary remarks
of two-thirds of all its Members, suspend or from the record
expel a Member. A penalty of suspension, ● Fine
when imposed, shall not exceed sixty days ● Imprisonment
[Section 16(3), Article VI, 1987 Constitution]. ● Censure
Each house may punish its members for The suspension contemplated in the
disorderly behavior, and with the concurrence Constitution is different from the suspension
of 2/3 of ALL its members, with: (SED-FIC) prescribed in the Anti-Graft and Corrupt
● Suspension Practices Act (R.A. No. 3019). The former is
● Expulsion punitive in nature while the latter is preventive
Page 36 of 384
[Defensor-Santiago v. Sandiganbayan, G.R. One Subject One Title Rule
No. 118364 (1995)]. 1. To prevent hodge-podge, "log-rolling", or
the smuggling in of "riders," that is, "any act
The determination of Congress when it comes containing several subjects dealing with
to disciplining its members is respected by the unrelated matters representing diverse
court. As such, the Supreme Court does not interests.
have the power to compel congress to 2. To prevent surprise or fraud upon the
reinstate a member who has been expelled by legislature.
it [Alejandrino v. Quezon, G.R. No. 22041
(1924)]. 3. To fairly apprise the people of the subjects
of legislation that are being considered in
The immunity for speech given to a member of order that they may have the opportunity of
Congress is not a bar to the power of Congress being heard thereon, by petition or otherwise,
to discipline its members [Osmeña v. if they should so desire.
Pendatun, G.R. No. L-17144 (1960)].
4. But the title need not be a complete
F. Process of Law-Making catalogue of a bill. In any case, a title must
not be "so uncertain that the average person
1. Function of the Bicameral reading it would not be informed of the
purpose of the enactment.”
Conference Committee
5. When there is conflict, the title of the bill is
A Conference Committee is constituted and is
controlling over any contradictory provision
composed of Members from each House of
on a law whose titles says “regulating” but has
Congress to settle, reconcile or thresh out
a provision which says “prohibiting” [Dela
differences or disagreements on any provision
Cruz v. Paras, G.R. No. L-42571-72 (1983)].
of the bill.
The conferees are not limited to reconciling the b. As to certain laws

differences in the bill but may introduce new
provisions germane to the subject matter or Appropriation Laws – Created to guide
may report out an entirely new bill on the spending
subject.
SECTION 22, ARTICLE VII. The President shall
The Conference Committee prepares a report submit to the Congress within thirty days from the
to be signed by all the conferees and the opening of every regular session, as the basis of
the general appropriations bill, a budget of
Chairman. expenditures and sources of financing, including
receipts from existing and proposed revenue
The Conference Committee Report is measures.
submitted for consideration/approval of both
Houses. No amendment is allowed. SECTION 24, ARTICLE VI. All appropriation,
revenue or tariff bills, bills authorizing increase of
the public debt, bills of local application, and
2. Requirement as to Bills private bills shall originate exclusively in the
House of Representatives, but the Senate may
a. As to titles of bills propose or concur with amendments.
SECTION 25, ARTICLE VI. (1) The Congress

SECTION 26(1), ARTICLE VI. Every bill passed may not increase the appropriations
by the Congress shall embrace only one subject recommended by the President for the operation
which shall be expressed in the title thereof. xxx of the Government as specified in the budget. The
form, content, and manner of preparation of the
budget shall be prescribed by law.
(2) No provision or enactment shall be embraced

in the general appropriations bill unless it relates
Page 37 of 384
specifically to some particular appropriation reconsider it. If, after such reconsideration, two-
therein. Any such provision or enactment shall be thirds of all the Members of such House shall
limited in its operation to the appropriation to agree to pass the bill, it shall be sent, together with
which it relates. the objections, to the other House by which it shall
likewise be reconsidered, and if approved by two-
(3) The procedure in approving appropriations for thirds of all the Members of that House, it shall
the Congress shall strictly follow the procedure for become a law. In all such cases, the votes of each
approving appropriations for other departments House shall be determined by yeas or nays, and
and agencies. the names of the Members voting for or against
shall be entered in its Journal. The President shall
(4) A special appropriations bill shall specify communicate his veto of any bill to the House
the purpose for which it is intended, and shall be where it originated within thirty days after the date
supported by funds actually available as certified of receipt thereof; otherwise, it shall become a law
by the National Treasurer, or to be raised by a as if he had signed it.
corresponding revenue proposed therein.
(5) No law shall be passed authorizing any Generally, there are 3 ways for the bill to
transfer of appropriations; however, the become a law:
President, the President of the Senate, the a. By signature: When it is approved by
Speaker of the House of Representatives, the
the President;
Chief Justice of the Supreme Court, and the
heads of Constitutional Commissions may, by b. By lapse of time: Upon failure of the
law, be authorized to augment any item in the President to veto the bill and to return
general appropriations law for their respective it with his objections, to the House
offices from savings in other items of their where it originated, within 30 days after
respective appropriations. the date of receipt; or
c. By congressional override: When the
(6) Discretionary funds appropriated for particular
officials shall be disbursed only for public vote of the President is overridden by
purposes to be supported by appropriate a two-thirds vote of all the members of
vouchers and subject to such guidelines as may both houses.
be prescribed by law.
House Rules
(7) If, by the end of any fiscal year, the Congress
shall have failed to pass the general
appropriations bill for the ensuing fiscal year, the 1. Preparation of the bill
general appropriations law for the preceding fiscal
year shall be deemed reenacted and shall remain The Member or the Bill Drafting Division of the
in force and effect until the general appropriations Reference and Research Bureau prepares
bill is passed by the Congress. and drafts the bill upon the Member's request.
SECTION 29(1), ARTICLE VI. No money shall be
paid out of the Treasury except in pursuance of 2. First reading
an appropriation made by law.
The bill is filed with the Bills and Index Service
and the same is numbered and reproduced.
3. Limitations on Legislative Power
(See Nature of Legislative Power; Limitations, Three days after its filing, the same is
supra). included in the Order of Business for First
Reading.
4. Procedure for Passage of Bills
On First Reading, the Secretary General
reads the title and number of the bill. The
SECTION 27(1), ARTICLE VI. Every bill passed Speaker refers the bill to the appropriate
by the Congress shall, before it becomes a law,
Committee/s.
be presented to the President. If he approves the
same, he shall sign it; otherwise, he shall veto it
and return the same with his objections to the
House where it originated, which shall enter the
objections at large in its Journal and proceed to
Page 38 of 384
3. Committee consideration / action same are distributed to all the Members three
days before its Third Reading.
The Committee where the bill was referred to
evaluates it to determine the necessity of On Third Reading, the Secretary General
conducting public hearings. If the Committee reads only the number and title of the bill.
finds it necessary to conduct public hearings, A roll call or nominal voting is called and a
it schedules the time thereof, issues public Member, if he desires, is given three minutes
notice and invites resource persons. If the to explain his vote. No amendment on the bill
Committee finds that no public hearing is is allowed at this stage.
needed, it schedules the bill for Committee The bill is approved by an affirmative vote of a
discussion/s. majority of the Members present.
If the bill is disapproved, the same is
Based on the result of the public hearings or transmitted to the Archives.
Committee discussions, the Committee may
introduce amendments, consolidate bills on 6. Transmittal of the approved bill to the
the same subject matter, or propose a Senate
substitute bill. It then prepares the
corresponding committee report. The approved bill is transmitted to the Senate
for its concurrence.
The Committee approves the Committee
Report and formally transmits the same to the 7. Senate action on approved bill of the
Plenary Affairs Bureau. House
4. Second reading The bill undergoes the same legislative

process in the Senate.
The Committee Report is registered and
numbered by the Bills and Index Service. It is 8. Conference committee (Bicameral)
included in the Order of Business and (See Function of the Bicameral Conference
referred to the Committee on Rules. Committee, supra).
The Committee on Rules schedules the bill 9. Transmittal of the bill to the President
for consideration on Second Reading.
Copies of the bill, signed by the Senate
On Second Reading, the Secretary General President and the Speaker of the House of
reads the number, title and text of the bill and Representatives and certified by both the
the following takes place: Secretary of the Senate and the Secretary
● Period of Sponsorship and Debate General of the House, are transmitted to the
● Period of Amendments President.
● Voting which may be done by:
○ Viva voce; 10. Presidential action on the bill
○ Count by tellers;
○ Division of the House; or If the bill is approved by the President, the
○ Nominal voting. same is assigned an RA number and
transmitted to the House where it originated.
5. Third reading
If the bill is vetoed, the same, together with a
The amendments, if any, are engrossed and message citing the reason for the veto, is
printed copies of the bill are reproduced for transmitted to the House where the bill
Third Reading. originated.
The engrossed bill is included in the Calendar 11. Action on approved bill
of Bills for Third Reading and copies of the
The bill is reproduced and copies are sent to
the Official Gazette Office for publication and
Page 39 of 384
distribution to the implementing agencies. It is origin, indicating his objections thereto in what
then included in the annual compilation of is commonly known as a veto message so that
Acts and Resolutions. the same may be studied by the members for
possible overriding of his veto.
12. Action on vetoed bill General Rule: The President must approve a
bill in its entirety or disapprove it in toto.
The message is included in the Order of
Business. If the Congress decides to override Exception: Item Veto. In appropriation,
the veto, the House and the Senate shall revenue and tariff bills, any particular item or
proceed separately to reconsider the bill or items of which may be disapproved without
the vetoed items of the bill. If the bill or its affecting the item or items to which he does not
vetoed items is passed by a vote of two-thirds object.
of the Members of each House, such bill or
items shall become a law. However, the condition in an expenditure bill
“cannot be vetoed separately from the items to
A joint resolution is NOT a bill, and its which they relate so long as they are
passage does not enact the joint resolution “appropriate” in the budgetary sense”
into a law even if it follows the requirements [PHILCONSA v. Enriquez, G.R. No. 113105
expressly prescribed in the Constitution for (1994)].
enacting a bill into law. However, a joint
resolution can be part of the Congressional Override: To override the
implementation of a law as provided in the President’s veto, at least ⅔ of ALL members
law itself. A joint resolution can also be of each house must agree to pass the bill. In
such case, the veto is overridden and the bill
treated as a recommendation to the
becomes law without need of presidential
Executive on how the law can be
approval.
implemented. Further, neither the Rules of
the Senate nor the Rules of the House of
6. Doctrine of Inappropriate Provision
Representatives can amend the
Constitution which recognizes only a bill
A provision that is constitutionally inappropriate
can become law [Ang Nars Party-List v. for an appropriation bill may be singled out for
Executive Secretary, G.R. No. 215746 veto even if it is not an appropriation or revenue
(2019)]. item.
SECTION 26(2), ARTICLE VI. No bill passed by Examples:

either House shall become a law unless it has
passed three readings on separate days, and Inappropriate: A provision in the GAA requiring
printed copies thereof in its final form have been the President to first submit to Congress a list
distributed to its Members three days before its
of equipment the Executive will purchase
passage, except when the President certifies to
the necessity of its immediate enactment to meet before the appropriation is released. (This is an
a public calamity or emergency. Upon the last inappropriate provision as it constitutes a
reading of a bill, no amendment thereto shall be legislative veto and post-enactment
allowed, and the vote thereon shall be taken interference with the Executive.)
immediately thereafter, and the yeas and nays
entered in the Journal.
Appropriate: The veto of a clause in the GAA
which places of a 30%-limit on the DPWH’s
5. The President’s Veto Power budget for road maintenance hat can be
contracted out. (This is appropriate and cannot
Section 27, Article VI defines the only way for be item-vetoed as Congress can set pre-
the President to veto a bill. implementation limits on how expenditures
shall be spent.) [PHILCONSA v. Enriquez,
When the President vetoes a measure, he supra]
should return the measure to the House of
Page 40 of 384
7. Effectivity of Laws Presidential certification dispenses with (1) the
printing requirement; and (2) the requirement
for readings on separate days [Kida v. Senate,
Civil Code, Article 2. Laws shall take effect after
G.R. No. 196271 (2011), citing Tolentino v.
fifteen days following the completion of their
publication in the Official Gazette, unless it is Secretary of Finance, supra].
otherwise provided. This Code shall take effect
one year after such publication. 5. Substantive Limitations
Even when the law provides its own date of
Circumscribe both the exercise of the power
effectivity, the publication requirement is
itself and the allowable subject of legislation.
mandatory, in order that a law may become
effective. The object of the publication Notable Examples:
requirement is to give the general public • Const., Art. III (Bill of Rights)
adequate notice of the various laws which • Const., Art. VI, Sections 25,28, and 29
are to regulate their actions and conduct— (Appropriation, Taxation,
without publication, there would be no basis Disbursement)
for the application of the maxim, “ignorantia • Const., Art. VI, Section 30 (Nobility)
legis non excusat.” The publication • Const., Art. VI, Section 31 (Expansion
requirement is a requirement of due process of Supreme Court Jurisdiction)
[Tanada v. Tuvera, G.R. No. L-63915 • Non-Delegation Doctrine
(1985)]. • Irrepealable Laws: Congress may not
bind future congresses by imposing
8. Limitations on Legislative Power supermajority requirements for the
repeal of a law, or making the
Formal/Procedural Limitations procedure of repeal or amendment
1. Prescribes the manner of passing bills and more cumbersome than that already
the form they should take. provided in the Constitution. [City of
Davao v. RTC Branch XII, G.R. No.
Rider clause: Every bill passed by the 127383 (August 18,2005)]
Congress shall embrace only one subject,
which shall be expressed in the title [Section G. Appropriation and Re-
26(1), Article VI, 1987 Constitution].
alignment
2. The title is not required to be an index of
the contents of the bill. It is sufficient Exec. Ord. No. 292 (1987), Book VI,
compliance if the title expresses: Chapter 1
(a) the general subject; and
(b) all the provisions of the statute are SECTION 1. Constitutional Policies on the
germane to that subject [Tio v. Videogram Budget.—
Regulatory Commission, G.R. No. L-75697 (1) All appropriations, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local
(1987)]. application, and private bills shall originate
exclusively in the House of Representatives but the
3. No bill passed by either house shall become Senate may propose or concur with amendments.
law unless it has passed three (3) readings on
separate days [Section 26(2), Article VI, 1987 (2) The Congress may not increase the
Constitution]. appropriations recommended by the President for
the operation of the Government as specified in the
budget. The form, content and manner of
4. Printed copies in its final form must have preparation of the budget shall be prescribed by law.
been distributed.
(3) No provision or enactment shall be embraced in
Exception: When the President certifies to the general appropriations bill unless it relates
the necessity of its immediate enactment to specifically to some particular appropriation to which
it relates.
meet a public calamity or emergency.
Page 41 of 384
(4) The procedures in approving appropriations for

Legislative Question
the Congress shall strictly follow the procedure for
approving appropriations for other departments and Inquiries Hour
agencies.
Constitutional Section 21, Section 22,
(5) A special appropriations bill shall specify the Provision Article VI Article VI
purpose for which it is intended, and shall be
supported by funds actually available as certified by
the National Treasurer or to be raised by a Topic In aid of On any matter
corresponding revenue proposal therein. legislation pertaining to
the subject’s
(6) No law shall be passed authorizing any transfer
of appropriations. However, the President, the department
President of the Senate, the Speaker of the House
of Representatives, the Chief Justice of the
Supreme Court and the heads of Constitutional Persons Any person Heads of
Commissions may, by law, be authorized to Subjected upon departments
augment any item in the general appropriations laws subpoena only
for their respective offices from savings in other
items of their respective appropriations.
Appearance of Appearance Appearance
(7) Discretionary funds appropriated for particular
official shall be disbursed only for public purposes to
Executive of executive of executive
be supported by appropriate vouchers and subject Officials officials officials
to such guidelines as may be prescribed by law. generally 1. Via request;
mandatory 2. Upon
(8) If, by the end of any fiscal year, the Congress executive
shall have failed to pass the general appropriations official’s
bill for the ensuing fiscal year, the general
appropriations law for the preceding fiscal year shall
volition with
be deemed reenacted and shall remain in force and President’s
effect until the general appropriations bill is passed consent.
by the Congress.
(9) Fiscal autonomy shall be enjoyed by the The mere filing of a criminal or an
Judiciary, Constitutional Commissions, Office of the administrative complaint before a court or
Ombudsman, Local Government and Commission quasi-judicial body should not automatically
on Human Rights. bar the conduct of a legislative inquiry
[Standard Chartered Bank v. Senate
Committee on Banks, G.R. No. 167173,
H. Legislative Inquiries and (2007)].
Oversight Functions
The requirement of securing prior consent of
1. Requisites of Legislative Inquiries the President prior to appearing before either
a. Must be in aid of legislation; House of Congress applies only to Cabinet
b. Is in accordance with duly published Members and not to other public officials and
rules of procedure; only when either House of Congress conducts
c. Right of persons appearing in or a Question Hour and not in cases of inquiries
affected by such inquiries shall be in aid of legislation as the latter should be
respected [Bengson v. Senate Blue untrammeled because it is co-extensive with
Ribbon Committee, G.R. No. 89914 the power to legislate [Senate of the
(1991)] Philippines v. Ermita, G.R. No. 169777 (2006)].
2. Legislative Inquiries v. Question However, in Gudani v. Senga [G.R. No.

170165 (2006)], the Court en banc clarified the
Hour
above authority over the military. It held that
[See also Senate v. Ermita, G.R. No. 169777
obedience and deference to the military chain
(2006)]
of command and the President as commander-
Page 42 of 384
in-chief are the cornerstones of a professional involves military or diplomatic secrets, closed-
military in the firm cusp of civilian control. door Cabinet meetings, etc.
In the same case, the Supreme Court also A claim of privilege, being a claim of exemption
ruled that any chamber of Congress which from an obligation to disclose information must
seeks the appearance before it of a military be clearly asserted. Congress has the right to
officer against the consent of the President has know why the executive considers the
adequate remedies under the law to compel requested information privileged. It does not
such attendance. suffice to merely declare that the President, or
an authorized head of office, has determined
Final judicial orders have the force of the law of that it is so.
the land which the President has the duty to
faithfully execute. If the President and Congress cannot agree on
whether the matter is privileged or not, then the
If the courts so rule, the duty falls on the Court must come in to determine the validity of
shoulder of the President, as Commander-in- the claim of privilege [Senate of the Philippines
Chief, to authorize the appearance of military v. Ermita, supra].
officials before Congress ruling and upheld the
President’s constitutional powers. 4. Elements of Presidential
Communications Privilege
3. Additional Limitation: Executive
Privilege In Neri v. Senate Committees [G.R. No.
180643 (2008)], the Court ruled that the claim
Executive privilege is the right of the President of executive privilege was properly invoked
and high level officials authorized by her to by Secretary Neri, specifically under what is
withhold information from Congress, from the called “presidential communication privilege.”
courts, and ultimately from the public. The elements of presidential communications
privilege are:
Among the types of information which have a. The protected communication must
been judicially recognized as privileged are relate to a “quintessential and non-
state secrets regarding military, diplomatic and delegable presidential power.”
other national security matters. Certain
information in the possession of the executive b. The communication must be
may validly be claimed as privileged even authored or “solicited and received”
against Congress, such as Presidential by a close advisor of the President or
conversations, correspondences, or by the President himself. The judicial
discussions during closed-door Cabinet test is that an advisor must be in
meetings [Chavez v. PEA, G.R. No. 133250 “operational proximity” with the
(2003)]. President.
Who may invoke: Only the President can c. The presidential communications
invoke it. She may also authorize the privilege remains a qualified privilege
Executive Secretary to invoke the privilege on that may be overcome by a showing
her behalf, in which case, the Executive of adequate need, such that
Secretary must state that the Act is “By order information sought “likely contains
of the President,” which means that he important evidence” and by the
personally consulted with the President on unavailability of the information
such matters of concern [Senate of the elsewhere by an appropriate
Philippines v. Ermita, supra]. investigating authority.
The claim of privilege must be specific, e.g.,

whether the information sought to be withheld
Page 43 of 384
5. Contempt Power a. Scrutiny
As long as there is legitimate inquiry, then the Passive inquiry, the primary purpose of which
inherent power of contempt by the Senate may is to determine economy and efficiency of the
be properly exercised. Conversely, once the operation of government activities.
legislative inquiry concludes, the exercise of
the inherent power of contempt ceases and In the exercise of legislative scrutiny,
there is no more genuine necessity to penalize Congress may request information and report
the detained witness [Balag v. Senate of the from the other branches of government. It can
Philippines, G.R. No. 234608 (2018)]. give recommendations or pass resolutions for
consideration of the agency involved.
As the Senate is not a continuing body, all
inquiries automatically end once the Senate Legislative scrutiny is based primarily on the
adjourns sine die (i.e., at the end of the Third power of appropriation of Congress. Under the
Session of each Congress). The imprisonment Constitution, the "power of the purse" belongs
for contempt automatically terminates on such to Congress.
date as well. [Balag, supra]
Legislative scrutiny does not end in budget
6. Contempt of Congressional hearings. Congress can ask the heads of
Oversight departments to appear before and be heard by
Broadly defined, the power of oversight either House of Congress on any matter
embraces all activities undertaken by pertaining to their departments, pursuant to
Congress to enhance its understanding of and Section 22, Article VI of the 1987 Constitution.
influence over the implementation of legislation
it has enacted. b. Congressional Investigation
Clearly, oversight concerns post-enactment More intense digging of facts, compared to

measures undertaken by Congress: scrutiny. Power of investigation recognized by
Section 21, Article VI, 1987 Constitution.
1. to monitor bureaucratic compliance
with program objectives; c. Legislative supervision (legislative
2. to determine whether agencies are veto)
properly administered;
3. to eliminate executive waste and Connotes a continuing and informed
dishonesty; awareness on the part of a congressional
4. to prevent executive usurpation of committee regarding executive operations in a
legislative authority, and given administrative area.
5. to assess executive conformity with the
congressional perception of public Allows Congress to scrutinize the exercise of
interest. delegated law-making authority, and permits
Congress to retain part of that delegated
7. Categories of Congressional authority. Through this, Congress exercises
Oversight Functions supervision over the executive agencies.
The acts done by Congress purportedly in the Note: Legislative supervision is NOT allowed
exercise of its oversight powers may be divided under the Constitution [Abakada Guro Partylist
into 3categories, namely: scrutiny, v. Purisima, supra; See also discussion under
investigation and supervision. Checks and Balances, supra].
Page 44 of 384
Congressmen) the stringent standards it asks
I. Power of Impeachment of justices and judges when it comes to
inhibition from hearing cases.
The House of Representatives shall have the
exclusive power to initiate all cases of
Constitutional requirement that HOR shall
impeachment [Section 3(1), Article XI, 1987
promulgate its rules on impeachment [Sec.
Constitution].
3(8), Art. XI, 1987 Constitution] is different from
the publication requirement in Tañada v.
1. Initiation: Regular Procedure Tuvera, supra. When the Constitution provides
[Section 3(2) & (3), Article XI, 1987 for promulgation of the HOR Rules on
Constitution] Impeachment, posting via any medium or even
provisional adoption of references to the rules
FILING by (a) any member of the HOR or (b) any
of the previous Congress may suffice.
citizen upon endorsement by a member of the HOR; [Gutierrez v. House of Representatives, supra]
followed by REFERRAL to the proper HOR
Committee (i.e., HOR Committee on Justice). Contrast Rules on Legislative Inquiries, which
must be published under Art. VI, Sec. 21
!
3. Trial
COMMITTEE REPORT by proper committee, which
either favorably or unfavorably resolves the The Senate shall have the sole power to try
complaint. and decide all cases of impeachment [Section
3(6), Article XI, 1987 Constitution].
!
By virtue of the expanded judicial review
Above resolution is AFFIRMED if favorable or
[Section 1(2), Article VIII, 1987 Constitution],
OVERRIDDEN if unfavorable, by vote of ⅓ of ALL
the members of the HOR. the Court’s power of judicial review extends
over justiciable issues arising in impeachment
proceedings [Francisco v. House of
Verified complaint or resolution [Section 3(4), Representatives, supra]. But the question of
Article XI, 1987 Constitution] FILED by 1/3 of whether or not Senate Impeachment Rules
all the members of the HOR; trial by Senate were followed is a political question [Corona v.
forthwith proceeds. Senate, G.R. No. 200242 (2012)].
2. Notes on Initiation [Gutierrez v. 4. Periods Rule

HOR Committee on Justice, G.R. No. 10 days: a verified complaint for impeachment
193459 (2011)] must be included in the Order of Business
within 10 session days;
No impeachment proceeding shall be initiated
against the same official more than once 3 days: after the lapse of the 10 days, the
within a period of one (1) year [Section 2(5), complaint must be referred to a Committee
Article XI, 1987 Constitution]. within 3 session days;
Initiation means filing coupled with referral to 60 days: The Committee, after hearing, and by
the Committee on Justice. a majority vote of all its Members, shall submit
its report to the House within sixty session
The Court cannot make a determination of days from such referral;
what constitutes an impeachable offense; it is
a purely political question [Francisco v. 10 days: The resolution shall be calendared
House of Representatives, G.R. No. for consideration by the House within ten
160261(2003)]. session days from receipt thereof.
On motion to inhibit: Impeachment is a

political exercise. The Court cannot apply (to
Page 45 of 384
out a declared national policy in times of war or
III. EXECUTIVE other national emergency.
DEPARTMENT
2. Tariff Powers (Art. VI, Sec. 28(2): i.e., fix
A. Nature of Executive Power within specified limits, and subject to such
limitations and restrictions as Congress may
impose, tariff rates, import and export quotas,
1987 Constitution tonnage and wharfage dues, and other duties
or imposts within the framework of the national
Article VII, Section 1. The executive power shall be
vested in the President of the Philippines. development program of the Government.
b. Emergency Powers [Section 23,

The executive power is vested in the Article VI, 1987 Constitution]
Presidents. It is generally defined as the power
a. In times of war or other national
to enforce and administer the laws. It is the
emergency, the Congress, may, by law,
power of carrying the laws into practical authorize the President, for a limited
operation and enforcing their due observance.
period, and subject to such restrictions as
it may prescribe, to exercise powers
Corollary to the power of control, the President
necessary and proper to carry out a
also has the duty of supervising the declared national policy
enforcement of laws for the maintenance of
b. Unless sooner withdrawn by resolution of
general peace and public order. Thus, he is the Congress, such powers shall cease
granted administrative power over bureaus and
upon the next adjournment thereof.
offices under his control to enable him to
discharge his duties effectively. [Ople v.
Torres, G.R. No. 127685 (1998)] c. Commander-in-Chief powers vs.
Emergency Powers
1. In Relation to the Implementation of
Laws (Including Delegated Powers) Commander-in- Emergency Powers
Chief powers
1987 Constitution When the President When the President
Article VI, Section 23 (2). In times of war or other acts under the acts under the
national emergency, the Congress may, by law, Commander-in-Chief emergency power,
authorize the President, for a limited period and clause, he acts under he acts under a
subject to such restrictions as it may prescribe, to a constitutional grant Congressional
exercise powers necessary and proper to carry out of military power to delegation of law-
a declared national policy. Unless sooner withdrawn suppress an invasion making (i.e. policy-
by resolution of the Congress, such powers shall
cease upon the next adjournment thereof. or rebellion that making) power.
endangers public
safety.
a. Principle
General Rule: Executive Power is limited to d. When emergency powers cease

the implementation of the law. a. According to the text of the Constitution, the
power ceases:
Constitutionally-Grafted Exceptions: The i. Upon withdrawal by resolution of the
Constitution provides for limited instances Congress; or
when Congress can delegate legislative ii. If Congress fails to adopt such resolution,
powers to the President, i.e., [See Belgica v. upon the next adjournment of Congress.
Ochoa, supra]:
1. Emergency Powers (Art. VI, Sec. 23): i.e., to

exercise powers necessary and proper to carry
Page 46 of 384
b. Example: The residual unstated powers of the President
i. March 15, 202X – Congress is in recess are implicit in and correlative to the paramount
from its regular session. Emergency duty residing in that office to safeguard and
arises. protect general welfare. [Marcos v. Manglapus,
ii. March 16, 202X – President calls G.R. No. 88211 (1989)]
Congress to a special session, certifying
an emergency bill as urgent. In MEWAP v. Romulo, G.R. No. 160093
iii. March 17, 202X – Congress passes law (2007), the Court upheld the reorganization of
granting President Emergency Powers. the DOH through EOs 102 and 1165, as it was
Congress adjourns the special session. within the President’s residual power to
This is the first adjournment. restructure the executive departments since he
iv. April 1, 202X – Congress resumes the has the power of control over executive
regular session. During the session, it departments granted by the Constitution.
doesnot withdraw Emergency Powers.
v. June 15, 202X – Congress adjourns its The power to create ad hoc bodies is a residual
regular session. This is the next power vested in the President in accordance
adjournment, and the Emergency Powers with faithful execution clause [Biraogo v. Phil.
grant expires by operation of the Truth Commission of 2010, G.R. Nos. 192935,
Constiution. 193036 (2010)].
c. Because the Constitution was promulgated B. Concept of Presidential

after the lastest jurisprudence on adjournment
[see, e.g., Araneta v. Dinglasan, G.R. No. L- Immunity
2044 (1949)], it supersedes any inconsistency The President as such cannot be sued,
in the rulings of the Court on those points. enjoying as he does immunity from suit. But the
validity of his acts can be tested by an action
against other executive officials [Carillo v.
2. Express or Implied (Including the
Marcos, G.R. No. L-21015 (1981)].
Faithful Execution of Laws and
Residual Powers) 1. Conduct Covered
The President, during his tenure of office or
1987 Constitution actual incumbency, may not be sued in any civil
or criminal case, and there is no need to
Section 17, Article VII. The President shall have provide for it in the Constitution or law. It will
control of all the executive departments, bureaus,
and offices. He shall ensure that the laws be
degrade the dignity of the high office of the
faithfully executed. President, the head of State, if he can be
dragged into court litigation while serving as
such. Furthermore, it is important that he be
The allocation of power in the three principal freed from any form of harassment, hindrance
branches of government is a grant of all powers or distraction to enable him to fully attend to the
inherent in them. The President’s power to performance of his official duties and functions.
conduct investigations [e.g., via fact-finding [David v. Macapagal-Arroyo, G.R. No. 171396
commissions] to aid him in ensuring the faithful (2006)]
execution of laws is inherent in the President’s
powers as the Chief Executive. [Biraogo v. 2. Waiver and Exceptions
Philippine Truth Commission of 2010, G.R. No. The concept of presidential immunity under our
192935 (2010)] governmental and constitutional system does
not distinguish whether or not the suit pertains
The powers of the President cannot be said to to an official act of the President. Neither does
be limited only to the specific powers immunity hinge on the nature of the suit.
enumerated in the Constitution. In other words,
executive power is more than the sum of The concept is clear and allows no
specific powers so enumerated. qualifications or restrictions that the President
Page 47 of 384
cannot be sued while holding such office. [De
Cause of Action Accrues
Lima v. Duterte, G.R. No. 227635 (2019)]
suit is one
a. May be invoked only by the President against the
Immunity from suit pertains to the President by state (cf.
virtue of the office and may be invoked only by state
the holder of the office; not by any other person immunity)
on the President's behalf. The President may
waive the protection afforded by the privilege Unoffical Suit may not Suit cannot
and submit to the court's jurisdiction [Soliven v. Act (or acts be filed be filed
Makasiar, G.R. No. 82585 (1988); Beltran v. beyond during during tenure
Makasiar, G.R. No. 82827(1988)]. authority) tenure.
Suit may be
But presidential decisions may be questioned filed after
before the courts where there is grave abuse of tenure ends.
discretion or that the President acted without or
in excess of jurisdiction [Gloria v. CA, G.R. No.
119903 (2000)]. C. Concept of Executive
Privilege
b. Limitations
Immunity is coextensive with tenure. After Executive privilege is not a personal privilege,
tenure, the Chief Executive cannot invoke but one that adheres to the Office of the
immunity from suit for civil damages arising out President. It exists to protect public interest, not
of acts done by him while he was President to benefit a particular public official. Its
which were not performed in the exercise of purpose, among others, is to assure that the
official duties [Estrada v. Desierto, G.R. Nos. nation will receive the benefit of candid,
146710-15 (2001)]. objective and untrammeled communication
and exchange of information between the
This presidential privilege of immunity cannot President and his/her advisers in the process
be invoked by a non-sitting president even for of shaping or forming policies and arriving at
acts committed during his or her tenure [Saez decisions in the exercise of the functions of the
v. Macapagal-Arroyo, G.R. No. 183533 Presidency under the Constitution. The
(2012)]. confidentiality of the President’s conversations
and correspondence is not unique. It is akin to
Cause of Action Accrues the confidentiality of judicial deliberations. It
possesses the same value as the right to
Act Before During privacy of all citizens and more, because it is
complained: Presidential Presidential dictated by public interest and the
Tenure Tenure constitutionally ordained separation of
(e.g., governmental powers. [Neri v. Senate, G.R.
preexisting No. 180643, (2008)]
civil claims,
or for facts in 1. Types
prior office)
a. Presidential Communications Privilege
Official Act Suit may not Suit cannot (President): communications are
be filed be filed presumptively privileged; the president
during tenure during must be given freedom to explore
tenure. alternatives in policy-making.
b. Deliberative Process Privilege
Suit cannot (Executive Officials): refer to materials
be filed even that comprise part of a process by which
after tenure if governmental decisions and policies are
Page 48 of 384
formulated. This includes diplomatic The diplomatic negotiations privilege seeks,
processes [Akbayan v. Aquino, G.R. No. through the same means, to protect the
170516 (2008)]. independence in decision-making of the
President, particularly in its capacity as “the
Varieties sole organ of the nation in its external relations,
While there certainly are privileges grounded and its sole representative with foreign
on the necessity of safeguarding national nations.” And, as with the deliberative process
security such as those involving military privilege, the privilege accorded to diplomatic
secrets, not all are founded thereon. One negotiations arises, not on account of the
example is the informer’s privilege, or the content of the information per se, but because
privilege of the Government not to disclose the the information is part of a process of
identity of a person or persons who furnish deliberation which, in pursuit of the public
information of violations of law to officers interest, must be presumed confidential.
charged with the enforcement of that law. [Akbayan v. Aquino, supra]
Also illustrative is the privilege accorded to 2. Who May Invoke

presidential communications, which are
presumed privileged without distinguishing Only the President or the Executive Secretary
between those which involve matters of (by authority of the President) can invoke the
national security and those which do not. In the privilege.
same way that the privilege for judicial
deliberations does not depend on the nature of In light of this highly exceptional nature of the
the case deliberated upon, so presidential privilege, the Court finds it essential to limit to
communications are privileged whether they the President the power to invoke the privilege.
involve matters of national security. She may of course authorize the Executive
Secretary to invoke the privilege on her behalf,
It bears emphasis, however, that the privilege in which case the Executive Secretary must
accorded to presidential communications is not state that the authority is "By order of the
absolute, one significant qualification being President", which means that he personally
that “the Executive cannot, any more than the consulted with her. The privilege being an
other branches of government, invoke a extraordinary power, it must be wielded only by
general confidentiality privilege to shield its the highest official in the executive hierarchy.
officials and employees from investigations by In other words, the President may not authorize
the proper governmental institutions into her subordinates to exercise such power.
possible criminal wrongdoing.” This There is even less reason to uphold such
qualification applies whether the privilege is authorization in the instant case where the
being invoked in the context of a judicial trial or authorization is not explicit but by mere silence
a congressional investigation conducted in aid [Senate v. Ermita, G.R. No. 169777 (2006)].
of legislation.
D. Qualifications, Election, Term
The deliberative process [privilege] covers
documents reflecting advisory opinions, of the President and Vice-
recommendations and deliberations President, and Rules on
comprising part of a process by which Succession
governmental decisions and policies are
formulated. Notably, the privileged status of
such documents rests, not on the need to 1. Qualifications
protect national security but, on the “obvious a. Natural-born citizen of the Philippines;
realization that officials will not communicate b. A registered voter;
candidly among themselves if each remark is a c. Able to read and write;
potential item of discovery and front page d. At least 40 years of age on the day of the
news.” election; and
e. A resident of the Philippines for at least 10
years immediately preceding such
Page 49 of 384
election [Section 2, Article VII, 1987 5. Term of Office
Constitution]. 6 years, which shall begin at noon on the 30th
day of June next following the day of the
2. Election election and shall end at noon of the same day
a. Regular Election: Second Monday of 6 years thereafter [Section 4, Article VII, 1987
May Constitution].
b. National Board of Canvassers (President
and Vice-President): Congress Note:
i. Returns shall be transmitted to ● The President is not eligible for any
Congress, directed to the Senate reelection.
President ○ The Supreme Court has not yet
ii. Joint public session: not later than 30 decided whethera run for second
days after election date; returns to be non-consecutive term is
opened in the presence of the Senate reelection.[Pormento v. Estrada G.R.
and HOR in joint session No. 191988 (2010)]
b. Congress, upon determination of the ● No person who has succeeded as
authenticity and due execution, shall President and has served as such for
canvass the votes more than four years shall be qualified for
c. Person having the highest number of election to the same office at any time
votes shall be proclaimed elected [Section 4, Article VII, 1987 Constitution].
d. In case of tie, one will be chosen by the ○ “Succeeded as President” — refers
vote of majority of all the Members of both to Vice President as automatic
Houses of Congress, voting separately successor or elected President by
virtue of special election, and serves
3. Jurisprudence on Canvassing the unexpired term; ineligible to run
Congress may validly delegate the initial for President if he has served for
determination of the authenticity and due more than four years
execution of the certificates of canvass to a
Joint Congressional Committee, composed of The Acting President is not included (as an
members of both houses [Lopez v. Senate, Acting President does not succeed to the office
G.R. No. 163556 (2004)]. of the President).
Even after Congress has adjourned its regular 6. Rules on Succession

session, it may continue to perform this
constitutional duty of canvassing the a. Who shall act as or become President
presidential and vice-presidential election
results without need of any call for a special In cases where the Constitution provides that
session by the President. Only when the board an official shall act as president, such Acting
of canvassers has completed its functions is it President does notbecome President as
rendered functus officio [Pimentel, Jr. v. Joint he/she does not succeed to the office.
Committee of Congress, G.R. No. 163783
(2004)].
Situation Who shall act as
President
4. The Supreme Court as Presidential
Electoral Tribunal Before/at the beginning of the term
The Supreme Court, sitting en banc, shall be
the sole judge of all contests relating to the
election, returns and qualifications of the President-elect fails Vice-President-elect
President or Vice-President, and may to qualify (until the President-
promulgate its rules for the purpose. elect shall have
qualified)
Page 50 of 384
Situation Who shall act as Situation Who shall act as

President President
President shall not Vice-President-elect First written Vice-President as

have been chosen (until a President declaration by Acting President
shall have been majority of the
chosen and qualified) Cabinet
Beginning of the term: Vice-President-elect Determination by ⅔ vote: Vice-

President-elect died shall become Congress by ⅔ vote President as Acting
or became President of all members, voting President
permanently disabled separately, acting on Otherwise: President
the second written continues exercising
No President and Senate President or, declaration by his powers and
Vice-President have in case of his majority of the duties
been chosen or shall inability, the Speaker Cabinet
have qualified of the House shall act [Strictly not a
as President (until a succession.
Both President and President or a Vice- Temporary only.]
Vice-President died President shall have
or became been chosen and
permanently disabled qualified) b. What if the Senate President and
Speaker are also not capable to act as
[Strictly not a President?
succession. Vacancy before the term: Congress shall, by
Temporary only.] law, provide the manner of selecting the one
who will act as President until President or Vice
During the term President have either been chosen and
qualified pursuant to special elections.
Death, permanent Vice-President to
Vacancy during the term: Congress shall, by
disability, removal serve the unexpired
law, provide who will be acting President until
from office, or term
President or Vice President have either been
resignation of the
elected and qualified pursuant to special
President
elections.
Death, permanent Senate President or,
disability, removal in case of his Congress has yet to pass a law providing for
from office, or inability, the Speaker such manner of selection.
resignation of both of the House shall act
the President and as President (until a c. Vacancy in the Office of the President
Vice-President President or a Vice-
President shall have At the Beginning of Term
been chosen and 1987 Constitution
qualified)
[Strictly not a Section 7, Article VII. The President-elect and the
succession. Vice-President-elect shall assume office at the
beginning of their terms.
Temporary only.]
Temporary disability resulting to vacancy Order of succession:

1. Vice-President;
Voluntary written Vice-President as 2. Senate President (as acting President
declaration of the Acting President only);
President
Page 51 of 384
3. Speaker of the House(as acting President election shall be deemed certified under paragraph
only); 2, Section 26, Article VI of this Constitution and shall
4. Congress, by law, shall provide the become law upon its approval on third reading by the
manner in which one who is to act as Congress. Appropriations for the special election
President shall be selected [Section 7, shall be charged against any current appropriations
and shall be exempt from the requirements of
Article VII, 1987 Constitution].
paragraph 4, Section 25, Article VI of this
Constitution. The convening of the Congress cannot
1. Temporary or Permanent Vacancy in the be suspended nor the special election postponed.
Presidency before the Term No special election shall be called if the vacancy
occurs within eighteen months before the date of the
Permanent vacancy occurs when: next presidential election.
1. The President dies; or
2. The President is permanently During Term
incapacitated.
1. Permanent Vacancy in the Presidency
Effect of permanent incapacity: Order of during the Term
succession in Section 7, Article VII is followed.
1987 Constitution
1987 Constitution
Section 8, Article Vii. In case of death, permanent
Section 7 (2)-(6), Article VII. If the President-elect disability, removal from office, or resignation of the
fails to qualify, the Vice-President-elect shall act as President, the Vice-President shall become the
President until the President-elect shall have President to serve the unexpired term. In case of
qualified. death, permanent disability, removal from office, or
resignation of both the President and Vice-
If a President shall not have been chosen, the Vice- President, the President of the Senate or, in case of
President-elect shall act as President until a his inability, the Speaker of the House of
president shall have been chosen and qualified. Representatives, shall then act as President until the
President or Vice-President shall have been elected
If at the beginning of the term of the President, the and qualified.
President-elect shall have died or shall have
become permanently disabled, the Vice-President- The Congress shall, by law, provide who shall serve
elect shall become President. as President in case of death, permanent disability,
or resignation of the Acting President. He shall serve
Where no President and Vice-President shall have until the President or the Vice-President shall have
been chosen or shall have qualified, or where both been elected and qualified, and be subject to the
shall have died or become permanently disabled, same restrictions of powers and disqualifications as
the President of the Senate or, in case of his inability, the Acting President.
the Speaker of the House of Representatives shall
act as President until a President or a Vice-President
shall have been chosen and qualified. Four possibilities for permanent vacancy
during term of office
The Congress shall, by law, provide for the manner 1. Death;
in which one who is to act as President shall be
2. Removal (by impeachment);
selected until a President or a Vice-President shall
have qualified, in case of death, permanent 3. Resignation;
disability, or inability of the officials mentioned in the 4. Permanent Disability.
next preceding paragraph.
In case of Temporary Disability
Section 10, Article VII. The Congress shall, at ten 1. Temporary Vacancy in the Presidency
o’clock in the morning of the third day after the
during the Term
vacancy in the offices of the President and Vice-
President occurs, convene in accordance with its
rules without need of a call and within seven days A temporary vacancy in the Presidency arising
enact a law calling for a special election to elect a from his disability can occur in any of the
President and a Vice-President to be held not earlier following ways:
than forty-five days nor later than sixty days from the ● Voluntary written declaration of the
time of such call. The bill calling such special
President;
Page 52 of 384
● First written declaration by majority of the If the Congress, within 10 days after receipt of
Cabinet; the last written declaration, or, if not in session,
● Determination by Congress by 2/3 vote of within 12 days after it is required to assemble,
all members, voting separately, acting on determines by a 2/3 vote of both Houses,
the second written declaration by majority voting separately, that the President is unable
of the Cabinet. to discharge the powers and duties of his office,
the Vice-President shall act as the President;
In all these cases, the Vice-President assumes otherwise, the President shall continue
the powers and duties of the office as Acting exercising the powers and duties of his office.
President.
3. Constitutional Duty of Congress in Case
2. Section 11, Article VII of Double Vacancy in the Offices of the
a. Voluntary written declaration of the President and the Vice- President
President
1987 Constitution
Whenever the President transmits to the
President of the Senate and the Speaker of the Section 10, Article VII. The Congress shall, at
House of Representatives his written 10AM of the 3rd day after the vacancy in the offices
declaration that he is unable to discharge the of the President and Vice-President occurs:
1. Convene in accordance with its rules without
powers and duties of his office.
need of a call; and
2. Within seven days, enact a law calling for a
b. First written declaration by majority of the special election to elect a President and a Vice-
Cabinet President to be held not earlier than forty-five
days nor later than sixty days from the time of
Whenever a majority of all the Members of the such call.
Cabinet transmit to the President of the Senate
The bill calling such special election shall be
and to the Speaker of the House of deemed certified under paragraph 2, Section 26,
Representatives their written declaration that Article VI of this Constitution and shall become law
the President is unable to discharge the upon its approval on third reading by the Congress.
powers and duties of his office. Appropriations for the special election shall be
charged against any current appropriations and shall
be exempt from the requirements of paragraph 4,
c. Determination by Congress by 2/3 vote of all
Section 25, Article VI of this Constitution. The
members, voting separately, acting on the convening of the Congress cannot be suspended
second written declaration by majority of the nor the special election postponed. No special
Cabinet election shall be called if the vacancy occurs within
eighteen months before the date of the next
Thereafter, when the President transmits to the presidential election.
President of the Senate and to the Speaker of
the House of Representatives his written 4. Vacancy timetable
declaration that no inability exists, he shall a. 0 days – Vacancy occurs
reassume the powers and duties of his office. b. 3 days – Congress convenes
Meanwhile, should a majority of all the c. 10 days – Law providing for special
Members of the Cabinet transmit within five elections should be enacted
days to the President of the Senate and to the d. 55–70 days – Elections should be held
Speaker of the House of Representatives their within this period
written declaration that the President is unable e. 85–100 days – Canvassing by
to discharge the powers and duties of his office, Congress should be done within this
the Congress shall decide the issue. For that period
purpose, the Congress shall convene, if it is not
in session, within 48 hours, in accordance with
its rules and without need of call.
Page 53 of 384
d. Vacancy in the Office of the Vice- 5. Prohibitions on the Executive
President Department
The following prohibitions apply to:
1987 Constitution a. President;
b. Vice-President;
SECTION 9, ARTICLE VII. Whenever there is a c. The members of the Cabinet, and their
vacancy in the Office of the Vice-President during deputies or assistants.
the term for which he was elected, the President
shall nominate a Vice-President from among the
Members of the Senate and the House of 6. Multiple Offices and Double
Representatives who shall assume office upon Compensation
confirmation by a majority vote of all the Members of a. Shall not receive any other emoluments
both Houses of the Congress, voting separately. from the government or any other source
[For President and Vice-President,
E. Other Privileges, Inhibitions, Section 6, Article VII, 1987 Constitution].
b. Unless otherwise provided in the
and Disqualifications Constitution, shall not hold any other office
or employment [Section 13, Article VII,
1. Official residence 1987 Constitution].
The president shall have an official residence
[Section 6, Article VII, 1987 Constitution]. Exceptions
i. Constitutional Exceptions
2. Salary ii. Ex-Officio Exception: The prohibition
This shall be determined by law. It shall not be does not include posts occupied by
decreased during tenure. No increase shall executive officials without additional
take effect until after the expiration of the term compensation in an ex officio capacity,
of the incumbent during which such increase as provided by law and as required by
was approved [Section 6, Article VII, 1987 the primary functions of the said official’s
Constitution]. office [National Amnesty Commission v.
COA, G.R. No. 156982 (2004)].
3. Presidential Privilege iii. The Vice-President being appointed as a
member of the cabinet.
Note: Case law uses the term presidential iv. The Secretary of Justice sitting as ex
privilege to refer to either (a) immunity from suit officio member of the Judicial and Bar
(i.e., immunity from judicial processes, see Neri Council [Section 8(1), Article VIII, 1987
v. Senate, infra, and Saez v. Macapagal- Constitution; Civil Liberties Union v.
Arroyo, supra); or (b) executive privilege Executive Secretary, supra].
[Akbayan v. Aquino, infra], both discussed
above. c. Shall not directly or indirectly:
1. Practice any other profession;
2. Participate in any business; or
4. The Vice President
3. Be financially interested in any contract
Qualifications, election and term of office and
with, or in any franchise or special
removal are the same as the President, except
privilege granted by the government or
that no Vice-President shall serve for more
any subdivision, agency, or
than 2 successive terms.
instrumentality thereof, including
government-owned or -controlled
The Vice-President may be appointed as a
corporations or their subsidiaries
member of the Cabinet; such requires no
[Section 14, Article VII, 1987
confirmation by the Commission of
Constitution].
Appointments.
d. Strictly avoid conflict of interest in the
conduct of their office [Section 13, Article
VII, 1987 Constitution].
Page 54 of 384
e. May not appoint (a) spouse; or (b) requires no confirmation [Section 3, Article VII,
relatives by consanguinity or affinity within 1987 Constitution].
the fourth civil degree as members of
Constitutional Commissions, or the Office Cabinet
of the Ombudsman, or as Secretaries, The Constitution allows a Cabinet member to
Undersecretaries, chairmen or heads of hold another office provided:
bureaus or offices, including government
owned or controlled corporation and their i. It is in an ex-officio capacity and without
subsidiaries. additional compensation;
ii. Such is necessitated by the primary
a. President’s spouse and relatives functions of his position (e.g., Secretary of
President's spouse and relatives by Trade and Industry as Chairman of NDC;
consanguinity or affinity within the fourth civil Secretary of Agrarian Reform as Chairman
degree cannot be appointed during his tenure of the Land Bank); and
as: (COSUCH) iii. Such is provided by law [Civil Liberties
Union v. Executive Secretary, supra].
a. Members of the Constitutional
Commissions F. Powers of the President
b. The Office of the Ombudsman
c. Secretaries, Undersecretaries, Chairmen 1. Executive and Administrative
or Heads of bureaus or offices (including
Powers
GOCCs and subsidiaries)
The stricter prohibition applied to the President 1987 Constitution

and his official family under Article VII, Section
Section 1, Article VII. The executive power shall be
13, as compared to the prohibition applicable
vested in the President of the Philippines.
to appointive officials in general under Article
IX-B, Section 7, par. 2, is proof of the intent of
the 1987 Constitution to treat them as a class a. Executive Power
by itself and to impose upon said class stricter This refers to the President’s power to enforce,
prohibitions [Civil Liberties Union v. Executive implement, and administer laws. The President
Secretary, G.R. No. 83896 (1991)]. shall ensure that the laws be faithfully executed
[Section 17, Article VII, 1987 Constitution].
b. Exceptions to the rule prohibiting
executive officials from holding The President’s power to conduct
additional positions investigations to aid him in ensuring the faithful
execution of laws is inherent in the President’s
President powers as the Chief Executive. The purpose of
The President can assume any or all Cabinet allowing ad hoc investigating bodies to exist is
posts because the departments are mere to allow an inquiry into matters which the
extensions of his personality, according to the President is entitled to know so that he can be
Doctrine of Qualified Political Agency and the properly advised and guided in the
Unitary (Single) Executive Doctrine. Hence, no performance of his duties relative to the
objection can be validly raised based on execution and enforcement of the laws of the
Section 13, Article VII. land [Biraogo v. Philippine Truth Commission,
G.R. Nos. 192935-36 (2010)].
The President can assume ex officio positions
(e.g., The President is the Chairman of NEDA) b. Summary of Presidential Powers
[Section 9, Article XII, 1987 Constitution].
1. Executive Power: This is the power to
Vice-President enforce and administer laws.
The Vice-President may be appointed as a
member of the Cabinet. Such appointment
Page 55 of 384
2. Power of Appointment: The Legislative a. These are rulemaking powers
can create office, but only the Executive of the President furtherto his
can fill it; Congress cannot circumvent implementation of directives by
this by setting very narrow qualifications, the Constitution or
such that only one person is qualified to statutes/legislation.
hold office [Flores v. Drilon, G.R. No. b. This includes the power to
104732 (1993)]. declare a state of facts or to
mark events. Hence, a
3. Power of Control: The President may Declaration of a State of
(a) nullify, modify judgments of Emergency is within the
subordinates [See Section 17, Article VII, ordinance power of the
1987 Constitution]; (b) undo or redo President. Howerver, this does
actions of subordinates; and (c) lay down not vest him with Emergency
rules for the performance of Powers (including the power to
subordinates’ duties. issue decrees in the nature of
statutes), which can only be
4. Power of Supervision: This refers to done by Congress through a
the oversight function. The Executive law. [See David v. Macapagal-
must see to it that rules, which it did not Arroyo, supra]
make, are followed.
8. Diplomatic Powers: Includes the power
5. Commander-in-Chief Powers [Section to ratify treaties (subject to the consent
18, Article VII, 1987 Constitution]: of the Senate) and enter into executive
a. Call Out Power: Armed forces to agreements.
suppress lawless violence.
b. Suspension of the privilege of the 9. Residual Power: To protect the general
Writ of Habeas Corpus: Only (i) in welfare of people; founded on duty of
times of rebellion or invasion; and (ii) President as steward of the people;
when required by public safety. includes powers unrelated to execution
c. Martial law: Does not suspend the of any provision of law [See Marcos v.
Constitution or result in the closure of Manglapus, G.R. No. 88211 (1989)]
Congress or the courts (which
continue to perform their legislative 10. Other Powers
and judicial functions). i. Power to Pardon: Reprieve,
commute, pardon, remit fines and
6. Power as to Legislation forfeitures after final judgment
a. Veto Power [Section 19(1), Article VII, 1987
b. Power to Declare Emergency: The Constitution].
President only has the power to ii. Power to Grant Amnesty: With
declare a state of emergency. The concurrence of majority of all
exercise of emergency power is members of Congress.
vested in Congress, but may be iii. Borrowing Power: Contract or
delegated by it to the President. guarantee foreign loans with
c. Integrative Power: Powers shared concurrence of Monetary Board
with legislative (e.g., appointments [Section 20, Article VII, 1987
requiring confirmation, rule-making); Constitution].
legislation during times of iv. Budgetary Power: Submit to
emergency Congress budget of bills and
expenditures [Section 22, Article VII,
7. Ordinance Power: The power to issue 1987 Constitution].
executive orders, administrative orders,
proclamations, memorandum orders, 10. Informing Power: Address Congress
memorandum circulars, and general and during opening of session, or at any
special orders
Page 56 of 384
other time [Section 23, Article VII, 1987 iii. Vacant position at the time of
Constitution]. appointment;
iv. Receipt of the appointment papers and
Note: The presidential power of control over acceptance of the appointment by the
the Executive Branch of Government is a self- appointee who possesses all
executing provision of the Constitution and qualifications and none of the
does not require statutory implementation, nor disqualifications [Velicaria-Garafil v.
may its exercise be limited, much less Office of the President, G.R. No.
withdrawn, by the Legislature [Ocampo v. 203372 (2015)].
Enriquez, G.R. No. 225973 (2016)]. 5. Four Groups of Officers whom the
President may appoint:
2. Power of Appointment i. With Consent of the Commission on
Appointments:
● Heads of the executive departments
1987 Constitution
● Ambassadors, other public
Section 16, Article VII. The President shall ministers and consuls
nominate and, with the consent of the Commission ● Officers of the armed forces from
on Appointments, appoint the heads of the executive the rank of colonel or naval captain
departments, ambassadors, other public ministers ● Other officers whose appointments
and consuls, or officers of the armed forces from the
are vested in him by the
rank of colonel or naval captain, and other officers
whose appointments are vested in him in this Constitution:
Constitution. He shall also appoint all other officers ● Regular Members of the JBC (ex-
of the Government whose appointments are not officio members do not need the
otherwise provided for by law, and those whom he confirmation of the CA)
may be authorized by law to appoint. The Congress ● Chairman and Commissioners of
may, by law, vest the appointment of other officers
the CSC, COMELEC, and COA.
lower in rank in the President alone, in the courts, or
in the heads of departments, agencies, ● Members of the Regional and
commissions, or boards. Consultative Commissions
ii. All other officers of the government
whose appointments are not otherwise
1. Appointment: Selection by the proper provided by law;
authority of an individual who is to exercise iii. Those whom the President may be
the powers and functions of a given office. authorized by law to appoint (e.g.,
Appointee has a right to claim Chairman and Members of the
compensation as stated in the Commission on Human Rights
appointment. [Bautista v. Salonga, G.R. No. 86439
2. Designation: Imposition of additional (1989)]; and
duties, usually by law, upon a person iv. Officers lower in rank whose
already in the public service by virtue of an appointments Congress may by law
earlier appointment. Does not entail vest in the President alone [Sarmiento
payment of additional benefits or grants III v. Mison, G.R. No. 79974 (1987)]
upon the person so designated [National
Amnesty Commission v. COA, G.R. No. Consent of the Commission on Appointments
156982 (2004)]. is not required for 2, 3, and 4 as these are not
3. Commission: Written evidence of the positions whose appointments are granted by
appointment. the Constitution
4. Elements of a valid appointment:
i. Authority to appoint and evidence of Note: Appointments to the Philippine Coast
the exercise of authority; Guard, which is no longer under the AFP, need
ii. Transmittal of the appointment paper not undergo confirmation [Soriano v. Lista,
and evidence of the transmittal G.R. No. 153881 (2003)].
(preferably through the Malacañang
Records Office);
Page 57 of 384
The Philippine National Police (PNP) [Section For lower courts, appointments shall be
6, Article XVI, 1987 Constitution] is separate issued within 90 days from submission
and distinct from the Armed Forces of the of the list.
Philippines (AFP) [Section 4, Article XVI, 1987
Constitution]. The police force is different from ii. Ombudsman and his 5 deputies (for
and independent of the armed forces and that Luzon, Visayas, Mindanao, general
the ranks in the military are not similar to those and military) [Section 9, Article XI, 1987
in the PNP. Thus, directors and chief Constitution].
superintendents of the PNO do not fall under
the first category of presidential appointees 8. Clustering of JBC Nominations
requiring confirmation by the COA [Manalo v.
Sistoza, G.R. No. 107369 (1999)]. Clustering: A previous JBC practice where,
when there are multiple vacancies in a court
Note: Re: “Congress may by law vest in the (e.g., Associate Justice A, B, and C in the
appointment of other officers lower in rank in Sandiganbayan), candidates (e.g., Candidates
the President alone.” 1 to 9) who meet the criteria for the position are
● The inclusion of the word “alone” was an nominated by the JBC only for specific
oversight. The Constitution should read: vacancies (e.g., Candidates 1-3 for Associate
“The Congress may, by law, vest the Justice A, Candidates 4-6 for AssociateJustice
appointment of other officers lower in rank B, and Candidates 7-9 for Associate Justice C).
in the President” [Sarmiento v. Mison,
supra] In Aguinaldo v. Aquino, G.R. No. 224302
(2017), the Court ruled that clustering impinged
6. Other cases where confirmation is not upon the President’s appointment power in
required: appointing the Associate Justices in the
i. When Congress creates inferior Sandiganbayan.
officers but omits to provide for
appointment thereto, or provides in an The President’s option for every vacancy was
unconstitutional manner for such limited to the 5 to 7 nominees in each cluster.
appointments – power to appoint is Once the President chose an appointee from
vested upon the President by default, one cluster, he was proscribed from
but this will not require confirmation; considering other nominees in the same cluster
ii. Appointment of the Vice-President as for the other vacancies. All the nominees
member of the Cabinet [Section 3, applied for and were qualified for appointment
Article VII, 1987 Constitution]; to any of the vacant Associate Justice positions
iii. Appointments upon recommendation in the Sandiganbayan, however, the JBC did
of the Judicial Bar Council; not explain why one nominee should be
iv. Appointments solely by the President. considered for appointment to the position
assigned to one specific cluster only.
7. Appointments upon nomination of the
Judicial and Bar Council (does not The nominees' chance for appointment was
require confirmation by the restricted to the consideration of the one
Commission on Appointments) cluster in which they were included, even
i. Members of the Supreme Court and all though they applied for and were qualified for
other courts [Section 9, Article VIII, all vacancies.
1987 Constitution].
9. Steps in the appointing process (for
Note: The appointment must be made appointees requiring confirmation):
90 days from when the vacancy occurs
[Section 4(1), Article VIII, 1987
Nomination by the President
Constitution]
!
Page 58 of 384
appointment cannot have the effect of recalling
Confirmation by the Commission on
or setting aside said appointment. The
Appointments
Constitution is clear — there must be a
! rejection by the Commission on Appointments
or non-action on its part for the confirmation to
Issuance of the Commission be recalled.
! b. By-Passed Appointments and their

Effects
Acceptance by the Appointee
A by-passed appointment is one that has not
been finally acted upon on the merits by the
Note: In the case of ad interim appointments, Commission on Appointments at the close of
steps 1, 3 and 4 precede step 2. the session of Congress. There is no final
decision by the Commission on Appointments
An appointment is deemed complete only upon to give or withhold its consent to the
acceptance [Lacson v. Romero, G.R. No. L- appointment as required by the Constitution.
3081 (1949)]. Absent such decision, the President is free to
renew the ad interim appointment of a by-
Appointment is essentially a discretionary passed appointee [Matibag v. Benipayo, G.R.
power, the only condition being that the No. 149036 (2002)].
appointee, if issued a permanent appointment,
should possess the minimum qualification A by-passed appointee, or one whose
requirements, including the Civil Service appointment was not acted upon the merits by
eligibility prescribed by law for the position. the CA, may be appointed again by the
Discretion also includes the determination of President, because failure by the CA to confirm
the nature or character of the appointment. an ad interim appointment is not disapproval.
a. Process of Confirmation by the c. Appointments by Acting President

Commission
1987 Constitution
Types of Appointment
● Regular Section 14, Article VII. Appointments extended by
● Recess (Ad Interim) an Acting President shall remain effective, unless
revoked by the elected President, within ninety days
from his assumption or reassumption of office.
Two Kinds of Appointments Requiring
Confirmation:
1. Regular: If the CA (Congress) is in Midnight appointments ban applies to the
session; and acting President.
2. Ad Interim: during the recess of Congress
(because the CA shall meet only while d. Scope of Midnight Appointments
Congress is in session) [Section 19, Article
VI, 1987 Constitution] General Rule: 2 months immediately before
the next presidential elections (2nd Monday of
Regular Appointment March), and up to the end of his “term” (June
1. Made by the President while Congress is 30), a President (or Acting President) shall not
in session make appointments [Section 15, Article VII,
2. Takes effect only after confirmation by the 1987 Constitution].
Commission on Appointments (CA)
3. Once approved, continues until the end of Exception: Temporary appointments to
the term. executive positions, when continued vacancies
will: (1) Prejudice public service; or (2)
Note: The mere filing of a motion for endanger public safety.
reconsideration of the confirmation of an
Page 59 of 384
Limited to Executive Departments: The Exception: The President cannot remove
prohibition against midnight appointment officials appointed by him where the
applies only to positions in the executive Constitution prescribes certain methods for
department [De Castro v. JBC, G.R. No. 91002 separation of such officers from public service,
(2010)]. e.g., Chairman and Commissioners of
Constitutional Commissions who can be
Limited to Caretaker Capacity: While removed only by impeachment, or judges who
“midnight appointments” (i.e., made by are subject to the disciplinary authority of the
outgoing President near the end of his term) Supreme Court.
are not illegal, they should be made in the
capacity of a “caretaker” [a new president Career Civil Service: Members of the career
being elected], doubly careful and prudent in civil service who are appointed by the
making the selection, so as not to defeat the President may be directly disciplined by him,
policies of the incoming administration. Hence, but their removal is subject to compliance with
the issuance of 350 appointments in one night civil service rules. [Villaluz v. Zaldivar, G.R. No.
and planned induction of almost all of them a L-22754 (1965)].
few hours before the inauguration of the new
President may be regarded as abuse of Serve at the pleasure of the President:
presidential prerogatives [Aytona v. Castillo, Cabinet members and such officers whose
G.R. No. L-19313 (1962)]. It must be shown continuity in office depends upon the pleasure
that there is regard for the fitness of appointees of the president may be replaced at any time,
and the filling up must be few and so spaced but legally speaking, their separation is
which indicates there was a deliberate action effected not by removal but by expiration of
taken by the appointing power. their term of the appointee (as their “term” is
only until the President is pleased with their
Applies only to the President: Ban does not continuance).
extend to appointments made by local elective
officials. There is no law that prohibits local 3. Power of Control and Supervision
elective officials from making appointments
during the last day of his/her tenure [De Rama
1987 Constitution
v. CA, G.R. No. 131136 (2001)].
Section 17, Article VII. The President shall have
e. Recess of Ad Interim appointments control of all the executive departments, bureaus,
The President shall have the power to make and offices. He shall ensure that the laws be
appointments during the recess of the faithfully executed.
Congress, whether voluntary or compulsory,
but such appointments shall be effective only Control is essentially the power to (1) alter or
until disapproval by the Commission on modify or nullify or set aside what a subordinate
Appointments or until the next adjournment of officer had done in the performance of his
the Congress [Section 16(2), Article VII, 1987 duties; and to (2) substitute the judgment of the
Constitution]. former with that of the latter [Biraogo v.
Philippine Truth Commission, G.R. No. 192935
Hence, when an ad interim appointment is (2010)].
bypassed, it expires during the adjournment of
Congress and must be re-extended by the The power of control includes:
President. ● Acting directly whenever a specific
function is entrusted by law or regulation
f. Power of Removal to a subordinate
● Directing the performance of a duty
General Rule: The power of removal is implied ● Restraining the commission of certain acts
from the power of appointment. ● Reviewing, approving, reversing,
modifying acts and decisions of
subordinate officials or units
Page 60 of 384
● Determining priorities in the execution of Exceptions:
plans and programs a. Cases where the Chief Executive is
● Prescribing guidelines, plans and required by the Constitution or by law to
programs act in person; or
● Reorganization (transfer of unit, transfer of b. The exigencies of the situation demand
functions, abolish, consolidate, or merge that he acts personally.
units)
The President may, by executive or
Supervision is the overseeing or the power of administrative order, direct the reorganization
the officer to see that subordinate officers of government entities under the Executive
perform their duties, and if the latter fail or Department. This is also sanctioned under the
neglect to fulfill them, then the former may take Constitution, as well as the Admin Code. This
such action or steps as prescribed by law to recognizes the recurring need of every
make them perform these duties. This does not President to reorganize his or her office "to
include the power to overrule their acts, if these achieve simplicity, economy and efficiency," in
acts are within their discretion. the manner the Chief Executive deems fit to
carry out presidential directives and policies
a. Doctrine of Qualified Political Agency [Tondo Medical Employees v. CA, G.R. No.
All the different executive and administrative 167324 (2007)].
organizations are mere adjuncts of the
Executive Department. This is an adjunct of the Power to Abolish Offices
Doctrine of the Unitary (Single) Executive. Generally, the power to abolish a public office
is legislative (as it is correlative of the power to
The heads of the various executive create a public office). However, as far as
departments are assistants and agents of the bureaus, offices or agencies of the executive
Chief Executive [Villena v. Secretary of Interior, department are concerned, the power of
G.R. No. L-45670 (1939)]. In the regular course control may justify him to inactivate functions of
of business, acts of executive departments, a particular office [Buklod ng Kawaning EIIB v.
unless disapproved or reprobated by the Chief Zamora, G.R. No. 142801-802 (2001)].
Executive, are presumptively acts of the Chief
Executive [Free Telephone Workers Union v. In establishing an executive department,
Minister of Labor and Employment, G.R. No. L- bureau, or office, the legislature necessarily
581184 (1981)]. ordains an executive agency's position in the
scheme of administrative structure. Such
There is a special class of powers which the determination is primary, but subject to the
President cannot delegate (e.g., declaration of President's continuing authority to reorganize
martial law, suspension of the privilege of the the administrative structure [Anak Mindanao v.
writ of habeas corpus, executive clemency, Executive Secretary, G.R. No. 166052 (2007)].
among others), which are textually committed
by the Constitution to the President. However, Power to Reorganize
the power of administrative review is not The Administrative Code delegated to the
among these quintessential presidential President the power to reorganize the Office of
powers. Thus, the President can choose not to the President in the interest of “simplicity,
review the decision of the DOJ and delegate economy, and efficiency” (cf. Admin. Code, Bk.
such power to the Secretary by virtue of the III, Ch.10, Sec.31).
Qualified Agency Doctrine [Angeles v. Gaite,
G.R. 165276 (2009)]. Note: A distinction is made in the Admin. Code
between the power to reorganize the Office of
b. Executive Departments and Offices the President Proper and that for the Office of
General Rule: The multifarious executive and the President.
administrative functions of the Chief Executive
are performed by and through the executive
departments.
Page 61 of 384
orders, or local ordinance) as he only exercises
Office of the Office of the
general supervision over LGUs, not control
President Proper President
The President has the Power of the 4. Emergency Powers

power to abolish, President to a. Emergency Powers
consolidate, merge reorganize is limited Delegated by the Congress. It covers such
units of the Office of to merely transferring power necessary to carry out a declared
the President Proper. functions. This refers national policy of Congress.
to outside the Office
of the President b. Nature of Grant
Proper but still within Generally, Congress is the repository of
the Office of the emergency powers. This is evident in the tenor
President. of Section 23 (2), Article VI authorizing it to
[Pichay v. Office of the Deputy Executive delegate such powers to the President.
Secretary, G.R. No. 196425 (2012)]. Certainly, a body cannot delegate a power not
reposed upon it.
The Office of the President Proper is a smaller
office that includes the Private Office, the a. Limited period — Ceases upon withdrawal
Executive Office, the Common Staff Support by Congress through a resolution, or
System, and the Presidential Special failing to adopt it upon next voluntary
Assistants/Advisers System. [See Admin. adjournment.
Code, Bk. III, Ch. 8, Sec. 22]. b. Subject to restrictions from Congress.
[See Rodriguez v. Gella, G.R. No. L-6266
(1953) on the Nature of Emergency
c. General Supervision over Local
Power]
Government Units
c. Requisites of Grant of Emergency
The President shall exercise general
supervision over local governments [Section 4, Powers
Article X, 1987 Constitution]. a. There must be a war or other emergency;
b. The delegation must be for a limited period
The President shall exercise general only;
supervision over autonomous regions to c. The delegation must be subject to such
ensure that laws are faithfully executed restrictions as the Congress may
[Section 16, Article X, 1987 Constitution]. prescribe; and
d. The emergency powers must be exercised
The President may suspend or remove local to carry out a national policy declared by
officials by virtue of the power delegated to him Congress.
by Congress through the Local Government
Code. The Constitution also places local [See David v. Macapagal-Arroyo, G.R. No.
governments under the general supervision of 171396 (May 3,2006)]
the President, and also allows Congress to
include in the local government code d. Concept of Emergency
provisions for removal of local officials [Section Emergency, as a generic term, connotes the
3, Article X, 1987 Constitution; See also existence of conditions suddenly intensifying
Ganzon v. CA, G.R. No. 93252 (1991)]. the degree of existing danger to life or
wellbeing beyond that which is accepted as
In relation to local government units (LGUs), normal. Implicit in these definitions are the
supervision includes the authority to ensure elements of intensity, variety, and perception.
that LGUs are operating and acting in Emergencies, as perceived by legislature or
accordance with law and not ultra vires. executive in the United States have been
However, the President cannot directly occasioned by a wide range of situations,
overrule the acts of LGUs (e.g., local executive classifiable under three principal heads: (a)
economic, (b) natural disaster, and (c) national
Page 62 of 384
security. Emergency as contemplated in the suspension, convene in accordance with its rules
1987 Constitution, is of the same breadth. It without any need of a call.
may include rebellion, economic crisis,
pestilence or epidemic, typhoon, flood, or other The Supreme Court may review, in an appropriate
similar catastrophe of nationwide proportions proceeding filed by any citizen, the sufficiency of the
factual basis of the proclamation of martial law or the
or effect.
suspension of the privilege of the writ or the
extension thereof, and must promulgate its decision
In David v. Macapagal-Arroyo, G.R. No. thereon within thirty days from its filing.
171396 (2006), the Court made it clear that
Presidential Proclamation 1017 (Declaring a A state of martial law does not suspend the
State of National Emergency) was woven out operation of the Constitution, nor supplant the
functioning of the civil courts or legislative
of the “calling out” and “take care” powers of
assemblies, nor authorize the conferment of
the President joined with the “temporary jurisdiction on military courts and agencies over
takeover” provision under Section 17, Article civilians where civil courts are able to function, nor
XII. PP 1017 purports to grant the President, automatically suspend the privilege of the writ.
without delegation from Congress, to take over
or direct operation of any privately-owned The suspension of the privilege of the writ shall apply
only to persons judicially charged for rebellion or
public utility or business affected with public
offenses inherent in or directly connected with the
interest. invasion.
Pursuant to her ordinance power, the President During the suspension of the privilege of the writ, any
may declare the existence of a state of national person thus arrested or detained shall be judicially
emergency without Congressional enactment charged within three days, otherwise he shall be
released.
however the exercise of emergency powers
requires a delegation from Congress which is
the repository of emergency powers. The President is the commander-in-chief of all
armed forces of the Philippines. The ability of
5. Commander-In-Chief Powers the President to require a military official to
secure prior consent before appearing before
1987 Constitution
Congress pertains to a wholly different and
independent species of presidential authority
Section 18, Article VII. The President shall be the — the commander-in-chief powers of the
Commander-in-Chief of all armed forces of the President. By tradition and jurisprudence, the
Philippines and whenever it becomes necessary, he commander-in-chief powers of the President
may call out such armed forces to prevent or are not encumbered by the same degree of
suppress lawless violence, invasion or rebellion. In
case of invasion or rebellion, when the public safety
restriction as that which may attach to
requires it, he may, for a period not exceeding sixty executive privilege or executive control
days, suspend the privilege of the writ of habeas [Gudani v. Senga, G.R. No. 170165 (2006)].
corpus or place the Philippines or any part thereof
under martial law. Within forty-eight hours from the Graduated Powers (From most to least
proclamation of martial law or the suspension of the benign)
privilege of the writ of habeas corpus, the President
shall submit a report in person or in writing to the
a. Calling out power: He may call out such
Congress. The Congress, voting jointly, by a vote of armed forces to prevent or suppress
at least a majority of all its Members in regular or lawless violence, invasion, or rebellion.
special session, may revoke such proclamation or b. Power to suspend PWHC: He may
suspension, which revocation shall not be set aside suspend the privilege of the writ of habeas
by the President. Upon the initiative of the President, corpus.
the Congress may, in the same manner, extend
such proclamation or suspension for a period to be
c. Power to declare ML: He may proclaim
determined by the Congress, if the invasion or martial law over the entire Philippines or
rebellion shall persist and public safety requires it. any part thereof [Sanlakas v. Executive
Secretary, G.R. No. 159085 (2004)].
The Congress, if not in session, shall, within twenty-
four hours following such proclamation or
Page 63 of 384
Conditions for the exercise of calling out 2. Public safety requires the proclamation of
power: martial law all over the Philippines or in
1. An actual invasion or rebellion; AND any part thereof.
2. Public safety requires the exercise of such
power. The power to declare martial law and to
suspend the privilege of the writ of habeas
These conditions are not required in the corpus involve curtailment and
exercise of the calling out power. The only suppression of civil rights and individual
criterion is that ‘whenever it becomes freedom. Thus, the declaration of martial
necessary,’ the President may call the armed law serves as a warning to citizens that the
forces ‘to prevent or suppress lawless violence, Executive Department has called upon the
invasion or rebellion.’ [Sanlakas v. Executive military assist in the maintenance of law
Secretary, supra] and order, and while the emergency
remains, the citizens must, under pain of
Outside explicit constitutional limitations, the arrest and punishment, not act in a
commander-in-chief clause vests in the manner that will render it more difficult to
President, as commander-in-chief, absolute restore order and enforce the law [Lagman
authority over the persons and actions of the v. Medialdea, supra].
members of the armed forces. Such authority
includes the ability of the President to restrict The following cannot be done by a
the travel, movement and speech of military proclamation of Martial Law [Section 18,
officers, activities which may otherwise be Article VII, 1987 Constitution]:
sanctioned under civilian law [Gudani v. 1. Suspend the operation of the Constitution;
Senga, supra]. 2. Supplant the functioning of the civil courts
and legislative assemblies;
a. Calling Out Powers 3. Confer jurisdiction upon military courts
This is merely a police measure meant to quell and agencies over civilians, where civil
disorder. As such, the Constitution does not courts are able to function.
regulate its exercise radically.
Open Court Doctrine: Civilians cannot be
State of Rebellion tried by military courts if the civil courts are
Since the Constitution did not define the term open and functioning. Martial law usually
"rebellion," it must be understood to have the contemplates a case where the courts are
same meaning as the crime of "rebellion" in the already closed and the civil institutions
Revised Penal Code (RPC). have already crumbled, i.e., a "theater of
war." [Olaguer v. Military Commission No.
In determining the existence of rebellion, the 34, G.R. No. L-54558 (1987)].
President only needs to convince himself that
there is probable cause or evidence showing 4. Automatically suspend the privilege of the
that more likely than not a rebellion was writ of habeas corpus. The President must
committed or is being committed. To require expressly suspend the privilege.
him to satisfy a higher standard of proof would
restrict the exercise of his [commander-in- Suspension of the Privilege of the Writ of
chief] powers [Lagman v. Medialdea, G.R. No. Habeas Corpus
231658 (2017)].
Requisites for suspension of the privilege
b. Declaration of Martial Law and the of the writ of habeas corpus:
Suspension of the Privilege of the Writ 1. There must be an actual invasion or
of Habeas Corpus (Including Extension rebellion; and
2. Public safety requires it.
of Period)
Note that the privilege of the writ is suspended,
Requisites of Proclaiming Martial Law
not the writ itself. The writ is an order from the
1. There must be an in invasion or rebellion.
Page 64 of 384
court commanding a detaining officer to inform iii. The right to bail shall not be impaired
the court: even when the privilege of the writ of
1. If he has the person in custody; and habeas corpus is suspended.
2. His basis for detaining that person. Excessive bail shall not be required
[Section 13, Article III, 1987
The privilege is the order from the court to Constitution].
release the person in the custody of the
respondent/detaining officer. The suspension of the privilege does not
destroy petitioners' right and cause of action for
Effects of the Suspension of the Privilege: damages for illegal arrest and detention and
a. The suspension of the privilege of the writ other violations of their constitutional rights
applies only to persons “judicially charged” [Aberca v. Ver, G.R. No. L-69866 (1988)].
(should be read as one who is suspected
of complicity in) for rebellion or offenses The President may exercise the power to call
inherent in or directly connected with out the Armed Forces independently of the
invasion [Section 18, par. 5, Article VII, power to suspend the privilege of the writ of
1987 Constitution]. habeas corpus and to declare martial law,
i. Such persons suspected of the above although, of course, it may also be a prelude to
can be arrested and detained without a possible future exercise of the latter powers,
warrant of arrest. as in this case [Lagman v. Medialdea, supra].
ii. The suspension of the privilege does
not make the arrest without warrant Four (4) ways for the Proclamation of Martial
legal. But the military is, in effect, Law or the Suspension of the Privilege of the
enabled to make the arrest anyway Writ of Habeas Corpus to be Lifted:
since, with the suspension of the 1. Lifting by the President himself
privilege, there is no remedy available 2. Revocation by Congress
against such unlawful arrest (arbitrary 3. Nullification by the Supreme Court
detention). 4. Operation of law after 60 days
iii. The arrest without warrant is justified
by the emergency situation and the Either may also be extended for a period to be
difficulty in applying for a warrant determined by Congress, upon the initiative of
considering the time and the number of the President, and if the invasion or rebellion
persons to be arrested. shall persist and public safety requires it.
iv. The crime for which he is arrested must
be one related to rebellion or invasion. The Role of Congress [See Section 18, par.
As to others, the suspension of the 1 & 2, Article VII, 1987 Constitution]
privilege does not apply. 1. Congress may revoke the proclamation of
b. During the suspension of the privilege of martial law or suspension of the privilege
the writ, any person thus arrested or of the writ of habeas corpus before the
detained shall be judicially charged within lapse of 60 days from the date of
3 days, or otherwise he shall be released suspension or proclamation.
[Section 18(6), Article VII, 1987
Constitution]. 2. Upon such proclamation or suspension,
i. The effect therefore is only to extend Congress shall convene at once. If it is not
the periods during which he can be in session, it shall convene in accordance
detained without a warrant. When the with its rules without need of a call within
privilege is suspended, the period is 24 hours following the proclamation or
extended to 72 hours. suspension.
ii. What happens if he is not judicially
charged nor released after 72 hours? The houses of Congress may convene
The public officer becomes liable under separately at this point, i.e., in their
RPC Article 125 for "delay in the respective chambers [See Padilla v.
delivery of detained persons." Congress, G.R. No. 231671 (2017)].
Page 65 of 384
3. Within 48 hours from the proclamation or ii. The extension thereof. It must
the suspension, the President shall submit promulgate its decision thereon
a report, in person or in writing, to the within 30 days from its filing.
Congress of the action he has taken.
In reviewing the sufficiency of the factual
4. The Congress shall then vote jointly, by a basis of the proclamation or suspension, the
majority of all its members, if it desires to Court considers only the information and
avail of two options: data available to the President prior to or at
a. To revoke such proclamation or the time of the declaration; it is not allowed
suspension. When it is so revoked, the to "undertake an independent investigation
President cannot set aside (or veto) the beyond the pleadings." On the other hand,
revocation as he normally would do in Congress may take into consideration not
the case of bills. only data available prior to, but likewise
b. To extend it beyond the 60-day period events supervening the declaration.
of its validity.
Thus, the power to review by the Court and
Congress need only meet in joint session the power to revoke by Congress are not
to revoke (or extend) the proclamation only totally different but likewise
(such as when one of the houses has independent from each other although
expressed an intent to revoke it, thereby concededly, they have the same trajectory,
compelling the houses to meet in joint which is, the nullification of the presidential
session). If Congress simply intends to proclamation. Needless to say, the power of
respect or support the President’s initial the Court to review can be exercised
proclamation, it need not meet in joint independently from the power of revocation
session [See Padilla v. Congress, supra]. of Congress [Lagman v. Medialdea, supra].
Congress can only so extend the Petition for Habeas Corpus

proclamation or suspension upon the i. When a person is arrested without a warrant
initiative of the President. The period need for complicity in the rebellion or invasion, he
not be 60 days; it could be more, as or someone else on his behalf has the
Congress would determine, based on the standing to question the validity of the
persistence of the emergency. proclamation or suspension.
ii. Before the SC can decide on the legality of
Note: If Congress fails to act before the his detention, it must first pass upon the
measure expires, it can no longer extend validity of the proclamation or suspension.
it until the President again re-declares the
measure. Cf. R.A. No. 7055 (1991)
If Congress extends the measure, but An Act Strengthening Civilian Supremacy

before the period of extension lapses the over the Military by Returning to the Civil
requirements for the proclamation or Courts the Jurisdiction over Certain
suspension no longer exist, Congress can Offenses involving Members of the Armed
lift the extension, since the power to confer Forces of the Philippines, other Persons
implies the power to take back. Subject to Military Law, and the Members of
the Philippine National Police, Repealing
The Role of the Supreme Court [See Section for the Purpose Certain Presidential
18, par. 3, Article VII, 1987 Constitution] Decrees
1. The Supreme Court may review, in an
appropriate proceeding filed by any citizen, R.A. No. 7055 provides that when these
the sufficiency of the factual basis of: individuals commit crimes or offenses
i. The proclamation of martial law or penalized under the RPC, other special penal
the suspension of the privilege of laws, or local government ordinances,
the writ; or regardless of whether civilians are co-accused,
Page 66 of 384
victims, or offended parties which may be time, a postponement of execution, a
natural or juridical persons, they shall be tried temporary suspension of execution
by the proper civil court, except when the [People v. Vera, G.R. No. L-45685 (1937)].
offense, as determined before arraignment by
the civil court, is service-connected in which ● Commutations: Reduction of sentence
case it shall be tried by court-martial. [Black’s Law Dictionary]. It is a remission
of a part of the punishment; a substitution
The assertion of military authority over civilians of a lesser penalty for the one originally
cannot rest on the President's power as imposed [People v. Vera, supra].
Commander in Chief or on any theory of martial
law. As long as civil courts remain open and are ● Amnesty: A sovereign act of oblivion for
regularly functioning, military tribunals cannot past acts, granted by government
try and exercise jurisdiction over civilians for generally to a class of persons who have
offenses committed by them and which are been guilty usually of political offenses and
properly cognizable by civil courts [Olaguer v. who are subject to trial but have not yet
Military Commission No. 34, supra]. been convicted, and often conditioned
upon their return to obedience and duty
6. Pardoning Powers within a prescribed time [Black’s Law
Dictionary; Brown v. Walker, 161 US 591
(1896)].
1987 Constitution
1. Requires concurrence of majority of all
Section 19, Article VII. Except in cases of members of Congress [Sec. 19, Art.
impeachment, or as otherwise provided in this VII, 1987 Constitution].
Constitution, the President may grant reprieves,
commutations and pardons, and remit fines and ● Remission of Fines/Forfeitures: After
forfeitures, after conviction by final judgment.
conviction by final judgment
a. Scope and Limitations: When ● Pardons: Permanent cancellation of

sentence [Black’s Law Dictionary]. It is an
clemency may not be extended by the
act of grace proceeding from the power
President:
entrusted with the execution of the laws,
1. In case of impeachment;
which exempts the individual on whom it is
2. As otherwise provided in this Constitution,
bestowed, from the punishment the law
including:
inflicts for the crime he has committed. It is
a. For election offenses, without
a remission of guilt, a forgiveness of the
the favorable recommendation
offense [People v. Vera, supra].
of the COMELEC: [Section 5,
Article IX-B, 1987 Constitution]
● Parole: The suspension of the sentence of
b. For amnesties, without the
a convict granted by a Parole Board after
concurrence of a majority of all
serving the minimum term of the
members of Congress [Section
indeterminate sentence penalty, without
5, Article IX].
granting a pardon, prescribing the terms
3. In cases of legislative and civil contempt
upon which the sentence shall be
(rationale: these infringe upon legislative
suspended.
and judicial prerogatives)
4. Before conviction by final judgment
Pardon
(except amnesty).
Plenary or Partial
b. Forms of Executive Clemency Plenary: Extinguishes all the penalties
● Reprieves: A temporary relief from or imposed upon the offender, including
postponement of execution of criminal accessory disabilities.
penalty or sentence or a stay of execution Partial: Does not extinguish all penalties
[Black’s Law Dictionary]. It is the imposed.
withholding of a sentence for an interval of
Page 67 of 384
Conditional or Absolute The right to seek public elective office is
Conditional: The offender has the right to unequivocally considered as a political right.
reject the same since he may feel that the Hence, upon acceptance of the pardon, the
condition imposed is more onerous than the pardonee regained his full civil and political
penalty sought to be remitted. rights – including the right to seek elective
office, even though that right is not expressly
The determination of whether the conditions mentioned as provided under Article 36 of the
had been breached rests exclusively in the Revised Penal Code [Risos-Vidal v.
sound judgment of the Chief Executive [Torres COMELEC, G.R. No. 206666 (2015)].
v. Gonzales, G.R. No. 76872 (1987)].
Pardon v. Amnesty
Absolute: The pardonee has no option at all
and must accept it whether he likes it or not. In
Pardon Amnesty
this sense, an absolute pardon is similar to
commutation, which is also not subject to Infractions of peace Generally addressed
acceptance by the offender. of the state to political offenses
Limitations on Pardon Granted to individuals To classes of

a. Cannot be granted for impeachment persons
[Section 19, Article VII, 1987 Constitution].
b. Cannot be granted in cases of violation of Exercised solely by Requires
election laws without the favorable the executive concurrence of
recommendation of the COMELEC Congress
[Section 5, Article IX-C, 1987
Constitution]. Differentiated from
c. Can be granted only after conviction by a. Probation: Disposition where a defendant
final judgment [People v. Salle, G.R. No. after conviction and sentence is released
103567 (1995)]. subject to (1) conditions imposed by the
court and (2) supervision of a probation
Section 19, Article VII prohibits the grant officer [Section 3(a), PD No. 968].
of pardon, whether full or conditional, to an b. Parole: Suspension of the sentence of a
accused during the pendency of his convict granted by a Parole Board after
appeal from his conviction by the trial serving the minimum term of the
court. Any application therefore should not indeterminate sentence penalty, without
be acted upon or the process toward its granting a pardon, prescribing the terms
grant should not be begun unless the upon which the sentence shall be
appeal is withdrawn [People v. Bacang, suspended [Reyes].
G.R. No. 116512 (1996)].
Application of Pardoning Powers to
d. Cannot absolve the convict of civil liability Administrative Cases
[People v. Nacional, G.R. Nos. 111294-95 a. If the President can grant reprieves,
(1995)]. commutations and pardons, and remit
e. Cannot be granted to cases of legislative fines and forfeitures in criminal cases, with
contempt or civil contempt much more reason can she grant
f. Cannot restore public offices forfeited, executive clemency in administrative
even if pardon restores the eligibility for cases, which are clearly less serious than
said offices [Monsanto v. Factoran, G.R. criminal offenses.
No. 78239 (1989)]. b. However, this is limited only to
administrative cases in the Executive
However, if a pardon is given because he did branch [Llamas v. Executive Secretary,
not commit the crime, reinstatement and back G.R. No. 99031 (1991)].
wages would be due [Garcia v. COA, G.R. No.
75025 (1993)].
Page 68 of 384
Denial of Commission of Offenses d. Ratify treaties, but subject to the
Persons invoking the benefit of amnesty must concurrence of the Senate;
first admit to their complicity in the crimes e. Enter into executive agreements; and
charged. Amnesty presupposes the f. Transact the business of foreign relations
commission of a crime, and when the accused [See Pimentel v. Executive Secretary,
maintains that he has not committed the crime, G.R. No. 158088 (2005)].
he cannot have any use for amnesty [Vera v.
People, G.R. No. L-18184 (1963)]. b. To Contract or Guarantee Foreign
Loans
Amnesty Requisites
a. With the concurrence of the monetary
Who May Avail board [Section 20, Article VII, 1987
Generally: Individuals who form part of the Constitution]
class of persons covered by an amnesty b. Subject to limitations as may be provided
proclamation whose acts constitute the political by law [Section 20, Article XII, 1987
offenses covered by the same. Constitution]
c. Information on foreign loans obtained or
Jurisprudence guaranteed shall be made available to the
Amnesty Proclamation No. 76 applies even to public [Section 21, Article XII, 1987
Hukbalahaps already undergoing sentence Constitution]
upon the date of its promulgation. The majority
of the Court believes that by its context and Cf. R.A. No. 4860
pervading spirit the proclamation extends to all Congress may provide guidelines for
members of the Hukbalahap [Tolentino v. contracting or guaranteeing foreign loans, and
Catoy, G.R. No. L-2503 (1948)]. have these rules enforced through the
Monetary Board. But for Congress to grant
The SC agreed with the Sandiganbayan that in prior approval is a totally different issue. At any
fact the petitioners were expressly disqualified rate, the present power, which was first
from amnesty. The acts for which they were introduced in the 1973 Constitution, was based
convicted were ordinary crimes without any on R.A. No. 4860 or the Foreign Loan Act.
political complexion and consisting only of What used to be a statutory grant of power is
diversion of public funds to private profit. The now a constitutional grant which Congress
amnesty proclamation covered only acts in the cannot take away, but only regulate.
furtherance of resistance to duly constituted
authorities of the Republic and applies only to Role of Congress in such Foreign Loans
members of the MNLF, or other anti- The President does not need prior approval by
government groups [Macagaan v. People, G.R. Congress:
No. 77317-50 (1987)]. a. Because the Constitution places the
power to check the President’s power on
7. Foreign Relations Powers the Monetary Board;
a. In General b. BUT Congress may provide guidelines
The President, being the head of state, is and have them enforced through the
regarded as the sole organ and authority in Monetary Board.
external relations and is the country’s sole
representative to foreign nations. As the chief c. Entry into Treaties or International
architect of foreign policy, the President acts as Agreements
the country’s mouthpiece with respect to Treaty: As defined by the Vienna Convention
international affairs. on the Law of Treaties, “an international
instrument concluded between States in
The President is vested with the authority to: written form and governed by international law,
a. Deal with foreign states and governments; whether embodied in a single instrument or in
b. Extend or withhold recognition; two or more related instruments, and whatever
c. Maintain diplomatic relations;
Page 69 of 384
its particular designation” [Bayan v. Zamora, agreement to the main RP-US Military Defense
G.R. No. 138570 (2000)]. Treaty. The VFA is therefore valid for it is a
presence “allowed under” the RP-US Mutual
Note: It is the President who ratifies a treaty Defense Treaty. Since the RP-US Mutual
(not the Senate), the Senate merely concurs Defense Treaty itself has been ratified and
[Bayan v. Zamora, supra]. Thus, the President concurred in by both the Philippine Senate and
cannot be compelled to submit a treaty to the the US Senate, there is no violation of the
Senate for concurrence; he has the sole power Constitutional provision resulting from such
to submit it to the Senate and/or to ratify it presence [Nicolas v. Romulo, G.R. No. 175888
[Bayan Muna v. Romulo, G.R. No. 159618 (2009)].
(2011)].
Executive Agreements
Military Bases Treaty a. Entered into by the President.
b. May be entered into without the
1987 Constitution concurrence of the Senate.
c. Distinguished from treaties —
Section 25, Article XVIII. After the expiration in International agreements involving
1991 of the Agreement between the Philippines and political issues or changes in national
the United States of America concerning Military policy and those involving international
Bases, foreign military bases, troops, or facilities
agreements of permanent character
shall not be allowed in the Philippines except under
a treaty duly concurred in by the Senate and, when usually take the form of treaties. But the
the Congress so requires, ratified by a majority of the international agreements involving
votes cast by the people in a national referendum adjustments in detail carrying out well-
held for that purpose, and recognized as a treaty by established national policies and traditions
the other contracting State. and those involving a more or less
temporary character usually take the form
The President, however, may enter into an of executive agreements [Commissioner
executive agreement on foreign military bases, of Customs v. Eastern Sea Trading, G.R.
troops, or facilities, if: No. L-14279 (1961)].
a. It is not the instrument that allows the
presence of foreign military bases, troops, However, from the point of view of
or facilities; or international law, there is no difference
b. It merely aims to implement an existing between treaties and executive
law or treaty. agreements in their binding effect upon
states concerned as long as the
Section 25 refers solely to the initial entry of the negotiating functionaries have remained
foreign military bases, troops, or facilities. within their powers [USAFFE Veterans
Assn. v. Treasurer, G.R. No. L-10500
To determine whether a military base or facility (1959)]
in the Philippines, which houses or is accessed
by foreign military troops, is foreign or remains Note: An executive agreement that does
a Philippine military base or facility, the legal not require the concurrence of the Senate
standards are: for its ratification may not be used to
a. Independence from foreign control; amend a treaty that, under the
b. Sovereignty and applicable law; and Constitution, is the product of the ratifying
c. National security and territorial integrity acts of the Executive and the Senate
[Saguisag v. Executive Secretary, G.R. [Bayan Muna v. Romulo, supra].
No. 212426 (2016)].
Two (2) Classes of Executive Agreements
Visiting Forces Agreement (VFA) 1. Agreements made purely as executive
The VFA, which is the instrument agreed upon acts affecting external relations and
to provide for the joint RP-US military independent of or without legislative
exercises, is simply an implementing
Page 70 of 384
authorization, which may be termed as Scope of the Power
presidential agreements; and a. The President’s power to deport aliens
2. Agreements entered into in pursuance of and to investigate them subject to
acts of Congress, or congressional- deportation are provided in Chapter 3,
executive agreements. Book III, of the Admin. Code of 1987.
b. There is no legal or constitutional provision
Although the President may, under the defining the power to deport aliens
American constitutional system, enter into because the intention of the law is to grant
executive agreements without previous the Chief Executive the full discretion to
legislative authority, he may not, by determine whether an alien’s residence in
executive agreement, enter into a the country is so undesirable as to affect
transaction which is prohibited by statutes the security, welfare or interest of the
enacted prior thereto. He may not defeat state.
legislative enactments that have acquired c. The Chief Executive is the sole and
the status of law by indirectly repealing the exclusive judge of the existence of facts
same through an executive agreement which would warrant the deportation of
providing for the performance of the very aliens [Go Tek v. Deportation Board, G.R.
act prohibited by said laws [Gonzales v. No. L-23846 (1977)].
Hechanova, G.R. No. L-21897 (1963)].
8. Tariff-Setting Power
Rules on Withdrawal from Treaties
• The President enjoys leeway in Preparing and Submitting the Budget
withdrawing from agreements which he
or she determines to be contrary to the
1987 Constitution
Constitution or statutes.
• The President cannot unilaterally Section 22, Article VII. The President shall submit
withdraw from agreements which were to the Congress within thirty (30) days from the
entered into pursuant to congressional opening of every regular session, as the basis of the
imprimatur. general appropriations bill, a budget of expenditures
and sources of financing, including receipts from
• The President cannot unilaterally existing and proposed revenue measures.
withdraw from international agreements
where the Senate concurred and
expressly declared that any withdrawal The budget is the plan indicating:
must also be made with its concurrence a. Expenditures of the government;
[Pangilinan v. Cayetano, G.R. No. b. Sources of financing; and
238875 (2021)]. c. Receipts from revenue-raising measures.
Deportation of Undesirable Aliens The budget is the upper limit of the

The President may deport only according to appropriations bill to be passed by Congress.
grounds enumerated by law, otherwise it would Through the budget, therefore, the President
be unreasonable and undemocratic [Qua Chee reveals the priorities of the government.
Gan v. Deportation Board, G.R. No. L-10280
(1963)]. Program of Expenditure
Even upon the enactment of the General
Two (2) Ways of Deporting an Undesirable Appropriations Act, the release of funds from
Alien the Treasury is still subject to a Program of
a. By order of the President after due Expenditure, proposed by the Secretary of
investigation [Chapter 3, Book III, Admin. Budget, to be approved by the President, and
Code of 1987]; such approved program of expenditure is to be
b. By the Commissioner of Immigration the basis for the release of funds [TESDA v.
under Section 37 of the Immigration Law COA, G.R. No. 204869 (2014); Section 34,
[Qua Chee Gan v. Deportation Board, Chapter 5, Book VI, Administrative Code].
supra]
Page 71 of 384
Fixing of Tariff Rates [Section 28, Article VI,
1987 Constitution]
IV. JUDICIAL DEPARTMENT
The Congress may, by law, authorize the
President to fix (1) within specified limits, and A. Concept of Judicial Power
(2) subject to such limitations and restrictions
as it may impose: 1987 Constitution
a. Tariff rates;
b. Import and export quotas; Section 1, Article VIII. The judicial power shall be
c. Tonnage and wharfage dues; vested in one Supreme Court and in such lower
courts as may be established by law.
d. Other duties or imposts within the
framework of the national development Judicial power includes the duty of the courts of
program of the government. justice to settle actual controversies involving rights
which are legally demandable and enforceable, and
Rationale for Delegation to determine whether or not there has been a grave
Highly technical nature of international abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or
commerce, and the need to constantly and with
instrumentality of the Government.
relative ease adapt the rates to prevailing
commercial standards.
On whom vested: The judicial power shall be
9. Veto Powers vested in:
General Rule
All bills must be approved by the President a. One Supreme Court; and
before they become law. b. In such lower courts as may be
established by law.
Exceptions
a. When the veto of the President is What: Judicial power includes the duty of the
overridden by 2/3 vote of all the Members courts of justice to:
of Congress, the President returns the bill a. Settle actual controversies involving rights
with his veto message to the House where which are legally demandable and
the bill originated, which shall then enter enforceable; and
the objections at large in its Journal and b. To determine whether or not there has
proceed to reconsider it. If, after such been a grave abuse of discretion
reconsideration, two-thirds of all the amounting to lack or excess of jurisdiction.
Members of such House shall agree to
pass the bill, it shall be sent, together with The Supreme Court is entrusted exclusively
the objections, to the other House by with the judicial power to adjudicate with finality
which it shall likewise be reconsidered, all justiciable disputes, public and private. No
and if approved by two-thirds of all the other department or agency may pass upon its
Members of that House, it shall become a judgments or declare them unjust [In Re
law; Laureta and Maravilla, G.R. No. L-68635
b. The bill lapsed into law because of the (1987)].
President’s failure to act on the bill within
thirty (30) days [Section 27, Article VI, Absent a showing of a violation of the
1987 Constitution]; and Constitution or grave abuse of discretion, the
c. The bill passed is the special law to elect Court cannot use its judicial power to inquire
the President and Vice-President. into allegations that, in enacting a law, a House
of Congress failed to comply with its own rules
Limitations to the Veto Power: [Arroyo v. De Venecia, G.R. No. 127255
The President may only veto bills as a whole. (1997)].
(See Legislative Power of Congress)
Page 72 of 384
B. Judicial Review Where the legislature or executive branch acts
beyond the scope of its constitutional power, it
The Court’s exercise of its traditional becomes the duty of the judiciary to declare
jurisdiction is rooted in its power of judicial what the other branches of the government had
review which gives the Court the authority to assumed to do so as void [Demetria v. Alba,
strike down acts of the legislative and/or G.R. No. 71977 (1987)].
executive, constitutional bodies or
administrative agencies contrary to the 1. Requisites
Constitution. The power of judicial review is
part and parcel of the Court’s judicial power Requisites of Judicial Review
and is a power inherent in all courts [Villanueva
v. Judicial and Bar Council, G.R. No. 211833 1. There must be an actual case or
(2015)]. controversy;
2. There is locus standi, i.e., person
Judicial Power vs. Judicial Review [Miranda challenging the act must have “standing”
v. Aguirre, G.R. No. 133064 (1999)] to challenge;
3. Constitutional question must be raised at
the earliest possible opportunity; and
Judicial Power Judicial Review 4. Constitutionality must be the very lis mota
of the case.
Where vested
Supreme Court & lower courts Generally, a party will be allowed to litigate only
when these conditions sine qua non are
Definition present, especially when the constitutionality of
an act by a co-equal branch of government is
(a) Duty to settle Power to determine put in issue [Chavez v. Judicial and Bar
actual controversies the constitutionality Council, G.R. No. 202242 (2012)].
involving rights which of acts of any branch
are legally or instrumentality of a. Actual case or controversy
demandable and the government An actual case or controversy exists when a
enforceable, and case involves a clash of legal rights or an
assertion of opposite legal claims that the
(b) Duty to determine courts can resolve through applying law and
whether or not there jurisprudence. An actual case is ripe for
has been grave adjudication when the act being challenged
abuse of discretion has a direct adverse effect on the individual
amounting to lack or challenging it [De Castro v. Judicial and Bar
excess of jurisdiction Council, G.R. No. 191002 (2010)].
on the part of any
branch or For a case to be considered ripe for
instrumentality of the adjudication, the following prerequisites must
government [Article concur:
VIII, Section 1 (2), 1. An act had been accomplished or
Constitution]. performed by either government branch
before a court may interfere; and
Requisites for exercise 2. Petitioner must allege that an immediate
or threatened injury to himself exists as a
Jurisdiction, or the (1) Actual case or
result of the challenged action [Phil.
power to decide and controversy;
Constitution Association v. Phil.
hear a case and (2) locus standi;
Government, G.R. No. 218406 (2016)].
execute a decision (3) earliest
thereof opportunity; and
(4) lis mota
Page 73 of 384
b. Locus standi 2. Citizen standing
Legal standing or locus standi refers to a A plaintiff in a citizen standing is a mere
party’s personal and substantial interest in a instrument of the public concern. Plaintiff
case, arising from the direct injury it has invokes at least the right, if not the duty, of
sustained or will sustain as a result of the every citizen to interfere and see that a public
challenged government action. The term offense be properly pursued and punished, and
“interest” means material interest, an interest in that a public grievance be remedied [David v.
an issue affected by governmental action, as Macapagal-Arroyo, G.R. No. 171396 (2006)].
distinguished from mere interest in the
question involved, or a mere incidental interest 3. Environmental standing
[CREBA v. Energy Regulatory Commission, Any Filipino citizen in representation of others,
G.R. No. 174697 (2010)]. including minors or generations yet unborn,
may file an action to enforce rights or
The interest of the party plaintiff must be obligations under environmental laws [Sec. 5,
personal and not one based on a desire to Rules of Procedure for Environmental Cases
vindicate the constitutional right of some third (2010)].
and unrelated party [Joya v. PCGG, G.R. No.
96541 (1993)]. Citizens are allowed to bring a suit to enforce
environmental laws on the principle that
Direct injury test - The person who impugns humans are stewards of nature and as part of
the validity of a statute must have a personal their right to a balanced and healthful ecology
and substantial interest in the case such that [Resident Marine Mammals v. Sec. Reyes,
he has sustained, or will sustain direct injury as G.R. No. 180771 (2015)].
a result [People v. Vera, G.R. No. L-45685
(1937)]. 4. Governmental standing
The People of the Philippines, represented by
This may be brushed aside by the court as a the Solicitor General and the Fiscal, is the
mere procedural technicality in view of public proper party to question the statute because it
interest or transcendental importance of the is always interested in the integrity of its
issues involved [Kilosbayan v. Guingona, G.R. Constitution or the statutes involved and can
No. 113375 (1994)]. set aside a law that violated the Constitution
[People v. Vera, supra].
Special Forms of locus standi / Exceptions
to Direct Injury Test 5. Legislative standing
N.B. In these cases, a party has standing even There must be a claim from the legislators that
if it may not necessarily suffer direct injury. the official action complained of infringes upon
their legislative prerogatives [David v.
1. Associational or third-party standing Macapagal-Arroyo, supra].
The association may assert the concerns of its
constituents as long as the interest sought to 6. Taxpayer’s standing
be protected is germane to the association’s In a taxpayer’s suit, the plaintiff is affected by
purpose [Kilusang Mayo Uno Labor Center v. the expenditure of public funds. There must be
Garcia, G.R. No. 115381 (1994)]. a claim of illegal disbursement of public funds
or that the tax measure is unconstitutional
Due to the nature of one party’s relation to [David v. Macapagal-Arroyo, supra].
another party, the former is allowed standing to
invoke fundamental due process or equal 7. Voter’s standing
protection claims of the latter injured by state There must be a showing of obvious interest in
action [GMA Network Inc. v. Commission on the validity of the election law in question
Elections, G.R. No. 205357 (2014)]. [David v. Macapagal-Arroyo, supra]
Page 74 of 384
Standing Requisites c. Earliest Possible Opportunity

General Rule: An act or law’s constitutionality
Issues must be of cannot be raised for the first time at the
transcendental appellate level, unless that court has original
importance which jurisdiction over the case. The earliest
Citizen must be settled early opportunity to raise a constitutional issue is
[David v. during the pleadings before a competent court
Macapagal-Arroyo, that can resolve the same [Sta. Rosa Realty
supra] Development Corp. v. Amante, G.R. No.
112526 (2005)].
1. Any Filipino
citizen; Exceptions:
2. In representation 1. In criminal cases, at the court’s discretion;
of others, 2. In civil cases, if necessary to determine
including minors the case itself; and
or unborn 3. When issue of the court’s jurisdiction is
Environmental involved.
generations
[Resident Marine
Mammals v. Note: The reckoning point is the first competent
Sec. Reyes, court. The question must be raised at the first
supra] court empowered with judicial review. Thus,
failure to raise the constitutional question
before the NLRC is not fatal to the case
Affects legislative [Serrano v. Gallant Maritime Services, G.R.
Legislator
prerogatives No. 167614 (2009)].
Issue must be of d. Lis Mota

misappropriation or Lis mota pertains to the determinative issue of
illegal disbursement the case, the resolution of which cannot be
Taxpayer [David v. done without deciding whether an act or law is
Macapagal-Arroyo, unconstitutional.
supra]
2. Political Questions Doctrine
Litigants must show:
A “political question” connotes a question of
1. Injury-in-fact;
policy and refers to: (a) matters to be exercised
2. Close relation to
by the people in their primary political capacity;
third-party; and
or (b) those specifically delegated to some
3. Third-party’s
other department or particular office of the
Third-party or inability or
government with discretionary power to act.
associational hindrance to
protect its own
It is concerned with issues dependent upon the
interest.
wisdom, not legality, of a particular measure
[White Light Corp. v.
[Tañada v. Cuenco, G.R. No. L-10520 (1957)].
City of Manila,
supra]
A “judicial question” or purely justiciable issue
implies a given right, legally demandable and
Voter Obvious interest in
the validity of enforceable, an act or omission violative of
election law in such right, and a remedy granted and
question [David v. sanctioned by law, for said breach of right
Macapagal-Arroyo, [Casibang v. Aquino, G.R. No. L-38025
supra] (1979)].
Examples:
Page 75 of 384
[Ocampo v. Enriquez, G.R. No. 225973
Political Question Justiciable
(2016)].
Question
The legislature’s Election of Senate Guidelines to determine whether a question

exercise of President without is political or not:
disciplinary power the required quorum 1. There is a textually demonstrable
over its members is is a justiciable constitutional commitment of the issue to
not to be interfered question [Avelino v. a political department;
with by the Court Cuenco, G.R. No. L- 2. Lack of judicially discoverable and
[Alejandrino v. 2821 (1949)]. manageable standards for resolving it;
Quezon, G.R. No. 3. The impossibility of deciding without an
22041 (1924)]. initial policy determination of a kind clearly
or non-judicial discretion;
The legislature has The selection of the 4. Impossibility of a court’s undertaking
the inherent right to Senate Electoral independent resolution without expressing
determine who shall Tribunal members is lack of the respect due coordinate
be admitted to its subject to branches of government;
membership [Vera v. constitutional 5. An unusual need for unquestioning
Avelino, G.R. No. L- limitations [Tañada adherence to a political decision already
543 (1946)] v. Cuenco, supra]. made;
6. Potential embarrassment from
Mandamus and The Commission on multifarious pronouncements by various
injunction cannot lie Appointments is a departments on one question [Estrada v.
to enforce or restrain constitutional Desierto, G.R. Nos. 146710-15 (2001),
a duty which is creation and does citing Baker v. Carr, 369 US 186 (1962)].
discretionary, e.g., not derive its power
calling a special from Congress 3. Moot Questions
local election [Cunanan v. Tan,
[Severino v. G.R. No. L-19721 General Rule: A case becomes moot and
Governor General, (1962)]. academic when there is no more actual
G.R. No. L-6520 controversy between the parties or no useful
(1910)]. purpose can be served in passing upon the
merits [Quino v. COMELEC, G.R. No. 197466
The President’s Suspending the (2012)]
appointing power is privilege of the writ of
not to be interfered habeas corpus is not Exceptions: The Court may decide cases
with by the Court a political question otherwise moot and academic when:
[Manalang v. [Lansang v. 1. There is a grave constitutional violation;
Quitoriano, G.R. No. Garcia, G.R. No. L- 2. The situation is of exceptional character
L-6898 (1954)]. 33964 (1971)]. and paramount public interest is involved;
3. Constitutional issue requires a formulation
of controlling principles to guide the bench,
Note: In 2016, the SC ruled that President the bar, and the public; and
Duterte's decision to have the remains of 4. The case is capable of repetition yet
Marcos interred at the Libingan Ng Mga Bayani evading review [Islamic Da’wah v
(LNMB) was not a justiciable controversy but a Executive Secretary, G.R. No. 216870
political question. The issue was a question of (2020)].
policy which the President decided upon based
on his wisdom that it shall promote national 4. Operative Fact Doctrine
healing and forgiveness. There being no taint
of grave abuse in the exercise of such General Rule: The interpretation or
discretion, his decision on that political declaration of unconstitutionality is retroactive
question is outside the ambit of judicial review in that it applies from the law’s effectivity.
Page 76 of 384
Exception: Subsequent declaration of 2. Safeguards of Judicial
unconstitutionality does not nullify the acts Independence
exercised in line with the law. The past cannot
always be erased by a new judicial declaration Provision Safeguards
[Municipality of Malabang v. Benito, supra]
The SC cannot be abolished
The operative fact doctrine recognizes the Article VIII, nor may its membership or
existence and validity of a legal provision prior Section 4 the manner of its meetings be
to its being declared as unconstitutional and changed by mere legislation.
hence, legitimizes otherwise invalid acts done
The members of the judiciary
pursuant thereto because of considerations of
are not subject to
practicality and fairness. In this regard, certain Article XI,
confirmation by the
acts done pursuant to a legal provision which Section 2
Commission on
was just recently declared as unconstitutional
Appointments.
by the Court cannot be anymore undone
because not only would it be highly impractical The members of the SC may
to do so, but more so, unfair to those who have not be removed from office
relied on the said legal provision prior to the except by impeachment.
time it was struck down [Film Development
Council of the Phils. V. Colon Heritage Realty The SC may not be deprived
Corp., G.R. 203754 (2020)]. of its minimum original and
Article VIII,
appellate jurisdiction as
The doctrine is applicable when a declaration Section 2
prescribed in Article X,
of unconstitutionality will impose an undue Section 5 of the Constitution.
burden on those who have relied on the invalid
law, but it can never be invoked to validate an The appellate jurisdiction of
unconstitutional act as constitutional Article VI, the SC may not be increased
[Municipality of Malabang v. Benito, G.R. No. Section 30 by law without its advice and
L-28113 (1969)]. concurrence.
Applicability: The doctrine "applies only to The SC has administrative

Article VIII,
cases where extraordinary circumstances supervision over all lower
Section 6
exist, and only when the extraordinary courts and their personnel.
circumstances have met the stringent
conditions that will permit its application." The SC has exclusive power
Article VIII,
[Mandanas v. Ochoa, Jr., citing Araullo v. to discipline judges of lower
Section 11
Aquino III, G.R. Nos. 199802 and 208488)] courts.
The members of the SC and

C. Judicial Independence and all lower courts have security
Fiscal Autonomy Article VIII,
of tenure, which cannot be
Section 2
undermined by a law
1. Concepts reorganizing the judiciary.
The 2 distinct concepts of judicial
independence are: They shall not be designated
1. Decisional independence - refers to a to any agency performing
Article VII,
judge’s ability to render decisions solely quasi-judicial or
Section 12
based on facts and applicable law, free administrative functions.
from political or popular influence.
2. Institutional independence - refers to the
collective independence of the judiciary or The salaries of judges may
freedom from outside control, e.g., fiscal Article VIII, not be reduced during their
autonomy. Section 10 continuance in office.
Page 77 of 384
Constitutional Requirements
Provision Safeguards
The SC has administrative Supreme Court

Article VI, 1. Natural born citizens;
supervision over all lower
Section 3 2. At least 40 years of age;
courts and their personnel.
3. Engaged in the practice of law or a judge
of 15 years or more; and
D. Appointments to the Judiciary 4. Must be of proven competence, integrity,
probity and independence.
1. Qualifications of members
Lower Collegiate Courts
1. Natural born citizen;
SC and RTC Judge MTC/MCTC
2. Member of the Philippine Bar;
Collegiate (B.P. 129, Judge (B.P.
3. Must be of proven competence, integrity,
Court Section 15) 129, Section
probity and independence; and
Justices 26)
4. Such additional requirements provided by
Citizenship law.
Natural-born citizen Lower Courts

1. Filipino citizens (Rules of the Judicial and
At least 40 At least 35 At least 30 Bar Council, Nov. 2000, Rule 2; B.P.129)
years of age years of age years of age 2. Member of the Philippine Bar;
3. Must be of proven competence, integrity,
Experience probity and independence; and
4. Such additional requirements provided by
15 years or At least 5 years in the practice
law.
more as a of law OR has held public
judge of a office in the PH requiring
lower court admission to the practice of Note: In the case of judges of the lower courts,
OR has been law as an indispensable the Congress may prescribe other
engaged in requisite qualifications [Section 7(2), Article VIII, 1987
the practice Constitution].
of law in the
PH for the Disqualification from Other Position or
same period Offices
The Members of the Supreme Court and of
Tenure other courts established by law shall not be
designated to any agency performing quasi-
Hold office in good behavior until the age of 70 judicial or administrative functions [Section 12,
OR become incapacitated to discharge their Article VIII, 1987 Constitution].
duties
The SC and its members should not and
Character
cannot be required to exercise any power or to
Person of proven competence, integrity, perform any trust or to assume any duty not
probity, and independence pertaining to or connected with the
administering of judicial functions, e.g., serving
The “practice of law” is not confined to litigation. as administrators in an out-of-court arbitration
It means any activity in and out of the court, [Meralco v. Pasay Transportation Co., G.R. No.
which requires the application of law, legal L-37838 (1932)].
procedure, knowledge, training, and
experience [Cayetano v. Monsod, G.R. No. A judge in the CFI shall not be detailed with the
100113 (1991)]. Department of Justice to perform
administrative functions as this contravenes
Page 78 of 384
the doctrine of separation of powers [Garcia v. There is no dichotomy between Senate and
Macaraig, A.M. No. 198-J (1971)]. HOR when Congress interacts with other
branches. But the SC is not in a position to say
2. Judicial and Bar Council who should sit (and should be left to the
agreement of the houses). The lone
a. Composition representative from Congress is entitled to one
1. Ex-officio members [Section 8(1), full vote [Chavez v. JBC, G.R. No. 202242
Article VIII, 1987 Constitution] (2012)].
a. Chief Justice as ex-officio Chairman
b. Secretary of Justice Regular Members [Section 8(2), Article VIII,
c. One representative of Congress 1987 Constitution]
2. Regular members [Section 8(2), Article The regular members shall be appointed by the
VIII, 1987 Constitution] President with the consent of the Commission
a. Representative of the Integrated Bar on Appointments. The term of the regular
b. Professor of law members is 4 years (with reappointment).
c. Retired member of the SC
d. Representative of private sector b. Powers
3. Secretary ex-officio [Section 8 (3),
Article VIII, 1987 Constitution] 1. Primary function
Recommend appointees to the judiciary; may
Clerk of Court of the Supreme Court, who exercise such other functions and duties as the
shall keep a record of its proceedings; not SC may assign to it [Section 8(5), Article VIII,
a member of the JBC. 1987 Constitution].
In the absence of the Chief Justice because of Note: Judges may not be appointed in any
his impeachment, the most Senior Justice of acting or temporary capacity as this would
the Supreme Court, who is not an applicant for undermine the independence of the judiciary.
Chief Justice, should participate in the
deliberations for the selection of nominees for 2. Supervisory authority of SC over JBC
the said vacant post and preside over the Section 8, Article VIII of the Constitution
proceedings, pursuant to Section 12 of provides “A Judicial and Bar Council is hereby
Republic Act No. 296, or the Judiciary Act of created under the supervision of the Supreme
1948 [Dulay v. Judicial and Bar Council, G.R. Court.” The supervisory authority of the Court
No. 202143 (2012)] over the JBC covers the overseeing of
compliance with its rule [Jardeleza v. Judicial
4. Appointment, tenure, and salary and Bar Council, G.R. No. 213181 (2014)].
Ex-officio members Supervisory power, when contrasted with

The position in the Council is good only while control, is the power of mere oversight over an
the person is the occupant of the office. inferior body; it does not include any restraining
authority over such body [Aguinaldo v. Aquino,
Only ONE representative from Congress: G.R. No. 224302 (2016)].
Former practices of giving ½ vote or (more
recently) 1 full vote each for the Chairmen of 3. Appointment procedure
the House and Senate Committees on Justice The JBC shall submit a list of at least three (3)
is invalid. Any member of Congress, whether nominees for every covered vacancy to the
from the upper or lower house, is President [Section 9, Article VIII, 1987
constitutionally empowered to represent the Constitution].
entire Congress.
Afterwards, any vacancy in the Supreme Court
The framers intended the JBC to be composed shall be filed within ninety (90) days from the
of 7 members only. Intent is for each co-equal occurrence thereof [Section 4(1), Article VIII,
branch of gov’t to have one representative. 1987 Constitution].
Page 79 of 384
For lower courts, the President shall issue the suspension of the privilege of the writ
appointment within ninety (90) days from the [Section 18, Article VII, 1987 Constitution].
submission by the JBC of such list [Section 9, 6. When sitting as Presidential Electoral
Article VIII, 1987 Constitution]. Tribunal [Section 4, par. 7, Article VII,
1987 Constitution].
The prohibition against midnight appointments 7. All other cases which under the Rules of
does not apply to the judiciary [De Castro v. Court are required to be heard by the SC
JBC, G.R. No. 191002 (2010)]. en banc [Section 4 (2), Article VIII, 1987
Constitution].
E. The Supreme Court
All other cases are heard in divisions.
(Composition, Powers, and
Functions) Note: In the case of Cruz v. Sec’y of
Environment and Natural Resources (G.R. No.
1. Composition 135385, December 6, 2000), the Court
● Chief Justice and 14 Associate Justices deliberated on the petition and the votes
● May sit en banc or in divisions of three, gathered were equally divided with no majority
five, or seven Members (currently sits in vote obtained. Seven (7) Members voted to
three (3) divisions, each with five (5) dismiss the petition, while seven (7) other
Members) members voted to grant the petition. After
redeliberation, the voting remained the same.
a. En banc instances Thus, the petition pursuant to Rule 56, Sec. 7
Decided with the concurrence of a majority of of the Rules of Civil Procedure, was dismissed.
the Members who actually took part in the
deliberations and voted. b. Requirements and procedures in
divisions
1. Those involving the constitutionality, 1. Cases decided with the concurrence of a
application, or operation of: majority of the Members who actually took
a. Treaty part in the deliberations and voted.
b. Orders 2. In no case without the concurrence of at
c. International or executive agreement least three (3) of such Members.
d. Law 3. When the required number is not obtained,
e. Presidential decrees the case shall be decided en banc on:
f. Instructions a. Cases for decision when required votes
g. Proclamations are not obtained;
h. Ordinances b. Cases of first instance, or matters after
i. Other regulations the first instance such as post-decision
motions.
2. In disciplinary cases for judges, when the c. An undecided case due to a tie creating
penalty is dismissal, disbarment, a failure to resolve a motion [Fortich v.
suspension for more than 1 year, or fine of Corona, G.R. No. 131457 (1999)].
more than P10,000
3. Cases or matters heard by a Division The SC en banc is not an appellate court vis-à-
where the required number of votes to vis its Divisions. The only constraint is that any
decide or resolve is not met [Section 4(3), doctrine or principle of law laid down by the
Article VIII, 1987 Constitution]. Court, either rendered en banc or in division,
4. Modifying or reversing a doctrine or may be overturned or reversed only by the
principle of law laid down by the court in a Court sitting en banc [PUP v. Firestone
decision rendered en banc or in division Ceramics, G.R. No. 143513 (2001)].
[Section 4(3), Article VIII, 1987
Constitution]. There is but one Supreme Court of the
5. Actions instituted by citizens to test the Philippine Islands. The Supreme Court
validity of a proclamation of Martial law or remains a unit notwithstanding it works in
Page 80 of 384
divisions. Although it may have two divisions, it 4. Appoint all officials and employees of the
is but a single court. Actions considered in any Judiciary in accordance with the Civil
one of these divisions and decisions rendered Service Law;
therein are, in effect, by the same Tribunal. The 5. Supervise over all courts and the
two divisions of this court are not to be personnel thereof;
considered as two separate and distinct courts 6. Discipline judges of lower courts, or order
but as divisions of one and the same court their dismissal.
[U.S. v. Limsiongco, G. R. No. 16217 (1920)].
Note: The qualifications of judges of lower
2. Powers and Functions courts as stated by the Constitution are
minimum requirements. The JBC may
a. Procedural rule-making determine or add more qualifications when
The Supreme Court shall have the following such policies are necessary and incidental to
powers: […] (5) Promulgate rules concerning the function conferred in the Constitution
the protection and enforcement of [Villanueva v. JBC, G.R. No. 211833 (2015)].
constitutional rights, pleading, practice, and
procedure in all courts, the admission to the d. Period for deciding cases
practice of law, the integrated bar, and legal [Section 5(1), Article VIII, 1987 Constitution]
assistance to the under-privileged [Section 5
Supreme Lower Other Lower
(5), Article VIII, 1987 Constitution]. Court Collegiate Courts
Courts
The 1987 Constitution took away the power of
Congress to repeal, alter, or supplement rules 24 months 12 months, 3 months,
concerning pleading, practice and procedure. unless unless
The power to promulgate rules of pleading, reduced by reduced by
practice and procedure is no longer shared by the SC the SC
the Court with Congress, more so with the
Executive [Echegaray v. Secretary of Justice,
G.R. No. 132601 (1999)]. Notes:
a. Period counted from date case is
Because of Article VIII, Section 5, Congress “submitted for decision”
may no longer grant legislative exemptions b. Case deemed submitted upon filing of the
from payment of court fees [Baguio Market last pleading, brief or memorandum
Vendors Multi-Purpose Cooperative v. Cortes, required by the Rules or the court [Section
G.R. No. 165922 (2010)]. 15(2), Article VIII, 1987 Constitution].
b. Limitations Upon expiration of the period, the Chief Justice

a. Shall provide a simplified and inexpensive or presiding judge shall issue a certification
procedure for speedy disposition of cases stating why the decision or resolution has not
b. Uniform for all courts in the same grade been rendered within the period [Section 15(3),
c. Shall not diminish, increase or modify Article VIII, 1987 Constitution].
substantive rights
This provision is merely directory and failure to
c. Administrative supervision over decide on time would not deprive the
lower courts corresponding courts of jurisdiction or render
their decisions invalid [De Roma v. CA, G.R.
1. Assign temporarily judges of lower courts No. L-46903 (1987)].
to other stations as public interest may
require; The failure to decide cases within the 90-day
2. Shall not exceed 6 months without the period required by law constitutes a ground for
consent of the judge concerned; administrative liability against the defaulting
3. Order a change of venue or place of trial judge. But it does not make the judgment a
to avoid a miscarriage of justice; nullity. The judgment is valid [People v.
Mendoza, G.R. No. 143702 (2001)].
Page 81 of 384
Even when there is delay and no decision or of a law or regulation at the first instance
resolution is made within the prescribed period, is of paramount importance and
there is no automatic affirmance of the immediately affects the social, economic
appealed decision [Sesbreño v. CA, G.R. No. and moral well-being of the people
161390 (2008)]. [Moldex Realty v. HLURB, G.R. No.
149719 (2007)];
The Sandiganbayan, while of the same level as b. Cases involving the legality of any tax,
the Court of Appeals, functions as a trial court. impost, assessment, or toll, or any penalty
Therefore, the period for deciding cases which imposed in relation thereto;
applies to the Sandiganbayan is the three (3) c. Cases in which the jurisdiction of any
month period, not the twelve (12) month period lower court is in issue;
[In Re Problems of Delays in Cases before the d. Criminal cases where the penalty imposed
Sandiganbayan, A. M. No. 00-8-05- SC is reclusion perpetua or higher;
(2001)]. e. Cases where only a question of law is
involved.
e. Original and appellate jurisdiction
Jurisdiction is the authority to hear and Note: A party who has not appealed from a
determine a case [U.S. v. Limsiongco, supra]. decision may not obtain any affirmative relief
from the appellate court other than what he had
f. Original jurisdiction [Section 5(1), obtained from the lower court, if any, whose
Article VIII, 1987 Constitution] decision is brought up on appeal [Daabay v.
a. Cases affecting ambassadors, other Coca-Cola Bottlers, G.R. No. 199890 (2013)]
public ministers and consuls
b. Petition for certiorari h. Doctrine of judicial stability or
c. Petition for prohibition noninterference
d. Petition for mandamus No court can interfere by injunction with the
e. Petition for quo warranto judgments or orders of another court of
f. Petition for habeas corpus concurrent jurisdiction having the power to
grant the relief sought by injunction. The
Note: Original jurisdiction also extends to writs rationale for the rule is founded on the concept
of amparo, habeas data, and the of jurisdiction: a court that acquires jurisdiction
environmental writ of kalikasan. over case and renders judgment therein has
jurisdiction over its judgment, to the exclusion
The Supreme Court’s original jurisdiction to of all other coordinate courts, for its execution
issue writs of certiorari (as well as prohibition, and over all its incidents, and to control, in
mandamus, quo warranto, habeas corpus and furtherance of justice, the conduct of ministerial
injunction) is not exclusive. Its jurisdiction is officers acting in connection with this judgment
concurrent with the CA, and with the RTC in [United Alloy Philippines v. UCPB, G.R. No.
proper cases [Cruz v. Judge Gingoyon, G.R. 179257 (2015)].
No. 170404 (2011)].
g. Appellate jurisdiction [Section 5(2), i. Finality of judgments
Article VIII, 1987 Constitution] A decision that has acquired finality becomes
On appeal or certiorari (as the Rules of Court immutable and unalterable and may no longer
provide), the SC may review, revise, reverse, be modified in any respect even if the
modify, or affirm final judgments and orders of modification is meant to correct erroneous
lower courts in: conclusions of fact or law and whether it was
a. Cases involving the constitutionality or made by the court that rendered it or by the
validity of any treaty, international or highest court of the land [Genato v. Viola, G.R.
executive agreement, law, presidential No. 169706 (2010)].
decree, proclamation, order, instruction,
ordinance, or regulation, except in
circumstances where the Court believes
that resolving the issue of constitutionality
Page 82 of 384
j. Requirements for decisions and 3. Independent constitutional bodies.
resolutions 4. The Chairmen and members may not be
The conclusions of the Supreme Court in any removed except by impeachment.
case submitted to it for decision en banc or in 5. Fixed term of office of 7 years.
division shall be reached in consultation before 6. Rotational scheme [See Funa v. Villar,
the case is assigned to a Member for the G.R. No. 192791 (2012)]; staggered terms
writing of the opinion of the Court. A of 7 years with uniform reckoning date
certification to this effect signed by the Chief (i.e., February 2) is designed to ensure
Justice shall be issued and copy thereof that at no point is the entire membership
attached to the record of the case and served of a commission appointed by a single
upon the parties. Any Members who took no president. Hence, promotional
part, or dissented, or abstained from a decision appointments are allowed only insofar as
or resolution, must state the reason therefor. they do not disturb the rotation cycle.
The same requirements shall be observed by 7. The Chairmen and members may not be
all lower collegiate courts [Section 13, Article appointed in an acting capacity [Matibag v.
VIII, 1987 Constitution]. Benipayo, G.R. No. 149036 (2002)].
8. The salaries of the Chairmen and
No decision shall be rendered by any court members may not be decreased during
without expressing therein clearly and distinctly their tenure.
the facts and the law on which it is based. 9. The Commissions enjoy fiscal autonomy.
10. Each Commission may promulgate its
No petition for review or motion for own procedural rules, provided they do not
reconsideration of a decision of the court shall diminish, increase or modify substantive
be refused due course or denied without rights (though subject to disapproval by
stating the legal basis therefore [Section 14, the Supreme Court).
Article VIII, 1987 Constitution]. 11. The Commission may appoint their
own officials and employees in
A "Resolution" is not a "Decision" within the accordance with Civil Service Law
meaning of Section 14 of Article VIII. This
mandate applies only in cases "submitted for B. Common Provisions
decision," i.e., given due course and after the
filing of Briefs or Memoranda and/or other Three (3) Constitutional Commissions:
pleadings, as the case may be. It does not 1. The Commission on Elections,
apply to an Order or Resolution refusing due 2. Commission on Audit, and
course to a Petition for certiorari [Nunal v. 3. Civil Service Commission
Commission on Audit, G.R. No. 78648 (1989)].
Constitutionally-Created Administrative
Agencies: The grant of a constitutional
V. CONSTITUTIONAL commission’s rulemaking power is
COMMISSIONS (COMELEC, untouchable by Congress, absent a
constitutional amendment or revision.
COA, CSC) [However,] the laws that the Commission
interprets and enforces fall within the
A. Constitutional Safeguards to prerogative of Congress. As an administrative
agency, its quasi-legislative power is subject to
Ensure Independence of the same limitations applicable to other
Commissions administrative bodies [Trade and Investment
Development Corporation of the Philippines v.
1. They are constitutionally created, hence Civil Service Commission, G.R. No. 182249
may not be abolished by statute. (2013)].
2. Each commission is vested with powers
and functions which cannot be reduced by
statute.
Page 83 of 384
1987 Constitution first set of commissioners, shall always be for

a fixed term of seven (7) years; an appointment
Section 1(2), Article IX-D. The Chairman and the for a lesser period is void and unconstitutional.
Commissioners shall be appointed by the President The appointing authority cannot validly shorten
with the consent of the Commission on the full term of seven (7) years in case of the
Appointments for a term of seven years without
expiration of the term as this will result in the
reappointment. Of those first appointed, the
Chairman shall hold office for seven years, one distortion of the rotational system prescribed by
Commissioner for five years, and the other the Constitution,
Commissioner for three years, without
reappointment. Appointment to any vacancy shall be Appointments to vacancies resulting from
only for the unexpired portion of the term of the certain causes (death, resignation, disability or
predecessor. In no case shall any Member be
impeachment) shall only be for the unexpired
appointed or designated in a temporary or acting
capacity. portion of the term of the predecessor; such
appointments cannot be less than the
unexpired portion [as it will disrupt the
1. Promotional Appointment of staggering].
Commissioner to Chairman [Funa v.
Villar, supra] Members of the Commission who were
Section 1(2), Article IX-D of the Constitution appointed for a full term of seven years and
does not prohibit a promotional appointment who served the entire period, are barred from
from commissioner to chairman as long as: reappointment to any position in the
a. The commissioner has not served the full Commission. The first appointees in the
term of 7 years; and Commission under the Constitution are also
b. The appointment to any vacancy shall be covered by the prohibition against
only for the unexpired portion of the term reappointment.
of the predecessor [Section 1(2), Article
IX-D, 1987 Constitution]. A commissioner who resigns after serving in
c. The promotional appointment must the Commission for less than seven years is
conform to the rotational plan or the eligible for an appointment as Chairman for the
staggering of terms in the commission unexpired portion of the term of the departing
membership chairman. Such appointment is not covered by
the ban on reappointment, provided that the
Examples of promotional appointments: aggregate period of the length of service will
• If the commissioner has already served not exceed seven (7) years and provided
5 years, she cannot be promoted to a further that the vacancy in the position of
fresh chairmanship of 7 years. Chairman resulted from death, resignation,
• If the commissioner has already served disability or removal by impeachment. This is
5 years, she cannot be promoted to not a reappointment, but effectively a new
chair if the unexpired portion of the appointment.
latter is anything more than 2 years.
• If the commissioner has already served Any member of the Commission cannot be
2 years and there is a vacancy in the appointed or designated in a temporary or
chair for 4 years, she can be promoted acting capacity.
to the chairmanship. The 1 year (in
what would have been a 7-year tenure 3. Term of Office of Commission
in the commission) is forfeited. Members
2. Jurisprudence on Section 1(2), The terms of the first Chairmen and

Article IX-D [Funa v. Villar, supra] Commissioners of the Constitutional
Commissions under the 1987 Constitution
The appointment of members of any of the must start on a common date, irrespective of
three constitutional commissions, after the the variations in the dates of appointments and
expiration of the uneven terms of office of the qualifications of the appointees, in order that
Page 84 of 384
the expiration of the first terms of seven, five and may not be compelled by
and three years should lead to the regular mandamus [Torregoza v. Civil
recurrence of the two-year interval between the Service Commission, G.R. No.
expiration of the terms. This common 101526 (1992)].
appropriate starting point must be on February
02, 1987, the date of the adoption of the 1987 2. Under the Administrative Code of 1987, the
Constitution [Gaminde v. Commission on Civil Service Commission has the power to
Audit, G. R. No. 140335 (2000)]. hear and decide administrative cases
instituted before it directly or on appeal,
Term – The time during which the officer may including contested appointments.
claim to hold office as of right, and fixes the
interval after which the several incumbents 3. The Commission has original jurisdiction to
shall succeed one another. hear and decide a complaint for cheating in
the Civil Service examinations committed by
Tenure – The time during which the incumbent government employees [Cruz v. CSC, G.R.
actually holds and exercises the office The No. 144464 (2001)].
term of office is not affected by the hold-over.
The tenure may be shorter than the term for 4. It is the intent of the Civil Service Law, in
reasons within or beyond the power of the requiring the establishment of a grievance
incumbent. procedure, that decisions of lower level
officials (in cases involving personnel
C. Powers, Functions, and actions) be appealed to the agency head,
then to the Civil Service Commission
Jurisdiction [Olanda v. Bugayong, G.R. No. 140917
(2003)].
1. Civil Service Commission
As the central personnel agency of the
government, the CSC has broad authority to
1987 Constitution
pass upon all civil service matters. The
Section 3, Article IX-B. The Civil Service mandate of the CSC should therefore be read
Commission, as the central personnel agency of the as the comprehensive authority to perform all
Government, shall establish a career service and functions necessary to ensure the efficient
adopt measures to promote morale, efficiency, administration of the entire civil service,
integrity, responsiveness, progressiveness, and
including the Central Executive Service (CES).
courtesy in the civil service. It shall strengthen the
merit and rewards system, integrate all human Further, the specific powers of the CESB must
resources development programs for all levels and be narrowly interpreted as exceptions to the
ranks, and institutionalize a management climate comprehensive authority granted to the CSC
conducive to public accountability. It shall submit to by the Constitution and relevant statutes
the President and the Congress an annual report on [Career Executive Service Board v. Civil
its personnel programs.
Service Commission, G.R. No. 197762 (2017)].
a. Functions b. Scope of Civil Service

1. Implement various laws governing Embraces all branches, subdivisions,
appointments to, removals from, instrumentalities and agencies of the
discipline, and benefits within the civil Government, including GOCCs with original
service. charters [Section 2(1), Article IX-B, 1987
a. In the exercise of its powers to Constitution].
implement R.A. No. 6850 (granting
civil service eligibility to employees The Civil Service does not include government-
under provisional or temporary owned or -controlled corporations which are
status who have rendered seven organized under the general corporation law
years of efficient service), the CSC (e.g., created as private corporations but
enjoys a wide latitude of discretion, majority-owned by the government) [See
Page 85 of 384
National Service Corp. v. NLRC, G.R. No. L- the imposition of a penalty of suspension of
69870 (1988)]. more than 30 days or fine in an amount
exceeding 30 days’ salary [Torres v. De Leon,
Note: The University of the Philippines, having G.R. No. 199440 (2016)].
an original charter, is clearly part of the CSC
[University of the Philippines v. Regino, G.R. e. Classes of service [CSC v. Sojor, G.R.
No. 88167 (1993)]. No. 168766 (2008)]
Career Service: Characterized by entrance (a)
c. Jurisdiction based on merit and fitness to be determined,
The CSC has been granted by the Constitution as far as practicable, by competitive
and the Administrative Code jurisdiction over examinations, OR (b) based on highly technical
all civil service positions in the government qualifications; with opportunity for
service, whether career or non-career [Civil advancement to higher career positions and
Service Commission v. Sojor, G.R. No. 168766 security of tenure.
(2008); See CSC Resolution No. 991936 1. Open career positions: Where prior
detailing the disciplinary and non-disciplinary qualification in an appropriate
jurisdiction]. examination is required.
2. Closed career positions: e.g. scientific
The Board of Regents (BOR) of a state or highly technical in nature;
university has the sole power of administration 3. Career Executive Service: e.g.
over the university. But…there is no showing undersecretaries, bureau directors
that such power is exclusive. The CSC has 4. Career Officers: Other than those
concurrent jurisdiction over a president of a belonging to the Career Executive
State university [CSC v. Sojor, supra]. Service who are appointed by the
President, e.g. those in the foreign
d. Appellate Jurisdiction service
The appellate power of the CSC will only apply 5. Positions in the AFP, although
when the subject of the administrative cases governed by a different merit system
filed against erring employees is in connection 6. Personnel of GOCCs with original
with the duties and functions of their office, and charters
not in cases where the acts of the complainant 7. Permanent laborers, whether skilled,
arose from cheating in the civil service semi-skilled, or unskilled
examinations [Cruz v. CSC, G.R. No. 144464
(2001)]. Non-career Service: Characterized by
entrance on bases other than those of the
In administrative disciplinary cases decided by usual tests utilized for the career service;
the COA, the proper remedy in case of an tenure limited to a period specified by law, or
adverse decision is an appeal to the Civil which is co-terminus with that of the appointing
Service Commission and not a petition for authority or subject to his pleasure, or which is
certiorari before SC under Rule 64 [Galindo v. limited to the duration
Commission on Audit, G.R. No. 210788 1. Elective officials, and their personal
(2017)]. and confidential staff;
2. Department heads and officials of
The Philippine National Red Cross, although Cabinet rank who hold office at the
not a GOCC, is sui generis in character. The pleasure of the President, and their
sui generis character of PNRC requires the personal and confidential staff;
court to approach controversies involving the 3. Chairmen and members of
PNRC on a case-to-case basis. Since the issue commissions and bureaus with fixed
involves the enforcement of labor laws and terms;
penal statutes, PNRC can be treated as a 4. Contractual personnel;
GOCC. Thus, the CSC has jurisdiction. 5. Emergency and seasonal personnel.
Moreover, the CSC has appellate jurisdiction
on administrative disciplinary cases involving
Page 86 of 384
Note: Except as otherwise provided by the or in any of its subsidiaries [Section 6,
Constitution or by law, the Civil Service Article IX-B, 1987 Constitution].
Commission shall have the final authority to 2. No elective official shall be eligible for
pass upon the removal, separation and appointment or designation in any
suspension of all officers and employees in the capacity to any public office or position
civil service and upon all matters relating to the during his tenure [Section 7(1), Article
conduct, discipline and efficiency of such IXB, 1987 Constitution].
officers and employees [CSC v. Sojor, supra]. 3. Unless otherwise allowed by law OR by
the primary functions of his position, no
e. Appointments in the Civil Service appointive official shall hold any other
The role of the CSC in the appointing process office or employment in the
is limited to the determination of qualifications Government or any subdivision,
of the candidates for appointments and plays agency or instrumentality thereof
no role in the choice of the person to be including GOCCs or their subsidiaries
appointed [Bernas]. [Section 7(2), Article IX-B, 1987
Constitution].
General Rule: Appointments are made only 4. No officer or employee in the civil
according to merit and fitness to be service shall engage directly or
determined, as far as practicable, by indirectly, in any electioneering or
competitive examination partisan political activity [Section 2(4),
Article IX-B, 1987 Constitution].
Exceptions:
1. Policy determining: Where the officer g. Removal or suspension only for
lays down principal or fundamental cause
guidelines or rules; or formulates a No officer or employee of the civil service shall
method of action for government or any be removed or suspended except for cause
of its subdivisions; e.g. department provided by law [Section 2 (2), Article IX-B,
head. 1987 Constitution].
2. Primarily confidential: Denoting not
only confidence in the aptitude of the 2. Commission on Elections
appointee for the duties of the office but a. Powers and Functions
primarily close intimacy which ensures 1. Enforce all laws relating to the conduct
freedom of intercourse without of election, plebiscite, initiative,
embarrassment or freedom from referendum and recall;
misgivings or betrayals on confidential
matters of state [De los Santos v. Initiative: The power of the people to propose
Mallare, G.R. No. L-3881 (1950)]; OR amendments to the Constitution or to propose
one declared to be so by the President and enact legislation through an election called
of the Philippines upon the for that purpose. There are 3 systems of
recommendation of the CSC, subject to initiative: Initiative on the Constitution, initiative
judicial review [Salazar v. Mathay, G.R. on statutes, and initiative on local legislation
No. L-44061 (1976)]. [Section 3(a), R.A. No. 6735].
3. Highly technical: Requires
possession of technical skill or training Referendum: The power of the electorate to
in supreme degree [De los Santos v. approve or reject legislation through an
Mallare, supra]. election called for that purpose. Not counting
constitutionally-required ratifications (e.g., on
f. Disqualifications statutes changing the name of the country),
1. No candidate who has lost in any there are 2 classes: Referendum on statutes or
election shall within one (1) year after referendum on local laws [Section 3(c), R.A.
such election, be appointed to any No. 6735].
office in the Government or any GOCC
Page 87 of 384
Recall: The termination of official relationship 8. Deputize law enforcement agencies and
of a local elective official for loss of confidence instrumentalities of the Government for
prior to the expiration of his term through the the exclusive purpose of ensuring free,
will of the electorate. orderly, honest, peaceful, and credible
elections;
Plebiscite: The submission of constitutional
amendments or the incorporation (and related COMELEC may validly delegate its power to
alterations) of LGUs to the people for their investigate and prosecute election law
approval. violations to the Provincial Fiscal [now
provincial prosecutor], pursuant to its
2. Recommend to the Congress effective deputization power [People v. Judge Basilia,
measures to minimize election G.R. No. 83938 (1989)].
spending, and to prevent and penalize
all forms of election frauds, offenses, 9. Recommend to the President the
malpractices, and nuisance removal of any officer or employee it
candidacies; has deputized for violation or disregard
of, or disobedience to its directive;
3. Submit to the President and the
Congress, a comprehensive report on 10. Registration of political parties,
the conduct of each election, plebiscite, organizations and coalitions and
initiative, referendum, or recall; accreditation of citizens’ arms;
4. Decide administrative questions 11. Regulation of public utilities and media

pertaining to election except the right to of communication or information;
vote (the jurisdiction of which is with the
judiciary); While respondent COMELEC cited the
Constitution, laws and jurisprudence to support
Power to declare failure of election: The their position that they had the power to
COMELEC may exercise such power motu regulate the tarpaulin, however, all these
proprio or upon a verified petition, and the provisions pertain to candidates and political
hearing of the case shall be summary in nature parties. COMELEC does not have the authority
[Sison v. COMELEC, G.R. No. 134096 (1998)]. to regulate the enjoyment of the preferred right
to freedom of expression exercised by a non-
5. File petitions in court for inclusion or candidate. Regulation of election
exclusion of voters; paraphernalia will still be constitutionally valid if
it reaches into speech of persons who are not
6. Investigate and prosecute cases of candidates or who do not speak as members
violations of election laws; of a political party if they are not candidates,
only if what is regulated is declarative speech
Note: Section 43, R.A. No. 9369 or the that, taken as a whole, has for its principal
Automated Election System Law of January object the endorsement of a candidate only.
2007 grants to the Department of Justice
concurrent jurisdiction to investigate and The regulation (a) should be provided by law;
prosecute violations of election law. In contrast, (b) reasonable; (c) narrowly tailored to meet
the Omnibus Election Code exclusively grants the objective of enhancing the opportunity of all
the equivalent investigative/prosecutorial candidates to be heard and considering the
jurisdiction to the COMELEC. primacy of the guarantee of free expression,
and (d) demonstrably the least restrictive
7. Recommend pardon, amnesty, parole means to achieve that objective. The regulation
or suspension of sentence of election must only be with respect to the time, place and
law violators; manner of the rendition of the message. In no
situation may the speech be prohibited or
censored on the basis of its content [The
Page 88 of 384
Diocese of Bacolod v. COMELEC, G.R. No. d. Jurisdiction over intra-party disputes
205728 (2015)]. The COMELEC’s powers and functions under
the Constitution, "include the ascertainment of
12. Decide on election cases the identity of the political party and its
legitimate officers responsible for its acts." The
The Commission on Elections may sit en banc power to register political parties necessarily
or in two divisions and shall promulgate its involves the determination of the persons who
rules of procedure in order to expedite must act on its behalf. Thus, the COMELEC
disposition of election cases [Section 3, Article may resolve an intra-party leadership dispute,
IX-C, 1987 Constitution]. in a proper case brought before it, as an
incident of its power to register political parties
The Constitution vested upon the COMELEC [Lokin v. COMELEC, G.R. No. 193808 (2012)].
judicial powers to decide all contests relating to
elective local officials as therein provided e. Appellate Jurisdiction
[Garcia v. De Jesus, G.R. No. 97108-09 All contests involving elected municipal officials
(1992)]. decided by trial courts of general jurisdiction or
involving elective barangay officials decided by
b. Cases which must be heard by a court of limited jurisdiction [Garcia v. De
Division Jesus, supra].
ARTICLE IX-C, SECTION 3. The f. Limited jurisdiction to issue writs of

Commission on Elections may sit en banc or certiorari
in two divisions, and shall promulgate its
rules of procedure in order to expedite Interpreting the phrase “in aid of its appellate
disposition of election cases, including pre- jurisdiction,” if a case may be appealed to a
proclamation controversies. All such election particular court or judicial tribunal or body, then
cases shall be heard and decided in division,
said court or judicial tribunal or body has
provided that motions for reconsideration of
jurisdiction to issue the extraordinary writ of
decisions shall be decided by the
certiorari, in aid of its appellate jurisdiction
Commission en banc.
Hence: Hence, the COMELEC may take cognizance of

• Election contests (e.g., pre- a petition for certiorari questioning an
proclamation controversies, recounts) interlocutory order of the regional trial court in
are decided first by division. The en an electoral protest case. [Bulilis v. Nuez, G.R.
banc only decides motions for No. 195953 (2011)].
reconsideration of those election
contests [See Ong v. COMELEC, G.R. 3. Commission on Audit
No. 105717 (1992)].
• In all other instances (e.g., canvassing, a. Powers and functions
administrative functions), the Examine, audit, and settle accounts pertaining
COMELEC acts en banc. to government funds or property: its revenue,
receipts, expenditures, and uses.
c. Exclusive jurisdiction
All contests relating to the elections, returns LGUs, though granted local fiscal autonomy,
and qualifications of all elective regional, are still within the audit jurisdiction of the COA
provincial, and city officials. [Veloso v. COA, G.R. No. 193677 (2011)]. The
Boy Scouts of the Philippines (BSP) is a public
Currently, the enforcement of election laws corporation and its funds are subject to the
may be concurrent when Congress assigns COA’s audit jurisdiction [Boy Scouts of the
such enforcement to a different body (e.g., the Philippines v. COA, G.R. No. 177131 (2011)].
Department of Justice).
The Constitution formally embodies the long-
established rule that private entities who
Page 89 of 384
handle government funds or subsidies in trust ● Promulgate accounting and auditing
may be examined or audited in their handling rules and regulations.
of said funds by government auditors [Blue Bar
Coconut Philippines, Inc. v. Tantuico, G.R. No. This includes giving the COA Assistant
L-47051 (1988)]. Commissioner and General Counsel the
authority to deputize a special audit team [The
b. Post-audit basis Special Audit Team, Commission on Audit v.
● Constitutional bodies, commissions, CA, G.R. No. 174788 (2013)].
and offices;
● Autonomous state colleges and Note: No law shall be passed exempting any
universities; entity of the Government or its subsidiaries in
● GOCCs with no original charters and any guise whatsoever, or any investment of
their subsidiaries; public funds, from the jurisdiction of the
● Non-governmental entities receiving Commission on Audit [Section 3, Article IXD,
subsidy or equity, directly or indirectly, 1987 Constitution].
from or through the Government, which
are required by law or the granting Congress cannot exempt foreign grants from
institution to submit such audit as a the jurisdiction of the Commission on Audit. Its
condition of subsidy or equity. jurisdiction extends to all government-owned or
controlled corporations, including those funded
Complementing the constitutional power of the by donations through the Government
COA to audit accounts of “non–governmental [Petitioner Corporations v. Executive
entities receiving subsidy or equity, directly or Secretary, G.R. Nos. 147036-37 (2012)].
indirectly, from or through the government” is
Section 11(1), Book V of the Administrative d. Primary jurisdiction over money
Code, which authorizes the COA to audit claims
accounts of non–governmental entities Primary jurisdiction over money claims Limited
“required to pay…or have government share” to liquidated claims: The COA has primary
but only with respect to “funds…coming from or jurisdiction to pass upon a private entity’s
through the government.” money claims against a provincial gov’t.
However, the scope of the COA’s authority to
COA does not have the exclusive power to take cognizance of claims is circumscribed by
examine and audit government agencies. The cases holding statutes of similar import to
framers of the Constitution were fully aware of mean only liquidated claims, or those
the need to allow independent private audit of determined or readily determinable from
certain government agencies in addition to the vouchers, invoices, and such other papers
COA audit [DBP v. COA, G.R. No. 88435 within reach of accounting officers [Euro-Med
(2002)]. Laboratories, Phil. Inc. v. Province of
Batangas, G.R. No. 148106 (2006)].
The COA’s audit jurisdiction does not allow it to
interfere in how the Supreme Court appraises No jurisdiction over their validity or
the value of properties that can be purchased constitutionality: The jurisdiction of the COA
by its retired justices, as this would be an over money claims against the government
interference in the judiciary’s fiscal autonomy. does not include the power to rule on the
[In Re: COA Opinion on Appraised Value, A.M. constitutionality or validity.
No. 11-7-10-SC (2012)]
C. Exclusive authority
● Define the scope of its audit and
examination;
● Establish techniques and methods
required;
Page 90 of 384
D. Composition and Note: At no time shall all members belong to
the same profession.
Qualifications of Members
E. Prohibited Offices and
Interests
a. Composition
A Chairman and two (2) Commissioners. No member of the Constitutional Commissions
shall, during their tenure:
b. Qualifications [Section 1(1), Article 1. Hold any other office or employment.
IX-B, 1987 Constitution] This is similar to the prohibition against
high executive officers (cf. Art. VII, Sec.
a. Natural-born citizens of the Philippines;
b. At the time of their appointment, at 13). It applies to both public and private
offices and employment;
least 35 years of age;
c. With proven capacity for public
administration; and 2. Engage in the practice of any
profession;
d. Must not have been candidates for any
elective position in the election
3. Engage in the active management or
immediately preceding their
appointment. control of any business which in any
way may be affected by the functions
of his office; or
c. Term of office
Seven (7) years (except those first appointed)
4. Be financially interested, directly or
indirectly, in any contract with, or in any
2. Commission on Elections franchise or privilege granted by, the
Government, its subdivisions, agencies
a. Composition or instrumentalities, including GOCCs
A Chairman and six (6) Commissioners. or their subsidiaries [Section 2, Article
IX-A, 1987 Constitution].
b. Qualifications
1. Must be natural-born citizens; The CSC Chairman cannot be a member of a
2. At least 35 years of age; government entity that is under the control of
3. Holders of a college degree; the President without impairing the
4. Have not been candidates in the independence vested in the CSC by the 1987
immediately preceding election; Constitution [Funa v. Civil Service
5. Majority, including the Chairman, must Commission, G.R. No. 191672 (2014)].
be members of the Philippine Bar who
have been engaged in the practice of F. Judicial Review of Final
law for at least ten (10) years. [Section
1, Article IX-C, 1987 Constitution] Orders, Resolutions, and
Decisions of Constitutional
3. Commission on Audit Commissions
a. Composition
A Chairman and two (2) Commissioners
b. Qualifications 1. Rendered in Exercise of Quasi-
1. Natural born Filipino citizens; Judicial Functions
2. At least thirty-five (35) years of age;
3. CPAs with not less than ten (10) years a. Decisions
of auditing experience OR members of Each Commission shall decide by a majority
the Philippine bar with at least ten (10) vote of all its members (NOT only those who
years practice of law participated in the deliberations) any case or
matter brought before it within 60 days from the
Page 91 of 384
date of its submission for decision or resolution of CSC, Rule 43 will be applied, and the
[Section 7, Article IX-A, 1987 Constitution]. case will be brought to the Court of
Appeals.
Any decision, order or ruling of each
Commission may be brought to the SC on 2. Rendered in Exercise of
certiorari by the aggrieved party within thirty Administrative Functions
(30) days from receipt of the copy thereof.
General Rule: Acts rendered in the exercise of
In resolving cases brought before it on appeal,
the administrative functions of a Constitutional
respondent COA is not required to limit its Commission (e.g., awarding a contract to a
review only to the grounds relied upon by a
bidder) are not judicially reviewable.
government agency’s auditor with respect to
disallowing certain disbursements of public
Rationale: These are in the exercise of the
funds. Such would render COA’s vital
Commission’s discretion/prerogatives, which
constitutional power unduly limited and thereby are in the nature of policy and generally not
useless and effective [Yap v. COA, G.R. No.
reviewable by the courts.
158562 (2010)].
Exceptions:
b. Certiorari Jurisdiction of the • When they are in violation of statutes
Supreme Court (e.g., procurement laws) or breach civil
law (e.g., obligations and contracts),
For Final Orders in the Exercise of a they may be challenged through
Commission's Quasi-Judicial Functions ordinary civil actions in the regular
(via Rule 64): Limited to decisions rendered in courts (e.g., the Regional Trial Court)
actions or proceedings taken cognizance of by [See Filipinas Engineering and
the Commissions in the exercise of their quasi- Machine Shop v. Ferrer, G.R. No.
judicial powers. 31455 (1985)] This is subject to the
rules on state immunity.
The Court exercises extraordinary jurisdiction,
thus, the proceeding is limited only to issues • When there is a proper case and for
involving grave abuse of discretion resulting in grave abuse of discretion, they may be
lack or excess of jurisdiction, and does not challenged via certiorari on Rule 65.
ordinarily empower the Court to review the
factual findings of the Commission [Aratuc v.
COMELEC, G.R. No. L-49705-09 (1999)]. CITIZEN IN RELATION TO
THE STATE
For Interlocutory Orders: Via Rule 65, in a
proper case. [See Macabago v. COMELEC,
G.R. No. 152163 (2002)] I. CITIZENSHIP
c. Synthesis on the Rules of Modes of A. Who are Filipino Citizens
Review
1. Decisions, order or ruling of the The following are citizens of the Philippines:
Commissions in the exercise of their 1. Those who are citizens of the
quasi-judicial functions may be Philippines at the time of the adoption
reviewed by the Supreme Court. of the Constitution;
2. General Rule: The mode of review is a 2. Those whose fathers or mothers are
petition for certiorari under Rule 64 (not citizens of the Philippines
Rule 65). 3. Those born before January 17, 1973,
3. Exception: The Rules of Civil of Filipino mothers, who elect
Procedure, however, provides for a Philippine citizenship upon reaching
different legal route in the case of the the age of majority; and
Civil Service Commission. In the case
Page 92 of 384
4. Those who are naturalized in elect Filipino citizenship when she reached the
accordance with law [Section 1, Article age of majority.||| [Uy-Belleza v. Civil Registrar
IV, 1987 Constitution]. of Tacloban City, G.R. No. 218354,
(September 15, 2021)]
Note: A passport is "a document issued by the
Philippine government to its citizens requesting b. Naturalized Citizens
other governments to allow its citizens to pass Those who are naturalized in accordance with
safely and freely, and in case of need, to give the law [Section 1(4), Article IV, 1987
him/her all lawful aid and protection." It is an Constitution]
official document of identity of Philippine
citizenship of the holder issued for travel Modes:
purposes. A passport proves that the country
which issued it recognizes the person named (A) By direct conferment of Congress.
therein as its national. (Uy-Belleza v. Civil Here, Congress passes a private bill conferring
Registrar of Tacloban City, G.R. No. 218354, citizenship on a foreigner, subject to approval
[September 15, 2021]) or veto of the President).
1. Classification of Citizens (B) By application under Naturalization

Statutes.
a. Natural-born Citizens
i. Via Judicial Action (CA 473)
ii. Via Administrative Action with the Special
SECTION 2, ARTICLE IV. Natural-born citizens are
those who are citizens of the Philippines from birth Committee on Naturalization (RA 9139)
without having to perform any act to acquire or
perfect their Philippine citizenship. Those who elect (1) Naturalization via Judicial Action [CA
Philippine citizenship in accordance with paragraph 473]
(3), Section 1 hereof shall be deemed natural-born
citizens.
Judicial process by which a foreigner is
adopted by the country and clothed with the
Who are natural-born citizens privileges of a native-born citizen. The
1. Citizens of the Philippines from birth applicant must prove that he has all of the
without having to perform any act to qualifications and none of the disqualifications
acquire or perfect their Philippine for citizenship.
citizenship [Section 1(1) & Section (2) Qualifications [Section 2, CA 473]
1(2), Article IV, 1987 Constitution]; and
a. Not less than twenty-one years of age
2. Those who elect Philippine citizenship on the day of the hearing of the
in accordance with Section 1(3), Article petition;
IV b. Resided in the Philippines for a
continuous period of 10 years or more;
The requirement of electing Filipino citizenship c. Of good moral character; believes in
the principles underlying the Philippine
when a child reached the age of majority under
Constitution; conducted himself in a
the Constitution applied only to legitimate
proper and irreproachable manner
children. These would not apply in the case of
during the entire period of his
Adelaida who is an illegitimate child, residence towards the government
considering that her Chinese father and Filipino and community
mother were never married. As such, she was d. Must own real estate in the Philippines
not required to comply with said constitutional worth P5,000 or more OR must have
and statutory requirements to become a lucrative trade, profession, or lawful
Filipino citizen. By being an illegitimate child of occupation;
a Filipino mother, Adelaida automatically e. Able to speak or write English or
became a Filipino upon birth. Stated differently, Spanish or anyone of the principal
she is a Filipino since birth without having to languages; and
Page 93 of 384
f. Enrolled his minor children of school Filipinos, or who have not evinced a
age in any of the recognized schools sincere desire to learn and embrace
where Philippine history, government the customs, traditions, and ideals of
and civics are taught or prescribed as the Filipinos;
part of the school curriculum, during
the entire period of the residence in the g. Citizens or subjects of nations with
Philippines required of him. whom the Philippines is at war; or
(3) Special Qualifications [Section 3, CA h. Citizens or subjects of a foreign

473] country other than the United States,
whose laws do not grant Filipinos the
ANY will result to reduction of the 10-year right to become naturalized citizens or
period to 5 years: subject thereof.
a. Having honorably held office under the (5) No Petition for Judicial Declaration of
Government of the Philippines or Philippine Citizenship
under that of any of the provinces,
cities, municipalities, or political The Court has consistently ruled that there is
subdivisions thereof; no proceeding established by law, or the Rules
b. Established a new industry or for the judicial declaration of the citizenship of
introduced a useful invention in the an individual. There is no specific legislation
Philippines; authorizing the institution of a judicial
c. Married to a Filipino woman; proceeding to declare that a given person is
d. Engaged as a teacher in the part of our citizenry.
Philippines in a public or recognized
private school not established for the It should be stressed that there is no specific
exclusive instruction of children of statutory or procedural rule which authorizes
persons of a particular nationality or
the direct filing of a petition for declaration of
race, in any of the branches of
election of Philippine citizenship before the
education or industry for a period of 2
years or more; or courts. The special proceeding provided under
e. Born in the Philippines. Section 2, Rule 108 of the Rules of Court on
Cancellation or Correction of Entries in the Civil
(4) Disqualifications [Section 4, CA 473] Registry, merely allows any interested party to
file an action for cancellation or correction of
a. Persons opposed to organized entry in the civil registry, i.e.,election, loss and
government or affiliated with groups recovery of citizenship [Republic v. Sagun,
who uphold and teach doctrines G.R. No. 187567, (February 15, 2012), 682
opposing all organized governments; PHIL 303-317]
b. Persons defending or teaching the (6) Denaturalization

necessity or propriety of violence,
personal assault, or assassination for Process by which grant of citizenship is
the success of their ideas; revoked.
c. Polygamists or believers in polygamy; Judgment directing the issuance of a

certificate of naturalization is a mere grant of a
d. Persons convicted of crimes involving political privilege and that neither estoppel nor
moral turpitude; res judicata may be invoked to bar the State
from initiating an action for the cancellation or
e. Persons suffering from mental nullification of the certificate of naturalization
alienation or incurable contagious thus issued [In Re: Yao MunTek v. Republic,
diseases; G.R. No. L-23383 (1971)].
f. Persons who during the period of their (7) Grounds
stay, have not mingled socially with the
Page 94 of 384
Upon the proper motion of the Sol. Gen. or the
and/or in Philippine embassies, consulates and
provincial fiscal, naturalization may be territories abroad is presumed a natural-born Filipino
canceled when: citizen regardless of the status or circumstances of
a. Naturalization certificate was birth. As a natural-born citizen of the Philippines, a
fraudulently or illegally obtained [Po foundling is accorded with rights and protections at
Soon Tek v. Republic, G.R. No. L- the moment of birth equivalent to those belonging to
32408 (1974)]; such class of citizens whose citizenship does not
need perfection or any further act.
If obtained fraudulently or via perjury,
The presumption of natural-born status of a
naturalization is never final (i.e., does not
foundling may not be impugned in any proceeding
attain res judicata) and may be revoked [In Re: unless substantial proof of foreign parentage is
Republic v. Guy, G.R. No. L-41399 (1982)]. shown. The natural-born status of a foundling shall
not also be affected by the fact that the birth
certificate was simulated, or that there was absence
b. If, within the 5 years next following the of a legal adoption process, or that there was
issuance, he shall return to his native inaction or delay in reporting, documenting, or
country or to some foreign country and registering a foundling.
establish his permanent residence
there; Are foundlings natural-born citizens?
Yes. As a matter of law, foundlings are, as a
c. Remaining for more than one year in
class, natural-born citizens. The presumption
his native country or the country of his
of natural-born citizenship of foundlings stems
former nationality, or two years in any
other foreign country, shall be from the presumption that their parents are
considered as prima facie evidence of nationals of the Philippines. While the 1935
his intention of taking up his Constitution’s enumeration is silent as to
permanent residence in the same; foundlings, there is no restrictive language
which would definitely exclude foundlings
d. Petition was made on an invalid either. No such intent or language permits
declaration of intention; discrimination against foundlings. On the
contrary, all three Constitutions (1935, 1973,
e. Minor children of the person 1987) guarantee the basic right to equal
naturalized failed to graduate from the protection of the laws. All exhort the State to
schools mentioned in Section 2, render social justice [Poe-Llamanzares v.
through the fault of their parents, either COMELEC, G.R. No. 221697 (2016)].
by neglecting to support them or by
transferring them to another school or
schools; or
B. Modes of Acquiring
Citizenship
f. If he has allowed himself to be used as
a dummy in violation of the 1. By Birth
Constitutional or legal provision a. Jus Soli — “Right of soil;” a person’s
requiring Philippine citizenship as a nationality is based on place of birth;
requisite for the exercise, use or formerly effective in the Philippines
enjoyment of a right, franchise or
[Roa v. Collector of Customs, G.R. No.
privilege.
L-7011 (1912)].
2. Foundlings b. Jus Sanguinis — “Right of blood;” a
person's nationality follows that of his
REP. ACT 11767 FOUNDLING RECOGNITION natural parents. The Philippines
AND PROTECTION ACT (MAY 6, 2022) currently adheres to this principle.
ARTICLE I, SECTION 5. Citizenship Status of a
Foundling Found in the Philippines and/or in 2. By Naturalization
Philippine Embassies, Consulates and Territories Naturalization signifies the act of formally
Abroad. — A foundling found in the Philippines adopting a foreigner into the political body of a
Page 95 of 384
nation by clothing him or her with the privileges she reaches the age of majority [Republic v.
of a citizen. Lim, G.R. No. 153883 (2004)].
Three modes by which an alien may become a 5. Reglementary Period

Filipino citizen by naturalization: Under Article IV, Section 1(3) of the 1935
1. Administrative naturalization pursuant Constitution, the citizenship of a legitimate
to R.A. No. 9139; child born of a Filipino mother and an alien
2. Judicial naturalization pursuant to C.A. father followed the citizenship of the father,
437; and unless, upon reaching the age of majority, the
3. Legislative naturalization in the form of child elected Philippine citizenship. The 1935
a law enacted by Congress granting Charter only provides that the election should
Philippine citizenship to an alien [So v. be made “upon reaching the age of majority.”
Republic, G.R. No. 170603 (2007)]. The age of majority then commenced upon
reaching 21 years. In the opinions of the
3. Derivative Naturalization Secretary of Justice on cases involving the
Under Sec. 15 of CA 473, foreign women who validity of election of Philippine citizenship, this
are married to Philippine citizens may be dilemma is resolved by basing the time period
deemed ipso facto Philippine citizens and it is on the decisions of this Court prior to the
neither necessary for them to prove that they effectivity of the 1935 Constitution.
possess other qualifications for naturalization
at the time of their marriage nor do they have In these decisions, the proper period for
to submit themselves to judicial naturalization electing Philippine citizenship, should be made
[Republic v. Batuigas, G.R. No. 183110 within “reasonable time” after attaining the age
(2013)]. of majority. This phrase “reasonable time” has
been interpreted to mean the election should
Pursuant to the principle of derivative be made within three years from reaching the
naturalization, Section 15 of CA 437, extends age of majority [Re: Application for Admission
the grant of Philippine citizenship to the minor to the Philippine Bar, Vicente D. Ching, Bar
children of those naturalized thereunder. Matter No. 914, October 1, 1999].
The following are requisites should be applied

to the minor children in order to be entitled to 6. Eligibility under the Administrative
Philippine citizenship: Naturalization Law; Rationale
1. They are legitimate children of R.A. No. 9139 is an act providing for the
petitioner acquisition of Philippine citizenship for (1)
aliens born in the Philippines and (2) residing
2. They were born in the Philippines, and therein since birth by administrative
naturalization subject to certain requirements
3. They were still minors when the dictated by national security and interest.
petitioner was naturalized as a Filipino
citizen [Tan Co v. Civil Register of R.A. No. 9139 was enacted as a remedial
Manila, G.R. No. 138496 (2004)]. measure intended to make the process of
acquiring Philippine citizenship less tedious,
4. Election of Filipino Citizenship less technical and more encouraging. It also
The constitutional and statutory requirements addresses the concerns of degree holders
of electing Filipino citizenship apply only to who, by reason of lack of citizenship
legitimate children and not to one who was requirement, cannot practice their profession,
concededly an illegitimate child, as her thus promoting "brain drain for the Philippines
Chinese father and Filipino mother were never [So v. Republic, supra].
married. Being an illegitimate child of a Filipino
mother, respondent is a Filipino since birth, 7. Qualifications Prescribed Under Act
without having to elect Filipino citizenship when
473 NOT APPLICABLE to R.A. No.
9139
Page 96 of 384
The qualifications and disqualifications of an pact with the country, or it maintains
applicant for naturalization by judicial act are armed forces in RP with RP’s consent;
set forth in Sections 2 and 4 of C.A. 473. On
the other hand, Sections 3 and 4 of R.A. No. e. Denaturalization (The court, upon its
9139 provide for the qualifications and discretion, may cancel certificate of
disqualifications of an applicant for naturalization subsequent to the
naturalization by administrative act. requirements provided. This is
because naturalization is not a natural
Rationale:
right but a political privilege);
1. C.A. 473 and R.A. No. 9139 are
separate and distinct laws - the former
covers all aliens regardless of class f. Being found by final judgment to be a
while the latter covers native-born deserter of the AFP.
aliens who lived here in the Philippines
all their lives, who never saw any other Note: Previously, Marriage by a Filipino woman
country and all along thought that they to an alien, if by the laws of her husband’s
were Filipinos; who have country, she becomes a citizen thereof. (Now
demonstrated love and loyalty to the qualified by Section 4, Article IV. Citizens of the
Philippines and affinity to customs and Philippines who marry aliens shall retain their
traditions. citizenship, unless by their act or omission they
are deemed, under the law, to have renounced
2. If the qualifications prescribed in R.A. it).
No. 9139 would be made applicable
even to judicial naturalization, the 2. General Rule
coverage of the law would be Expatriation is a constitutional right. No one
broadened since it would then apply can be compelled to remain a Filipino if he does
even to aliens who are not native- not want to [Go Julian v. Government, G.R. No.
born. 20809 (1923)].
Applying the provisions of R.A. No. 9139 to
judicial naturalization is contrary to the
3. Exception
intention of the legislature to liberalize the A Filipino may not divest himself of Philippine
naturalization procedure in the country [So v. citizenship in any manner while the Republic of
Republic, G.R. No. 170603 (2007)]. the Philippines is at war with any country
[Section 1(3), CA 63].
C. Loss and Re-Acquisition of Loss of Philippine citizenship cannot be
Philippine Citizenship presumed. Considering the fact that
admittedly, Osmeña was both a Filipino and an
1. Grounds for Loss of Philippine American, the mere fact that he has a
Citizenship certificate stating that he is an American does
a. Naturalization in a foreign country not mean that he is not still a Filipino, since
[Section 1(1), CA 63]; there has been no express renunciation of his
Philippine citizenship [Aznar v. COMELEC,
b. Express renunciation or expatriation G.R. No. 83820 (1995)].
[Section 1(2), CA 63];
4. Reacquisition
c. Taking an oath of allegiance to another a. Naturalization [CA 63 and CA 473]
country upon reaching the age of Now an abbreviated process, no need to wait
majority; for 3 years (1 year for declaration of intent, and
2 years for the judgment to become executory)
d. Accepting a commission and serving in
the armed forces of another country, Requirements:
unless there is an offensive/defensive 1. Must be 21 years of age
2. Must be a resident for 6 months
Page 97 of 384
3. Must have good moral character Retention
4. Must have no disqualification Natural-born citizens of the Philippines who,
after the effectivity of R.A. 9225, become
b. Repatriation citizens of a foreign country shall retain their
Repatriation results in the recovery of the Philippine citizenship upon taking the aforesaid
original nationality. Therefore, if he is a natural- oath [Section 3, R.A. No. 9225].
born citizen before he lost his citizenship, he
will be restored to his former status as a Derivative Citizenship
natural-born Filipino [Bengson III v. HRET, The unmarried child, whether legitimate,
G.R. No. 142840 (2001)]. illegitimate or adopted, below eighteen (18)
years of age, of those who re-acquire
Mere filing of certificate of candidacy is not a Philippine citizenship upon effectivity of R.A.
sufficient act of repatriation. Repatriation No. 9225 shall be deemed citizens of the
requires an express and equivocal act Philippines [Section 4, R.A. No. 9225].
[Frivaldo v. COMELEC, G.R. No. 120295
(1989)]. Effect of retention or reacquisition:
Those who retain or re-acquire Philippine
In the absence of any official action or approval citizenship under this Act shall enjoy full civil
by proper authorities, a mere application for and political rights and be subject to all
repatriation does not, and cannot, amount to attendant liabilities and responsibilities under
an automatic reacquisition of the applicant’s existing laws of the Philippines.
Philippine citizenship [Labo v. COMELEC,
G.R. No. 86564 (1989)]. Conditions for enjoyment of full civil and
political rights
c. Legislative Act
Citizenship can be acquired by an alien thru
Right Condition
legislative naturalization in the form of a law
enacted by Congress bestowing Philippine
citizenship to an alien [So v. Republic, GR Suffrage Meet requirements under
No.170603 (2007)]. Section 1, Article V of the
1987 Constitution, R.A.
No. 9189 (Overseas
Citizenship can be reacquired by natural-born
Absentee Voting Act of
citizens of the Philippines who have lost their
2003), other existing
Philippine citizenship by reason of their laws.
naturalization as citizens of a foreign country
upon taking the oath of allegiance to the
Republic [Section 3, R.A. 9225]. Seeking (1) Meet the
elective qualifications for holding
public office such public office as
5. R.A. No. 9225 (CITIZENSHIP required by the
RETENTION AND REACQUISITION Constitution and existing
ACT OF 2003) laws and,
(2) at the time of the
Reacquisition filing of the certificate of
Natural-born citizens of the Philippines who candidacy, make a
have lost their Philippine citizenship by reason personal and sworn
of their naturalization as citizens of a foreign renunciation of any and
country are deemed to have reacquired all foreign citizenship
Philippine citizenship upon taking the oath of before any public officer
allegiance to the Republic [Section 3, R.A. authorized to administer
9225]. an oath.
Page 98 of 384
naturalization, or for the purpose of avoiding
Right Condition deportation and prosecution in the US [Tabasa
v. CA, G.R. No. 125793 (2006)].
Appointment (1) Subscribe and swear
to public to an oath of allegiance Mode of Repatriation
office to the Republic of the
Philippines and its duly If Repatriation Under 9225: Repatriation as a
constituted authorities mode of reacquiring Philippine citizenship does
prior to their assumption not require the filing of a petition in court. All
of office; that an applicant had to do is to take an oath of
allegiance to the Republic of the Philippines
(2) provided, that they and register said oath in the Local Civil Registry
renounce their oath of of the place where the person concerned
allegiance to the country resides or last resided [Angat, supra]. In
where they took that addition thereto, registration of the Certificate
oath. of Repatriation in the Bureau of Immigration is
a prerequisite in effecting the repatriation of a
Practice Apply with the proper citizen [Altarejos v. COMELEC, G.R. No.
profession in authority for a license or 163256 (2004)].
the permit to engage in such
Philippines practice. If Repatriation Under 8171: A petition for
repatriation shall be filed with the Special
[Section 5, R.A. No. 9225] Committee on Naturalization (SCN) which was
designated to process petitions for repatriation
The right to vote or be elected or appointed to pursuant to A.O. 285 dated August 22, 2006.
any public office in the Philippines cannot be [Tabasa v. CA, supra]
exercised by, or extended to, those who:
7. Renunciation of Reacquisition
1. Are candidates for or are occupying
any public office in the country of which A person who renounces all foreign citizenship
they are naturalized citizens; and/or
under Section 5(2) of R.A. No. 9225 recants
this renunciation by using his foreign passport
2. Are in active service as commissioned
or noncommissioned officers in the afterwards [Maquiling v. COMELEC, G.R. No.
armed forces of the country in which 195649 (2013)].
they are naturalized citizens.
D. Dual Citizenship and Dual
6. Repatriation under R.A. No. 8171 Allegiance
R.A. No. 8171, which lapsed into law on
October 23, 1995, is an act providing for the
1. Dual Citizenship
repatriation (a) of Filipino women who have lost
Allows a person who acquires foreign
their Philippine citizenship by marriage to
citizenship to simultaneously enjoy the rights
aliens and (b) of natural-born Filipinos who
he previously held as a Filipino citizen. This
have lost their Philippine citizenship on account
may be voluntary or accidental, and results in
of political or economic necessity, including
the application of different laws of two or more
their minor children [Angat v. Republic, GR No.
states to a dual citizen.
132244 (1999)].
Included in the second group are minor 2. Dual Allegiance

children at the time of repatriation and does not
include one who is no longer minor at the time Completely voluntary, and occurs when:
of his repatriation or one who lost his Philippine
citizenship by operation of law. The loss of a. Aliens who are naturalized as Filipinos
Philippine citizenship must be on account of but remain loyal to their country of
political or economic necessity and not by origin;
operation of law such as derivative
Page 99 of 384
b. Public officers who, while serving the consequence of conflicting laws of different
government, seek citizenship in States.
another country.
Automatic Renunciation of Dual
3. Dual citizenship vs. dual Citizenship: Once a candidate files his
candidacy, he is deemed to have renounced
allegiance [Mercado v. Manzano, 307 his foreign citizenship in case of dual
SCRA 630 (1999)]. citizenship [Mercado v. Manzano, G.R. No.
135083 (1999)].
Dual Citizenship v. Dual Allegiance: Dual
citizenship arises when, as a result of the
concurrent application of the different laws of II. SOCIAL JUSTICE AND
two or more states, a person is simultaneously HUMAN RIGHTS
considered a national by the said states.
For instance, such a situation may arise when A. Concept of Social Justice
a person whose parents are citizens of a state SECTION 10, ARTICLE II. The State shall promote
which adheres to the principle of jus sanguinis social justice in all phases of national development.
is born in a state which follows the doctrine of
jus soli. SECTION 1. ARTICLE XIII. The Congress shall give
highest priority to the enactment of measures that
Such person, ipso facto is concurrently protect and enhance the right of all the people to
considered a citizen of both states. human dignity, reduce social, economic, and
political inequalities, and remove cultural inequities
by equitably diffusing wealth and political power for
Dual allegiance on the other hand, refers to a the common good. To this end, the State shall
situation in which a person simultaneously regulate the acquisition, ownership, use, and
owes, by some positive acts, loyalty to two or disposition of property and its increments.
more states. While dual citizenship is
involuntary, dual allegiance is the result of an SECTION 2, ARTICLE XIII. The promotion of social
individual’s volition justice shall include the commitment to create
economic opportunities based on freedom of
Local Electoral Disqualification for Dual initiative and self-reliance.
Allegiance Only: “Dual citizens” are
disqualified from running for any elective local Social justice refers to the promotion of the
position [Section 40(d), Local Government welfare of all the people, the adoption by the
Code]; this should be read as referring to “dual Government of measures calculated to insure
allegiance. economic stability of all the competent
Clearly, in including Section 5 in Article IV on
elements of society, through the maintenance
citizenship, the concern of the Constitutional
of a proper economic and social equilibrium in
Commission was not with dual citizens per se
but with naturalized citizens who maintain their the interrelations of the members of the
allegiance to their countries of origin even after community, constitutionally, through the
their naturalization. Hence, the phrase “dual adoption of measures legally justifiable, or
citizenship” in Section 40(d), R.A. No. 7160 extra constitutionally, through the exercise of
and in Section 20, R.A. No. 7854 must be powers underlying the existence of all
understood as referring to “dual allegiance.” governments on the time-honored principle of
salus populi est suprema lex.
Consequently, persons with mere dual
citizenship do not fall under this Social justice is the humanization of laws and
disqualification. For candidates with dual the equalization of social and economic forces
citizenship, it should suffice if, upon the filing of by the State so that justice in its rational and
their certificates of candidacy, they elect objectively secular conception may at least be
Philippine citizenship to terminate their status approximated. It must be founded on the
as persons with dual citizenship considering recognition of the necessity of
that their condition is the unavoidable interdependence among divers and diverse
units of a society and of the protection that
Page 100 of 384
should be equally and evenly extended to all The State shall regulate the relations between
groups as a combined force in our social and workers and employers, recognizing the right of
economic life, consistent with the fundamental labor to its just share in the fruits of production and
and paramount objective of the state of the right of enterprises to reasonable returns to
promoting the health, comfort, and quiet of all investments, and to expansion and growth.
persons, and of bringing about "the greatest
good to the greatest number" [Calalang v. it was ruled that the early retirement of an
Williams, G.R. 47800 (1940)]. employee due to a work-related ailment, as in
the case at bar, proves that he was really
We have repeatedly stressed that social justice disabled totally to further perform his assigned
— or any justice for that matter — is for the task, and to deny permanent total disability
deserving, whether he be a millionaire in his benefits when he was forced to retire would
mansion or a pauper in his hovel. It is true that, render inutile and meaningless the social
in case of reasonable doubt, we are to tilt the justice precept guaranteed by the Constitution.
balance in favor of the poor to whom the (Government Service Insurance System v.
Constitution fittingly extends its sympathy and Cadiz, G.R. No. 154093, [July 8, 2003], 453
compassion. But never is it justified to give PHIL 384-392)
preference to the poor simply because they are
poor, or reject the rich simply because they are Work is a necessity that has economic
rich, for justice must always be served for the significance deserving legal protection. The
poor and the rich alike according to the social justice and protection to labor provisions
mandate of the law. (Valencia v. Court of in the Constitution dictate so. Employers are
Appeals, G.R. No. 122363, [April 29, 2003], also accorded rights and privileges to assure
449 PHIL 711-741) their self-determination and independence and
reasonable return of capital. This mass of
B. Economic, Social and Cultural privileges comprises the so-called
Rights management prerogatives.
Although they may be broad and unlimited in

1. Economic and Social scope, the State has the right to determine
SECTION 18, ARTICLE II. The State affirms labor whether an employer's privilege is exercised in
as a primary social economic force. It shall protect a manner that complies with the legal
the rights of workers and promote their welfare. requirements and does not offend the
protected rights of labor [Capitol Medical
SECTION 3, ARTICLE XIII. The State shall afford
full protection to labor, local and overseas, Center Inc. v. Meris, G.R. No. 155098 (2005)].
organized and unorganized, and promote full
employment and equality of employment 2. Agrarian and Natural Resources
opportunities for all.
Reform
It shall guarantee the rights of all workers to self- SECTION 4, ARTICLE XIII. The State shall, by law,
organization, collective bargaining and negotiations, undertake an agrarian reform program founded on
and peaceful concerted activities, including the right the right of farmers and regular farmworkers who are
to strike in accordance with law. They shall be landless, to own directly or collectively the lands they
entitled to security of tenure, humane conditions of till or, in the case of other farmworkers, to receive a
work, and a living wage. They shall also participate just share of the fruits thereof. To this end, the State
in policy and decision-making processes affecting shall encourage and undertake the just distribution
their rights and benefits as may be provided by law. of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may
The State shall promote the principle of shared prescribe, taking into account ecological,
responsibility between workers and employers and developmental, or equity considerations, and
the preferential use of voluntary modes in settling subject to the payment of just compensation. In
disputes, including conciliation, and shall enforce determining retention limits, the State shall respect
their mutual compliance therewith to foster industrial the right of small landowners. The State shall further
peace. provide incentives for voluntary land-sharing.
Page 101 of 384

SECTION 5, ARTICLE XIII. The State shall with the private sector, a continuing program of
recognize the right of farmers, farmworkers, and urban land reform and housing which will make
landowners, as well as cooperatives, and other available at affordable cost, decent housing and
independent farmers’ organizations to participate in basic services to underprivileged and homeless
the planning, organization, and management of the citizens in urban centers and resettlement areas. It
program, and shall provide support to agriculture shall also promote adequate employment
through appropriate technology and research, and opportunities to such citizens. In the implementation
adequate financial, production, marketing, and other of such program the State shall respect the rights of
support services. small property owners.
SECTION 7, ARTICLE XIII. The State shall protect SECTION 10, ARTICLE XIII. Urban or rural poor
the rights of subsistence fishermen, especially of dwellers shall not be evicted nor their dwelling
local communities, to the preferential use of the demolished, except in accordance with law and in a
communal marine and fishing resources, both inland just and humane manner.
and offshore. It shall provide support to such
fishermen through appropriate technology and No resettlement of urban or rural dwellers shall be
research, adequate financial, production, and undertaken without adequate consultation with them
marketing assistance, and other services. The State and the communities where they are to be relocated.
shall also protect, develop, and conserve such
resources. The protection shall extend to offshore
fishing grounds of subsistence fishermen against The constitutional requirement (under Section
foreign intrusion. Fishworkers shall receive a just 10, Article XIII) that the eviction and demolition
share from their labor in the utilization of marine and be in accordance with law and conducted in a
fishing resources. just and humane manner does not mean that
the validity or legality of the demolition or
General welfare legislation such as land reform eviction is hinged on the existence of a
laws is to be construed in favor of the resettlement area designated or earmarked by
promotion of social justice to ensure the well- the government.
being and economic security of the people.
What is meant by "in accordance with law" and
The rationale for holding that the properties of "just and humane manner" is that the person to
the Hospicio are covered by P.D. No. 27 and be evicted be accorded due process or an
Rep. Act No. 6657 is so well-grounded in law opportunity to controvert the allegation that his
that it obviates any resort to the sordid game of or her occupation or possession of the property
choosing which of the two competing involved is unlawful or against the will of the
aspirations is nobler. The body which would landowner; that should the illegal or unlawful
have unquestionable discretion in assigning occupation be proven, the occupant be
hierarchical values on the modalities by which sufficiently notified before actual eviction or
social justice may be implemented is the demolition is done; and that there be no loss of
legislature. lives, physical injuries or unnecessary loss of
or damage to properties.
Land reform affords the opportunity for the
landless to break away from the vicious cycle Precisely, the enactment of an anti-squatting
of having to perpetually rely on the kindness of law affords the alleged "squatters" the
others. By refusing to exempt properties owned opportunity to present their case before a
by charitable institutions or maintained for competent court where their rights will be
charitable purposes from agrarian reform, the amply protected and due process strictly
legislature has indicated a policy choice which observed [People v. Leachon, G.R. Nos.
the Court is bound to implement [Hospicio de 108725-26 (1998)].
San Jose de Barili Cebu City v. Department of
Agrarian Reform, G.R. No. 140847 (2005)]. To ensure that evictions and demolitions are
conducted in a just and human manner,
3. Urban Land Reform and Housing Section 28, Para. 2 of R.A. No. 7279
commands officials to comply with the
SECTION 9, ARTICLE XIII. The State shall, by law, prescribed procedure in executing eviction
and for the common good, undertake, in cooperation
and/or demolition orders:
Page 102 of 384
4. Health
a. Notice upon the affected persons or entities
at least thirty (30) days prior to the date of
SECTION 9, ARTICLE XIII. The State shall adopt an
eviction or demolition;
integrated and comprehensive approach to health
development which shall endeavor to make
b. Adequate consultations on the matter of essential goods, health and other social services
settlement with the duly designated available to all the people at affordable cost. There
representatives of the families to be resettled shall be priority for the needs of the underprivileged,
and the affected communities in the areas sick, elderly, disabled, women, and children. The
State shall endeavor to provide free medical care to
where they are to be relocated;
paupers.
c. Presence of local government officials or
their representatives during eviction or
demolition; With the State's obligation to protect and
promote the right to health of the people and
d. Proper identification of all persons taking instill health consciousness among them
part in the demolition; (Article II, Section 15, 1987 Constitution), in
order to develop a healthy and alert citizenry
e. Execution of eviction or demolition only (Article XIV Section 19(1)), it became
during regular office hours from Mondays to mandatory for the government to supervise
Fridays and during good weather, unless the and control the proliferation of drugs in the
affected families consent otherwise; market.
f. No use of heavy equipment for demolition The BFAD is the government agency vested by
except for structures that are permanent and of law to make a mandatory and authoritative
concrete materials; determination of the true therapeutic effect of
drugs because it involves technical skill which
g. Proper uniforms for members of the is within its special competence. The health of
Philippine National Police who shall occupy the the citizenry should never be compromised
first line of law enforcement and observe [People v. Estrada, G.R. No. 124461 (2000)].
proper disturbance control procedures; and
The right to health in Articles XV and II is self-
h. Adequate relocation, whether temporary or executing. [Imbong v. Ochoa, supra]
permanent: Provided, however, That in cases
of eviction and demolition pursuant to a court 5. Women
order involving underprivileged and homeless SECTION 14, ARTICLE XIII. The State shall protect
citizens, relocation shall be undertaken by the working women by providing safe and healthful
local government unit concerned and the working conditions, taking into account their
National Housing Authority with the assistance maternal functions, and such facilities and
of other government agencies within forty-five opportunities that will enhance their welfare and
(45) days from service of notice of final enable them to realize their full potential in the
service of the nation.
judgment by the court, after which period the
said order shall be executed: Provided, further,
That should relocation not be possible within In Saudia v. Rebesencio [G.R. No. 198587
the said period, financial assistance in the (2015)], Rebesencio et. al. were not granted
amount equivalent to the prevailing minimum with their maternity leaves and were
daily wage multiplied by sixty (60) days shall be subsequently terminated by Saudia due to their
extended to the affected families by the local pregnancy.
government unit concerned [Kalipunan ng
Damayang Mahihirap v. Robredo, G.R. No. The Court ruled that Saudia's policy is
200903 (2014)]. discriminatory. There is the glaringly
discriminatory nature of Saudia's policy since it
entails the termination of employment of flight
attendants who become pregnant. At the risk of
Page 103 of 384

stating the obvious, pregnancy is an C. Commission on Human
occurrence that pertains specifically to women.
Rights
Saudia's policy excludes from and restricts
employment based on no other consideration SECTION 17(1) & (3), ARTICLE XIII.
but sex. It would be the height of iniquity to view (1) There is hereby created an independent office
pregnancy as a disability so permanent and called the Commission on Human Rights.
immutable that it must entail the termination of
(3) Until this Commission is constituted, the existing
one's employment. The respondents were Presidential Committee on Human Rights shall
illegally terminated. continue to exercise its present functions and
powers.
6. Role and Rights of People’s
Organization
1. Powers
SECTION 15, ARTICLE XIII. The State shall respect a. Investigate, on its own or on complaint by
the role of independent people’s organizations to
enable the people to pursue and protect, within the
any party, all forms of human rights violations
democratic framework, their legitimate and collective involving civil and political rights;
interests and aspirations through peaceful and
lawful means. b. Adopt its operational guidelines and rules of
procedure, and cite for contempt for violations
People’s organizations are bona fide associations of thereof in accordance with the Rules of Court;
citizens with demonstrated capacity to promote the
public interest and with identifiable leadership,
membership, and structure. c. Provide appropriate legal measures for the
protection of human rights of all persons within
the Philippines, as well as Filipinos residing
7. Cultural abroad, and provide for preventive measures
SECTION 22, ARTICLE II. The State recognizes and legal aid services to the underprivileged
and promotes the rights of indigenous cultural whose human rights have been violated or
communities within the framework of national unity need protection;
and development.
d. Exercise visitorial powers over jails, prisons,
SECTION 5, ARTICLE XII. The State, subject to the
or detention facilities;
provisions of this Constitution and national
development policies and programs, shall protect
the rights of indigenous cultural communities to their e. Establish a continuing program of research,
ancestral lands to ensure their economic, social, and education, and information to enhance respect
cultural well-being. for the primacy of human rights;
SECTION 15, ARTICLE XIV. Arts and letters shall
f. Recommend to Congress effective measures
enjoy the patronage of the State. The State shall
conserve, promote, and popularize the nation’s to promote human rights and to provide for
historical and cultural heritage and resources, as compensation to victims of violations of human
well as artistic creations. rights, or their families;
SECTION 17, ARTICLE XIV. The State shall g. Monitor the Philippine Government's
recognize, respect, and protect the rights of
compliance with international treaty obligations
indigenous cultural communities to preserve and
develop their cultures, traditions, and institutions. It on human rights;
shall consider these rights in the formulation of
national plans and policies. h. Grant immunity from prosecution to any
person whose testimony or whose possession
of documents or other evidence is necessary
The National Commission on Indigenous
or convenient to determine the truth in any
People (NCIP) was established to protect and
investigation conducted by it or under its
promote the interest and well-being of ICCs/IPs
authority;
with due regard to their beliefs, customs and
institutions (R.A. 8371).
Page 104 of 384
i. Request the assistance of any department, • Majority must be members of the
bureau, office, or agency in the performance of Philippine bar
its functions;
Terms [Sec. 2(c)]:
j. Appoint its officers and employees in • The term of office is fixed at 7 years,
accordance with law; and without reappointment.
• The terms of office are not staggered.
k. Perform such other duties and functions as • Appointment to a vacancy is only for
may be provided by law [Section 18, Article the unexpired portion of the term.
XIII, 1987 Constitution].
Executive Order 163-A, which provided that the
The Constitution clearly and categorically members of the CHR serve “at the pleasure of
grants to the Commission the power to the president”, is unconstitutional as it violates
investigate all forms of human rights violations the independence of the CHR. While they may
involving civil and political rights. But it cannot be sanctioned or even removed (e.g., by the
try and decide cases (or hear and determine Ombudsman), it must be for cause. [See
causes) as courts of justice, or even quasi- Bautista v. Salonga, supra]
judicial bodies do.
Note: Members of the CHR are not
To investigate is not to adjudicate or adjudge impeachable officers, and the CHR is not
[Cariño v. CHR, G.R.No. 96681 (1991)]. among the constitutional commissions.
The Commission is not a court of justice or a

quasi-judicial body. The Commission cannot
III. EDUCATION, SCIENCE,
try and resolve cases on merits as it is not TECHNOLOGY, ARTS,
within its power to investigate. Its power to
investigate is only fact-finding. When providing
CULTURE, AND SPORTS
preventive measures, it can file a case before
a court to represent victims [EPZA v. CHR, A. Academic Freedom
G.R. No. 101476 (1992)]. 1987 Constitution
2. Composition and Qualification of Section 5, Article XIV. (1) the State shall take into
Members account regional and sectoral needs and conditions
and shall encourage local planning in the
SECTION 17(2), ARTICLE XIII. The Commission development of educational policies and programs.
shall be composed of a Chairman and four Members
who must be natural-born citizens of the Philippines (2)Academic freedom shall be enjoyed in all
and a majority of whom shall be members of the Bar. institutions of higher learning.
The term of office and other qualifications and
disabilities of the Members of the Commission shall (3) Every citizen has a right to select a profession or
be provided by law. course of study, subject to fair, reasonable, and
equitable admission and academic requirements.
The CHR’s terms and qualifications are defined (4) The State shall enhance the right of teachers to
in EO 163 series of 1987. Under this: professional advancement. Non-teaching academic
and non-academic personnel shall enjoy the
protection of the State.
Qualifications [Sec 2(a)]:
• Natural-born Filipinos (5) The State shall assign the highest budgetary
• At least 35 years of age at the time of priority to education and ensure that teaching will
appointment. attract and retain its rightful share of the best
available talents through adequate remuneration
• must not have been candidates for any
and other means of job satisfaction and fulfillment.
elective position in the elections
immediately preceding their
appointment
Page 105 of 384

Section 17, Article II. The State shall give priority to

There is a marked distinction between the
education, science and technology, arts, culture, treatment of non-stock, non-profit educational
and sports to foster patriotism and nationalism, institutions and proprietary educational
accelerate social progress, and promote total human institutions. The tax exemption granted to non-
liberation and development. stock, non-profit educational institutions is
conditioned only on the actual, direct and
Article XIV of the 1987 Constitution exclusive use of their revenues and assets for
guarantees all institutions of higher educational purposes. While tax exemptions
learning academic freedom. may also be granted to proprietary educational
institutions, these exemptions may be subject
This institutional academic freedom includes to limitations imposed by Congress [CIR v.
the right of the school or college to decide for DLSU, G.R. No. 196596 (2016)].
itself, its aims, and objectives, and how best to
attain them free from outside coercion or A simple reading of the Constitution would
interference save possibly when the overriding show that Article XIV, Section 4 (3) does not
public welfare calls for some restraint. Indeed, require that the revenues and income must
the Constitution allows merely the State's have also been earned from educational
regulation and supervision of educational activities or activities related to the purposes of
institutions, and not the deprivation of their an educational institution. The phrase "all
rights [Son v. UST, G.R. No. 211273 (2018)]. revenues" is unqualified by any reference to
the source of revenues. Thus, so long as the
The essential freedoms subsumed in the term revenues and income are used actually,
academic freedom encompasses the freedom directly and exclusively for educational
to determine for itself on academic grounds: purposes, then said revenues and income shall
1. Who may teach be exempt from taxes and duties [La Sallian
2. What may be taught Educational Innovators Foundation v. CIR,
3. How it shall be taught, and G.R. No. 202792 (2019)].
4. Who may be admitted to study [Pena v.
NLRC, G.R. No. 100629 (1996)] NATIONAL ECONOMY AND
PATRIMONY
B. Constitutional Tax
Exemptions for Certain I. REGALIAN DOCTRINE
Educational Institutions
SECTION 2, ARTICLE XII. All lands of the public
Section 4(3) & (4), Article XIV. domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy,
(3) All revenues and assets of non-stock, non-profit fisheries, forests or timber, wildlife, flora and fauna,
educational institutions used actually, directly, and and other natural resources are owned by the
exclusively for educational purposes shall be State. With the exception of agricultural lands, all
exempt from taxes and duties. Upon the dissolution other natural resources shall not be alienated.
or cessation of the corporate existence of such
institutions, their assets shall be disposed of in the
manner provided by law.
Nationality and Citizenship Requirement
Provisions
Proprietary educational institutions, including those Filipino Filipino Filipino
cooperatively owned, may likewise be entitled to Citizens, or Citizens, or Citizens, or
such exemptions, subject to the limitations provided 100% Filipino 60-40% 70-30%
by law, including restrictions on dividends and Corporations Filipino Filipino
provisions for reinvestment. Corporations Corporations
(4) Subject to conditions prescribed by law, all

Use and Coproductio Engagement
grants, endowments, donations, or contributions
used actually, directly, and exclusively for enjoyment of n, Joint in advertising
educational purposes shall be exempt from tax. marine venture, and industry
Page 106 of 384

Filipino Filipino Filipino Filipino Filipino Filipino

Citizens, or Citizens, or Citizens, or Citizens, or Citizens, or Citizens, or
100% Filipino 60-40% 70-30% 100% Filipino 60-40% 70-30%
Corporations Filipino Filipino Corporations Filipino Filipino
Corporations Corporations Corporations Corporations
wealth, Production [Section 11, Small-scale Operation of

exclusive to sharing Article utilization of public
Filipino agreements XVI] natural utilities
citizens over natural resources, [Section 11,
[Section 2, resources as may be Article XII]
par. 2, Article [Section provided by Cannot be
XII] 2(1), Article law for longer
XII] [Section period than
Agreements 2(3), Article 50 years
shall not XII] Executive
exceed a and
period of 25 managing
years officers must
renewable be Filipino
for another
25 years Note: To
stimulate
investment,
Rules on Educational the
agricultural Institutions government
lands [Section recently
[Section 3, 4(2), Article passed R.A.
Article XII] XIV] No. 11659,
(1) Citizens approved by
may lease Congress the President
only < 500 may on March 21,
ha. increase 2022 and
(2) Citizens Filipino effective on
may acquire equity April 9, 2022.
by purchase, participation. (See more
homestead below).
or grant only
< 12 ha.
General Rule: The Constitution holds that
Practice of Areas of private corporations or associations may not
professions, Investment hold alienable lands of the public domain.
save in as Congress
cases may Exception: Qualified corporations may hold
provided by prescribe land through lease, for a period not exceeding
law (Congress 25 years, renewable for not more than 25
[Section may years, and not to exceed 1000 ha. in area
14(2), Article prescribe a [Section 3, Article XII, 1987 Constitution].
XII] higher
percentage) As land is a natural resource, a qualified
[Section 10, corporation is one that complies with the 60%
Article XII] Filipino capital requirement in Art. XII, Sec. 2.
Page 107 of 384

A joint venture falls within the purview of an 1. That the foreign investors provide practically
“association” pursuant to Section 11, Article all the funds for the joint investment undertaken
XII. It must comply with the 60-40% Filipino by these Filipino businessmen and their foreign
foreign capitalization requirement [JG Summit partner;
Holdings v. CA, G.R. No. 124293 (2000)]. 2. That the foreign investors undertake to
provide practically all the technological support
What “capital” is covered – The 60% for the joint venture;
requirement applies to both the voting control 3. That the foreign investors, while being
and the beneficial ownership of the public minority stockholders, manage the company
utility. Therefore, it shall apply uniformly, and prepare all economic viability studies.
separately, and across the board to all classes
of shares, regardless of nomenclature or When there is doubt, both Control Test and
category, comprising the capital of the Grandfather Rule must be satisfied.
corporation (e.g., 60% of common stock, 60%
of preferred voting stock, and 60% of preferred Note: If the Filipino has the voting power of the
non-voting stock) [Gamboa v. Teves, G.R. No. "specific stock", or the Filipino has the
176579 (2012)]. investment power over the "specific stock", or
both, then such Filipino is the "beneficial
2. Tests of Compliance on National owner" of that "specific stock."
Requirements Being considered Filipino, that "specific stock"
is then to be counted as part of the 60% Filipino
Level 1: Direct Ownership Level ownership requirement under the Constitution.
Capital requirement refers to total voting The right to the dividends, jus fruendi - a right
stock, not total outstanding shares [Gamboa v. emanating from ownership of that "specific
Teves, G.R. No. 176579 (2011)]. stock" necessarily accrues to its Filipino
"beneficial owner" [Roy III v. Herbosa, G.R. No.
Capital restrictions apply not just to the voting 207246 (2016)].
stock, but also separately to each class of
shares [Gamboa v. Teves, G.R. No. 176579 3. Filipino First
(2012)]. SECTION 10, PARA. 2-3, ARTICLE XII. In the
grant of rights, privileges, and concessions
Level 2: Indirect Ownership Level covering the national economy and patrimony, the
State shall give preference to qualified Filipinos.
Based on Narra Nickel Mining and Dev’t Corp.
The State shall regulate and exercise authority over
v. Redmont Consolidated Mines Corp. [G.R.
foreign investments within its national jurisdiction
No. 195580 (2014)]: and in accordance with its national goals and
priorities.
General Rule – Control Test
Shares belonging to juridical entities at least
60% of the capital of which is owned by Filipino Such provision is per se enforceable and
citizens shall be considered as of Philippine requires no further guidelines or implementing
nationality. rules or laws for its operation [Manila Prince
Hotel v. GSIS, G.R. No. 122156 (1997)].
Exception – Grandfather Rule
The combined totals in the Investing The Constitution does not impose a policy of
Corporation and the Investee Corporation must Filipino monopoly of the economic
be traced (i.e., “grandfathered”) to determine environment. It does not rule out the entry of
the total percentage of Filipino ownership. foreign investments, goods, and services.
While it does not encourage their unlimited
Indicators of Doubt [Narra Nickel Mining and entry into the country, it does not prohibit them
Dev’t Corp. v. Redmont Consolidated Mines either.
Corp., G.R. No. 195580 (2015)]
Page 108 of 384

In fact, it allows an exchange on the basis of While the newly amended law may attract
equality and reciprocity, frowning only on critically-needed investment, some may
foreign competition that is unfair [Tañada v. consider the law’s liberality as going against
Angara, G.R. No. 118295 (1997)]. the conservation of national patrimony.
Therefore, to ensure a Filipino-controlled
SECTION 12, ARTICLE XII. The State shall promote national economy, below are 5 safeguards:
the preferential use of Filipino labor, domestic
materials and locally produced goods, and adopt 1. The President has the power to
measures that help make them competitive. suspend or prohibit any investment in
public services in the interest of
4. R.A. No. 11659 R.A. No. 11659 amended national security upon the review,
the 86-year-old Public Service Act (C.A. No. evaluation, and recommendation of the
146). relevant government agencies;
a. Public Utility Definition [Section 13(d), 2. Restrictions are imposed on foreign

C.A. No. 146, as amended by R.A. No. state-owned enterprises (SOEs)
11659] owning capital in a public service
Public utility refers to a public service that classified as public utility or critical
operates, manages, or controls, for public use, infrastructure;
any of the following:
1. Distribution of Electricity; 3. Information security clauses ensure
2. Transmission of Electricity; that entities engaged in the
3. Petroleum and Petroleum Products telecommunications business meet
Pipeline Transmission Systems; relevant ISO standards;
4. Water Pipeline Distribution Systems
and Wastewater Pipeline Systems, 4. The reciprocity clause prevents foreign
including sewerage pipeline systems; nationals from owning more than 50%
5. Seaports; and of capital in the operation and
6. Public Utility Vehicles. management of critical infrastructure
unless the foreign nationals’ home
All concessionaires, joint ventures, and similar countries accord reciprocity to
entities that wholly operate, manage, or Philippine nationals; and
control, for public use, the sectors above are
public utilities. 5. The performance audit provision
mandates an independent evaluation
The 60-40 restriction is now limited to entities to monitor the cost, the quality of
classified as a public utility under R.A. No. services provided to the public, and the
11659 in accordance with Section 11, Article ability of the public service provider to
XII of the 1987 Constitution. immediately and adequately respond
to emergency cases.
These key sectors are considered natural
monopolies where a single firm can effectively
serve the market at a lower cost than two or II. PUBLIC TRUST
more firms. DOCTRINE
b. Foreign-Ownership of Public Services (Maynilad Water Services, Inc. v. Secretary of
Key industries such as telecommunications, the Department of Environment and Natural
expressways, airports, and shipping have been Resources, G.R. Nos. 202897, 206823 &
removed from the category of public utility. 207969, [August 6, 2019])
Under the new law, these industries may now
be 100% foreign-owned. Public Trust as a Continuing Supervision
Over the Taking and Use of Natural
c. Safeguards Resources
Page 109 of 384
Essence of Public Trust Doctrine
The doctrine speaks of an imposed duty upon In essence, "[t]he public trust doctrine is based
the State and its representative of continuing on the notion that private individuals cannot
supervision over the taking and use of fully own trust resources but can only hold them
appropriated water. Thus, "[p]arties who subject to a servitude on behalf of the public."
acquired rights in trust property [only hold]
these rights subject to the trust and, therefore, "States can accomplish this goal more
could assert no vested right to use those rights efficiently through statutory regulation" which
in a manner harmful to the trust." was essentially done through the legislation of
the Clean Water Act, and the urgency and
The doctrine further holds that certain natural significance of which is now fortified by the
resources belong to all and cannot be privately courts under the Public Trust Doctrine as
owned or controlled because of their inherent clamored for by the circumstances of this case.
importance to each individual and society as a
whole.
III. EXPLORATION,
A clear declaration of public ownership, the
doctrine reaffirms the superiority of public
DEVELOPMENT, AND
rights over private rights for critical resources. UTILIZATION OF NATURAL
It impresses upon states the affirmative duties
of a trustee to manage these natural resources
RESOURCES
for the benefit of present and future
generations and embodies key principles of 1. La Bugal-B’laan Tribal Assn. v.
environmental protection: stewardship, Ramos [G.R. No. 127882, (2004)]
communal responsibility, and sustainability.
The State, being the owner of the natural
Duty of State as Trustee of Natural resources, is accorded the primary power and
Resources responsibility in the exploration, development
and utilization thereof.
In this framework, a relationship is formed —
"the [s]tate is the trustee, which manages As such it may undertake these activities
specific natural resources — the trust principal through four modes:
— for the trust principal — for the benefit of the
current and future generations — the Directly. The State may directly undertake
beneficiaries." such activities
"[T]he [S]tate has an affirmative duty to take the Co-Production/JV/Production-Sharing. The

public trust into account in the planning and State may enter co-production, joint venture or
allocation of water resources, and to protect production-sharing agreements with Filipino
public trust uses whenever feasible." citizens or qualified corporations
Public as the Beneficial Owner of Trust By Law. Congress may, by law, allow small-
Resources scale utilization of natural resources by Filipino
These exigencies forced the public trust citizens; or
doctrine to evolve from a mere principle to a
resource management term and tool flexible Presidential Agreements. For the large- scale
enough to adapt to changing social priorities exploration, development and utilization of
and address the correlative and consequent minerals, petroleum and other mineral oils, the
dangers thereof. The public is regarded as President may enter into agreements with
the beneficial owner of trust resources, and foreign-owned corporations involving technical
courts can enforce the public trust doctrine or financial assistance subject to the following
even against the government itself. limitations:
Page 110 of 384

As to Parties. Only the President, on
FTAA Service
behalf of the State, may enter into
Contract
these agreements, and only with
corporations. only with a “foreign person
corporations or entity”
As to Size of the Activities. Only
large-scale exploration, development Size of Only large- Contractor
and utilization is allowed, i.e., very Activities scale provides
capital-intensive activities exploration, all necessary
development services and
As to intent. The natural resources , and technology and
subject of the activities is restricted to utilization the requisite
minerals, petroleum and other mineral financing,
oils, the intent being to limit service performs the
contracts to those areas where Filipino exploration work
capital may not be sufficient. obligations, and
assumes all
FTAA Requirements exploration risks
i. Consistency with the Provisions of Statute Natural Minerals, Virtually the

is necessary. The FTAA must be in Sources petroleum, entire range of
accordance with the terms and conditions Covered and other the country’s
provided by law. mineral oils natural resources
ii. The FTAA must be based on real Scope of Involving Contractor

contributions to economic growth and general Agreement either provides financial
welfare of the country. technical or or technical
financial resources,
iii. The FTAA must contain rudimentary assistance undertakes the
stipulations for the promotions of the exploitation or
development and use of local scientific and production of a
technical resources. given resource,
or directly
As to the Notification Requirement. The manages the
President shall notify Congress of every FTAA productive
entered within 30 days from its execution. enterprise,
operations of the
Scope of the FTAA. Only for agreements exploration and
involving either financial or technical exploitation of
assistance and does not include “service the resources or
contracts” and “management or other forms of the disposition of
assistance” [La Bugal-B’Laan Tribal Assn. v. marketing or
Ramos, G.R. No. 127882 (2004)]. resources
2. FTAA v. Service Contract 3. Service Contracts Not Prohibited
FTAA Service The following are valid:

Contract a. Financial and Technical Assistance
Agreements (FTAA): even supposing
Only the A Filipino citizen, they are service contracts, these are
Who may President (in corporation or not prohibited agreements in the
Participate behalf of the association with contemplation of the Constitution
State), and
Page 111 of 384
b. Philippine Mining Law (R.A. No. 7942) 3. Mineral Lands
4. National Park [Section 3, Article XII,
c. Its Implementing Rules and 1987 Constitution]
Regulations, insofar as they relate to
financial and technical agreements Note: The classification of public lands is a
function of the executive branch, specifically
The Constitution should be construed to grant the Director of the Land Management Bureau
the President and Congress sufficient (formerly Director of Lands). The decision of
discretion and reasonable leeway to enable the Director, when approved by the Secretary
them to attract foreign investments and of the DENR, as to questions of fact, is
expertise, as well as to secure for our people conclusive upon the courts [Republic v.
and our posterity the blessings of prosperity Imperial, G.R. No. 130906 (1999)].
and peace.
It is not unconstitutional to allow a wide degree Alienable lands of the public domain shall be
of discretion to the Chief Executive, given the limited to agricultural lands [Section 3, Article
nature and complexity of such agreements, the XII, 1987 Constitution].
humongous amounts of capital and financing
required for large-scale mining operations, the To prove that the land subject of an application
complicated technology needed, and the for registration is alienable, an applicant must
intricacies of international trade, coupled with conclusively establish the existence of a
the State’s need to maintain flexibility in its positive act of the government such as a
dealings, to preserve and enhance our presidential proclamation or an executive order
country’s competitiveness in world markets [La or a legislative act or statute [Republic v.
Bugal-B’laan Tribal Assn. v. Ramos, supra]. Candymaker, Inc., G.R. No. 163766 (2006)].
Requisites for a Valid Service Contract Foreshore land is that part of the land which is
under the Constitution between the high and low water, and left dry by
the flux and reflux of the tides. It is part of the
a. A general law that will set standards or alienable land of the public domain and may be
uniform terms, conditions, and disposed of only by lease and not otherwise
requirements [Republic v. Imperial, supra].
b. The president shall be the signatory for B. Private Lands

the government
General Rule: No private lands shall be
c. Within thirty (30) days of the executed transferred or conveyed except to individuals,
agreement, the President shall report it corporations, or associations qualified to
to Congress acquire or hold lands of the public domain
[Section 7, Article XII, 1987 Constitution].
Exceptions:
IV. ACQUISITION, 1. Hereditary succession [Section 7,
OWNERSHIP, AND Article XII, 1987 Constitution]
TRANSFER OF PUBLICAND 2. A natural-born citizen of the Philippines
PRIVATE LANDS who has lost his Philippine citizenship
may be a transferee of private lands,
subject to limitations provided by law
A. Lands of Public Domain [Section 8, Article XII, 1987
Constitution].
Lands of the Public Domain are classified
into: The primary purpose of the
1. Agricultural Lands constitutional prohibition disqualifying
2. Forest or Timber Lands aliens from acquiring lands of the
Page 112 of 384
public domain and private lands is the British husband. Being an alien, the husband is
conservation of the national economy absolutely prohibited from acquiring private
and patrimony [Muller v. Muller, G.R. and public lands in the Philippines even if he
149615 (2006)]. claims that he provided funds for such
acquisition.
Consequence of sale to non-citizens
Any sale or transfer in violation of the
prohibition is null and void [Ong Ching Po v. VI. CONCEPT OF
CA, G.R. Nos. 113472-73 (1994)].
ANCESTRAL DOMAIN
When a disqualified foreigner later sells it to a (INCLUDING ANCESTRAL
qualified owner (e.g. Filipino citizen), the defect
is cured. The qualified buyer owns the land
LANDS)
[Godinez v. Pak Luen, G.R. No L-36731
(1983)]. SECTION 5, ARTICLE XII. The State, subject to the
provisions of this Constitution and national
Can a former owner file an action to recover development policies and programs, shall protect
the rights of indigenous cultural communities to their
the property? ancestral lands to ensure their economic, social, and
cultural well-being.
Yes. The Court in Philippine Banking Corp. v.
Lui She [G.R. No. L-17587 (1967)] provided an The Congress may provide for the applicability of
exception to the application of the principle of customary laws governing property rights or
in pari delicto. Thus, the action will lie. relations in determining the ownership and extent of
ancestral domain.
However, land sold to an alien which was later

transferred to a Filipino citizen OR when the 1. Ancestral domains
alien later becomes a Filipino citizen can no
longer be recovered by the vendor, because Ancestral domain – an all-embracing concept
there is no longer any public policy involved which refers to lands, inland waters, coastal
[Sarsosa vda. de Barsobia v. Cuenco, G.R. No. areas, and natural resources therein and
L-33048 (1982); Republic v. IAC, G.R. No. includes ancestral lands, forests, pasture,
74170 (1989)]. residential, agricultural, and other lands
individually owned whether alienable or not,
Foreigners are allowed to own condominium hunting grounds, burial grounds, worship
units and shares in condominium corporations areas, bodies of water and other natural
up to not more than 40% of the total and resources. They include lands which longer be
outstanding capital stock of a Filipino-owned or exclusively occupied by indigenous cultural
controlled corporation. Under this set up, the communities but to which they have
ownership of the land is legally separated from traditionally had access for their subsistence
the unit itself. and traditional activities.
The land is owned by a Condominium Ancestral land – a narrower concept. It refers

Corporation and the unit owner is simply a to those held under the same conditions as
member in this Condominium Corporation. ancestral domain but limited to lands that are
Provided that 60% of the members of this not merely occupied and possessed but are
Condominium Corporation are Filipinos, the also utilized by cultural communities under the
remaining members can be foreigners [Hulst v. claim of individual or traditional group
PR Builders, G.R. No. 156364 (2008)]. ownership. These include but are not limited to
residential lots, rice terraces or paddies, private
In Matthews v. Taylor [G.R. No. 164584 forests, farms and tree lots.
(2009)], the Court upheld the validity of an
Agreement of Lease of a parcel of land a 2. Ancestral land
Filipino wife entered, without the consent of her
Page 113 of 384

The ancestral lands referred to in Section 5 of (3) the law contravenes the provision
the Constitution include both those outside and which says that all natural resources
those inside autonomous regions. For the belong to the state.
purpose of protecting indigenous cultural
communities, the provision in effect authorizes
Congress to prescribe how priorities are to be VII. PRACTICE OF
determined in case of conflict between civil law
and customary law.
PROFESSIONS
The law passed by Congress. R.A. No. 8371, 1987 Constitution
was assailed as unconstitutional on the ground
Section 14, Article XII. The practice of all
that it deprived the State of its ownership over
professions in the Philippines shall be limited to
lands of the public domain and the natural Filipino citizens, save in the case prescribed by law.
resources in them. The vote of the Supreme
Court on the subject, in Cruz v. Secretary was
equally divided, 7-7 and therefore meant that Like the legal profession, the practice of
validity was upheld. medicine is not a right, but a privilege burdened
with conditions as it directly involves the very
The opinion defending constitutionality held the lives of the people. A fortiori, this power
following: includes the power of Congress to prescribe
the qualifications for the practice of professions
(1) Ancestral domain and ancestral lands are or trades which affect the public welfare, the
not part of lands of the public domain. They are public health, the public morals, and the public
private and belong to indigenous people. safety; and to regulate or control such
Section 5 commands the State to protect the professions or trades, even to the point of
rights of indigenous people. Carino v. Insular revoking such right altogether [Imbong v.
Government recognized native title held by Ochoa, supra].
Filipinos from time immemorial and excluded
them from the coverage of jura regalia. The Philippines allows Japanese nationals to
practice the medical profession, provided he
(2) The right of ownership granted does not has taken and passed the medical board
include natural resources. The right to examination and upon submission of a proof of
negotiate terms and conditions over natural reciprocity between Japan and the Philippines
resources covers only exploration to ensure in admitting foreigners into the practice of
environmental protection. It is not a grant of medicine. It is enough that the laws in the
exploration rights. (3) The limited right of foreign country permit a Filipino to get license
management refers to utilization as expressly and practice therein.
allowed in Section 2, Article XII. (4) What is
given is priority right, not exclusive right. It does However, the power to regulate the exercise of
not preclude the State from entering into co- a profession or pursuit of an occupation cannot
production, joint venture, or production sharing be exercised by the State or its agents in an
agreements with private entities. arbitrary, despotic or oppressive manner
[Board of Medicine v. Ota, G.R. No. 166097
The opinion assailing the constitutionality of the (2008)].
law held the following:
(1) the law amounts to an abdication of

state authority over a significant area of
the country's patrimony;
(2) it relinquishes full control of natural
resources in favor of indigenous
people;
Page 114 of 384

CONSTITUTIONAL LAW 2
INTERNATIONAL LAW
Art. III contains the chief protection for human
rights, but the body of the Constitution
CONSTITUTIONAL guarantees other rights as well.
LAW 2 1. Civil Rights - Rights that belong to an

individual by virtue of his citizenship in a
state or community (e.g., rights to property,
I. BILL OF RIGHTS marriage, freedom to contract, equal
protection, etc.).
A. Private Acts and the Bill of 2. Political Rights - Rights that pertain to an
Rights individual’s citizenship vis-à-vis the
management of the government (e.g., right
The Bill of Rights, in General of suffrage, right to petition government for
It is a declaration and enumeration of a redress, right to hold public office, etc.).
person’s fundamental civil and political rights. 3. Social and Economic Rights – Rights
It also imposes safeguards against violations which are intended to insure the well-being
by the government, by individuals, or by groups and economic security of the individual.
of individuals. 4. Rights of the Accused – Civil rights
intended for the protection of a person
The Bill of Rights governs the relationship accused of any crime.
between the individual and the state. Its
concern is not the relation between individuals, Application to Private Individuals
between a private individual and other The Bill of Rights cannot be invoked against
individuals. What the Bill of Rights does is to acts of private individuals. The equal protection
declare some forbidden zones in the private erects no shield against private conduct,
sphere inaccessible to any power holder however discriminatory or wrongful [Yrasuegui
[People v. Marti, G.R. No. 81561 (1991)]. v. PAL, G.R. No. 168081 (2008)].
In a democracy, the preservation and Constitutional protection applies to government

enhancement of the dignity and worth of the action and is meant as a restraint against
human personality is the central core as well as sovereign authority. The Bill of Rights is not
the cardinal article of faith of our civilization. meant to be invoked against private
The inviolable character of man as an individuals, and governs relations between
individual must be “protected to the largest individuals and the state [People v. Marti,
possible extent in his thoughts and in his beliefs supra].
as the citadel of his person.”
Private Acts
The Bill of Rights is designed to preserve the The principle that the Bill of Rights applies only
ideals of liberty, equality and security “against to actions taken by state officials does not
the assaults of opportunism, the expediency of necessarily mean that a private individual
the passing hour, the erosion of small cannot violate the liberty of another. Violation
encroachments, and the scorn and derision of of the Bill of Rights precisely as a constitutional
those who have no patience with general guarantee can be done only by public officials.
principles [Philippine Blooming Mills But almost all these liberties are also
Employment Organization v. Philippine guaranteed by Art. 32 of the Civil Code, thus
Blooming Mills, Co., G.R. No. L-31195 (1973)]. making private violations actionable even if the
violation does not have a constitutional
It is self-executing. It is recognized that consequence [Bernas, the 1987 Constitution of
legislation is unnecessary to enable courts to the Republic of the Philippines: A Commentary,
effectuate constitutional provisions 2009].
guaranteeing the fundamental rights of life,
liberty and the protection of property [Gamboa
v. Teves, G.R. No. 176579 (2011)].
Page 116 of 384
B. Due Process Scope
Universal in application to all persons without
regard to any difference in race, color or
Article III, Section 1. No person shall be deprived
nationality. Artificial persons are covered by the
of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection protection but only insofar as their property is
of the laws. concerned [Smith Bell and Co. v. Natividad,
G.R. No. 15574 (1919)].
Article XIII, Section 1. The Congress shall give The guarantee extends to aliens and includes
highest priority to the enactment of measures that the means of livelihood [Villegas v. Hiu Chiong,
protect and enhance the right of all the people to G.R. No. L-29646 (1978)].
human dignity, reduce social, economic, and
political inequalities by equitably diffusing wealth
and political power for the common good. 1. Procedural and Substantive
Definition Substantive Procedural

Due process furnishes a standard to which the Due Process Due Process
governmental action should conform in order
that deprivation of life, liberty or property, in Nature Requires that Refers to the
each appropriate case, be valid [Ermita-Malate the law must method or
Hotel and Motel Operators Association v. City be fair, manner by
Mayor of Manila, G.R. No. L-24693 (1967)]. reasonable, which a law is
just. enforced.
Constitutional Due Statutory Due
Process Process Essence Fairness and Notice and
justice hearing
Protects the Found in the Who Lawmakers The

individual from the statutes (e.g., Labor should adjudicating
government and Code and comply body or officer
assures him of his Implementing
rights in criminal, Rules) and protects a. Substantive Due Process
civil, or employees from
administrative being unjustly
Requisites of Substantive Due Process
proceedings. terminated without
Due process of law simply means that:
just cause after
1. There shall be a law prescribed in harmony
notice and hearing.
with the general powers of the legislative
Lack or deficiency in Lack or deficiency in department of the Government;
constitutional statutory procedural 2. This law shall be reasonable in its
procedural due due process does operation;
process voids the NOT void the 3. It shall be enforced according to the regular
decision made by the decision of the methods of procedure prescribed;
State. corporation or 4. It shall be applicable alike to all the citizens
company, if the of the state or to all of a class [Rubi v.
dismissal is found to Provincial Board of Mindoro, G.R. No.
have been made 14078 (1919)].
with just cause. It
would only give rise Substantive due process requires that the
to claims for means employed in depriving persons of
nominal damages. property must not be unduly oppressive [SJS v.
Atienza Jr., G.R. No. 156052 (2008)].
[Agabon v. NLRC, G.R. No. 158693 (2004)].
Page 117 of 384

Expanded Test of Substantive Due nature of the property involved or the urgency
Process of the need to protect the general welfare from
1. Is there public interest, public purpose, a clear and present danger.
public welfare involved?
2. Is the act reasonably necessary for the Instances when the need for expeditious
accomplishment of the legislature’s action will justify omission of these
purpose? requisites, (e.g., summary abatement of a
3. Is it not unreasonable, arbitrary, or nuisance per se like a mad dog on the loose,
oppressive? which may be killed on sight) because of the
4. Is there sufficient foundation or reason in immediate danger it poses to the safety and
connection with the manner involved or has lives of the people.
there been capricious use of legislative
power? 2. Void-for-Vagueness
5. Can the aims conceived be achieved by
the means used, or is it not merely an Facial challenge is allowed because of
unjustified interference [Ichong v. possible chilling effect upon protected speech.
Hernandez, G.R. No. L-7995 (1957)]?
OVERBREADTH VOID FOR
Lawful Subject
VAGUENESS
The interests of the public in general (as
distinguished from those of a particular class) Both are unconstitutional.
require the intervention of the State; and
A law is A law is
Lawful Means unconstitutional unconstitutional
The means employed are reasonably because a because it fails to
necessary for the accomplishment of the government purpose accord persons fair
purpose and not unduly oppressive on may not be achieved notice of the conduct
individuals. by means which to avoid. Law
sweep unnecessarily enforcers have
Publication of Laws broadly and thereby unbridled discretion
Before a person may be bound by law, he must invade the area of in carrying out its
be officially and specifically informed of its protected freedoms. provisions.
contents. For the publication requirement,
“laws” refer to all statutes, including those of An overbroad law A vague law must
local application and private laws. In other need not. lack clarity and
words, the publication of laws “of a public precision.
nature” or “of general applicability” is mandated
by law. Basis for overbroad Basis for void for
law is the means vagueness is the
This does not cover internal regulations issued sweep unnecessarily lack of
by administrative agencies, which are broadly. comprehensible
governed by the Local Government Code. standard.
Publication must be full, or there is none at all
Vague laws violate Overbroad laws
[Tañada v. Tuvera, G.R. No. L-63915 (1986)].
due process. invade protected
freedoms.
b. Procedural Due Process
General Rule: The minimum requirements of Both the void for vagueness doctrine and the
due process are notice and hearing. overbreadth doctrine are subject to the same
principles. For one, it is also an analytical tool
Exceptions: However, notice and hearing are for a “facial” challenge of statutes in free
not required in every case, for there are an speech cases. Like overbreadth, it is said that
admitted number of exceptions in view of the
Page 118 of 384

a litigant may challenge a statute on its face property which is the subject of proceeding.
only if it is vague in all its possible applications.
Service of summons is not only required to
Facial Invalidity Test give the court jurisdiction over the person
Whether the language conveys a sufficiently of the defendant but also to afford the latter
definite warning as to the proscribed conduct the opportunity to be heard on the claim
when measured by common understanding made against him. Thus, compliance with
and practice [Estrada v. Sandiganbayan, G.R. the rules regarding the service of summons
No. 148560 (2001)]. is as much an issue of due process as of
jurisdiction [Samartino v. Raon, G.R. No.
Applicability to Penal Statutes 131482 (2002)].
General rule: Void for vagueness and 3. The defendant must be given an
overbreadth are inapplicable to penal statutes. opportunity to be heard; and
4. Judgment must be rendered upon lawful
Rationale: Statutes have a general in terrorem hearing.
effect, which is to discourage citizens from 5. No decision shall be rendered by any court
committing the prohibited acts. without expressing therein clearly and
distinctly the facts and the law on which it
Exception: is based. No petition for review or motion
1. The statute is challenged as applied; or for reconsideration of a decision of the
2. The statute involves free speech. court shall be refused due course or denied
without stating the legal basis therefor [Art.
Rationale: Statute may be facially challenged VIII, Sec. 14].
in order to counter the “chilling effect” of the
same [Disini v. Sec. of Justice, G.R. No. Note: The SC reiterated that the right to appeal
203335 (2014)]. is not a natural right nor part of due process
[Alba v. Nitorreda, G.R. No. 120223 (1996)].
As-Applied vs. Facial Challenges
A facial invalidation is an examination of the In Criminal Proceedings
entire law, pinpointing its flaws and defects, not
only on the basis of its actual operation to the Article III, Section 14.
parties, but also on the assumption or (1) No person shall be held to answer for a criminal
prediction that its very existence may cause offense without due process of law.
others not before the court to refrain from
constitutionally protected speech or activities. Requisites of Criminal Due Process
On the other hand, an as-applied challenge [Art. III, Sec. 14(2)]
considers only extant facts affecting real
1. Accused is heard by a court of competent
litigants [Disini v. Sec. of Justice, supra]. jurisdiction;
2. Accused is proceeded against under the
3. Judicial and Administrative Due orderly process of law;
Process 3. Accused is given notice and opportunity to
be heard;
a. Due Process in Judicial 4. Judgment rendered is within the authority
Proceedings of a constitutional law [Mejia v. Pamaran,
G.R. No. 56741-42 (1988)].
Requisites of Due Process in Civil
Proceedings [Banco Español v. Palanca, b. Due Process in Administrative
G.R. No. L-11390 (1918)]: Proceedings
1. There must be a court or tribunal clothed
with judicial power to hear and determine Seven Cardinal Rights in Administrative
the matter before it. Proceedings [Ang Tibay v. CIR, G.R. No.
2. Jurisdiction must be lawfully acquired over 46496 (1940)]:
the person of the defendant or over
Page 119 of 384
1. The right to a hearing, which includes the disclosed to the parties can the latter be
right of the party interested or affected to protected in their right to know and meet
present his own case and submit evidence the case against them.
in support thereof. 6. The body must act on its or his own
2. Not only must the party be given an independent consideration of the law and
opportunity to present his case and to facts of the controversy, and not simply
adduce evidence tending to establish the accept the views of a subordinate in
rights which he asserts, but the tribunal arriving at a decision.
MUST consider the evidence presented. 7. The body must render its decision in such
3. The decision of the tribunal should be manner that the parties to the proceeding
supported by something. Must be based on can know the various issues involved, and
evidence. A decision with absolutely the reasons for the decisions rendered.
nothing to support it is a nullity [...].
4. The evidence supporting a finding or Note: The constitutional requirement that the
conclusion must be “substantial” (such judgment be in writing and promulgated is NOT
relevant evidence as a reasonable mind APPLICABLE to administrative decisions.
might accept as adequate to support a
conclusion). This does not include Ang Tibay is used as a basis for stating that
uncorroborated hearsay or rumors. quasi-judicial tribunals should render its
5. The decision must be rendered on the decision in such a manner that parties to the
evidence presented at the hearing, or at proceeding know the various issues involved
least contained in the record and disclosed and reasons for the decision [Serrano v. PSC,
to the parties affected. Only by confining G.R. No. L-24165 (1968)
the administrative tribunal to the evidence
Labor Cases and Academic Disciplinary Proceedings

Labor Cases Academic Disciplinary Proceedings
Twin requirements which constitute the essential 1. The students must be informed in writing of
elements of due process [Perez v. Philippine the nature and cause of any accusation
Telegraph and Telephone Company, G.R. No. against them;
152048, (2009)]: 2. They shall have the right to answer the
charges against them, with the assistance of
Notice counsel, if desired;
The employer must furnish the employee with 3. They shall be informed of the evidence
two written notices before the termination of against them;
employment can be effected: 4. They shall have the right to adduce evidence
1. The first is to apprise the employee of the in their own behalf;
particular acts or omissions for which his 5. The evidence must be duly considered by
dismissal is sought; and the investigating committee or official
2. The second informs the employee of the designated by the school authorities to hear
employer’s decision to dismiss him. and decide the case [Non v. Dames, G.R.
No. 89317 (1990)].
Hearing
Due process of law simply means giving The proceedings may be summary. Cross-
opportunity to be heard before judgment is examination is not an essential part of the
rendered. This “procedural due process” investigation or hearing. The required proof in a
requirement is not constitutional but merely student disciplinary action is substantial
statutory, hence, a violation of such requirement evidence. What is crucial is that official action
does not render the dismissal void. The must meet minimum standards of fairness to the
employer must be sanctioned for non- individual, which generally encompass the right
compliance with the requirements of, or for of adequate notice and a meaningful opportunity
to be heard [Id.].
Page 120 of 384
Labor Cases Academic Disciplinary Proceedings
failure to observe, due process [Serrano v.

NLRC, G.R. No. 117040. January 27, 2000].
C. Equal Protection Examples:

In Central Bank Employees Association v.
Concept BSP, the challenged proviso operates on the
All persons or things similarly situated must be basis of the salary grade or officer-employee
similarly treated both as to rights conferred and status. It is akin to a distinction based on
responsibilities imposed [Ichong v. Hernandez, economic class and status, with the higher
supra]. grades as recipients of a benefit specifically
withheld from the lower grades. Officers of the
Scope BSP now receive higher compensation
Natural and juridical persons. However, the packages that are competitive with the
equal protection clause extends to artificial industry, while the poorer, low-salaried
persons only insofar as their property is employees are limited to the rates prescribed
concerned. by the SSL.
Considering that majority, if not all, the rank-

1. Requisites for Valid Classification
and-file employees consist of people whose
[SGEC] status and rank in life are less and limited,
especially in terms of job marketability, it is they
a. It must rest on substantial distinctions or — and not the officers — who have the real
must make for real differences; economic and financial need for the adjustment
b. It must be germane to the purpose of the [Central Bank Employees Association v. BSP,
law; G.R. No. 148208 (2004)].
c. It must not be limited to existing conditions
only; The Supreme Court upheld the constitutionality
d. It must apply equally to all members of the of an ordinance which imposed a curfew upon
same class. minors in Quezon City. In evaluating the
ordinance, the Court resorted to the strict
2. Standards of Judicial Review scrutiny test and ruled that under our legal
system’s own recognition of a minor’s inherent
a. Rational Basis Test lack of full rational capacity, and balancing the
same against the State’s compelling interest to
The classification should bear a reasonable promote juvenile crime, it finds that the curfew
relation to the government’s purpose or imposed is reasonably justified with its
legitimate state interest. narrowly drawn exceptions and hence, not
constitutionally infirm [SPARK v. Quezon City,
b. Strict Scrutiny Test G.R. No. 225442 (2017)].
Applies to legislative classifications which c. Intermediate Scrutiny Test

impermissibly interfere with the exercise of a
fundamental right, or operates to the peculiar Under the Intermediate Scrutiny Test, the
disadvantage of a suspect class. Such government must show that the challenged
classifications are presumed unconstitutional, classification serves “important governmental
and the government has the burden to prove objectives and must be substantially related to
that the classification is necessary to achieve a the achievement of those objectives” [Central
compelling state interest, and that it is the Bank Employees Association, Inc. v. BSP,
least restrictive means to protect such supra].
interest [Serrano v. Gallant Maritime, G.R. No.
167614 (2009)].
Page 121 of 384
Suspect Classes circumstances involved [Valmonte v. General
Refers to classification that violates a De Villa, G.R. No. 83988 (1989)].
fundamental right, or prejudices a person
accorded special protection by the Constitution 1. Requisites of a Valid Warrant
[Serrano v. Gallant Maritime, supra]. Suspect
classes may therefore include an income- a. Existence of probable cause;
based classification. b. Probable cause must be personally
determined by the judge;
3. Examples of Valid Classification c. After personal examination under oath
or affirmation of the complainant and
a. Filipino Female Domestics Working the witnesses he may produce;
Abroad d. On the basis of their personal
knowledge of the facts they are
They are a class by themselves because of the testifying to;
special risks to which their class was exposed e. There must be particularity in the
[Phil. Association of Service Exporters v. description of the places to searched
Drilon, G.R. No. 81958 (1988)]. and the persons or things to be seized;
and
b. Land-Based v. Sea-based Filipino f. The warrant must refer to one specific
Overseas Workers offense (Requisite added by
jurisprudence).
There is dissimilarity as to work environment,
General Rule: The warrant must indicate the
safety, danger to life and limb, and accessibility
to social, civil and spiritual activities particular place to be searched and person or
thing to be seized.
[Conference of Maritime Manning Agencies v.
POEA, G.R. No. 114714 (1995)].
Exception: If the nature of the goods to be
seized cannot be particularly determined:
c. Office of the Ombudsman
• The nature of the thing is general in
description;
Allowing the Ombudsman to start an
• The thing is not required of a very
investigation based on an anonymous letter
technical description [Alvarez v. CFI of
does not violate the equal protection clause.
Tayabas, G.R. No. 45358 (1937)].
The Office of the Ombudsman is different from
other investigatory and prosecutory agencies
The search warrant issued to search
of government because those subject to its
petitioner’s compound for unlicensed firearms
jurisdiction are public officials who, through
was held invalid for failing to describe the place
official pressure and influence, can quash,
with particularity, considering that the
delay or dismiss investigations against them
compound was made up of 200 buildings, 15
[Almonte v. Vasquez, G.R. No. 95367 (1995)].
plants, 84 staff houses, one airship, etc. spread
out over 255 hectares [PICOP v. Asuncion,
D. Arrests, Searches, and G.R. No. 122092 (1999)].
Seizures
The description of the property to be seized
The constitutional right against unreasonable need not be technically accurate or precise. Its
searches and seizures is a personal right nature will vary according to whether the
invocable only by those whose rights have identity of the property is a matter of concern.
been infringed or threatened to be infringed. The description is required to be specific only
insofar as the circumstances will allow [Kho v.
What constitutes a reasonable or Judge Makalintal, G.R. Nos. 94902-06 (1999)].
unreasonable search and seizure in any
particular case is purely a judicial question, An error in the name of the person in the search
determinable from a consideration of the warrant does not invalidate the warrant, as long
Page 122 of 384

as it contains a description personae [including Exception: General descriptions will not
additional descriptions] that will enable the invalidate the entire warrant if other items have
officer to identify the accused without difficulty been particularly described [Uy v. BIR, G.R.
[Nala v. Barroso, Jr., G.R. No. 153087 (2003)]. No. 129651 (2000)].
A John Doe search warrant is valid. There is Effect of a Void Arrest Warrant
nothing to prevent issue and service of warrant A void arrest warrant would render the arrest
against a party whose name is unknown invalid and illegal.
[People v. Veloso, G.R. No. 23051 (1925)].
The illegality of an arrest does not bar the state
General Warrant from the prosecution of the accused. Despite
Refers to a warrant that: illegality of both search and arrest thus
1. Does not describe with particularity the inadmissibility of evidence acquired, guilt may
things subject of the search and seizure; or still be established through eyewitness
2. Where probable cause has not been testimony [People v. Manlulu, G.R. No. 102140
properly established. (1994)].
Effects of a General Warrant
It is a void warrant [Nolasco v. Paño, G.R. No. a. Arrest Warrant
L-69803 (1985)]. A written document issued by a court ordering
any peace officer to bring the person before the
Any evidence obtained in violation [of this or court so that he may be bound to answer for
the preceding section] shall be inadmissible for the commission of an offense.
any purpose in any proceeding [Art. III, Sec. 3].
The unconstitutionality of the search and the b. Search Warrant
seizure or the use of a void search warrant, An order in writing, issued in the name of the
renders the items seized inadmissible in People of the Philippines, signed by a judge
evidence. and directed to a peace officer, commanding
him to search for certain personal property and
bring it before the court [Sec. 1, Rule 126,
ROC].
Arrest Warrant v. Search Warrant

Arrest Warrant Search Warrant
There is a need for a preliminary investigation No need for a preliminary investigation.

conducted by MTC or prosecutor.
In determining probable cause, the judge need In determining probable cause, the judge is
not examine the complainant and its witnesses required to personally examine the applicant
and may rely on the findings of the prosecutor. and the witnesses in searching questions, in
Judge may adopt the prosecutor’s findings, writing, and in oath.
disregard it and require the submission of
additional documents within five (5) days, or
dismiss the case right away.
No lifespan Valid only for 10 days
It may be issued only by a court of competent It can be issued by a court without jurisdiction.
jurisdiction. However, if the resultant case is a criminal
case implicating individuals, it must be
transferred to a court with competent
jurisdiction.
Page 123 of 384

2. Warrantless Arrests and Detention Requisites:
1. Offense had just been committed; The
Valid Warrantless Arrests [Section 5, Rule person must be immediately arrested after
113, Rules on Criminal Procedure] the commission of the offense [People v.
Manlulu, supra];
a. In Flagrante Delicto 2. Person making the arrest has probable
cause to believe based on personal
When in his presence, the person to be knowledge of the facts and
arrested has committed, is actually committing, circumstances.
or is attempting to commit an offense. The
person must be arrested after the offense has Note: There must be a large measure of
been committed and in the presence of a police immediacy between the time the offense is
officer [People v. Mengote, G.R. No. 87059 committed and the time of arrest. If there was
(1992)]. an appreciable lapse of time between the
arrest and commission of the crime, a warrant
Since rebellion is a continuing offense, a rebel of arrest must be secured [Nachura].
may be arrested without a warrant at any time
of the day or the night as he is deemed to be in The warrantless arrest of an accused for selling
the act of committing rebellion [In re Umil v. marijuana two days after he escaped is invalid
Ramos, G.R. No. 81567 (1991)]. [People v. Kimura, G.R. No. 130805 (2004)].
Though kidnapping with serious illegal There is no personal knowledge when the
detention is deemed a continuing crime, it can commission of a crime and identity of the
be considered as such only when the accused were merely furnished by an
deprivation of liberty is persistent and informant, or when the location of the firearm
continuing from one place to another [Parulan was given by the wife of the accused. It is not
v. Dir. of Prisons, G.R. No. L-28519 (1968)]. enough that there is reasonable ground to
believe that the person to be arrested has
Buy-Bust; When Not Proper committed a crime. That a crime has actually
A buy-bust operation is a valid in flagrante been committed is an essential precondition
arrest. The subsequent search of the person [People v. Burgos, G.R. No. L-68955 (1986)].
arrested and the premises within his immediate
control is valid as an incident to a lawful arrest c. Escaped Prisoners
[People v. Hindoy, G.R. No. 132662 (2001)].
When the person to be arrested is a prisoner
Instead of arresting the suspect after the sale who has escaped from a penal establishment
in a buy-bust operation, the officer returned to or place where he is serving final judgment or
the police headquarters and filed his report. It is temporarily confined while his case is
was only in the evening that he, without pending, or has escaped while being
warrant, arrested the suspect at his house transferred from one confinement to another.
where dried marijuana leaves were found
and seized. This is unlawful arrest [People v. d. Additional Exceptions
Rodriguez, G.R. No. 138987 (1992)].
When the Right is Voluntarily Waived
b. Hot Pursuit (Estoppel)
Appellant is estopped from questioning the
When an offense has just been committed and illegality of the arrest when he voluntarily
he has probable cause to believe based on submitted himself to the jurisdiction of the court
personal knowledge of facts or circumstances by entering a plea of not guilty and by
that the person to be arrested has committed it participating in the trial [People v. Salvatierra,
G.R. No. 104663 (1997)].
Page 124 of 384

Failure to raise the question of admissibility Absent a valid search warrant, the search is
during the trial is a waiver of the right to assert confined to the person being lawfully arrested.
inadmissibility on appeal [Manalili v. CA, G.R.
No. 113447 (1997)]. It is also a general rule that, as an incident of
an arrest, the place or premises where the
Waiver is limited to the illegal arrest. It does not arrest was made can also be searched without
extend to the search made as an incident a search warrant. In this case, the extent and
thereto, or the subsequent seizure of evidence reasonableness of the search must be decided
allegedly found during the search [People v. on its own facts and circumstances.
Peralta, G.R. No. 145176 (2004)].
What must be considered is the balancing of
Drug, Alcohol, and Blood Tests the individual’s right to privacy and the public’s
Randomized Drug Testing (RDT) for students interest in the prevention of crime and the
and employees does not violate the right to apprehension of criminals [Nolasco v. Paño,
privacy in the Constitution. Students do not supra].
have a rational expectation of privacy since
they are minors and the school is in loco Test for validity
parentis. Employees and students in 1. Item to be searched was within the
universities, on the other hand, voluntarily arrester’s custody;
subject themselves to the intrusion because of 2. Search was contemporaneous with the
their contractual relation to the company or arrest
university.
An “arrest being incipiently illegal, it logically
But it is unconstitutional to subject criminals to follows that the subsequent search was
RDT. Subjecting criminals to RDT would similarly illegal” [People v. Aruta, supra].
violate their right against self-incrimination.
b. Plain View Doctrine
It is also unconstitutional to subject public
officials whose qualifications are provided for in Things seized are within plain view of a
the Constitution (e.g., members of Congress) searching party.
to RDT. Subjecting them to RDT would amount
to imposing an additional qualification not Requisites
provided for in the Constitution [SJS v. 1. Prior valid intrusion based on valid
Dangerous Drugs Board, G.R. No. 157870 warrantless arrest in which the police are
(2008)]. legally present in the pursuit of their official
duties;
Warrantless Searches 2. Evidence was inadvertently discovered by
Probable cause (warrantless searches) must the police who had the right to be where
be “based on reasonable ground of suspicion they are;
or belief that a crime has been committed or is 3. Evidence must be immediately apparent;
about to be committed” [People v. Aruta, G.R. 4. “Plain view” justified mere seizure of
No. 120915 (1998)]. evidence without further search [People v.
Aruta, supra; N.B. substantially the same
3. Valid Warrantless Searches as Nala v. Barroso requirements].
a. Warrantless Search Incidental to a An object is in “plain view” if the object itself is

Lawful Arrest plainly exposed to sight. Where the seized
object is inside a closed package, the object is
A person lawfully arrested may be searched for not in plain view and, therefore, cannot be
dangerous weapons or anything which may be seized without a warrant. However, if the
used as proof of the commission of an offense, package proclaims its contents, whether by its
without a search warrant [Sec. 12, Rule 126, distinctive configuration, its transparency, or if
ROC]. its contents are obvious to an observer, then
Page 125 of 384

the contents are in plain view, and may be d. Consented Warrantless Search
seized [Caballes v. CA, G.R. No. 136292
(2002)]. Requisites
1. Must appear that right exists;
It must be immediately apparent to the police 2. Person involved had actual or constructive
that the items that they observe may be knowledge of the existence of such right;
evidence of a crime, contraband or otherwise 3. Said person had an actual intent to
subject to seizure [People v. Nuevas, G.R. No. relinquish the right [People v. Aruta, supra].
170233 (2007)].
The mere failure to object to the search and
c. Search of a Moving Vehicle seizure does not constitute a waiver.
“Stop and search” without a warrant at military The waiver may be express or implied. When
or police checkpoints has been declared not to one voluntarily submits to a search or consents
be illegal per se so long as it is required by to have it made of his person/premises, he is
exigencies of public order and conducted in a precluded from later complaining [People v.
way least intrusive to motorists [Valmonte v. de Kagui Malasugui, G.R. No. 44335 (1936)].
Villa, G.R. No. 83988 (1989)].
There is presumption against waiver by the
These are permissible if limited to the courts. It is the State that has the burden of
following: proving, by clear and convincing evidence, that
1. Where the officer merely draws aside the the necessary consent was obtained and that it
curtain of a vacant vehicle which is parked was voluntarily and freely given [Caballes v.
on the public fair grounds; CA, supra].
2. Simply looks into a vehicle;
3. Flashes a light therein without opening the e. Customs Search (Enforcement of
car’s doors; Fishing, Customs, and Immigration
4. Where the occupants are not subjected to Law)
a physical or body search;
5. Where the inspection of the vehicles is The police are allowed to conduct warrantless
limited to a visual search or visual searches on behalf of the Department of
inspection; and Customs.
6. Where the routine check is conducted in a
fixed area. They are authorized to open and examine any
box, trunk, or other containers where he has
It is well to clarify, however, that routine reasonable cause to believe that such items
inspections do not give police officers carte were hidden from customs search [Papa v.
blanche discretion to conduct warrantless Mago, G.R. No. L-27360 (1968)].
searches in the absence of probable cause.
When a vehicle is stopped and subjected to an Sec. 219 of the Customs Modernization and
extensive search - as opposed to a mere Tariff Act states that no warrant is required for
routine inspection - such a warrantless search police or authorized persons to pass, enter,
has been held to be valid only as long as the search any land, enclosure, building,
officers conducting the search have warehouse, vessels, aircrafts, vehicles but not
reasonable or probable cause to believe before dwelling.
the search that they will find the instrumentality
or evidence pertaining to a crime, in the vehicle Purpose of Customs Search
to be searched [People v. Manago, G.R. No. To verify whether or not custom duties and
212340 (2016)]. taxes were paid for their importation.
Page 126 of 384

f. Routine Security Checks activity to compel the arresting officer to
investigate further [Manibog v. People, supra].
The Court held that the search and seizure of
an illegal drug during a routine airport h. Exigent and Emergency
inspection made pursuant to the aviation Circumstances
security procedures is a constitutionally The raid and seizure of firearms and
reasonable administrative search. ammunition at the height of the 1989 coup
d’état, was held valid, considering the exigent
While the right of the people to be secure in and emergency situation. The military
their persons, houses, papers, and effects operatives had reasonable ground to believe
against unreasonable searches and seizures is that a crime was being committed, and they
guaranteed by Section 2, Article III of the 1987 had no opportunity to apply for a search
Constitution, a routine security check being warrant from the courts because the latter were
conducted in air and sea ports has been closed. Under such urgency and exigency, a
recognized exception [People v. O’Cochlain, search warrant could be validly dispensed with
G.R. No. 229071 (2018)]. [People v. de Gracia, G.R. Nos. 102009-10
(1994)].
g. Stop and Frisk
Administrative Arrests
For a valid stop and frisk search, the arresting Arrests made as an incident to a deportation
officer must have had personal knowledge of proceeding. The power to deport aliens is an
fact, which would engender a reasonable attribute of sovereignty and essential to self-
degree of suspicion of an illicit act [Manibog v. preservation of every state [De Leon].
People, G.R. No. 211214 (2019)].
The constitutional provision against
Test unreasonable searches and seizures does not
Whether or not a reasonably prudent man in require judicial intervention in the execution of
the circumstances would be warranted in the a final order of deportation issued in
belief that his safety or that of others was in accordance with law. It contemplates an order
danger [Terry v. Ohio, 392 US 1(1968)]. of arrest in the exercise of judicial power as a
step preliminary or incidental to prosecution or
Test for Validity of a Stop-and-Frisk proceedings or for a given offense or
Search as Established by Jurisprudence: administrative action, not as a measure
1. There must be specific and articulable facts indispensable to carry out a valid decision by a
which, taken together with rational competent official, such as a legal order of
inferences, reasonably warrant the deportation issued by the Commissioner of
intrusion. Immigration in pursuance of a valid legislation
2. The officer must identify himself and make [Morano v. Vivo, 20 SCRA 562 (1967)].
reasonable inquiries.
3. The “frisk” is permitted to search for In deportation cases, an arrest (of an
weapons for the protection of the police undesirable alien) ordered by the President or
officer, where he has reason to believe that his duly authorized representatives, in order to
he is dealing with an armed and dangerous carry out a final decision of deportation is valid.
individual, regardless of probable cause for It is valid, however, because of the recognized
a crime. supremacy of the Executive in matters
4. The scope of the search is limited to the involving foreign affairs [Salazar v. Achacoso,
outer surface of the subject’s clothing. G.R. No. 81510 (1990)].
Accordingly, to sustain the validity of a stop and 4. Exclusionary Rule

frisk search, the arresting officer should have
personally observed two (2) or more suspicious All evidence obtained in violation of Sec. 2, Art.
circumstances, the totality of which would then III shall be inadmissible for any purpose in any
create a reasonable inference of criminal
Page 127 of 384
proceeding [Stonehill v. Diokno, G.R. No. L- 1. Private and Public
19550 (1967)]. Communications
The exclusionary rule extends to evidence The Constitution does not have a specific
obtained through uncounseled confession provision protecting the right to privacy. It is a
[People v. Alicando, G.R. No. 117487 (1995)]. penumbral right formed from the shadows
The Fruit of the Poisonous Tree created by several constitutional provisions.
The Exclusionary Rule is also extended to That is to say, the right to privacy is located
exclude evidence which is derived or directly within the zones created by various provisions
obtained from that which was illegally seized of the Constitution and various statutes which
[Bautista, Basic Criminal Procedure (2010), protect aspects of privacy [Ople v. Torres, G.R.
hereinafter Bautista]. No. 127685 (1998)].
Once the primary source (tree) is shown to In Ople v. Torres, different provisions in the
have been unlawfully obtained, any secondary 1987 Constitution also constitute zones of
or derivative evidence (fruit) derived from it is privacy:
also inadmissible. a. Sec. 3 – Privacy of communication
b. Sec. 1 – Life, liberty, and property
Effects of Unreasonable Searches and c. Sec. 2 – Unreasonable searches and
Seizures seizures
An unlawful search will result in the exclusion d. Sec. 6 – Liberty of abode
from admission as evidence of that which was e. Sec. 8 – Right to form associations
obtained from such unlawful search and f. Sec. 17 – Right against self-incrimination
seizure.
Three Strands of the Right to Privacy
Further, an unlawful search and seizure may 1. Decisional Privacy - Liberty in the
justify: constitutional sense must mean more than
1. The use of self-help in the form of freedom from unlawful governmental
resistance to such unlawful search and restraint; it must include privacy as well, if
seizure; it is to be a repository of freedom. The right
2. The criminal prosecution of the searching to be let alone is indeed the beginning of all
officer; freedom … The concept of liberty would be
3. Civil damages against such officer; and emasculated if it does not likewise compel
4. Disciplinary action against the officer by his respect for his personality as a unique
administrative officers [Bautista]. individual whose claim to privacy and
interference demands respect [Morfe v.
E. Privacy of Communications Mutuc, G.R. No. L-20387 (1968)].
and Correspondence 2. Informational Privacy - Right of an
individual not to have private information
about himself disclosed; and the right of an
Article III, Section 3. individual to live freely without surveillance
(1) The privacy of communication and
and intrusion [Whalen v. Roe, 429 US 589,
correspondence shall be inviolable except upon
lawful order of the court, or when public safety (1977)].
or order requires otherwise as prescribed by 3. Locational or Situational Privacy -
law. Privacy that is felt in physical space, such
(2) Any evidence obtained in violation of this or the as that which may be violated by trespass
preceding section shall be inadmissible for any or unwarranted searches and seizure
purpose in any proceeding.
[Vivares v. St. Therese College, G.R. No.
202666 (2014)].
Page 128 of 384

Requisites of the Existence of the Right to Forms of Correspondence and
Privacy: Communication Covered:
1. Subjective: A person has exhibited an 1. Letters
actual expectation of privacy; and 2. Messages
2. Objective: The expectation be one that 3. Telephone calls
society is prepared to recognize as 4. Telegrams
reasonable [Pollo v. Constantino-David, 5. Others analogous to the foregoing [Bernas]
G.R. No. 181881 (2011)].
Right of Privacy v. Freedom of Speech and Communications

RIGHT OF PRIVACY FREEDOM OF SPEECH AND COMMUNICATION
It is not a preferred right, Because of the preferred character of the constitutional rights of the
thus there is no freedom of speech and of expression, a weighty presumption of
presumption of invalidity invalidity vitiates measures of prior restraint upon the exercise of
on encroachments of right such freedoms [Ayer Productions Pty. Ltd. v. Capulong, G.R. No.
to privacy. 82380 (1988)].
2. When Intrusion is Allowed

Right may be invoked against the wife who
General rule: An encroachment on the right to went to the clinic of her husband and there took
privacy is invalid when there is a reasonable documents consisting of private
expectation of privacy; and if there is no communications between her husband and his
compelling state interest. alleged paramour [Zulueta v. CA, G.R. No.
107383 (1996)].
When Allowed: Public Figure
1. Lawful order of the Court [Art. III, Sec. 3] A limited intrusion into a person’s privacy is
2. When public safety or public order required permissible where that person is a public figure
otherwise as may be provided by law and the information sought to be elicited from
him or to be published about him constitute
E.O. No. 424 (s. 2005), adopting a unified matters of a public character. The interest
multi- purpose ID system for government, does sought to be protected by the right to privacy is
not violate the right to privacy because it (1) the right to be free from unwarranted publicity
narrowly limits the data that can be collected, from the wrongful publicizing of the private
recorded, and released compared to existing affairs and activities of an individual which are
ID systems, and (2) provides safeguards to outside the realm of legitimate public concern
protect the confidentiality of the data collected [Ayer Productions Pty. Ltd. v. Capulong,
[KMU v. Director-General, G.R. No. 167798 supra].
(2006)].
But as held in Lagunzad v. Vda. de Gonzales
An intrusion into the privacy of workplaces is [G.R. No. L-32066 (1979)], being a public
valid if it conforms to the standard of figure does not automatically destroy in toto a
reasonableness. Under this standard, both person’s right to privacy.
inception and scope of intrusion must be
reasonable. It is justified at inception if there Online Privacy
are reasonable grounds for suspecting that it It is first necessary that said user, manifest the
will turn up evidence that the employee is guilty intention to keep certain posts private, through
of work-related misconduct. Scope of intrusion the employment of measures to prevent
is reasonable if measures used in the search access thereto or to limit its visibility (This case;
are reasonably related to the search’s OSN Privacy Tools). Therefore, a Facebook
objectives, and it is not highly intrusive [Pollo v. user who opts to make use of a privacy tool to
Constantino-David, supra]. grant or deny access to his or her post or profile
detail should not be denied the informational
Page 129 of 384
privacy right which necessarily accompanies F. Freedom of Speech and
said choice [Vivares v. St. Theresa’s College,
supra]. Expression
3. Exclusionary Rule Article III, Section 4. No law shall be passed

abridging the freedom of speech, of expression, or
of the press, or the right of the people peaceably to
Any evidence obtained in violation of Secs. 2 assemble and petition the government for redress of
or 3, Art. III shall be inadmissible for any grievances.
purpose in any proceeding [Art. III, Sec. 3(2)].
This applies not only to testimonial evidence Concept

but also to documentary and object evidence. The scope of freedom of expression is so broad
that it extends protection to nearly all forms of
The Anti-Wire Tapping Act (R.A. No. 4200) communication. It protects speech, print and
clearly and unequivocally makes it illegal for assembly regarding secular as well as political
any person, not authorized by all the parties to causes, and is not confined to any particular
any private communication, to secretly record field of human interest [Chavez v. Gonzales,
such communications by means of a tape G.R. No. 168338 (2008)].
recorder. The law does not make any
distinction [Ramirez v. CA, G.R. No. 93833 In the Philippines, the primacy and high esteem
(1995)]. accorded freedom of expression is a
fundamental postulate of our constitutional
Effect of violation: The communication shall system.
not be admissible in evidence in any judicial,
quasi-judicial, legislative, or administrative Free speech and free press may be identified
hearing or investigation [R.A. No. 4200, Sec. with the liberty to discuss publicly and truthfully
4]. any matter of public interest without censorship
and punishment [Newsounds Broadcasting
Generally, the provisions in the Bill of Rights Network, Inc. v. Dy, G.R. No. 170270 (2009)].
are protections against the government.
However, In the case of Zulueta v. CA the The right to freedom of expression applies to
Court has recognized an instance where it may the entire continuum of speech from utterances
also be applied as against a private individual. made to conduct enacted, and even to inaction
itself as a symbolic manner of communication
Note: While Zulueta seems to be an exception [Diocese of Bacolod v. COMELEC, G.R. No.
to the State Action Requirement, Zulueta’s 205728, (2015)].
application of the exclusionary rule has only
been cited once but to a state action. Communication is an essential outcome of
protected speech. Communication exists when
In that case, the wife took her husband’s “(1) a speaker, seeking to signal others, uses
private documents and papers to be used as conventional actions because he or she
evidence in the case, without the husband’s reasonably believes that such actions will be
knowledge and consent, the Court held that the taken by the audience in the manner intended;
intimacies between husband and wife do not and (2) the audience so takes the actions”
justify any one of them in breaking the drawers [Diocese of Bacolod v. COMELEC, supra].
and cabinets of the other and in ransacking
them for any telltale evidence of marital The right is not limited to vocal communication.
infidelity. A person, by contracting marriage, Conduct is also included.
does not shed his/her integrity or his right to
privacy as an individual and the constitutional Conduct - sometimes referred to as ‘symbolic
protection is ever available to him or her. speech’ such that “‘when ‘speech’ and ‘non-
speech’ elements are combined in the same
course of conduct,’ the ‘communicative
element’ of the conduct may be ‘sufficient to
Page 130 of 384
bring into play the [right to freedom of prior approval of the government. The
expression]. censor therefore serves as the political,
moral, social and artistic arbiter for the
Scope people, usually applying only their own
Expression and speech include: subjective standards in determining what is
1. Written or spoken words (recorded or not good and what is not;
recorded); ● Permits;
2. Symbolic speech (e.g., wearing of ● Business closure.
armbands as a symbol of protest)
However, in NUWHRAIN-APL-IUF Dusit General Rules
Hotel Nikko Chapter v. CA [G.R. No. 1. Any system of prior restraints of expression
163942 (2008)], it was held that the labor comes to the Court bearing a heavy
union members’ violation of the hotel’s presumption against its constitutionality,
grooming standards constitutes an illegal giving the government a heavy burden to
strike, which is not protected by the right to show justification for the imposition of such
freedom of expression; restraint [New York Times Co. v. US, 403
3. Films and television programs [Iglesia ni US 713 (1971)].
Cristo v. CA, G.R. No. 119673 (1996)]. 2. There need not be total suppression. Even
restriction of circulation constitutes
While the right has a widespread scope, it is censorship [Grosjean v. American Press
not absolute. Examples of unprotected speech Co., Inc., 297 U.S. 233 (1936)].
are obscenity, child pornography, and libel.
Examples of Unconstitutional Prior
1. Prior Restraint and Subsequent Restraint
● COMELEC prohibition against radio
Punishment
commentators and newspaper columnists
from commenting on the issues involved in
a. Prior Restraint a scheduled plebiscite [Sanidad v.
COMELEC, G.R. No. 90878 (1990)].
Refers to official governmental restrictions on ● Arbitrary closure of a radio station [Eastern
the press or other forms of expression in Broadcasting Corp. v. Dans, Jr., G.R. No.
advance of actual publication or dissemination L-59329 (1985)]; or even when there is
[Newsounds Broadcasting Network v. Dy, legal justification, such as lack of mayor’s
supra]. permit [Newsounds Broadcasting Network
v. Dy, supra].
Not all prior restraint is invalid. But all prior ● COMELEC resolution prohibiting the
restraints are presumed invalid (“any act that posting of decals and stickers in mobile
restrains speech is hobbled by the presumption units such as cars and other vehicles
of invalidity and should be greeted with [Adiong v. COMELEC, G.R. No. 103956
furrowed brows”). (1992)].
● Searching, padlocking, and sealing of the
Every man shall have a right to speak, write, offices of newspaper publishers by military
and print his opinions upon any subject authorities [Burgos, Sr. v. Chief of Staff,
whatsoever, without any prior restraint, so G.R. No. 64261 (1984)].
always that he does not injure any other person ● An announcement by a public official
in his rights, person, property, or reputation, prohibiting the media from airing or
and so always that he does not thereby disturb broadcasting the Garci tapes [Chavez v.
the public peace or attempt to subvert the Gonzales, supra].
government [Near v. Minnesota, 283 U.S. 697
(1931)]. Examples of Constitutional Prior
Restraint
Examples
● Law which prohibits, except during the
● Censorship: Censorship conditions the
prescribed election period, making
exercise of freedom of expression upon the
Page 131 of 384
speeches, announcements, or 2. Fair and true report of any judicial,
commentaries for or against the election of legislative, or other official proceedings;
any candidate for office [In re: Gonzales v. 3. Obscenity – Determination of what is
COMELEC, G.R. No. L-27833 (1969)]. obscene is a judicial function [Pita v. CA,
● Prohibiting any person making use of the G.R. No. 80806 (1989)];
media from selling or giving print space or 4. Contempt for criticism or publications
airtime free of charge for campaign or other tending to impede, obstruct, embarrass, or
political purposes. Ratio: Police power of influence the courts in administering justice
the State to regulate media for the purpose in a pending suit or proceeding (subjudice)
of ensuring equal opportunity, time, and [People v. Alarcon, G.R. No. 46551
space for political campaigns, which (1939)];
COMELEC is authorized to carry out 5. Right of students to free speech on school
[National Press Club v. COMELEC, G.R. premises must not infringe on the school’s
No. 102653 (1992); Osmeña v. right to discipline its students [Miriam
COMELEC, G.R. No. 132231 (1998)]. College Foundation, Inc. v. CA, G.R. No.
● Film censorship: The power of the MTRCB 127930 (2000)].
can be exercised only for purposes of
reasonable classification, not censorship Exceptions
[Nachura, citing Gonzalez v. Katigbak, 1. Fair comment on matters of public
G.R. No. L-69500 (1985) and Ayer Prod. interest – Fair comment is that which is
PTY. LTD. v. Judge Capulong, G.R. No. true or, if false, expresses the real opinion
82380 (1988)]. of the author based upon reasonable
degree of care and on reasonable grounds.
b. Subsequent Punishment 2. Criticism of official conduct is given the
widest latitude [US v. Bustos, G.R. No. L-
Freedom of speech includes freedom after 12592 (1918)].
speech. Without this assurance, citizens would
hesitate to speak for fear that they might be 2. Content-Based and Content-
provoking the vengeance of the officials they Neutral Regulations
criticized (chilling effect).
A government regulation is sufficiently
Examples of Valid Subsequent justified if:
Punishment 1. It is within the constitutional power;
● Libel – Every defamatory imputation is 2. It furthers an important or substantial
presumed to be malicious, even if it be true government interest;
[Alonzo v. CA, G.R. No. 110088 (1995)]. 3. The government interest is unrelated to the
suppression of free expression;
Exceptions to the Presumption [Art. 354, 4. The incident restriction is no greater than
Revised Penal Code] essential to the furtherance of that interest.
1. Private communication in the performance [US v. O’Brien, 391 U.S. 367 (1968)].
of any legal, moral, or social duty;
Content-Based v. Content-Neutral
CONTENT-BASED CONTENT-NEUTRAL
Object of restraint
The content: The message or idea of the Incidents of speech: the time, manner, place
expression. of the expression in public places, not the
content.
Page 132 of 384

CONTENT-BASED CONTENT-NEUTRAL
Test
a. Clear and present danger test: There must Only a substantial governmental interest is
be a clear and present danger of a required for its validity.
substantive evil that the State has a right to
prevent [Reyes v. Bagatsing, supra]. Intermediate approach: Somewhere between
b. Balancing of interests the mere rationality that is required of any other
c. Dangerous Tendency law and the compelling interest standard applied
d. Direct Incitement to content-based restrictions [Chavez v.
Gonzales, supra].
3. Facial Challenges and may well be prevented from enacting laws

Overbreadth Doctrine against socially harmful conduct. In the area of
criminal law, the law cannot take chances as in
General Rule: A party can question the validity the area of free speech [Southern Hemisphere
of a statute only if, as applied to him, it is Engagement Network, Inc. v. Anti-Terrorism
unconstitutional [Southern Hemisphere Council, supra].
Engagement Network, Inc. v. Anti-Terrorism
Council, G.R. No. 178552 (2010)]. However, Said Doctrine Applies to Penal
Exception: Facial challenges. Statutes When:
a. The statute is challenged as applied; or
A facial challenge may be directed against a b. The statute involves free speech [Disini v.
vague statute or to one which is overbroad Sec. of Justice, supra].
because of the possible “chilling effect” the
statute will have on protected speech. The Overbreadth Doctrine
theory is that “[w]hen statutes regulate or The overbreadth doctrine decrees that a
proscribe speech and no readily apparent governmental purpose to control or prevent
construction suggests itself as a vehicle for activities constitutionally subject to state
rehabilitating the statutes in a single regulations may not be achieved by means
prosecution, the transcendent value to all which sweep unnecessarily broadly and
society of constitutionally protected expression thereby invade the area of protected freedoms
is deemed to justify allowing attacks on overly [Southern Hemisphere Engagement Network,
broad statutes with no requirement that the Inc. v. Anti-Terrorism Council, supra].
person making the attack demonstrate that his
own conduct could not be regulated by a The statute must be carefully drawn or be
statute drawn with narrow specificity” [Gooding authoritatively construed to punish only
v. Wilson, 405 U.S. 518 (1972)]. unprotected speech and not be susceptible of
application to protected expression [Gooding v.
The possible harm to society in permitting Wilson, supra].
some unprotected speech to go unpunished is
outweighed by the possibility that the protected A governmental purpose may not be achieved
speech of others may be deterred, and through means which sweep too broadly and
perceived grievances left to fester because of thereby invade the area of protected freedoms.
possible inhibitory effects of overly broad
statutes. Void For Vagueness Doctrine
This rationale does not apply to penal statutes A law is vague when it lacks comprehensive
without a free speech aspect. Criminal statutes standards that men of common intelligence
have general in terrorem effect resulting from must necessarily guess at its common
their very existence and, if facial challenges meaning and differ as to its application.
were allowed for this reason alone, the State
Page 133 of 384

A statute establishing a criminal offense must administration of justice [Cabansag v.
define the offense with sufficient definiteness Fernandez, G.R. No. L-8974 (1957)].
that persons of ordinary intelligence can
understand what conduct is prohibited by the Note: This test has been adopted by SC and is
statute. It can only be invoked against that the test most applied to cases re: freedom of
specie of legislation that is utterly vague on its expression.
face, i.e., that which cannot be clarified either
by a saving clause or by construction. b. Balancing of Interests Test
A statute or act may be said to be vague when When a particular conduct is regulated in the
it lacks comprehensible standards that men of interest of public order, and the regulation
common intelligence must necessarily guess at results in an indirect, conditional and partial
its meaning and differ in its application [Estrada abridgement of speech, the duty of the courts
v. Sandiganbayan, G.R. No. 148560 (2001)]. is to determine which of the two conflicting
4. Tests to Determine the Validity of interests demands greater protection
Governmental Regulation [American Communications v. Douds, 339 U.S.
382 (1950)].
a. Clear and Present Danger Test
The test is applied when two legitimate values
The question in every case is whether the not involving national security crimes compete
words used are used in such circumstances [Gonzales v. COMELEC, supra].
and are of such a nature as to create a clear
and present danger that they will bring about Factors to Consider
the substantive evils that Congress has a right 1. Social value of the freedom restricted;
to prevent. It is a question of proximity and 2. Specific thrust of the restriction, i.e., direct
degree [Schenck v. US, 249 U.S. 47 (1919)]. or indirect, affects many or few;
3. Value of the public interest sought to be
Burden of proof: With the government secured by the regulation;
4. Whether the restriction is reasonably
This rule also requires that “the danger created appropriate and necessary for the
must not only be clear and present but also protection of the public interest;
traceable to the ideas expressed”. 5. Whether the necessary safeguarding of the
1. CLEAR – there must be a connection with public interest may be achieved by a
the danger of the substantive evil arising measure less restrictive of the protected
from the utterance questioned. freedom [Soriano v. Laguardia, G.R. No.
2. PRESENT - involves the time element, 164785 (2010)].
identified with imminent and immediate
danger. The danger must not only be c. Dangerous Tendency Test
probable but very likely inevitable
[Gonzales v. COMELEC, supra]. In each case, courts must ask whether the
gravity of the “evil,” discounted by its
The evil consequence of the comment or improbability, justifies such invasion of free
utterance must be “extremely serious and the speech as is necessary to avoid the danger
degree of imminence extremely high” before [Dennis v. US, 341 US 494 (1951)].
the utterance can be punished. The danger to
be guarded against is the “substantive evil” Under this test, the question is whether the
sought to be prevented. And this evil is words will create a dangerous tendency that
primarily the “disorderly and unfair the state has a right to prevent. It looks at the
administration of justice.” [...] Under this rule, probability that a substantive evil will result,
the advocacy of ideas cannot constitutionally and it is not necessary that some definite or
be abridged unless there is a clear and present immediate acts of force, violence, or
danger that such advocacy will harm the unlawfulness be advocated [Cabansag v.
Fernandez, supra].
Page 134 of 384

It is sufficient if the natural tendency and the But all forms of media, whether print or
probable effect of the utterance were to bring broadcast, are entitled to the broad protection
about the substantive evil that the legislative of the freedom of expression clause. The test
body seeks to prevent [Cabansag v. for limitations on freedom of expression
Fernandez, supra]. continues to be the clear and present danger
test [Eastern Broadcasting v. Dans, Jr., supra].
d. O’brien Test
6. Commercial Speech
A government regulation is sufficiently justified
if: Commercial speech is a separate category of
1. It is within the constitutional power; speech which is not accorded the same level of
2. It furthers an important or substantial protection as that given to other constitutionally
government interest; guaranteed forms of expression but is
3. The government interest is unrelated to nonetheless entitled to protection.
the suppression of free expression;
The incident restriction is no greater than Test to be Applied to Regulations on
essential to the furtherance of that interest [US Commercial Speech
v. O’Brien, supra]. 1. Speech must not be false, misleading, or
proposing an illegal activity;
5. State Regulation of Different Types 2. Government interest sought to be served
of Mass Media by regulation must be substantial;
3. The regulation must advance government
interest; and
Article XVI, Section 11(1). … The advertising
4. The regulation must not be overbroad
industry is impressed with public interest, and shall
be regulated by law for the protection of consumers [Central Hudson Gas & Elec. v. Public Svc.
and the promotion of the general welfare … Comm’n, 447 US 557 (1980)].
Political Speech
Four Aspects of Freedom of the Press
Political speech is pure and protected speech.
1. Freedom from prior restraint; The government is required to prove a “true
2. Freedom from punishment subsequent to
threat,” it cannot punish mere political
publication;
hyperbole [Watts v. US, 394 US 705 (1969)].
3. Freedom of access to information; and
4. Freedom of circulation [Chavez v.
A tarpaulin that expresses a political opinion
Gonzales, supra].
constitutes political speech. Speech that
promotes dialogue on public affairs, or airs out
Print vs. Broadcast Media grievances and political discontent, should be
While all forms of communication are entitled protected and encouraged [Diocese of Bacolod
to the broad protection of freedom of v. COMELEC, supra].
expression clause, the freedom of film,
television, and radio broadcasting is somewhat
Political Speech v. Commercial Speech
lesser than the freedom accorded to
newspapers and other print media [Chavez v. Political Speech Commercial Speech
Gonzales, supra].
Speech “both Speech that does “no
intended and more than propose a
Radio and television are accorded less
received as a commercial
protection because of:
contribution to public transaction.”
1. The scarcity of the frequencies by which
deliberation about
the medium operates, i.e., airwaves are some issue,”
physically limited while print medium may “foster[ing] informed
be limitless; and civic minded
2. Its pervasiveness as a medium; and deliberation.”
3. Its unique accessibility to children [FCC v.
Pacifica Foundation, 438 US 726 (1978)].
Page 135 of 384
7. Unprotected Speech persistent and unmitigated dissemination of
patent lies.
a. Hate Speech
Group Libel
Speech designed to promote hatred on the Where the defamation is alleged to have been
basis of race, religion, ethnicity or national directed at a group or class, it is essential that
origin [Rosenfield, Hate Speech in the statement must be so sweeping or all-
Constitutional Jurisprudence]. embracing as to apply to every individual in that
group or class, or sufficiently specific so that
International Covenant on Civil and each individual in the class or group can prove
Political Rights that the defamatory statement specifically
The Covenant mandates State Parties to pointed to him, so that he can bring the action
prohibit by law “[a]ny advocacy of national, separately, if need be [Newsweek, Inc. v. IAC,
racial or religious hatred that constitutes G.R. No. L-63559 (1986)].
incitement to discrimination, hostility or
violence” [ICCPR, Art. 20]. As the size of these groups increases, the
chances for members of such groups to
In Philippine jurisdiction, it is arguable that recover damages for tortious libel become
“hate speech” is not protected speech. In elusive. This principle is said to embrace two
Diocese of Bacolod v. COMELEC, the Court important public policies:
recognized that the right to freedom of 1. Where the group referred to is large, the
expression is not absolute [and that] some courts presume that no reasonable reader
forms of speech are still subject to some would take the statements as so literally
restrictions. applying to each individual member; and
2. The limitation on liability would
b. Defamation and Libel satisfactorily safeguard freedom of speech
and expression, as well as of the press,
Libel effecting a sound compromise between the
conflicting fundamental interests involved
Libel is not constitutionally protected speech.
The government has an obligation to protect in libel cases [MVRS v. Islamic Da’wah
Council of the Philippines, G.R. No.
individuals from defamation [Disini v. Sec. of
135306 (2003)].
Justice, supra].
The onus of proving malice shifts to the plaintiff, c. Sedition and Speech in Relation to
who must prove that the defendants were Rebellion
actuated by ill will in what they caused to be
published, with a design to injure the plaintiff. Heckler’s Veto
Heckler’s veto is an attempt to limit unpopular
In US v. Bustos, supra, a criminal action was speech. This occurs when an acting party’s
instituted against defendants for allegedly right to freedom of speech is curtailed or
publishing writings which were libelous against restricted by the government in order to
a justice of the peace. The SC held that the prevent a reacting party’s behavior.
said writings constitute qualifiedly privileged
matter as public opinion, therefore, they cannot For example, an unpopular group wants to hold
be presumed malicious. a rally and asks for a permit. The government
is not allowed to refuse the permit based on the
In In Re: Jurado [A.M. No. 93-2-037 SC beliefs of the applicants, but the government
(1995)], the SC held that false reports about a may deny the permit on the ground of fear that
public official or other person are not shielded many people will be outraged and cause
from sanction by the right to free speech. Free violent protests, not because the government
speech has never countenanced the disapproves of the group’s message.
publication of falsehoods, especially the
Page 136 of 384

Under the free speech clause, the government immoral and indecent materials must justify the
may not silence speech based on the reaction regulation or limitation.
(or anticipated reaction) of a hostile audience,
unless there is a clear and present danger One such regulation is Article 201 of the
of grave and imminent harm, which is not Revised Penal Code. To be held liable, the
easy to prove. prosecution must prove that (a) the materials,
publication, picture or literature are obscene;
d. Obscenity/Pornography and (b) the offender sold, exhibited, published
or gave away such materials. Necessarily, that
Obscenity the confiscated materials are obscene must be
The State in pursuing its mandate to protect, as proved
parens patriae, the public from obscene,
Various Tests Previously Developed to Determine Obscenity

Roth v. US Memoirs v. Massachusetts Miller v. California (Most
recent)
Whether, to the average A work is obscene if: A work is obscene if:

person, applying contemporary 1. The dominant theme of the 1. Whether the average
community standards, the material taken as a whole person, applying
dominant theme of the material, appeals to prurient interest contemporary community
taken as a whole, appeals to in sex; standards, would find that
prurient interest [354 US 476 2. Material is patently the work, taken as a whole,
(1957)]. offensive because it appeals to the prurient
affronts contemporary interest;
community standards 2. Whether the work depicts or
relating to the description or describes, in an offensive
representation of sexual way, sexual conduct or
matters; excretory functions,
3. Material is utterly without specifically defined by
redeeming social value applicable state law; and
[383 US 413 (1966)]. 3. Whether the work, taken as
a whole, lacks serious
literary, artistic, political, or
scientific value [413 US 15
(1973)].
Freedom of Expression and Obscenity muna, sige nakakalibog” (go ahead, go ahead,
Determination: Community Standard it is erotic), during the performance [People v.
Pictures depicting inhabitants of the country in Aparici, 52 OG 249 (1955)].
their native dress as they appear and can be
seen in the regions in which they live are not Child Pornography
obscene or indecent. The pictures in question The State is entitled to greater leeway in the
merely depict persons as they actually live, regulation of pornographic depictions of
without attempted presentation of persons in children because:
unusual postures or dress [People v. Kottinger, a. A state’s interest in safeguarding the
G.R. No. 20569 (1923)]. physical and psychological well-being of a
minor is compelling. The prevention of
A dance portraying the life of a widow who lost sexual exploitation and abuse of children
her husband cannot be considered protected constitutes a government objective of
speech if the audience, about a hundred surpassing importance.
customers, was howling and shouting, “sige
Page 137 of 384

b. Distribution of photographs and films profession of faith to an active power that binds
depicting sexual activity by juveniles is and elevates man to his Creator. Twenty years
intrinsically related to the sexual abuse of later, the Court cited the Aglipay definition in
children. American Bible Society v. City of Manila, a
c. Advertising and selling of child case involving the Free Exercise clause. The
pornography provide an economic motive latter also cited the American case of Davis in
for, and are thus an integral part of, the defining religion, viz: “(i)t has reference to one’s
production of such materials. views of his relations to His Creator and to the
d. Value of permitting live performances and obligations they impose of reverence to His
photographic reproductions of children being and character and obedience to His Will”
engaged in lewd sexual conduct is [Estrada v. Escritor, A.M. No. P-02-1651
exceedingly modest. (2003)].
G. Freedom of Religion Note: The Davis definition has been expanded

to include non-theistic beliefs, but only in U.S.
jurisprudence [Estrada v. Escritor, supra].
Article III, Section 5. No law shall be made
respecting an establishment of religion; or
prohibiting the free exercise thereof. The free Non-Establishment Clause
exercise and enjoyment of religious profession and The clause prohibits excessive government
worship, without discrimination or preference, shall entanglement with endorsement or disapproval
forever be allowed. No religious test shall be of religion [Victoriano v. Elizalde Rope Workers
required for the exercise of civil or political rights. Union, G.R. No. L-25246 (1974)].
1. Non-Establishment Clause Principle of Separation of Church and

State
The principle of separation of Church and State
Article II, Section 6. The separation of Church and
State shall be inviolable.
is based on mutual respect. Generally, the
State cannot meddle in the internal affairs of
the church, much less question its faith and
dogmas or dictate upon it. It cannot favor one
Article IX-C, Section 2(5). Religious denominations
and sects shall not be registered [as political religion and discriminate against another. On
parties]. the other hand, the church cannot impose its
beliefs and convictions on the State and the
rest of the citizenry. It cannot demand that the
Article VI, Section 5(2). For three consecutive nation follow its beliefs, even if it sincerely
terms after the ratification of this Constitution, one- believes that they are good for the country”
half of the seats allocated to party-list [Spouses Imbong v. Ochoa, Jr., G.R. No.
representatives shall be filled, as provided by law, 204819 (2014), on the constitutionality of the
by selection or election from [...] sectors as may be
provided by law, except the religious sector.
RH Law].
Separation
Purpose Protects the principle of church-separation with
The twin clauses of free exercise and non- a rigid reading of the principle.
establishment express an underlying relational
concept of separation between religion and Strict Separation
secular government. [Bernas]. ● The wall of separation is meant to protect
the state from the church.
Concept of Religion ● There is an absolute barrier to formal
“In Philippine jurisprudence, religion, for interdependence of religion and state.
purposes of the religion clauses, has thus far ● There is hostility between the two.
been interpreted as theistic. In 1937, the
Philippine case of Aglipay v. Ruiz involving the
Establishment Clause, defined religion as a
Page 138 of 384

Strict Neutrality or Tamer Separation oftentimes to the detriment of the populace.
● Requires the state to be neutral in its However, as apparent from the Constitution,
relation with groups of religious believers; the “wall” between the Church and the State
the relationship is not necessarily exists along with the recognition of freedom of
adversarial. religion. In fact, review of jurisprudence would
● Allow for interaction between church and reveal that this Court has carefully weighed
state, but is strict with regard to state action these principles as to allow the broadest
which would threaten the integrity of exercise of religious freedom without infringing
religious commitment. the non-establishment clause [Peralta].
● The basis of government action has a Permissible Acts; Constitutionally
secular criteria and religion may not be Created
used as a basis for classification of
purposes. Tax Exemption
● Public policy and the constitution require Article VI, Section 28(3). Charitable institutions,
the government to avoid religion-specific churches and personages or convents appurtenant
policy. thereto, mosques, non-profit cemeteries, and all
lands, buildings, and improvements, actually,
Acts not Permitted by Non-Establishment directly, and exclusively used for religious,
charitable, or educational purposes shall be exempt
Clause from taxation.
● Prayer and Bible-reading in public schools
[Abington School District v. Schemp, 374
US 203 (1963)]. Operation of Sectarian Schools
● Financial subsidy for parochial schools Article XIV, Section 4(2). Educational institutions,
[Lemon v. Kurtzman, 403 US 602 (1971)]. other than those established by religious groups and
● Religious displays in public spaces: mission boards, shall be owned solely by citizens of
Display of granite monument of 10 the Philippines or corporations or associations at
least sixty per centum of the capital of which is
commandments in front of a courthouse is
owned by such citizens.
unconstitutional for being unmistakably
non-secular [Glassroth v. Moore, 335 F.3d
1282 (2003)]. Religious Instruction in Public Schools
● Mandatory religious subjects or prohibition Article XIV, Section 3(3). At the option expressed
of secular subjects (evolution) in schools in writing by the parents or guardians, religion shall
[Epperson v. Arkansas, 393 US 97 (1968)]. be allowed to be taught to their children or wards in
● Mandatory bible reading in school (a form public elementary and high schools within the
of preference for belief over non-belief) regular class hours by instructors designated or
approved by the religious authorities of the religion
[Abington School District v. Schempp, to which the children or wards belong, without
supra]. additional cost to the Government.
Jurisprudence
The non-establishment of religion clause is not Limited Public Aid to Religion
equivalent to indifference to religion. It bears to Article VI, Section 29(2). No public money or
emphasize that the Constitution establishes property shall be appropriated, applied, paid, or
separation of the Church and the State, and not employed, directly or indirectly, for the use, benefit,
or support of any sect, church, denomination,
separation of religion and state [Peralta v. sectarian institution, or system of religion, or of any
Philippine Postal Corporation, G.R. No. priest, preacher, minister, other religious teacher, or
223395 (2018)]. dignitary as such, except when such priest,
preacher, minister, or dignitary is assigned to the
The Constitutional “wall” between the Church armed forces, or to any penal institution, or
and the State, has been jurisprudentially government orphanage or leprosarium.
recognized to stem from the country’s
unfortunate collective experience when the two
institutions are commingled into one entity,
exercising both power and influence,
Page 139 of 384

Free Exercise Clause ● The Doctrine of Accommodation allows the
a. Freedom to believe – Absolute government to take religion into account
b. Freedom to act on one’s belief – Subject to when creating government policies to allow
regulation people to exercise their religion without
hindrance. The government may take
Conduct remains subject to regulation for the religion into account to exempt, when
protection of society. The freedom to act must possible, from generally applicable
have appropriate definitions to preserve the governmental regulation individuals whose
enforcement of that protection. In every case, religious beliefs and practices would be
the power to regulate must be so exercised, in infringed, or to create without state
attaining a permissible end, as not to unduly involvement, an atmosphere in which
infringe on the protected freedom. voluntary religious exercise may flourish.
In a nutshell, the Constitution guarantees the ● The breach in the wall between church and
freedom to believe absolutely, while the state is allowed in order to uphold religious
freedom to act based on belief is subject to liberty, which is the integral purpose of the
regulation by the State when necessary to religion clauses. The purpose of
protect the rights of others and in the interest of accommodation is to remove the burden on
public welfare [Valmores v. Achacoso, G.R. a person’s exercise of his religion.
No. 217453 (2017)]. ● Although morality contemplated in laws is
secular, benevolent neutrality could allow
Laws and Acts Justified under the Free for accommodation of morality based on
Exercise Clause religion, provided it does not offend
● Exemption from flag salute in school compelling state interests [Estrada v.
[Ebralinag v. Division Superintendent of Escritor, supra].
Schools of Cebu, G.R. No. 95770 (1993)].
● Freedom to propagate religious doctrines. The Use of Benevolent Neutrality as a
The power to tax the exercise of the Standard Could Result in Three
privilege is the power to control or suppress Situations of Accommodation:
its enjoyment [American Bible Society v.
City of Manila, G.R. No. L-9637 (1957)]. Mandatory Accommodation
● Non-disqualification of religious leaders Those where the accommodation is required to
from local government office [Pamil v. preserve free exercise protections and not
Teleron, G.R. No. L-34854 (1978)]. unconstitutionally infringe on religious liberty or
● Working hours from 7:30am to 3:30pm create penalties for religious freedom.
without break during Ramadan [Re:
Request of Muslim Employees in the Permissive Accommodation
Different Courts of Iligan City, A.M. No. 02- The state may, but is not required to,
2-10-SC (2005)]. accommodate religious interests.
● Exemption from administrative charge on
immorality: Cohabiting with a married man Prohibited Accommodation
with church sanction evidenced by a It is when establishment concerns prevail over
document of “Declaration of Pledging potential accommodation interests [Estrada v.
Faithfulness” [Estrada v. Escritor, supra]. Escritor, supra].
2. Benevolent Neutrality and Note: In Estrada v. Escritor, the petitioner filed

Conscientious Objector a complaint against the respondent, who was a
court employee, praying for her dismissal on
Benevolent Neutrality and the Doctrine of account of immorality for cohabiting with a man
Accommodation not her husband. The respondent claims that
● It protects religious realities, tradition, and their arrangement is permitted by her religion.
established practice with a flexible reading
of the principle of separation of church and
state.
Page 140 of 384
Estrada is a carefully crafted doctrine, the use students [Board of Education v. Allen, 392
of which is limited for the protection of religious US 236 (1968)].
minorities. ● Display of crèche in a secular setting –
depicts origins of the holiday [Lynch v.
Conscientious Objectors Donnelly, 465 US 668 (1984)].
● Financial support for secular academic
Conscientious Objector in the RH Law facilities (i.e., library and science center) in
Sections 7, 23, and 24 of R.A. No. 10354 parochial schools – has secular use [Tilton
(Reproductive Health Law) impose upon the v. Richardson, 403 US 672 (1971)].
conscientious objector the duty to refer the ● Exemption from zoning requirements to
patient seeking reproductive health services to accommodate unique architectural
another medical practitioner. features of religious buildings i.e.,
Mormon’s tall-pointed steeple [Martin v.
A conscientious objector should be exempt Corporation of the Presiding Bishop, 434
from compliance with the mandates of the RH Mass. 141 (2001)].
Law. If he is compelled to act contrary to his
religious belief and conviction, it would be 3. Tests to Determine the Validity of
violative of “the principle of non-coercion” Governmental Regulation
enshrined in the constitutional right to free
exercise of religion. a. Clear and Present Danger
The Court found no compelling state interest Used for religious speech.
which would limit the free exercise of
conscientious objectors. Only the prevention of In order to justify restraint the court must
an immediate danger to the security and determine whether the expression presents a
welfare of the community can justify the clear and present danger of any substantive
infringement of religious freedom [Spouses evil, which the state has a right to prevent
Imbong v. Ochoa, Jr., supra]. [American Bible Society v. City of Manila,
supra, citing Tañada and Fernando on the
Test to Determine the Constitutionality of Constitution of the Philippines, Vol. 1, 4th ed.,
Policies Challenged under the p. 297].
Establishment Clause (Lemon Test)
a. The statute must have a secular legislative b. Compelling State Interest
purpose;
b. Its primary or principal effect must be one Benevolent Neutrality
that neither advances nor inhibits religion; Under the Benevolent Neutrality Doctrine, this
c. The statute must not foster an excessive is the proper test where conduct arising from
entanglement with religion [Estrada v. religious belief is involved.
Escritor, supra]. 1. Has the government’s action created a
burden on the free exercise? Court must
Jurisprudence look into sincerity (but not truth) of belief.
● Religious activities with secular 2. Is there a compelling state interest to justify
purpose/character. – Postage stamps the infringement?
depicting the Philippines as the site of a 3. Are the means to achieve the legitimate
significant religious event – promotes state objective the least intrusive [Estrada
Philippine tourism [Aglipay v. Ruiz, G.R. v. Escritor, supra]?
No. 45459 (1937)].
● Government sponsorship of town fiestas. –
has secular character [Garces v. Estenzo,
G.R. No. L-53487 (1981)].
● Book lending program for students in
parochial schools. – benefit to parents and
Page 141 of 384

H. Liberty of Abode and Right to Right to Travel
To “restrict” is to restrain or prohibit a person
Travel from doing something, to “regulate” is to govern
or direct according to rule [OCA v. Macarine,
Article III, Section 6. The liberty of abode and of A.M. No. MTJ-10-1770 (2012)].
changing the same within the limits prescribed by
law shall not be impaired except upon lawful order
A person’s right to travel is subject to usual
of the court. Neither shall the right to travel be
impaired except in the interest of national security, constraints imposed by the very necessity of
public safety or public health, as may be provided safeguarding the system of justice [Marcos v.
by law. Sandiganbayan, G.R. Nos. 115132-34 (1995)].
Proclamation No. 475 does not constitute an

1. Scope and Limitations impairment of the right to travel. Any bearing
that Proclamation No. 475 may have on the
Scope right to travel is merely corollary to the closure
Freedom of movement includes two rights: of Boracay and the ban of tourists and non-
1. Liberty of abode residents therefrom which were necessary
2. Liberty of travel incidents of the island’s rehabilitation [Zabal v.
Duterte, G.R. No. 238467 (2019)].
Limitations
a. Liberty of Abode Several laws recognized as constituting an
impairment on the right to travel which directly
May be impaired only upon lawful order of the impose restriction on the right, viz.:
court. ● The law restricts the right to travel of an
individual charged with the crime of
The court itself is to be guided by the limits terrorism even though such person is out
prescribed by law. on bail [The Human Security Act of 2007 or
R.A. No. 9372].
A condition imposed by the court in connection ● Pursuant to said law, the Secretary of
with the grant of bail is an example of a valid Foreign Affairs or his authorized consular
limitation to liberty. officer may refuse the issuance of, restrict
the use of, or withdraw, a passport of a
b. Liberty of Travel Filipino citizen [The Philippine Passport Act
of 1996 or R.A. No. 8239].
May be impaired even without a lawful order of ● Pursuant to the provisions thereof, the
the court. Bureau of Immigration, in order to manage
migration and curb trafficking in persons,
The right to travel may be impaired, if issued Memorandum Order Radjr No.
necessary, in interest of national security, 2011-011, allowing its Travel Control and
public safety or public health. Apart from the Enforcement Unit to ‘offload passengers
presence of these exclusive grounds, there is with fraudulent travel documents, doubtful
a further requirement that there must be a law purpose of travel, including possible
authorizing the impairment. The requirement victims of human trafficking’ from our ports
for a law ensures that the necessity for the [The Anti-Trafficking in Persons Act of
impairment has undergone the validation and 2003 or R.A. No. 9208].
deliberation of Congress before its enactment. ● In enforcement of said law, the Philippine
The strict requirement for the concurrence of Overseas Employment Administration
these two elements are formidable enough to (POEA) may refuse to issue deployment
serve as safeguard in the full enjoyment of the permit[s] to a specific country that
right to travel. [Garcia v. Sandiganbayan, G.R. effectively prevents our migrant workers to
Nos. 205904-06 (2018)]. enter such country [The Migrant Workers
and Overseas Filipinos Act of 1995 or R.A.
Impairment of this liberty is subject to judicial No. 8042, as amended by R.A. No. 10022].
review.
Page 142 of 384
2. Watch-List and Hold Departure The Court ruled that the issuance of DOJ
Orders Circular No. 41, without a law to justify its
action, is an unauthorized act of the DOJ of
There was no legal basis for Department empowering itself under the pretext of dire
Circular No. 41 because of the absence of a exigency or urgent necessity. [Genuino v. De
law authorizing the Secretary of Justice to Lima, G.R. No. 197930 (2018)].
issue Hold Departure Orders (HDO), Watch
List Orders (WLO), or Allow Departure Order Note: the following have been struck down by
(ADO). the Supreme Court as unconstitutional in
[Genuino v. De Lima, supra] but is included in
the bar syllabus.
Watch List Orders v. Hold Departure Orders

Watch List Orders Hold Departure Orders
Against whom issued
a. Accused in criminal cases (irrespective of a. Accused on criminal cases (irrespective of

nationality in the RTC or below); nationality in courts below RTC);
b. The respondent, irrespective of nationality, b. Aliens (defendant, respondent, and witness
in cases pending before the DOJ or any of in pending civil or labor case, or any case
its provincial or city prosecution offices; pending before an administrative agency of
c. Any person, motu proprio, upon the request the government); and
of any government agency, including c. Any person motu proprio by the Secretary
commissions, task forces or similar entities of Justice or request of heads of
created by the Office of the President, departments, Constitutional Commissions,
pursuant to the Anti-Trafficking in Persons Congress, or Supreme Court.
Act of 2003 and/or in connection with any
investigation being conducted by it, or in the
interest of national security, public safety or
public health.
Issuing authority
Secretary of Justice [Department Circular No. 41, June 7, 2010]
A hold departure order is but an exercise of the Precautionary Hold Departure Order
[Sandiganbayan’s] inherent power to preserve It is an order in writing issued by a court,
and to maintain the effectiveness of its commanding the Bureau of Immigration to
jurisdiction over the case and the person of the prevent any attempt by a person suspected of
accused [Santiago v. Vasquez, G.R. Nos. a crime to depart from the Philippines which
99289-90 (1993)]. shall be issued ex-parte in cases involving
crimes where the minimum of the penalty
Holding an accused in a criminal case within prescribed by law is at least six years and one
the reach of the courts by preventing his day or when the offender is a foreigner
departure from the Philippines must be regardless of the imposable penalty [Rule on
considered as a valid restriction on his right to Precautionary Hold Departure Order, A.M. No.
travel so that he may be dealt with in 18-07-05-SC, Sec. 1].
accordance with law [Silverio v. CA, G.R. No.
94284 (1991)]. Who Files an Application for a PHDP?
Prosecutor.
Page 143 of 384

Where Filed? Article XVI, Section 10. The State shall provide the
General Rule: A PHDO is filed with any RTC policy environment for the full development of
within whose territorial jurisdiction the alleged Filipino capability and the emergence of
crime was committed. communication structures suitable to the needs and
aspirations of the nation and the balanced flow of
information into, out of, and across the country, in
Exceptions: For compelling reasons, it can be
accordance with a policy that respects the freedom
filed with ANY RTC within the judicial region of speech and of the press.
where the crime was committed if the place of
the commission of the crime is known.
1. Scope and Limitations
The RTCs in the City of Manila, Quezon City,
Cebu City, Iloilo City, Davao City and Cagayan Policy of Full Public Disclosure
de Oro City shall also have the authority to act ● Covers all transactions involving public
on the applications filed by the prosecutor interest, including any matter contained in
based on complaints instituted by the NBI, official communications and public
regardless where the alleged crime was documents of the government agency.
committed [Rule on Precautionary Hold ● Does not require demand.
Departure Order, A.M. No. 18-07-05-SC, Sec. ● Pertains to duty to disclose of the
2]. government, pursuant to the policy of full
public disclosure [Art. II, Sec. 28].
Conditions for the issuance of a PHDO
1. Probable cause exists as determined by Right to Information on Matters of Public
the judge in whose court the application is Concern
filed; and ● Covers matters of public concern [Art. III,
2. There is a high probability that the Sec. 7].
respondent will depart from the Philippines
to evade arrest and prosecution of crime The people’s right to information is not
against him or her. absolute. The constitutional guarantee to
information “does not open every door to any
Validity of the PHDO and all information” [Legaspi v. CSC, G.R. No.
The order shall be valid until lifted by the 72119 (1987)]. It is limited to matters of public
issuing court as may be warranted by the concern, and is subject to such limitations as
preliminary investigation [Rule on may be provided by law. Also, the State’s policy
Precautionary Hold Departure Order, A.M. No. of full disclosure is restricted to transactions
18-07-05-SC, Sec. 6]. involving public interest, and is further subject
to reasonable conditions prescribed by law
I. Right to Information [Sereno v. CTRM-NEDA, G.R. No. 175210
(2016)].
Article III, Section 7. The right of the people to There is no rigid test in determining whether or
information on matters of public concern shall be
recognized. Access to official records, and to
not a particular information is of public concern
documents and papers pertaining to official acts, or public interest. Both terms cover a wide
transactions, or decisions, as well as to government range of issues that the public may want to be
research data used as basis for policy development, familiar with either because the issues have a
shall be afforded the citizen, subject to such direct effect on them or because the issues
limitations as may be provided by law. “naturally arouse the interest of an ordinary
citizen.” As such, whether or not the
information sought is of public interest or public
Article II, Section 28. Subject to reasonable
conditions prescribed by law, the State adopts and concern is left to the proper determination of
implements a policy of full public disclosure of all its the courts on a case-to-case basis [Sereno v.
transactions involving public interest. CTRM-NEDA, supra].
Page 144 of 384

Right to Information Covers Matters of 6. Offers exchanged during diplomatic
Public Concern: negotiations [Akbayan Citizens Action
1. Official records Party v. Aquino, G.R. No. 170516 (2008)]
2. Documents pertaining to official acts 7. Other confidential matters (i.e., RA 6713,
3. Government research date used as basis closed door Cabinet meetings, executive
for policy development sessions, or internal deliberations in the
Supreme Court) [Chavez v. PCGG,
Matters of Public Concern in supra]
Jurisprudence
● Loanable funds of GSIS [Valmonte v. b. Based on Access
Belmonte, Jr. G.R. No. 74930 (1989)] 1. Opportunity to inspect and copy records
● Civil service eligibility of sanitarian at his expense [Chavez v. PEA and
employees [Legaspi v. CSC, supra] Amari, supra]
● Appointments made to public offices and 2. Not the right to compel custodians of
the utilization of public property [Gonzales official records to prepare lists, abstracts,
v. Narvasa, G. R. No. 140835 (2000)] summaries and the like [Valmonte v.
● National board examinations such as the Belmonte, Jr., supra]
CPA Board Exams [Antolin v. Domondon,
G.R. No.165036 (2010)] c. Based on Availability
● Presidential and Vice-Presidential Debates The right is available only to citizens.
[Rappler, Inc. v. Bautista, G.R. No. 222702
(2016)] In case of denial of access, the government
Two requisites must concur before the agency has the burden of showing that the
right to information may be compelled by information requested is not of public concern,
writ of mandamus: or if it is of public concern, that the same has
1. The information sought must be in relation been exempted by law from the operation of
to matters of public concern or public the guarantee [Legaspi v. CSC, supra].
interest;
2. It must not be exempt by law from the J. Eminent Domain
operation of the constitutional guarantee
[Sereno v. CTRM-NEDA, supra]. Article III, Section 9. Private property shall not be
taken for public use without just compensation.
Restrictions to Right to Information
The right of the people to information must be
balanced against other genuine interests 1. Concept
necessary for the proper functioning of the The power of eminent domain is the inherent
government [Bernas]. right of the State to forcibly acquire needed
property upon just compensation, in order to
a. Based on Kinds of Information; devote it to the intended public use [Cruz].
Exempted information
1. Privileged information rooted in It is also called the power of expropriation.
separation of powers
2. Information of military and diplomatic Section 9, Article III merely imposes a limit on
secrets the government’s exercise of this power
3. Information affecting national and [Republic v. Tagle, G.R. No. 129079 (1998)].
economic security
4. Information on investigations of crimes by The exercise of the right of eminent domain,
law enforcers before prosecution [Chavez whether directly by the State or by its
v. PEA and Amari, G.R. No. 133250 authorized agents, is necessarily in derogation
(2002)] of private rights. The authority to condemn is to
5. Trade secrets and banking transactions be strictly construed in favor of the owner and
[Chavez v. PCGG, G.R. No. 130716 against the condemnor. When the power is
(1998)] granted, the extent to which it may be
Page 145 of 384

exercised is limited to the express terms or and without which, the government’s
clear implication of the statute in which the possession over the subject property becomes
grant is contained [National Power Corp. v. illegal [Secretary of the Department of Public
Tarcelo, G.R. No. 198139 (2014)]. Works and Highways v. Sps. Tecson, G.R. No.
179334 (2015)].
Who May Exercise
The repository of eminent domain powers is However, full payment of just compensation is
the legislature (i.e., exercised through the not a prerequisite for the Government’s
enactment of laws). But the power of eminent effective taking of the property. When the
domain may be delegated to LGUs and other taking of the property precedes the payment of
government entities (via charter); however, just compensation, the Government shall
such delegation must be made by law indemnify the property owner by way of interest
[Manapat v. CA, G.R. No. 110478 (2007)]. [Republic v. Mupas, G.R. No. 181892 (2015)].
Under the existing laws, the following Taking vs. Transfer of Title
may exercise the power of expropriation: There is taking when the owner is actually
1. Congress deprived or dispossessed of his property, or
2. President when there is a practical destruction or a
3. Local legislative bodies material impairment of the value of his
4. Certain public corporations, like the property, or when he is deprived of the ordinary
National Housing Authority (NHA) and use thereof [Republic v. Heirs of Borbon, 750
water districts [Metropolitan Cebu Water Phil. 37-56 (2015), citing Ansaldo v. Tantuico,
District v. J. King and Sons Company, Inc., Jr., 266 Phil. 319 (1990)].
G.R. No. 175983 (2009)]
5. Quasi-public corporations like the Two Phases of Expropriation:
Philippine National Railways (PNR), PLDT, a. The condemnation of the property after it is
and Meralco determined that its acquisition will be for a
public purpose or public use; and
Requisites for Valid Exercise b. The determination of just compensation to
1. Private property; be paid for the taking of private property to
2. Genuine necessity — Inherent/presumed be made by the court with the assistance of
in legislation, but when the power is not more than three commissioners
delegated (e.g., LGUs), necessity must be [Republic v. Mupas, supra].
proven;
3. For public use - Court has adopted a broad Eminent Domain vs. Regulatory Taking
definition of “public use”; a. Eminent domain is an inherent power of the
4. Payment of just compensation; state. Just compensation must be paid.
5. Due process [Manapat v. CA, supra]. b. Regulatory taking is done in the exercise of
the state’s police power. In this case, just
How Exercised compensation need not be paid.
Our laws require that the State’s power of
eminent domain shall be exercised through Examples from Jurisprudence
expropriation proceedings in court. Whenever The imposition of an aerial easement of right-
private property is taken for public use, it of-way was held to be compensable taking.
becomes the ministerial duty of the concerned The exercise of the power of eminent domain
office or agency to initiate expropriation does not always result in the taking or
proceedings [Department of Transportation appropriation of title to the expropriated
and Communication v. Sps. Abecina, G.R. No. property; it may also result in the imposition of
206484 (2016)]. a burden upon the owner of the condemned
property, without loss of title or possession
Prior filing of an expropriation case is a [National Power Corporation v. Gutierrez, G.R.
condition sine qua non before the government No. 60077 (1991)].
is allowed to enter the property being reclaimed
Page 146 of 384
A municipal ordinance prohibiting a building owners to just compensation has been
which would impair the view of the plaza from violated.
the highway was considered regulatory taking
[People v. Fajardo, G.R. No. L-12172 (1958)]. Section 3(a) of R.A. No. 6395, which limits its
liability to easement fee of not more than 10%
2. Public Use of the market value of the property traversed by
Any use directly available to the general public its transmission lines, cannot restrict the
as a matter of right and not merely of constitutional power of the courts to determine
forbearance of accommodation. just compensation.
Public use may also cover uses which, while Statutes and executive issuances fixing or
not directly available to the public, redound to providing for the method of computation just
their indirect advantage or benefit. compensation are not binding on courts and, at
best, are treated as mere guidelines in
The requirement of public use is deemed ascertaining the amount thereof.
satisfied because of the vicarious advantages
enjoyed by the people as a whole, by the General Rule: Just compensation is
promotion of social justice objectives (e.g., determined as of the date of the taking of the
equitable diffusion of property ownership; property, or the filing of the complaint,
agrarian reform; enhancement of the dignity; whichever came first [Sec. 4, Rule 67, Rules of
welfare and security of the underprivileged). Court]. If the filing of the complaint takes place
Under the new concept, “public use” means at the same time as the taking or entry, it is
public advantage, convenience or benefit, computed at the time of filing [City of Iloilo v.
which tends to contribute to the general welfare Judge Contreras-Besana, G.R. No. 168967
and the prosperity of the whole community, like (2010)].
a resort complex for tourists or housing project
[Heirs of Juancho Ardona v. Reyes, G.R. Nos. When the taking of the property sought to be
L-60549, 60553-60555 (1983); Sumulong v. expropriated coincides with the
Guerrero, G.R. No. L-48685 (1987)]. commencement of the expropriation
proceedings, or takes place subsequent to the
3. Just Compensation filing of the complaint for eminent domain, the
just compensation should be determined as of
a. Definition the date of the filing of the complaint [City of
The property’s fair market value at the time of Iloilo v. Judge Contreras-Besana, supra].
the filing of the complaint, or that sum of money
which a person desirous to buy but not Exception: When the property is taken before
compelled to buy, and an owner willing but not the filing of the complaint, assessment should
compelled to sell, would agree on as price to be made as of the time of taking or entry.
be given and received therefor [National Power
Corporation v. De Veyra, G.R. No. L-15763 The Court uniformly ruled in Secretary of the
(2008)]. Department of Public Works and Highways v.
Sps. Tecson [G.R. No. 179334 (2013)] that in
a long line of cases, the fair market value of the
b. Determination of Just
property at the time of taking is controlling for
Compensation purposes of determining just compensation
Determination of just compensation is a judicial
[Estate of Rodriguez v. National Transmission
function that cannot be “usurped by any other
Corporation, G.R. No. 245377 (2020)].
branch or official of the government” [National
Power Corporation v. Sps. Zabala, G.R. No.
In cases where the fair market value of the
173520 (2013)].
property is difficult to ascertain, the court may
use other just and equitable market methods of
No legislative enactments or executive
valuation in order to estimate the fair market
issuances can prevent the courts from
determining whether the right of the property
Page 147 of 384
value of the property [Republic v. Mupas, the difference between the just
supra]. compensation as determined by the court
and the amount already or initially paid
In order to determine just compensation, the [Republic v. Decena, et al., supra].
trial court should first ascertain the market
value of the property by considering the cost of c. Effect of Delay
acquisition, the current value of like properties,
its actual or potential uses, and in the particular General Rule: For non-payment, the remedy
case of lands, their size, shape, location, and is the demand of payment of the fair market
the tax declarations thereon [Republic v. Sps. value of the property and not the recovery of
Salvador, G.R. No. 205428 (2017)]. possession of the expropriated lots [Republic v.
Court of Appeals, G.R. No. 146587 (2002);
If as a result of the expropriation, the remaining Reyes v. National Housing Authority, G.R. No.
lot suffers from an impairment or decrease in 147511 (2003)].
value, consequential damages may be
awarded by the trial court, provided that the Exception: When the government fails to pay
consequential benefits which may arise from just compensation within five years from the
the expropriation do not exceed said damages finality of the judgment in the expropriation
suffered by the owner of the property [Republic proceedings, the owners concerned shall have
v. Sps. Salvador, supra]. the right to recover possession of their property
[Republic v. Lim, G.R. No. 161656 (2005)].
Prevailing Rate of Interest 4. Expropriation by Local

6% per annum [BSP Circular No. 799 (s. 2013), Government Units
effective July 1, 2013] .
Requisites
Just compensation contemplates just and 1. Enactment of an ordinance, not a
prompt payment, and ‘prompt’ payment, in resolution;
turn, requires the payment in full of the just 2. Must be for a public use, purpose or
compensation as finally determined by the welfare, or for the benefit of the poor and
courts. the landless;
3. Payment of just compensation;
Absent full payment of just compensation, 4. Must be preceded by a valid and definite
interest on the unpaid portion (i.e., the just offer made to the owner, who rejects the
compensation determined by the court at the same [Sps. Yusay v. CA, G.R. No. 156684
time the decision becomes final and executory (2011)].
minus the initial deposit), likewise runs as a
matter of law and follows as a matter of course
[Republic v. Decena, et al., G.R. No. 212786 K. Right to Association
(2018)]
Article III, Section 8. The right of the people,
R.A. No. 8974 Requires the Government including those employed in the public and private
to Pay at Two Stages: sectors, to form unions, association, or societies for
purposes not contrary to law shall not be abridged.
1. Immediately upon the filing of the
complaint, the initial deposit which is 100%
of the value of the property based on the Article XIII, Section 3. The State shall afford full
current relevant zonal valuation of the BIR, protection to labor, local and overseas, organized
and the value of the improvements and/or and unorganized, and promote full employment and
structures sought to be expropriated; equality of employment opportunities for all.
2. The just compensation as determined by
It shall guarantee the rights of all workers to self-
the court, when the decision becomes final organization, collective bargaining negotiations, and
and executory, in which case the peaceful concerted activities including the right to
implementing agency shall pay the owner strike in accordance with law. They shall be entitled
Page 148 of 384

to security of tenure, humane conditions of work, controversial political issues in order to find
and a living wage. They shall also participate in solutions capable of satisfying everyone
policy and decision-making processes affecting concerned. Only if a political party incites
their rights and benefits as may be provided by law. violence or puts forward policies that are
incompatible with democracy does it fall
xxx
outside the protection of the freedom of
association guarantee [Ang Ladlad LGBT Party
Article IX-B, Section 2(5). The right to self- v. COMELEC, supra].
organization shall not be denied to government
employees. Freedom not to Associate
Freedom of association presupposes freedom
not to associate [Roberts v. United States
How Should the Limitation “For Purposes
Jaycees, 468 U.S. 609 (1984)].
not Contrary to Law” be Interpreted?
Unless an association or society could be
Government actions that unconstitutionally
shown to create an imminent danger to public
burden that right may take many forms, one of
safety, there is no justification for abridging the
which is intrusion into a group’s internal affairs
right to form associations.
by forcing it to accept a member it does not
desire. Such forced membership is
The government must comply with the heavy
unconstitutional if the person’s presence
burden of showing that the organization in fact
affects in a significant way the group’s ability to
presents a clear and present danger of
advocate public or private viewpoints [Boy
substantive evil which the State has the right to
Scouts of America v. Dale, 530 US 640 (2000)].
protect [Bernas].
1. Scope and Limitations L. Non-Impairment of Contracts
The right is recognized as belonging to people Article III, Section 10. No law impairing the
whether employed or unemployed, and obligation of contracts shall be passed.
whether in the government or in the private
sector includes the right to unionize. 1. Scope and Limitations
The State does not infringe on the fundamental The non-impairment clause ensures that the
right to form lawful associations when it leaves integrity of contracts is protected from any
to citizens the power and liberty to affiliate or unwarranted State interference. It ensures that
not affiliate with labor unions [Victoriano v. the terms of a contract mutually agreed upon
Elizalde Rope Workers Union, supra]. by the parties are not tampered with or
modified by a subsequent law [BDO, Inc. v.
Every group has a right to join the democratic ICEC, G.R. Nos. 218485-86 & 218493-97
process, association itself being an act of (2021)].
expression of the member’s belief, even if the
group offends the sensibilities of the majority. The non-impairment clause is limited in
Any restriction to such requires a compelling application to laws that derogate from prior acts
state interest to be proven by the State [Ang or contracts by enlarging, abridging or in any
Ladlad LGBT Party v. COMELEC, G.R. No. manner changing the intention of the parties
190582 (2010)]. [PADPAO v. COMELEC, G.R. No. 223505
(2017)].
Political parties may freely be formed although
there is a restriction on their activities [...] but This provision prohibits the passing of a law
the ban is narrow, not total. It operates only on that changes the terms of an already existing
concerted or group action of political parties. contract which:
1. Changes the terms of a contract between
A political group should not be hindered solely the parties;
because it seeks to publicly debate
Page 149 of 384
2. Imposes new conditions; Examples of Valid Impairment of
3. Dispenses with those agreed upon; or Contracts
4. Withdraws remedies for the enforcement of 1. Invalidating contracts concerning forest
the rights of the parties [PADPAO v. lands. Preservation of forest lands could
COMELEC, supra]. entail intrusion upon contractual rights if it
is for the benefit of the many [Land Bank of
A change in procedural remedies which does the Phils. v. Republic, G.R. No. 150824
not diminish substantive rights or increase (2008)].
substantive obligations does not violate the 2. Caps on the rates that cooperatives can
guarantee. charge [SURNECO v. Energy Regulatory
Commission, G.R. No. 183626 (2010)].
Substantial impairment is a law which changes 3. Municipal ordinance, invalidating
the terms of a legal contract between parties, restrictions set by private developers
either in the time or mode of performance, or regarding the use of land [Learning Child,
imposes new conditions, or dispenses with Inc. v. Ayala Alabang Village Association,
those expressed, or authorizes for its G.R. No. 134269 (2010)].
satisfaction something different from that
provided in its terms, is law which impairs the c. Exclusions
obligation of a contract and is therefore null and The non-impairment clause is a limit on
void [Lepanto Consolidated Mining Co. v. legislative power, and not of judicial or quasi-
WMC Resources Int’l. Pty. Ltd., G.R. No. judicial power [BPI v. SEC, G.R. No. 164641
162331 (2006)]. (2007)].
Contemporary Application of the Non- Examples of Contracts Not Included in

Impairment Clause the Provision:
1. Timber license contracts [Republic v.
a. When Non-Impairment Clause Prevails Pagadian City Timber Co., Inc., G.R. No.
1. Against the removal of tax exemptions, 159308 (2008)].
where the consideration for the 2. Franchise contracts [PAGCOR v. BIR,
contract is the tax exemption itself. G.R. No. 208731 (2016)].
2. Regulation on loans. New regulations 3. Exercise of quasi-judicial powers of a
on loans making redemption of department, even if affirmed by the
property sold on foreclosure stricter are President [Hacienda Luisita v. PARC, G.R.
not allowed to apply retroactively [Co v. No. 171101 (2011)].
Philippine National Bank, G.R. No. L-
51767 (1982)] Note: Timber licenses, permits, and license
agreements are the principal instruments by
b. When Non-Impairment Clause Yields which the State regulates the utilization and
1. Valid exercise of police power (i.e., disposition of forest resources to the end that
zoning regulation) [Presley v. Bel-Air public welfare is promoted. They are not
Village Association, Inc., G.R. No. deemed contracts within the purview of the due
86774 (1991)]. process of law clause [Oposa v. Factoran, Jr.,
2. Premature campaign ban [Chavez v. G.R. No. 101083 (1993)].
COMELEC, G.R. No. 162777 (2004)].
3. Liquidation of a chartered bank The Court held that the non-impairment clause
[Philippine Veterans Bank Employees does not apply to the 1992 Memorandum of
Union v. Philippine Veterans Bank, Agreement (MOA) between The Government
G.R. No. 67125 (1990)]. of the Republic of the Philippines and the
4. Statute that exempts a party from any Marcos family. If one Congress cannot limit or
on class of taxes. reduce the plenary legislative power of
5. Against freedom of religion [Victoriano succeeding Congresses, so, too, the exercise
v. Elizalde Rope Workers, supra]. of executive power by the past president
6. Judicial or quasi-judicial order. cannot emasculate that of the incumbent
Page 150 of 384

president. The discretionary act of the former is Extending fee exemption to a juridical person
not binding upon and cannot tie the hands of may be prone to abuse by corporations and
the latter, who may alter the same” [Ocampo v. entities bent on circumventing the rule thereof.
Enriquez, G.R. No. 225973 (2017)].
Indigent Party
A party may be authorized to litigate his action,
M. Free Access to Courts and claim or defense as an indigent if the court,
Adequate Legal Assistance upon an ex parte application and hearing, is
satisfied that the party is one who has no
Article III, Section 11. Free access to the courts money or property sufficient and available for
and quasi-judicial bodies and adequate legal food, shelter and basic necessities for himself
assistance shall not be denied to any person by and his family.
reason of poverty.
Such authority shall include an exemption from
payment of docket and other lawful fees, and
Rules of Court, Rule 3, Section 21. Indigent party.
— … If the court should determine after hearing that
of transcripts of stenographic notes which the
the party declared as an indigent is in fact a person court may order to be furnished to him.
with sufficient income or property, the proper docket
and other lawful fees shall be assessed and If the applicant for exemption meets the salary
collected by the clerk of court. and property requirements under Section 19 of
Rule 141, then the grant of the application is
mandatory. When the application does not
Rules of Court, Rule 141, Section 19. Indigent
litigants exempt from payment of legal fees. —
satisfy one or both requirements, then the
Indigent litigants (a) whose gross income and that of application should not be denied outright;
their immediate family do not exceed four thousand instead, the court should apply the “indigency
(P4,000.00) pesos a month if residing in Metro test” under Section 21 of Rule 3 and use its
Manila, and three thousand (P3,000.00) pesos a sound discretion in determining the merits of
month if residing outside Metro Manila, and (b) who the prayer for exemption [Sps. Algura v. LGU
do not own real property with an assessed value of
more than fifty thousand (P50,000.00) pesos shall
of Naga City, G.R. No. 150135 (2006)].
be exempt from the payment of legal fees.
Free Access to the Court Does NOT Mean
The legal fees shall be a lien on any judgment the Courts Cannot Impose Filing Fees
rendered in the case favorably to the indigent Exemption of cooperatives from payment of
litigant, unless the court otherwise provides.
court and sheriff fees no longer stands.
To be entitled to the exemption herein provided, the Cooperatives can no longer invoke R.A. No.
litigant shall execute an affidavit that he and his 6938, as amended by R.A. No. 9520, as basis
immediate family do not earn a gross income above for exemption from the payment of legal fees
mentioned, nor they own any real property with the [Re: Perpetual Help Community Cooperative,
assessed value aforementioned, supported by an A.M. No. 12-2-03-0 (2012)].
affidavit of a disinterested person attesting to the
truth of the litigant’s affidavit.
Any falsity in the affidavit of a litigant or disinterested

person shall be sufficient cause to strike out the
pleading of that party, without prejudice to whatever
criminal liability may have been incurred.
Concept
The Constitution explicitly premised the fee
access clause on a person’s poverty, a
condition from which only a natural person can
suffer.
Page 151 of 384

N. Custodial Investigation counsel, preferably of his own choice, who shall at
all times be allowed to confer privately with the
person arrested, detained or under custodial
1. Meaning of Custodial Investigation investigation. If such person cannot afford the
services of his own counsel, he must be provided
Article III, Section 12. with a competent and independent counsel by the
(1) Any person under investigation for the investigating officer.
commission of an offense shall have the right to
be informed of his right to remain silent and to
have competent and independent counsel a. Availability
preferably of his own choice. If the person
cannot afford the services of counsel, he must a. When the person is already under
be provided with one. These rights cannot be custodial investigation;
waived except in writing and in the presence of b. During “critical pre-trial stages” in the
counsel.
(2) No torture, force, violence, threat, intimidation,
criminal process.
or any other means which vitiate the free will
shall be used against him. Secret detention Custodial Investigation
places, solitary, incommunicado, or other Involves any questioning initiated by law
similar forms of detention are prohibited. enforcement.
(3) Any confession or admission obtained in
violation of this or Section 17 hereof shall be
inadmissible in evidence against him. When the investigation is no longer a general
(4) The law shall provide for penal and civil inquiry unto an unsolved crime but has begun
sanctions for violations of this section as well as to focus on a particular suspect, as when the
compensation to the rehabilitation of victims of suspect has been taken into police custody and
torture or similar practices, and their families. the police carries out a process of interrogation
that lends itself to eliciting incriminating
Miranda Warning statements [People v. Marra y Zarate, G.R. No.
The person under custodial investigation must 108494 (1994)].
be informed that:
1. He has a right to remain silent and that any Includes issuing an invitation to a person under
statement he makes may be used as investigation in connection with an offense he
evidence against him; is suspected to have committed [Sec. 2, R.A.
2. That he has a right to have competent and No. 7438].
independent counsel of his choice;
3. That he has a right to be informed of the Custodial Investigation Report
first two rights. a. Reduced to writing by the investigating
officer;
2. Rights of a Person Under Custodial b. It shall be read and adequately explained
to person arrested or detained by counsel
Investigation
or assisting counsel in a language or
dialect known to him.
RA 7438: Rights of Persons Under Custodial
Investigation Non-compliance with the second requirement
Section 1. Statement of Policy. – It is the policy of
the State to value the dignity of every human being will render the report null and void and of no
and guarantee full respect for human rights. effect whatsoever [Sec. 2(c), R.A. No. 7438].
Section 2. Rights of Persons Arrested, Detained or Critical Pre-Trial Stage

Under Custodial Investigation; Duties of Public Any critical confrontation by the prosecution at
Officers. –
pretrial proceedings where the results might
(b) Any public officer or employee, or anyone acting
under his order or his place, who arrests, detains or well determine his fate and where the absence
investigates any person for the commission of an of counsel might derogate from his right to a
offense: shall inform the latter, in a language known fair trial [U.S. v. Wade, 388 U.S. 218 (1967)].
to and understood by him, of his rights to remain
silent and to have competent and independent
Page 152 of 384

Show-up and Police Line-up 2. Right to Counsel
General Rule: No right to counsel.
Section 2. Rights of Persons Arrested, Detained or
Exception: Right to counsel if accusatory. The Under Custodial Investigation; Duties of Public
moment there is a move or even an urge of said Officers. – (a) Any person arrested, detained or
investigators to elicit admissions or under custodial investigation shall at all times be
confessions or even plain information which assisted by counsel.
may appear innocent or innocuous at the time,
from said suspect [Gamboa v. Cruz, G.R. No. Competent and independent counsel
L-56291 (1988)]. preferably of the suspect’s own choice.
Show-up Not independent counsel: special counsel,

● Out-of-court identification; prosecutor, counsel of the police or a municipal
● Accused is brought face-to-face with the attorney whose interest is adverse to that of the
witness for identification. accused [People v. Fabro, G.R. No. 95089
(1997)], mayor [People v. Taliman, G.R. No.
Police Line-up 109143 (2000)], barangay captain [People v.
● Suspect is identified by witness from a Tomaquin, G.R. No. 133188 (2004)].
group of persons gathered for that
purpose; A lawyer who was applying for work in the NBI
● When the petitioner was identified by the cannot be considered independent because he
complainant at the police line-up, he had cannot be expected to work against the interest
not been held yet to answer for a criminal of a police agency he was hoping to join, as a
offense. The police line-up is not a part of few months later, he in fact was admitted into
the custodial inquest, hence, he was not its work force [People v. Januario, G.R. No.
yet entitled to counsel. 98252 (1997)].
b. Requisites Not competent counsel: lawyer signing only as

witness [People v. Ordoño, G.R. No. 132154
Effective communication by the investigator of (2000)], mayor of town where accused is
rights of accused [People v. Agustin, G.R. No. detained [People v. Velarde y Bandojo, G.R.
110290 (1995)]. No. 139333 (2002)].
1. Right to Remain Silent Failure to ask for a lawyer does not constitute
The warning is needed simply to make the a waiver.
person under custodial investigation aware of
the existence of the right. No effective waiver of the right to counsel
during interrogation can be recognized unless
This warning is the threshold requirement for specifically made after the warnings have been
an intelligent decision as to its exercise. given.
Further, the warning will show the individual Request for assistance of counsel before any
that his interrogators are prepared to recognize interrogation cannot be ignored/denied by
his privilege should he choose to exercise it. authorities. Not only right to consult with an
attorney but right to be given a lawyer to
The warning of the right to remain silent must represent him if he’s indigent.
be accompanied by the explanation that
anything said can and will be used against the
individual in court. This warning is needed in
order to make him aware not only of the
privilege to remain silent, but also of the
consequences of forgoing it.
Page 153 of 384

3. Rights to Visitation and Conference Burden Of Proving Voluntariness of
Waiver
Section 2. Rights of Persons Arrested, Detained or Presumption is against the waiver. Burden of
Under Custodial Investigation; Duties of Public proof lies with the prosecution.
Officers. – xxx (f) Any person arrested or detained
or under custodial investigation shall be allowed Prosecution must prove with strongly
visits by or conferences with any member of his convincing evidence to the satisfaction of the
immediate family, or any medical doctor or priest or
religious minister chosen by him or by any member
Court that indeed the accused:
of his immediate family or by his counsel, or by any a. Willingly and voluntarily submitted his
national non-governmental organization duly confession; and
accredited by the Commission on Human Rights or b. Knowingly and deliberately manifested that
by any international non-governmental organization he was not interested in having a lawyer
duly accredited by the Office of the President. The assist him during the taking of that
person’s “immediate family” shall include his or her
spouse, fiancé or fiancée, parent or child, brother or
confession [People v. Jara, G.R. No. L-
sister, grandparent or grandchild, uncle or aunt, 61356-57 (1986)].
nephew or niece, and guardian or ward.
4. Exclusionary Doctrine
3. Requisites of a Valid Waiver Exclusionary Rule
According to this rule, once the primary source
What can be waived? (the tree) is shown to have been unlawfully
The right to remain silent and the right to obtained, any secondary or derivative evidence
counsel. (the fruit) derived from it is also inadmissible.
The fruit of the poisonous tree is at least once
What cannot be waived? removed from the illegally seized evidence, but
The right to be given the Miranda warnings. it is equally inadmissible. The rule is based on
the principle that evidence illegally obtained by
Rule on Waiver [Art. III, Sec. 12] the State should not be used to gain other
a. Must be in writing; evidence because the originally illegally
b. Made in the presence of counsel. obtained evidence taints all evidence
subsequently obtained [People v.
Section 2. Rights of Persons Arrested, Detained or Samontañez, G.R. No. 134530 (2000)].
Under Custodial Investigation; Duties of Public
Officers. – xxx (c) The custodial investigation report Violations of the Miranda rights render
shall be reduced to writing by the investigating
inadmissible only the extrajudicial confession
officer, provided that before such report is signed, or
thumbmarked if the person arrested or detained or admission made during the custodial
does not know how to read and write, it shall be read investigation. The admissibility of other
and adequately explained to him by his counsel or evidence is not affected even if obtained or
by the assisting counsel provided by the taken in the course of the custodial
investigating officer in the language or dialect known investigation [People v. Malimit, G.R. No.
to such arrested or detained person, otherwise, such
109775 (1996)].
investigation report shall be null and void and of no
effect whatsoever.
Extrajudicial Confession by a Person
Any waiver by a person arrested or detained under Arrested, Detained or Under Custodial
the provisions of Article 125 of the Revised Penal Investigation
Code, or under custodial investigation, shall be in
1. Shall be in writing; and
writing and signed by such person in the presence
of his counsel; otherwise the waiver shall be null and 2. Signed in the presence of his counsel or in
void and of no effect. the latter’s absence:
a. upon a valid waiver; and
b. in the presence of any of the following:
i. Any of the parents;
ii. Older brother and sisters;
iii. Spouse;
Page 154 of 384
iv. Municipal mayor; thereat.
v. Municipal judge; When an accused under custody escapes, he
shall be deemed to have waived his right to be
vi. District school supervisor;
present on all subsequent trial dates until
vii. Priest or minister of the gospel as custody over him is regained. Upon motion, the
chosen by him. accused may be allowed to defend himself in
person when it sufficiently appears to the court
Otherwise, such extrajudicial confession shall that he can properly protect his right without the
be inadmissible as evidence in any proceeding assistance of counsel.
d. To testify as a witness in his own behalf but
[Sec. 2d, R.A. No. 7438].
subject to cross-examination on matters
covered by direct examination. His silence shall
In the absence of a valid waiver, any not in any manner prejudice him.
confession obtained from the appellant during e. To be exempt from being compelled to be a
the police custodial investigation relative to the witness against himself.
crime, including any other evidence secured by f. To confront and cross-examine the witnesses
against him at the trial. Either party may utilize
virtue of the said confession is inadmissible in
as part of its evidence the testimony of a
evidence even if the same was not objected to witness who is deceased, out of or cannot with
during the trial by the counsel of the appellant due diligence be found in the Philippines,
[People v. Samontañez, supra]. unavailable or otherwise unable to testify, given
in another case or proceeding, judicial or
administrative, involving the same parties and
O. Rights of the Accused subject matter, the adverse party having the
opportunity to cross-examine him.
Article III, Section 14. g. To have compulsory process issued to secure
(1) No person shall be held to answer for a criminal the attendance of witnesses and production of
offense without due process of law. other evidence in his behalf.
(2) In all criminal prosecutions, the accused shall h. To have speedy, impartial and public trial.
be presumed innocent until the contrary is i. To appeal in all cases allowed and in the
proved, and shall enjoy the right to be heard by manner prescribed by law.
himself and counsel, to be informed of the
nature and cause of the accusation against 1. Criminal Due Process
him, to have a speedy, impartial, and public
trial, to meet the witnesses face to face, and to
have compulsory process to secure the
In criminal proceedings then, due process is
attendance of witnesses and the production of satisfied if the accused is “informed as to why
evidence in his behalf. However, after he is proceeded against and what charge he
arraignment, trial may proceed notwithstanding shall meet, with his conviction being made to
the absence of the accused provided that he rest on evidence that is not tainted with falsity
has been duly notified and his failure to appear after full opportunity for him to rebut it and the
is unjustifiable.
sentence being implied in accordance with a
valid law. It is assumed, of course, that the
Rules of Court, Rule 115, Section 1. Rights of court that rendered the decision is one of
accused at the trial. — In all criminal prosecutions, competent jurisdiction [Mejia v. Pamaran,
the accused shall be entitled to the following rights:
supra].
a. To be presumed innocent until the contrary is
proved beyond reasonable doubt.
b. To be informed of the nature and cause of the Requisites
accusation against him. 1. Accused is heard by a court of competent
c. To be present and defend in person and by jurisdiction;
counsel at every stage of the proceedings, from 2. Accused is proceeded against under the
arraignment to promulgation of the judgment.
The accused may, however, waive his
orderly process of law;
presence at the trial pursuant to the stipulations 3. Accused is given notice and opportunity to
set forth in his bail, unless his presence is be heard; and
specifically ordered by the court for purposes of 4. Judgment rendered is within the authority
identification. of a constitutional law.
The absence of the accused without justifiable
cause at the trial of which he had notice shall
be considered a waiver of his right to be present
Page 155 of 384

2. Bail or life imprisonment when evidence of guilt
is strong, regardless of the stage of the
criminal prosecution [Sec. 7, Rule 114,
Article III, Section 13. All persons, except those
charged with offenses punishable by reclusion ROC].
perpetua when evidence of guilt is strong, shall, b. Military men who participated in failed coup
before conviction, be bailable by sufficient sureties, d’état because of their threat to national
or be released on recognizance as may be provided security [Comendador v. De Villa, G.R. No.
by law. The right to bail shall not be impaired even 93177 (1991)].
when the privilege of the writ of habeas corpus is
suspended. Excessive bail shall not be required.
When Available
General Rule: From the very moment of arrest
(which may be before or after the filing of formal
Rules of Court, Rule 114, Section 1. Bail defined.
— Bail is the security given for the release of a charges in court) up to the time of conviction by
person in custody of the law, furnished by him or a final judgement (which means after appeal.
bondsman, to guarantee his appearance before any
court as required under the conditions hereinafter Arraignment of the accused is not essential to
specified. Bail may be given in the form of corporate the approval of the bail bond. When bail is
surety, property bond, cash deposit, or
authorized, it should be granted before
recognizance. (1a)
arraignment. Otherwise, the accused may be
precluded from filing a motion to quash. Also,
Purpose of Bail the court will be assured of the presence of the
“The purpose for bail is to guarantee the accused at the arraignment precisely by
appearance of the accused at the trial, or granting bail and ordering his presence at any
whenever so required by the Court. The stage of the proceeding [Lavides v. CA, G.R.
amount should be high enough to assure the No. 129670 (2000)].
presence of the accused when required but no
higher than is reasonably calculated to fulfill Rules of Court, Rule 114, Section 18. Notice of
this purpose. To fix bail at an amount application to prosecutor. — In the application for
equivalent to the civil liability of which petitioner bail under section 8 of this Rule, the court must give
is charged is to permit the impression that the reasonable notice of the hearing to the prosecutor
amount paid as bail is an exaction of the civil or require him to submit his recommendation.
liability that accused is charged of; this we
cannot allow because bail is not intended as a In this jurisdiction, before a judge may grant an
punishment, nor as a satisfaction of civil liability application for bail, whether bail is a matter of
which should necessarily await the judgment of right or discretion, the prosecutor must be
the appellate court” [Yap, Jr., v. CA, G.R. No. given reasonable notice of hearing or he must
141529 (2001)]. be asked to submit his recommendation
Basis of Right: Presumption of Innocence [Taborite v. Sollesta, A.M. No. MTJ-02-1388
The right to bail springs from the presumption (2003)].
of innocence accorded every accused upon
whom should not be inflicted incarceration at The prosecution must first be accorded an
the outset since, after the trial, he would be opportunity to present evidence. It is on the
entitled to acquittal, unless his guilt be basis of such evidence that judicial discretion
established beyond reasonable doubt is exercised in determining whether the
[Paderanga v. CA, G.R. No. 115407 (1995)]. evidence of guilt of the accused is strong. In
other words, discretion must be exercised
Who May Avail of Bail regularly, legally and within the confines of
General Rule: All persons under custody of procedural due process, that is, after
the law evaluation of evidence submitted by the
prosecution [Taborite v. Sollesta, supra].
Exceptions:
a. Those charged with a capital offense, or an Bail for the provisional liberty of the accused
offense punishable by reclusion perpetua regardless of the crime charged should be
Page 156 of 384

allowed independently of the merits of the Thus, the order granting or refusing bail must
charge, provided his continued incarceration is contain a summary of the evidence for the
clearly shown to be injurious to his health or to prosecution followed by the conclusion on
endanger his life [Enrile v. Sandiganbayan, whether or not the evidence of guilt is strong.
G.R. No. 213847 (2015)].
The clear implication therefore, is that if an
Bail As a Matter of Right accused who is charged with a crime
All persons, except those charged with punishable by reclusion perpetua is convicted
offenses punishable by reclusion perpetua by the trial court and sentenced to suffer such
when evidence of guilt is strong, shall, before a penalty, bail is neither a matter of right on the
conviction, be bailable by sufficient sureties, or part of the accused nor of discretion on the part
be released on recognizance as may be of the court. In such a situation, the court would
provided by law. The right to bail shall not be xxx have xxx ruled that the accused’s guilt has
impaired even when the privilege of the writ of been proven beyond reasonable doubt. Bail
habeas corpus is suspended. must not then be granted to the accused during
the pendency of his appeal from the judgment
Excessive bail shall not be required [Art. III, of conviction [People v. Nitcha, G.R. No.
Sec. 13]. 113517 (1995)]”
Bail As a Matter of Discretion b. In Extradition Proceedings

When the accused has been convicted in the
RTC of an offense not punishable by death, Extradition courts do not render judgements of
reclusion perpetua or life imprisonment, the conviction or acquittal so it does not matter
admission to bail becomes discretionary [Sec. whether or not the crimes the accused is being
5, Rule 114, ROC]. extradited for is punishable by reclusion
perpetua [US Government v. Judge Puruganan
Note: Since the grant of bail is a matter of and Mark Jimenez, G.R. No. 148571 (2002)].
discretion, a hearing must be conducted
whether or not the prosecution refuses to While our extradition law does not provide for
present evidence and the prosecutor must be the grant of bail to an extradite, however, there
notified to require him to submit his is no provision prohibiting him or her from filing
recommendation. This notice of hearing a motion for bail, a right to due process under
applies in all cases whether bail is a matter of the Constitution. [Government of Honk Kong
right or a matter of discretion [Zuño v. Cabebe, SAR v. Olalia, G.R. No. 153675 (2007)].
A.M. OCA No. 03-1800-RTJ, (2004) citing
Cortes v. Catral, A.M. No. RTJ-97-1387, Standards for Fixing Bail
(1997)].
In the cases where the grant of bail is Rules of Court, Rule 114, Section 9. Amount of
discretionary, due process requires that the bail; guidelines. — The judge who issued the
prosecution must be given an opportunity to warrant or granted the application shall fix a
present, within a reasonable time, all the reasonable amount of bail considering primarily, but
evidence that it may desire to introduce before not limited to, the following factors:
(a) Financial ability of the accused to give bail;
the court should resolve the motion for bail (b) Nature and circumstances of the offense;
[People v. Judge Donato, G.R. No. 79269 (c) Penalty for the offense charged;
(1991)]. (d) Character and reputation of the accused;
(e) Age and health of the accused;
a. In Case the Evidence of Guilt is Strong (f) Weight of the evidence against the accused;
(g) Probability of the accused appearing at the trial;
(h) Forfeiture of other bail;
In such a case, according to People v. San (i) The fact that accused was a fugitive from justice
Diego [G.R. No. L-29676 (1966)] the court’s when arrested; and
discretion to grant bail must be exercised in the (j) Pendency of other cases where the accused is
light of a summary of the evidence presented on bail.
by the prosecution.
Page 157 of 384

Excessive bail shall not be required. innocence [Alejandro v. Pepito, G.R. L-52090
(1980)].
Discretion is with the court called upon to rule The presumption of regularity in official duties
on the question of bail. We must stress, cannot by itself prevail over the presumption of
however, that where conditions imposed upon innocence of the accused. But where it is not
a defendant seeking bail would amount to a the sole basis for conviction, the presumption
refusal thereof and render nugatory the of regularity of performance of official functions
constitutional right to bail, we will not hesitate may prevail over the constitutional presumption
to exercise our supervisory powers to provide of innocence [People v. Acuram, G.R. No.
the required remedy [De La Camara v. Enage, 117954 (2000); People v. Abenes y Pascua,
G.R. No. L-32951-52 (1971)]. G.R. No. 210878 (2016)].
Duties of a Trial Judge in Case an A corporate entity has no personality to invoke

Application for Bail is Filed: the right to be presumed innocent which right
1. In all cases, whether bail is a matter of right is available only to an individual who is an
or of discretion, notify the prosecutor of the accused in a criminal case [Feeder
hearing of the application for bail or require International Line, Pte. v. CA, G.R. No. 94262
him to submit his recommendation (Sec. (1991)].
18, Rule 114, ROC);
2. Where bail is a matter of discretion, Equipoise Rule
conduct a hearing of the application for bail The presumption of innocence has given rise
regardless of whether or not the to a jurisprudential rule referred to as the
prosecution refuses to present evidence to equipoise rule.
show that the guilt of the accused is strong
for the purpose of enabling the court to Where the evidence adduced by the parties is
exercise its sound discretion (Sec. 7 and 8, evenly balanced, the constitutional
Rule 114, ROC); presumption of innocence should tilt the
3. Decide whether the guilt of the accused is balance in favor of the accused [Corpuz v.
strong based on the summary of evidence People, G.R. No. 180016 (1991)].
of the prosecution; and
4. If the guilt of the accused is not strong, The application of the rule is triggered by a
discharge the accused upon approval of situation where:
the bail bond (Sec. 19, Rule 114, ROC) a. The court is faced with conflicting versions
[Cortes v. Catral, A.M. No. RTJ-97-1387 of the prosecution and the defense; and
(1997)]. b. The evidence, facts, and circumstances
3. Presumption of Innocence are capable of two or more explanations,
The requirement of proof beyond reasonable one of which is consistent with the
doubt is a necessary corollary of the innocence of the accused and the other
constitutional right to be presumed innocent consistent with his guilt.
[People v. Dramayo, G.R. No. L-21325 (1971)].
Proof Beyond Reasonable Doubt
The presumption of innocence in favor of the Proof beyond reasonable doubt does not mean
accused imposes upon the People of the such a degree of proof, excluding possibility of
Philippines, “as the plaintiff in criminal cases, to error, produces absolute certainty. Moral
prove beyond reasonable doubt not only each certainty only is required, or that degree of
element of the crime but also the identity of the proof which produces conviction in an
accused as the criminal” [People v. Espera y unprejudiced mind [Sec. 2, Rule 133, ROC].
Cuyacot, G.R. No. 202868, (2013)].
In order that circumstantial evidence may
The accused cannot present evidence before warrant conviction, the following requisites
the prosecution does so, even if the accused must concur:
pleads guilty. It violates the presumption of 1. There is more than once circumstance;
Page 158 of 384

2. The facts from which the inferences are informed of his right to remain silent and to have
derived from are proven; and competent and independent counsel preferably of
3. The combination of all the circumstances is his own choice. If the person cannot afford the
such as to produce a conviction beyond services of counsel, he must be provided with one.
reasonable doubt [People v. Bato, G.R. No. These rights cannot be waived except in writing and
in the presence of counsel.
113804 (1998)].
4. Right to be Heard Rules of Court, Rule 115, Section 1(c). Rights of

accused at the trial. — In all criminal prosecutions,
the accused shall be entitled to the following rights:
Article III, Section 14(2).
(2) In all criminal prosecutions, the accused shall be
(c) To be present and defend in person and by
presumed innocent until the contrary is proved, and
counsel at every stage of the proceedings, from
shall enjoy the right to be heard by himself and
arraignment to promulgation of the judgment.
counsel.
R.A. No. 7438, Section 2(a). Rights of Persons

Article III, Section 12(1).
Arrested, Detained or Under Custodial Investigation;
(1) Any person under investigation for the
Duties of Public Officers. – (a) Any person arrested
commission of an offense shall have the right to be
detained or under custodial investigation shall at all
informed of his right to remain silent and to have
times be assisted by counsel.
competent and independent counsel preferably of
his own choice. If the person cannot afford the
services of counsel, he must be provided with one. It means the accused is amply accorded legal
These rights cannot be waived except in writing and
in the presence of counsel.
assistance extended by a counsel who
commits himself to the cause of the defense
and acts accordingly. It is an efficient and truly
It means the accused is amply accorded legal decisive legal assistance, and not simply a
assistance extended by a counsel who perfunctory representation.
commits himself to the cause of the defense
and acts accordingly. It is an efficient and truly The right to counsel proceeds from the
decisive legal assistance, and not simply a fundamental principle of due process which
perfunctory representation [People v. Bermas, basically means that a person must be heard
G.R. No. 120420 (1999)]. before being condemned. The due process
requirement is part of a person’s basic rights; it
The right of the accused to present evidence is is not a mere formality that may be dispensed
guaranteed by no less than the Constitution with or performed perfunctorily [People v.
itself. Article III, Section 14(2) thereof, provides Bermas, G.R. No. 120420, (1999)].
that in all criminal prosecutions, the accused
shall enjoy the right to be heard by himself and One need not, however, be an accused to avail
counsel. This constitutional right includes the of the right to counsel and the right to counsel
right to present evidence in one’s defense, as does not commence only during trial. Every
well as the right to be present and defend person under custody of the law enjoys the
oneself in person at every stage of the right. Even a person under investigation for an
proceedings. Stripping the accused of all his offense has the right to have a competent and
pre-assigned trial dates constitutes a patent independent counsel preferably of his own
denial of the constitutionally guaranteed right to choice [Riano].
due process [Villareal v. People, G.R. No.
151258 (2012)]. Elements of the Right to Counsel:
a. Court’s duty to inform the accused of right
5. Right to Counsel to counsel before being arraigned;
b. It must ask him if he desires the services of
Article III, Section 12(1). counsel;
(1) Any person under investigation for the c. If he does, and is unable to get on, the
commission of an offense shall have the right to be Court must give him one; if the accused
Page 159 of 384

wishes to procure private counsel, the c. Subpoena
Court must give him time to obtain one.
d. Where no lawyer is available, the Court 10. Trial in Absentia
may appoint any person resident of the
province and of good repute for probity and Requisites
ability. a. Accused failed to appear for trial despite
postponement and notice;
6. Right to be Informed of the Nature b. Failure to appear is unjustified;
and Cause of Accusation c. After arraignment.
Procedural due process requires that the Consequences of the Accused’s Failure
accused must be informed why he is being to Appear for Trial
prosecuted and what charge he must meet Waiver of right to cross-examine and present
[Vera v. People, G.R. No. L-31218 (1970)]. evidence [Gimenez v. Nazareno, G.R. No. L-
37933 (1988)].
7. Right to Speedy, Impartial and
Public Trial When Presence of the Accused is a Duty
See: P. Right to Speedy Trial and Speedy General Rule:

Disposition of Cases a. Arraignment and Plea
Section 1(b) of Rule 116 requires that the
8. Right of Confrontation “accused must be present at the
arraignment and must personally enter his
Serves as the basis of the right to cross- plea.”
examination.
b. During Trial for Identification
Two-Fold Purpose Common reason suggests that the
a. To afford the accused an opportunity to test prosecution must be afforded the right to
identify the accused as the perpetrator of
the testimony of the witness by cross-
examination. the offense and the very person named or
b. To allow the judge to observe the described in the complaint or information
because rights during the trial are not
deportment of [the] witness [Go v. People,
G.R. No. 185527 (2012)]. designed to be for the accused alone.
c. Promulgation of Sentence
9. Right to Compulsory Processes
The right to compulsory process may be P. Right to Speedy Trial and

invoked by the accused to secure the Speedy Disposition of Cases
attendance of witnesses and the production of
witnesses in his behalf. This is a constitutional Article III, Section 16. All persons shall have the
right embodied in Sec. 14(2), Art. III of the Bill right to a speedy disposition of their cases before all
of Rights. judicial, quasi-judicial, or administrative bodies.
In case of the unjustified failure of the witness

The right to speedy disposition of cases is not
to comply, the court or judge issuing the
limited to the accused in criminal proceedings
subpoena, upon proof of the service of such
but extends to all parties in all cases, be it civil
subpoena and proof of his failure to attend,
or administrative in nature, as well as all
may issue a warrant for his arrest [ROC, Rule
proceedings, either judicial or quasi-judicial
21, Sec. 8].
[Coscolluela v. Sandiganbayan, G.R. No.
191411 (2013)].
Compulsory Process
a. Right to Secure Attendance of Witness
b. Right to Production of Other Evidence
Page 160 of 384
While the right to speedy trial is invoked against ● The defects in a motion are not reasons for
courts of law, the right to speedy disposition of a judge not to act on the same [Heirs of
cases may be invoked before quasi-judicial or Simeon Piedad v. Estrera, A.M. No. RTJ-
administrative tribunals in proceedings that are 09-2170 (2009)].
adversarial and may result in possible criminal
liability [Cagang v. Sandiganbayan, Fifth Inordinate delay in the resolution and
Division, G.R. Nos. 206438, 210141-42 termination of a preliminary investigation
(2018)]. violates the accused’s right to due process and
the speedy disposition of cases, and may result
Due regard must be given to the facts and in the dismissal of the case against the
circumstances surrounding each case xxx. accused. The burden of proving delay depends
What the Constitution prohibits are on whether delay is alleged within the periods
unreasonable, arbitrary and oppressive delays provided by law or procedural rules. If the delay
which render rights nugatory [Ombudsman v. is alleged to have occurred during the given
Jurado, G.R. No. 154155 (2008)]. periods, the burden is on the respondent or the
accused to prove that the delay was inordinate.
Note: The following show rulings of the Court If the delay is alleged to have occurred beyond
wherein the delay caused by the judge was not the given periods, the burden shifts to the
excused: prosecution to prove that the delay was
● A judge’s illness should not be an excuse reasonable under the circumstances and that
for his failure to render the corresponding no prejudice was suffered by the accused as a
decision or resolution within the prescribed result of the delay [Cagang v. Sandiganbayan,
period [Balajedeong v. Del Rosario, A.M. Fifth Division, supra].
No. MTJ-07-1662 (2007)].
● A heavy workload due to additional work, Dismissal Based on Violation of the Right
as acting presiding judge in other courts, is to Speedy Disposition of Cases
not sufficient justification for the delay A criminal case may be dismissed for violation
because judges are allowed, upon motion of a person’s right to speedy disposition of
or letter-requests, extensions of the cases [Coscolluela v. Sandiganbayan, supra].
reglementary period in deciding cases [Re:
Report on the Judicial and Financial Audit
Conducted in MTC’s of Bayombong and Q. Right Against Self-
Solano and MCTC, Aritao-Sta. Fe, Nueva Incrimination
Vizcaya, A.M. No. 05-3-83-MTC (2007)].
● The absence of a branch clerk of court Article III, Section 17. No person shall be
should not affect the prompt disposition of compelled to be a witness against himself.
cases. It is the duty of the judge to
recommend to the Supreme Court the
immediate appointment of a branch clerk of The right against self-incrimination secures to
a witness, whether she/he is a party or not, the
court [Office of the Court Administrator v.
Laron, A.M. No. RTJ-04-1870 (2007)]. right to refuse to answer any particular
incriminating question.
● The non-submission of the transcript of the
stenographic notes by stenographers
It prescribes an “option of refusal to answer
would not relieve judges of their duty to
render a decision within the required period incriminating questions and not a prohibition of
inquiry” [People v. Ayson, G.R. No. 85215
as judges are directed to take down notes
of salient portions of the hearing and (1989)].
proceed in the preparation of decisions
without waiting for the transcribed Purpose
stenographic notes [Office of the Court The self-incrimination clause is meant to avoid:
Administrator v. Janolo Jr., A.M. No. RTJ- 1. Placing the witness against the strongest
06-1994 (2007)]. temptation to commit perjury; and
2. Extorting a confession by force.
Page 161 of 384

1. Scope and Limitations pregnant by an adulterous relation [Villaflor
v. Summers G.R. No. 16444 (1920)].
The right applies only to testimonial
compulsion and production of documents, Note: Re-enactment of the crime by the
papers, and chattels in court, except when accused is not allowed.
books of account are to be examined in the
exercise of police power and the power of When to Invoke:
taxation. 1. This right may only be invoked for that
specific incriminating question and cannot
The right is available in: be claimed for any other time [Sabio vs.
1. Criminal proceedings; Gordon, G.R. Nos. 174340, 174318 &
2. Governmental proceedings; 174177 (2006)];
3. Administrative actions wherein the hearing 2. It does not give a witness the right to
partakes the nature of a criminal disregard a subpoena and decline to testify
proceeding because of the nature of the altogether. The witness must still take the
penalty; stand, be sworn, and answer questions. It
4. Legislative investigations; is the duty of his/her counsel to advise
5. Civil actions. him/her of his/her right against self-
incrimination [People v. Ayson, supra].
Exclusions
An accused may be compelled to be Right Against Self-incrimination of
photographed or measured, his garments may Accused vs. Ordinary Witness
be removed, and his body may be examined. ACCUSED ORDINARY
WITNESS
The Court has also declared as constitutional
several procedures performed on the accused The defendant in a An ordinary witness
such as pregnancy tests for women accused of criminal case may be compelled to
adultery, expulsion of morphine from one’s cannot be testify and invoke the
mouth and the tracing of one’s foot to compelled by right only against
determine its identity with bloody footprints. subpoena or any each question
The Court has even authorized the other process or requiring an
examination of a woman’s genitalia, in an order of the court to incriminating answer
action for annulment filed by her husband, to testify or produce [People vs. Ayson,
verify his claim that she was impotent, her evidence in the supra].
orifice being too small for his penis. criminal case in
which he is the
Some of these procedures were, to be sure, accused or one of
rather invasive and involuntary, but all of them the accused. In
were constitutionally sound. DNA testing and other words, s/he
its results are now similarly acceptable [Agustin can refuse to testify
v. CA, G.R. No. 162571 (2005)]. altogether.
Other exclusions: If the witness is

1. Handwriting in connection with a accused, he may
prosecution for falsification is not allowed totally refuse to take
[Beltran v. Samson, G.R. No. 32025 the stand.
(1929); Bermudez v. Castillo, Per. Rec. No.
714-A (1937)].
2. Accused may be made to take off her Note: The right against self-incrimination is not
garments and shoes and be photographed self- executing. It must be claimed. If not
[People v. Carreon, G.R. No. L-2154 claimed by or in behalf of the witness, the
(1950)]; compelled to show her body for protection does not come into play. It follows
physical investigation to see if she is that the right may be waived, expressly, or
Page 162 of 384

impliedly, as by a failure to claim it at the of a crime and to testify against the culprits, a
appropriate time [People v. Ayson, supra]. person opens himself to investigation and
prosecution if he himself had participated in the
Effects of Denial of Privilege criminal act. To secure his testimony without
1. Exclusionary Rule (under Sec. 17, Art. III in exposing him to the risk of prosecution, the law
relation to Sec. 12): When the privilege recognizes that the witness can be given
against self-incrimination is violated immunity from prosecution. In this manner, the
outside of court (e.g., police), then the state interest is satisfied while respecting the
testimony, as already noted, is not individual’s constitutional right against self-
admissible. incrimination [Quarto v. Marcelo G.R. No.
2. Ousted of Jurisdiction: When the privilege 169042 (2011)].
is violated by the Court itself, that is, by the
judge, the court is ousted of its jurisdiction, Note: The following is a list of immunity statutes
and all its proceedings, and even judgment included in the footnote 59 of Quarto v.
are null and void [Chavez v. CA, G.R. No. Marcelo:
L-29169 (1968)]. a. P.D. No. 749 (Granting Immunity from
Prosecution to Givers of Bribes and Other
Application Gifts and to their Accomplices in Bribery
General Rule: The privilege is available in any and Other Graft Cases against Public
proceedings, even outside the court, for they Officers, July 18, 1975);
may eventually lead to a criminal prosecution. b. P.D. No. 1731 (Providing for Rewards and
Incentives to Government Witnesses and
Expanded Application Informants and other Purposes, October 8,
1. The right of the accused against self- 1980);
incrimination is extended to respondents in c. P.D. No. 1732 (Providing Immunity from
administrative investigations that partake Criminal Prosecution to Government
of the nature of or are analogous to criminal Witnesses and for other Purposes, October
proceedings. The privilege has consistently 8, 1980);
been held to extend to all proceedings d. P.D. No. 1886 (creating the Agrava Fact-
sanctioned by law; and to all cases in which Finding Board, October 22, 1983);
punishment is sought to be visited upon a e. 1987 Constitution, Article XIII, Section
witness, whether a party or not [Standard 18(8) (empowering the Commission on
Chartered Bank v. Senate Committee on Human Rights to grant immunity);
Banks G.R. No. 167173 (2007)]. f. R.A. No. 6646 (An Act Introducing
2. Administrative proceedings with penal Additional Reforms in the Electoral System
aspect i.e., medical board investigation and for other Purposes, January 5, 1988);
[Pascual, Jr. v. Board of Medical g. Executive Order No. 14, August 18, 1986;
Examiners, G.R. No. L-25018 (1969)], h. R.A. No. 6770 (Ombudsman Act of 1989,
forfeiture proceeding [Cabal v. Kapunan November 17, 1989);
Jr., G.R. No. L-19052 (1962)]. i. R.A. No. 6981 (Witness Protection,
3. Fact-Finding investigation by an ad hoc Security and Benefit Act, April 24, 1991);
body [Galman v. Pamaran, G.R. Nos. j. R.A. No. 7916 (The Special Economic
71208-09 (1985)]. Zone Act of 1995, July 25, 1994);
k. R.A. No. 9165 (Comprehensive Dangerous
2. Immunity Statutes Drugs Act of 2002, June 7, 2002);
l. R.A. No. 9416 (An Act Declaring as
Nature and Purpose Unlawful Any Form of Cheating in Civil
Immunity statutes seek a rational Service Examinations, etc., March 25,
accommodation between the imperatives of an 2007); and
individual’s constitutional right against self- m. R.A. No. 9485 (Anti-Red Tape Act of 2007,
incrimination and the legitimate governmental June 2, 2007).
interest in securing testimony. By voluntarily
offering to give information on the commission
Page 163 of 384
Transactional Immunity constitute some of the elements of the
Article XIII, Section 18. The Commission on 1st offense);
Human Rights shall have the following powers and e. Offense that necessarily includes the
functions: xxx (8) Grant immunity from prosecution 1st offense (All the elements of the 1st
to any person whose testimony or whose constitute some of the elements of the
possession of documents or other evidence is 2nd offense).
necessary or convenient to determine the truth in 2. Prosecution for the same act
any investigation conducted by it or under its
authority; a. If punished by law and at the same
time punished by an ordinance;
b. There is conviction or acquittal under
Use and Fruit of Immunity either.
“Use immunity” prohibits use of a witness’
compelled testimony and its fruits in any Examples Where There is No Double
manner in connection with the criminal Jeopardy:
prosecution of the witness. 1. Conviction of a crime under a special law,
which also constitutes an offense under the
“Transactional immunity” grants immunity to RPC, may not be a bar to the prosecution
witnesses from prosecution for an offense to under the RPC because the former is
which his compelled testimony relates [Galman malum prohibitum while the other is malum
v. Pamaran, supra]. in se.
2. Where two informations are filed charging
R. Right Against Double the same accused with two different
Jeopardy offenses arising from the act, where the two
offenses have different elements
[Example: B.P.22 and the issuance of
Article III, Section 21. No person shall be twice put
bouncing checks for estafa].
in jeopardy of punishment for the same offense. If
an act is punished by a law and an ordinance,
conviction or acquittal under either shall constitute a 1. Requisites and Limitations
bar to another prosecution of the same act.
Application a. First jeopardy attached prior to the second;

1. In administrative cases: Not applicable b. First jeopardy must have been validly
[Cayao-Lasam v. Sps. Ramolete, G.R. No. terminated;
159132 (2008)]. c. Second jeopardy must be for the same
2. Contempt: Applicable. Acquittal offense or the second offense includes or
effectively bars a second prosecution is necessarily included in the first offense;
[Santiago v. Anunciacion, Jr., G.R. No. or is an attempt or frustration thereof.
89318 (1990)].
Requisites for First Jeopardy to Attach:
Termination of Jeopardy A previous case must be filed and must contain
1. By acquittal; the following:
2. By final conviction; 1. There must be a complaint or information
3. By dismissal without express consent of or other formal charge sufficient in form and
accused; substance to sustain a conviction;
4. By “dismissal” on the merits. 2. The complaint or information must be filed
before a court of competent jurisdiction;
Two Types of Double Jeopardy [People v. 3. The accused has been arraigned and has
pleaded to the charges;
Relova, G.R. L-45129 (1987)]:
4. The accused must have been convicted or
1. Prosecution for the same offense
acquitted or the case against him was
a. Same offense charged;
dismissed or otherwise terminated without
b. Attempt of the same offense;
his express consent [Sec. 7, Rule 117;
c. Frustration of the same offense;
People v. Obsania, G.R. No. L-24447
d. Offense necessarily included in the 1st
(1968)].
offense (All the elements of the 2nd
Page 164 of 384
Limitations; Exceptions to the Rule on 2. Mistrial [Galman v. Sandiganbayan, G.R.
Double Jeopardy No. 72670 (1986)].
The conviction of the accused shall not be a bar 3. Grave abuse of discretion amounting to
to another prosecution for an offense which lack or excess of jurisdiction [People v. Uy,
necessarily includes the offense charged in the G.R. No. 158157 (2005)].
former complaint or information under the
following instances, pursuant to Sec. 7, Rule Remedy for the above cases: special civil
117, Rules of Court: action of certiorari under Rule 65 of the Rules
a. Supervening Event: The graver offense of Court.
developed due to “supervening facts”
arising from the same act or omission The private complainant or the offended party
constituting the former charge (e.g., A may question such acquittal or dismissal only
person convicted of physical injuries may insofar as the civil liability of the accused is
still be prosecuted for homicide if the victim concerned [Villareal v. Aliga, G.R. No. 166995
dies later). (2014)].
b. Newly Discovered Event: The facts
constituting the graver charge became The prosecution can appeal where the
known or were discovered only after the accused is deemed to have waived or is
filing of the former complaint or information. estopped from invoking his right against double
c. Defective Plea Bargain: The plea of guilty jeopardy [Cruz, p. 778].
to the lesser offense was made without the
consent of the fiscal and the offended Waiver of Right Against Double Jeopardy
party, except as provided in Sec. 1 (f) of The right against double jeopardy is deemed
Rule 116. waived if he appeals his conviction.
Note: In case of failure of the offended party to If the accused had been prosecuted for a
appear despite due notice, the court may allow higher offense but was convicted for a lower
the accused to enter a plea of guilty to a lesser offense, he has technically been acquitted of
offense which is necessarily included in the the higher offense. His appeal would give the
offense charged with the conformity of the trial Court the right to impose a penalty higher than
prosecutor alone. that of the original conviction imposed on him
[Trono v. U.S. 199 US 521 (1905)].
Appeal by Prosecution; When Allowed
General Rule: A judgment of acquittal is final General Rule: Dismissal with consent of
and no longer reviewable. It cannot be accused waives double jeopardy.
reconsidered because it places the accused in
jeopardy for the same offense. [Cruz When the case is dismissed other than on the
Commentary, p. 777] merits, upon motion of the accused personally,
or through counsel, such dismissal is regarded
Exceptions: Appeal from acquittal is not as “with express consent of the accused”, who
double jeopardy if: (DuMi-GAD) is therefore deemed to have waived the right to
1. Deprivation of due process: Where the plea double jeopardy.
prosecution is deprived of a fair opportunity
to prosecute and prove its case [Villareal v. Provisional Dismissal – A case shall not be
People, G.R. No. 151258 (2012)]. provisionally dismissed except with the
express consent of the accused and with notice
Provided, that the judge considered the to the offended party [ROC, Rule 117, Sec. 8,
evidence, even if the appreciation of the par. 1].
evidence leading to the acquittal is
erroneous, an appeal or motion for
reconsideration by the prosecution will not
be allowed. [People v. Judge Velasco, G.R.
No. 127444 (2000)].
Page 165 of 384

Exceptions place of residence [In Re Brooks, G.R. No. 507
a. When the dismissal is based on (1901)].
insufficiency of the evidence of the
prosecution [People v. City Court of Silay, Domestic services are always to be
G.R. No. L-43790 (1976)]. remunerated, and no agreement may subsist in
b. When the dismissal is based on the denial law in which it is stipulated that any domestic
of his right to a speedy trial [People v. service shall be absolutely gratuitous [De los
Judge Abaño G.R. No. L-23599 (1955)]. Reyes v. Alojado, G.R. No. 5671 (1910)].
c. When accused is discharged to be a state
witness. Exceptions to the Prohibition against
Involuntary Servitude
A mere verbal dismissal is not final until written a. If punishment is for a crime after conviction
and signed by the judge [Rivera, Jr. v. People [Art. III, Sec. 18].
G.R. No. 93219 (1990)]. b. In the interest of national defense, all
citizens may be compelled by law to render
S. Right Against Involuntary personal military or civil service [Art. II, Sec.
4].
Servitude c. A return to work order. “So imperative is the
order in fact that it is not even considered
Article III, Section 18. No person shall be detained violative of the right against involuntary
solely by reason of his political beliefs and servitude.”
aspirations.
d. A worker must obey the order if he wants
No involuntary servitude in any form shall exist to retain his work even if his inclination is to
except as a punishment for a crime whereof the strike [Sarmiento v. Tuico, G.R. No. 75271-
party shall have been duly convicted. 73 (1988)].
e. Naval enlistment [Robertson v. Baldwin,
Involuntary Servitude refers to a condition of 165 US 275 (1897)].
enforced and compulsory service induced by f. Posse comitatus - obligation of the
means of any scheme, plan or pattern, individual to assist in the protection of the
intended to cause a person to believe that if he peace and good order of his community
or she did not enter into or continue in such [Kaisahan ng Manggagawa sa Kahoy v.
condition, he or she or another person would Gotamco Sawmills, G.R. No. L-1573,
suffer serious harm or other forms of abuse or (1948)].
physical restraint, or threat of abuse or harm,
or coercion including depriving access to travel The police power of the state may be said to
documents and withholding salaries, or the embrace the whole system of internal
abuse or threatened abuse of the legal process regulation, by which the state seeks not only to
[R.A. No. 9208, as amended by R.A. No. preserve public order and to prevent offenses
10364]. against the state, but also to establish, for the
intercourse of citizen with citizen, those rules of
Slavery and involuntary servitude, together good manners and good neighborhood, which
with their corollary peonage, all denote “a are calculated to prevent a conflict of rights,
condition of enforced, compulsory service of and to insure to each the uninterrupted
one to another” [Hodges v. U.S., 203 US 1 enjoyment of his own, so far as is reasonably
(1906) cited in Rubi v. Provincial Board of consistent, with a like enjoyment of the rights of
Mindoro, supra]. others. The police power of the state includes
not only the public health and safety, but also
A private person who contracts obligations of the public welfare, protection against
rendering services in a civil capacity to the impositions, and generally the public’s best
Army as an employee in its offices cannot, by interest. It is so extensive and all pervading,
law, either civil or military, be compelled to fulfill that the courts refuse to lay down a general rule
them by imprisonment and deportation from his defining it, but decide each specific case on its
Page 166 of 384

merits [Harding vs. People, 32 L.R.A., 445; US by Lethal Injection is hereby repealed. R.A. No.
v. Pompeya, 31 Phil. 245 (1915)]. 7659, otherwise known as the Death Penalty
Law, and all other laws, executive orders and
T. Right Against Excessive decrees, insofar as they impose the death
penalty are hereby repealed or amended
Fines, and Cruel and Inhuman accordingly [Sec. 1, R.A. No. 9346].
Punishments
The import of the grant of power to Congress
Article III, Section 19. to restore the death penalty requires:
(1) Excessive fines shall not be imposed, nor cruel, 1. That the Congress defined or describe
degrading or inhuman punishment inflicted. what is meant by heinous crimes;
Neither shall death penalty be imposed, unless, 2. That Congress specify and penalize by
for compelling reasons involving heinous death, only crimes that qualify as heinous
crimes, the Congress hereafter provides for it.
in accordance with the definition or
Any death penalty already imposed shall be
reduced to reclusion perpetua. description set in the death penalty bill
(2) The employment of physical, psychological, or and/or designate crimes punishable by
degrading punishment against any prisoner or reclusion perpetua to death in which latter
detainee or the use of substandard or case, death can only be imposed upon the
inadequate penal facilities under subhuman attendance of circumstances duly proven
conditions shall be dealt with by law.
in court that characterize the crime to be
heinous in accordance with the definition or
Cruel Punishment description set in the death penalty bill;
● Involve torture of lingering death [Legarda 3. That Congress, in enacting this death
v. Valdez G.R. No. 513 (1902)]. penalty bill be singularly motivated by
● Not only severe, harsh, or excessive but “compelling reasons involving heinous
flagrantly and plainly oppressive. crimes.”
● Wholly or disproportionate to the nature of
the offense as to shock the moral sense of For a death penalty bill to be valid, Sec. 19(1)
the community [People v. Estoista, G.R. does not require that there be a positive
No. L-5793 (1953)]. manifestation in the form of higher incidence of
crime first perceived and statistically proven.
The constitutional limit must be reckoned on Neither does the said provision require that the
the basis of the nature and of punishment death penalty be resorted to as a last recourse
measured in terms of physical pain. when all other criminal reforms have failed to
abate criminality in society [People v.
What is prohibited is cruel and unusual Echegaray, G.R. No. 117472 (1997)].
punishment. Unusual punishment is not
prohibited, especially if it makes the penalty As regards the imposable penalty for a crime,
less severe. the Supreme Court cannot suspend the
execution of a sentence on the ground that the
The prohibition of cruel and unusual strict enforcement of the provisions of the
punishment is generally aimed at the form or Revised Penal Code would cause excessive or
character of the punishment rather than its harsh penalty. All that the Court could do in
severity in respect of duration or amount, and such an event is to report the matter to the
applies to punishments which public sentiment Chief Executive with a recommendation for an
has regarded as cruel or obsolete. Fine and amendment or modification of the legal
imprisonment would not thus be within the provisions which it believes to be harsh
prohibition [People v. Dela Cruz, G.R. No. L- [Corpuz v. People, 724 SCRA 1 (2014)].
5790 (1953)].
The imposition of the penalty of death is hereby

prohibited. Accordingly, R.A. No. 8177,
otherwise known as the Act Designating Death
Page 167 of 384

U. Non-Imprisonment for Debts property, but an offense against public order
[Lozano v. Martinez, 146 SCRA 323 (1986)].
Article III, Section 20. No person shall be
imprisoned for debt or non-payment of a poll tax. V. Ex Post Facto Laws and Bill of
Attainder
Debt
Any civil obligation arising from a contract. It Definition
includes even debts obtained through fraud An ex post facto law is one that would make a
since no distinction is made in the Constitution previous act criminal although it was not so at
[Ganaway v. Quillen, G.R. No. 18619 (1922)]. the time it was committed [Cruz, p. 589].
Poll Tax Concept

A specific sum levied upon any person In general, ex post facto laws prohibits
belonging to a certain class without regard to retrospectivity of penal laws. Moreover, the
property or occupation (e.g., community tax). mode of procedure provided for in the right to
appeal, which is statutory and not natural, is not
In a case where the accused was convicted included in the prohibition against ex post facto
and imprisoned for estafa (where the accused laws [Lacson v. Executive Secretary, G.R. No.
failed to render promised service to the injured 128096 (1999)].
in exchange for the latter’s retrieval of the
former’s cedula), the Court held that the Equivalent of the impairment clause in criminal
imprisonment was correct since it was for matters.
estafa and not involuntary servitude or
imprisonment for debt [Ramirez v. De Orozco, What are Considered Ex Post Facto Laws
G.R. No. 11157 (1916)]. ● Makes criminal an action done before the
passage of the law which was innocent
No person may be imprisoned for debt in virtue when done, and punishes such action;
of a civil proceeding [Makapagal v. ● Aggravates a crime or makes it greater
Santamaria, G.R. No. 34616 (1930)]. than when it was committed;
● Changes the punishment and inflicts a
A person may be imprisoned as a penalty for a greater punishment than the law annexed
crime arising from a contractual debt and to the crime when it was committed;
imposed in a proper criminal proceeding. Thus, ● Alters the legal rules of evidence and
the conversion of a criminal fine into a prison receives less or different testimony than
term does not violate the right to non- the law required at the time of the
imprisonment for debts because in such a commission of the offense in order to
case, imprisonment is imposed for a monetary convict the defendant [Mekin v. Wolfe, G.R.
obligation arising from a crime [Ajeno v. No. 1251 (1903)];
Inserto, A.M. No. 1098-CFI (1976)]. ● Assumes to regulate civil rights and
remedies only but in effect imposes a
The gravamen of the offense punished by BP penalty or deprivation of a right which when
22 is the act of making and issuing a worthless done was lawful;
check or a check that is dishonored upon its ● Deprives a person accused of a crime of
presentation for payment. It is not the non- some lawful protection of a former
payment of an obligation which the law conviction or acquittal, or a proclamation of
punishes. The law is not intended or designed amnesty [In re: Kay Villegas Kami, G.R.
to coerce a debtor to pay his debt. The thrust No. L-32485 (1970)].
of the law is to prohibit, under pain of penal
sanctions, the making of worthless checks and Characteristics of an Ex-Post Facto Law
putting them in circulation. Because of its (CReP)
deleterious effects on the public interest, the 1. Refer to criminal matters;
practice is proscribed by the law. The law 2. Be retroactive in its application;
punishes the act not as an offense against
Page 168 of 384
3. To the prejudice of the accused [Cruz In Relation to Ex Post Facto Law
Commentary, p. 591]. “Frequently a bill of attainder was doubly
objectionable because of its ex post facto
“The prohibition applies only to criminal or features.
penal matters and not to laws which concern
civil matters or proceedings generally, or which Therefore, if a statute is a bill of attainder, it is
affect or regulate civil or private rights” also an ex post facto law. But if it is not an ex
[Republic v. Vda. de Fernandez, G.R. No. L- post facto law, the reasons that establish that it
9141 (1956)]. is not are persuasive that it cannot be a bill of
attainder” [People v. Ferrer, G.R. No. L-32613-
Examples 14 (1972)].
● In Bayot v. Sandiganbayan [G.R. No. L-
61776 to No. L-61861 (1984)], an Examples of Laws Which Are NOT Bills of
amendment to R.A. 3019, which provides Attainder
for suspension pendente lite of any public ● R.A. 9335, which provides for the removal
officer or employee accused of offenses of the Bureau of Customs’ employees who
involving fraudulent use of public funds or would not be able to meet their revenue
property, including those charged earlier, is targets, as prescribed by law. RA 9335
not an ex post facto law. The suspension does not seek to inflict punishment without
was not punitive, but only preventive in judicial trial, but it merely lays down the
nature. grounds for the termination of a BIR or
● In People v. Estrada [G.R. Nos. 164368-69 BOC official or employee and provides for
(2009)], R.A. 9160, which was made to the consequences thereof [Bureau of
apply to the accused for acts allegedly Customs Employees Association v. Teves,
committed prior to its enactment, was G.R. No. 181704 (2011)].
considered ex post facto. Prior to its
enactment, numbered accounts or In other words, if a legislation only states
anonymous accounts were permitted the grounds for a violation, then it is not
banking transactions, whether they be considered as a bill of attainder.
allowed by law or by a mere banking ● Sec. 20 of the Cybercrime Law, which
regulation. imposes a penalty of imprisonment upon
those who would fail to comply with certain
Bill of Attainder provisions of Chapter IV of the said law, is
Refers to a legislative act that inflicts not a bill of attainder.
punishment without trial. The essence of a bill ● The Court held that since the non-
of attainder is the substitution of legislative fiat compliance would be punished as a
for a judicial determination of guilt. There is a violation of PD 1829, Sec. 20 of the
bill of attainder when a statute applies to either Cybercrime Law necessarily incorporates
named individuals or to easily ascertainable elements of the offense which are defined
individuals, and such statute inflicts therein. The act of non-compliance, for it to
punishment unto them without trial. be punishable, must still be done
“knowingly or willfully.” There must still be
Elements a judicial declaration of guilt, during
1. There must be a law; which, defense and justifications for non-
2. The law imposes a penal burden on a compliance may be raised [Disini v. Sec. of
named individual or easily ascertainable Justice, supra].
members of a group; ● R.A. 1700 which declared the Communist
3. There is a direct imposition of penal Party of the Philippines a clear and present
burden without judicial trial. danger to Philippine security, and thus
prohibited membership in such
organization, was contended to be a bill of
attainder. Although the law mentions the
CPP in particular, its purpose is not to
Page 169 of 384

define a crime but only to lay a basis or to Availability
justify the legislative determination that 1. Involuntary restraint of liberty.
membership in such organization is a crime 2. Voluntary restraint of liberty i.e., right of
because of the clear and present danger to parents to regain custody of minor child
national security [People v. Ferrer, supra]. even if the child is in the custody of a third
person of her own free will [Sombong v.
W. Writ of Habeas Corpus, CA, supra].
3. Illegal arrest with supervening event when
Kalikasan, Habeas Data, and restraint of liberty is already by virtue of the
Amparo complaint or information [Velasco v. CA,
G.R. No. 118644 (1995)].
Article III, Section 15. The privilege of the writ of a. The issuance of a judicial process
habeas corpus shall not be suspended except in preventing the discharge of the detained
cases of invasion or rebellion when the public safety person.
requires it. b. Another is the filing of a complaint or
information for the offense for which the
Suspension of the Privilege of the Writ accused is detained [Sec. 4, Rule 102].
4. Where a sentence imposes punishment in
excess of the power of the court to impose,
Article VII, Section 18. The President shall be the such sentence is void as to the excess
Commander-in-Chief of all armed forces of the
[Gumabon v. Director of Prisons, G.R. No.
Philippines and whenever it becomes necessary, he
may call out such armed forces to prevent or L-30026 (1971)].
suppress lawless violence, invasion or rebellion. In 5. “Habeas corpus is the proper remedy for a
case of invasion or rebellion, when the public safety person deprived of liberty due to mistaken
requires it, he may, for a period not exceeding sixty identity. In such cases, the person is not
days, suspend the privilege of the writ of habeas under any lawful process and is
corpus or place the Philippines or any part thereof
continuously being illegally detained” [In re
under martial law.
Salibo v. Warden, G.R. No. 197597
xxx (2015)].
A state of martial law does not suspend the Restraint of Liberty

operation of the Constitution, nor supplant the The nature of the restraint of liberty need not
functioning of the civil courts or legislative be related to any offense so as to entitle a
assemblies, nor authorize the conferment of
jurisdiction on military courts and agencies over
person to the efficient remedy of habeas
civilians where civil courts are able to function, nor corpus. It may be availed of as a post-
automatically suspend the privilege of the writ. conviction remedy or when there is an alleged
violation of the liberty of abode. In other words,
The suspension of the privilege of the writ shall apply habeas corpus effectively substantiates the
only to persons judicially charged for rebellion or implied autonomy of citizens constitutionally
offenses inherent in or directly connected with
invasion.
protected in the right to liberty in Article III,
Section 1 of the Constitution. Habeas corpus
being a remedy for a constitutional right, courts
1. Writ of Habeas Corpus must apply a conscientious and deliberate level
of scrutiny so that the substantive right to liberty
Definition will not be further curtailed in the labyrinth of
A writ issued by a court directed to a person other processes [In re Salibo v. Warden,
detaining another, commanding him to produce supra].
the body of the prisoner at a designated time
and place, with the day and cause of his Not only physical restraint but any restraint on
caption and detention, to do, to submit to, and freedom of action is sufficient i.e., (1) curtailed
to receive whatever the court or judge freedom of movement by the condition that he
awarding the writ shall consider in his behalf must get approval of respondents for any travel
[Sombong v. CA, G.R. No. 111876 (1990)]. outside Metro Manila; (2) abridged liberty of
Page 170 of 384

abode because prior approval of respondent is official or employee, or private individual or
required in case petitioner wants to change entity; and
place of residence; (3) abridged freedom of 3. The actual or threatened violation involves
speech due to prohibition from taking any or will lead to an environmental damage of
interviews inimical to national security; and (4) such magnitude as to prejudice the life,
petitioner is required to report regularly to health or property of inhabitants in two or
respondents or their representatives [Moncupa more cities or provinces [Segovia v.
v. Enrile, G.R. No. L-63345 (1986)]. Climate Change Commission, G.R. No.
211010 (2017)].
This Court has held that a restrictive custody
and monitoring of movements or whereabouts Who May File
of police officers under investigation by their Natural or juridical persons, NGO or public
superiors is not a form of illegal detention or interest groups in behalf of persons whose right
restraint of liberty [Ampatuan v. Macaraig, G.R. is violated.
No. 182497 (2010)].
Who Has Jurisdiction
Restrictive custody is, at best, nominal restraint Supreme Court or Court of Appeals.
which is beyond the ambit of habeas corpus. It
is neither actual nor effective restraint that When is Writ Issued
would call for the grant of the remedy prayed Within three (3) days from the date of filing of
for. It is a permissible precautionary measure the petition, if the petition is sufficient in form
to assure the PNP authorities that the police and substance.
officers concerned are always accounted for
[Ampatuan v. Macaraig, supra]. Return of Respondent
Within a non-extendible period of ten (10) days
Note: The fact that the party to whom the writ after service of the writ, the respondent shall
is addressed has illegally parted with the file a verified return which shall contain all
custody of a person before the application for defenses; all defenses not raised are deemed
the writ is no reason why the writ should not waived.
issue [Villavicencio v. Lukban, G.R. No. 14639
(1919)]. Hearing
Preliminary conference; same priority as other
Test for Valid Suspension of the Privilege writs (no more than 60 days).
of the Writ
Arbitrariness, not correctness.
2. Writ of Kalikasan Reliefs
Permanent cease and desist order against the
A.M. No. 09-6-8-SC (13 April 2010) respondent, directive to respondent to protect,
Definition: Remedy against violation or threat preserve, rehabilitate or restore the
of violation of constitutional right to a balanced environment; to monitor strict compliance with
and healthful ecology by an unlawful act or the decision and orders of the court, to make
omission of a public official or employee, or periodic reports on the execution of the final
private individual or entity, involving judgment, and other reliefs [Sec. 15, Rule 7].
environmental damage of such magnitude as
to prejudice the life, health or property of “A rehabilitation or restoration program to be
inhabitants in two or more cities or provinces. implemented at the cost of the violator is also a
major relief that may be obtained under a
Requisites for the Issuance of the Writ judgment rendered in a citizens’ suit under the
1. There is an actual or threatened violation of Rules” [Arigo v. Swift, G.R. No. 206510
the constitutional right to a balanced and (2014)].
healthful ecology;
2. The actual or threatened violation arises
from an unlawful act or omission of a public
Page 171 of 384
3. Writ of Habeas Data [A.M. No. 08-1- Scope
16-SC (2008)] The Amparo Rule was intended to address the
intractable problem of “extralegal killings” and
The writ of habeas data is an independent and “enforced disappearances,” and its coverage,
summary remedy designed to protect the in its present form is confined to these
image, privacy, honor, information, and instances or to threats thereof.
freedom of information of an individual, and to
provide a forum to enforce one’s right to the If what is involved is the issue of child custody
truth and to informational privacy. and the exercise of parental rights over a child,
who, for all intents and purposes, has been
There must be a nexus between the right to legally considered a ward of the State, the
privacy on the one hand, and right to life, liberty Amparo rule cannot be properly applied
and security on the other [Lee v. Ilagan, G.R. [Caram v. Segui, G.R. No. 193652 (2014)].
No. 203254 (2014)].
Extralegal Killings
Right to Informational Privacy v. Killings committed without due process of law.
Legitimate State Interest
The determination of whether the privilege of Enforced Disappearances; Elements
the writ of habeas data, being an extraordinary 1. That there be an arrest, detention,
remedy, may be granted in this case entails a abduction or any form of deprivation of
delicate balancing of the alleged intrusion upon liberty;
the private life of a person and the relevant 2. That it be carried out by, or with the
state interest involved [Gamboa v. Chan, G.R. authorization, support or acquiescence of,
No. 193636 (2012)]. the State or a political organization;
3. That it be followed by the State or political
Without an actionable entitlement in the first organization’s refusal to acknowledge or
place to the right to informational privacy, a give information on the fate or whereabouts
habeas data petition will not prosper [Vivares v. of the person subject of the amparo
St. Theresa’s College, et al., G.R. No. 202666 petition; and,
(2014)]. 4. That the intention for such refusal is to
remove subject person from the protection
4. Writ of Amparo of the law for a prolonged period of time.
Basis
A.M. No. 07-9-12-SC, Section 1. Petition. — The
petition for a writ of amparo is a remedy available to
any person whose right to life, liberty and security is Article VIII, Section 5. The Supreme Court shall
violated or threatened with violation by an unlawful have the following powers: xxx
act or omission of a public official or employee, or of (5) Promulgate rules concerning the protection and
a private individual or entity. enforcement of constitutional rights, xxx.
Such rules shall provide a simplified and

Concept inexpensive procedure for the speedy disposition of
cases, shall be uniform for all courts of the same
An amparo proceeding does not determine
grade, and shall not diminish, increase, or modify
guilt nor pinpoint criminal culpability for the substantive rights.
disappearance [threats thereof or extrajudicial
killings]; it determines responsibility, or at least
accountability for purposes of imposing the Petition for Writ; Form
appropriate remedies to address the The petition shall be signed and verified [A.M.
disappearance [Razon Jr. v. Tagitis, G.R. No. No. 07-9-12-SC, Sec. 5].
182498 (2009)].
Petition for Writ; Contents
The petition shall allege the following:
1. The personal circumstances of the
petitioner;
Page 172 of 384
2. The name and personal circumstances of circumstances, and addresses of the
the respondent responsible for the threat, investigating authority or individuals, as
act or omission, or, if the name is unknown well as the manner and conduct of the
or uncertain, the respondent may be investigation, together with any report;
described by an assumed appellation; 5. The actions and recourses taken by the
3. The right to life, liberty and security of the petitioner to determine the fate or
aggrieved party violated or threatened with whereabouts of the aggrieved party and
violation by an unlawful act or omission of the identity of the person responsible for
the respondent, and how such threat or the threat, act or omission; and
violation is committed with the attendant 6. The relief prayed for.
circumstances detailed in supporting
affidavits; The petition may include a general prayer for
4. The investigation conducted, if any, other just and equitable reliefs [Sec. 5]
specifying the names, personal
Where to File
Filed Enforced Returnable
RTC of the place where the Anywhere in the Philippines. Before the issuing court or
threat, act, or omission was judge.
committed or any of its
elements occurred.
Sandiganbayan or any of its 1. Before the issuing court any

justices. justice thereof; or
2. any RTC of the place where
Court of Appeals or any of its the threat, act or omission was
justices. committed or any of its
elements occurred.
Supreme Court or any of its 1. Before the issuing court any

justices. justice thereof;
or
2. before the Sandiganbayan
or any CA or any of their
justices
3. any RTC of the place where
the threat, act or omission was
committed or
any of its elements occurred.
Return Proof Required: Substantial Evidence

Within 72 hours after service of the writ, the For the protective writ of amparo to issue,
respondent shall file a verified written return allegation and proof that the persons subject
together with supporting affidavits which shall, thereof are missing are not enough. It must
among other things, contain his defenses. A also be shown by the required quantum of
general denial is not allowed [Sec. 9]. proof that their disappearance was carried out
by, or with the authorization, support or
Hearing acquiescence of, [the government] or a political
Summary or court may call for a preliminary organization, followed by a refusal to
conference; given same priority as petition for acknowledge [the same or] give information on
habeas corpus [Sec. 13]. the fate or whereabouts of [said missing]
Page 173 of 384
persons [Navia v. Pardico, G.R. No. 184467
(2012)].
Defense
1. Private individual – ordinary diligence;
2. Public official – extraordinary diligence, no
presumption of regularity of duties [Sec.
17].
Note: Command responsibility is a way of

impleading a superior of the accused (subject
of the writ) to be made responsible for the
crimes committed by his subordinates — by
failing to prevent or punish the said accused.
As regards the relief granted, the Court held

that the production order under the Amparo
rule is different from a search warrant and may
be likened to the production of documents or
things under Rule 27.1, ROC [Secretary of
National Defense v. Manalo, G.R. No. 180906
(2008)].
Page 174 of 384

LAW ON PUBLIC OFFICERS

INTERNATIONAL LAW
LAW ON PUBLIC OFFICERS POLITICAL LAW
b. Not a Property Right
LAW ON PUBLIC General Rule: A public office is not property
within the sense of the constitutional
OFFICERS guaranties of due process of law, but is a public
trust or agency. Congress may amend at any
time the law to change or even withdraw the
I. GENERAL PRINCIPLES statutory right [Montesclaros v. COMELEC,
G.R. No. 152295 (2002)].
A. Public Office
XPN: Analogous to property in limited context.
1. Definition, Purpose, Nature Due process may be invoked when dispute
concerns constitutional right to security of
Public Office, Defined: tenure [Lumiqued v. Exevea, G.R. No. 117565
1. A right, authority and duty; (1997)].
2. Created and conferred by law, by which, for
a given period, either fixed by law or c. Not a Contract
enduring at the pleasure of the creating
power; Differs from a contract, which is limited in its
3. Individual is invested with some portion of duration and specific in its objects. Terms
the sovereign functions of the government, agreed upon define rights and obligations of
to be exercised by him for the benefit of the parties; neither may depart from them without
public [Laurel v. Desierto, G.R. No. 145368 assent of other [Mechem].
(2002)].
d. Public Office is Personal
1987 Constitution
Public office being personal, the death of a
Article II, Section 1, 2nd Sentence. The Philippines public officer terminates his right to occupy the
is a democratic and republican State. Sovereignty contested office and extinguishes his
resides in the people and all government authority counterclaim for damages. His widow and/or
emanates from them. heirs cannot be substituted in the counterclaim
Article XI, Section 1. Public office is a public trust. suit [Abeja v. Tañada, G.R. No. 112283
Public officers and employees must, at all times, be (1994)].
accountable to the people, serve them with utmost
responsibility, integrity, loyalty, and efficiency; act e. Right to Public Office Is Not a
with patriotism and justice, and lead modest lives.
Natural Right
Administrative Code of 1987, Introductory

The right exists only by virtue of a law expressly
Provisions, Sec. 2 (9). Office refers, within the or impliedly creating and conferring it [Mathay,
framework of governmental organization, to any Jr. v. CA, G.R. No. 124374 (1999)].
major functional unit of a department or bureau
including regional offices. It may also refer to any f. There Is No Such Thing as a Vested
position held or occupied by individual persons,
whose functions are defined by law or regulation.
Interest or an Estate in an Office, or
Even an Absolute Right to Hold It.
2. Characteristics Except constitutional offices which provide for

special immunity as regards salary and tenure,
a. Public office is a Public Trust no one can be said to have any vested right in
an office or its salary [National Land Titles and
Deeds Registration Commission v. Civil
Service Commission, G.R. No. 84301 (1993)].
Page 176 of 384

3. Elements The President has power to reorganize the
Executive. The President’s power of control
a. Created by the Constitution or by the gives him authority to deactivate the functions
legislature or created by a municipality or of particular offices. As far as bureaus,
other body through authority conferred agencies or offices in the executive department
by the legislature; are concerned, the President's power of control
b. Must possess a delegation of a portion of may justify him to inactivate the functions of a
the sovereign power of government, to particular office, or certain laws may grant him
be exercised for the benefit of the public; the broad authority to carry out reorganization
c. The powers conferred and the duties to measures [Buklod ng Kawaning EIIB v.
be discharged must be defined, directly Zamora, G.R. Nos. 142801-802 (2001)].
or impliedly, by the legislature or
through legislative authority; B. Public Officer
d. Duties must be performed
independently and without control of a Public officer, Defined
superior power, other than law, unless 1. An individual vested with some portion of
they be those of an inferior or subordinate sovereign functions of government;
office, created or authorized by the 2. To be exercised for the benefit of the public
legislature and by it placed under the [Alba v. Evangelista, G.R. Nos. L-10360
general control of a superior officer or and L-10433 (1957)].
body;
e. Must have some permanency and
Powers Conferred to Public Official
continuity and not be only temporary or
occasional. (Note: elements of Must Be Part of Sovereign Functions
permanence and continuity not of Government
indispensable [Laurel v. Desierto, G.R. No. The creation and conferring of an office involve
145368 (2002)]. a delegation to the individual of some of the
sovereign functions of government, to be
A salary is a usual but not a necessary criterion exercised by him for the benefit of the public; –
for determining the nature of the position. It is that some portion of the sovereignty of the
not conclusive. The salary is a mere incident country, either legislative, executive or judicial,
and forms no part of the office [Laurel v. attaches, for the time being, to be exercised for
Desierto, supra]. the public benefit. Unless the powers
conferred are of this nature, the individual
4. Creation modification, abolition is not a public officer [Laurel v Desierto,
supra].
a. Modes of Creation
1. By Constitution; Who Are Public Officers
2. By statute/law;
3. By authority of law [Secretary of DOTC 1. According to the Administrative Code
v. Mabalot, G.R. No. 138200 (2002)].
Administrative Code, Introductory Provisions,
b. Modification/Abolition Section 2.
(14) “Officer” as distinguished from “clerk” or

General Rule: Power to create an office “employee”, refers to a person whose duties, not
includes the power to modify or abolish it. being of a clerical or manual nature, involves the
(Hence, the power to modify or abolish an exercise of discretion in the performance of the
office is also primarily legislative) functions of the government. When used with
reference to a person having authority to do a
particular act or perform a particular function in the
Exception: Where the Constitution prohibits
exercise of governmental power, “officer” includes
such modification/abolition. any government employee, agent or body having
Page 177 of 384

authority to do the act or exercise that function. II. MODES OF ACQUIRING

(15) “Employee” when used with reference to a TITLE TO PUBLIC OFFICE
person in the public service, includes any person in
the service of the government or any of its agencies,
divisions, subdivisions or instrumentalities.
Four Modes
1. Appointment
2. Election
2. According to the Revised Penal Code 3. Succession
4. Operation of law
Revised Penal Code, Article 203. Who are public
officers. – For the purpose of applying the provisions A. Appointment
of this and the preceding titles of this book, any
person who, by direct provision of the law,
popular election or appointment by competent Appointment
authority, shall take part in the performance of 1. Designation of a person;
public functions in the Government of the 2. By person/persons having authority;
Philippine Islands, or shall perform in said 3. To fill an office or public function;
Government or in any of its branches public
4. To discharge the duties of the office or trust
duties as an employee, agent or subordinate
official, of any rank or class, shall be deemed to [Flores v. Drilon, G.R. No. 104732 (1993)].
be a public officer.
Characteristics of Appointment
1. Discretionary in nature, performed by
3. Under the Anti-Graft and Corrupt
officer in which it is vested; only condition
Practices Act
being that the appointee should possess
qualifications required by law [Luego v.
R.A. No. 3019, Section 2. Definition of terms. CSC, G.R. No. 69137 (1986)].
(b) "Public officer" includes elective and appointive
officials and employees, permanent or temporary,
GR: A political question involving
whether in the classified or unclassified or exempt
service receiving compensation, even nominal, from considerations of wisdom which only the
the government as defined in the preceding appointing authority can decide.
subparagraph.
XPN: Appointments requiring confirmation
by the Commission of Appointments;
Definition of Public Officer Under R.A.
Commission may review wisdom of
No. 3019 Not Restrictive appointment and has power to refuse to
The word "includes" used in defining a public concur even if President’s choice
officer in Sec. 2(b) indicates that the possessed all qualifications prescribed by
definition is not restrictive. The terms law [Luego v. CSC, supra].
"classified, unclassified or exemption service"
were the old categories of positions in the civil 2. Generally an executive function:
service which have been reclassified into Appointment to office is intrinsically an
Career Service and Non-Career Service by executive act involving the exercise of
P.D. No. 807 providing for the organization of discretion [Concepcion v. Paredes, G.R.
the Civil Service Commission and by the 17539 (1921)].
Administrative Code of 1987 [Preclaro vs.
Sandiganbayan, G.R. No. 111091 (1995)]. XPN: Congress may appoint its own
officials and staff [See Springer v.
Government of the Philippine Islands, 277
U.S. 189 (1928)].
a. When the Constitution vests the
powers in another branch of the State
(i.e., Judiciary, Sec. 5(6), Art. VIII) or an
independent office (e.g., Constitutional
Commissions, Sec. 4, Art. IX-A;
Page 178 of 384
Ombudsman, Sec. 6, Art. XI; 2. From the exercise of the limited
Commission on Human Rights, Sec. legislative power to prescribe the
18(10), Art. XIII). qualifications to a given appointive
office [Manalang v. Quitoriano, supra].
3. Cannot be hindered by Congress:
GR: Exclusive prerogative of the President 1987 Constitution, Article IX-B, Section 2(2).
[Manalang v. Quitoriano, G.R. No. 6898 (2) Appointments in the civil service shall be made
(1954)]. only according to merit and fitness to be determined,
as far as practicable, and, except to positions which
When Congress clothes the President with are policy-determining, primarily confidential, or
highly technical, by competitive examination.
the power to appoint an officer, it
(Congress) cannot at the same time limit
the choice of the President to only one B. Election
candidate. Once the power of appointment
is conferred on the President, such Election
conferment necessarily carries the
The choice or selection of candidates to public
discretion of whom to appoint. Even on the office by popular vote through the use of the
pretext of prescribing the qualifications of
ballot [Rulloda v. COMELEC, G.R. No. 154198
the officer, Congress may not abuse such (2003)].
power as to divest the appointing authority,
directly or indirectly, of his discretion to pick C. Succession
his own choice. Consequently, when the
qualifications prescribed by Congress can Example: In case of death, permanent
only be met by one individual, such disability, removal from office, or resignation of
enactment effectively eliminates the the President, Vice-President becomes
discretion of the appointing power to president to serve unexpired term [Art. VII,
choose and constitutes an irregular Sec. 8].
restriction on the power of appointment
[Flores v. Drilon, supra]. D. Operation of Law
XPN: Those resulting: Example: By direct provision of law, such as
1. From the need of securing the Sec. 8, Art. VIII, which provides that the Chief
concurrence of the Commission on Justice of the SC is the ex officio Chairman of
Appointments; and the JBC.
III. MODES AND KINDS OF APPOINTMENT

Appointments
As to term 1. Permanent
2. Temporary
Appointments by the President Those under Sec. 16, Art. VII of the Constitution.
Appointments to the Civil 1. Career Service

Service 2. Non-career Service
3. Career Executive Service
Page 179 of 384

A. As to term
Permanent Appointment Temporary Appointment
Issued to a person who meets all the

Issued to a person who meets all the requirements for the position to which
requirements for the positions to which he is being appointed except the
he is being appointed issued to a appropriate civil service eligibility,
person who meets all the requirements provided the following conditions are
Eligibility for the positions to which he is being present:
appointed, including the appropriate (1) absence of appropriate eligibles;
eligibility prescribed [Sec. 27, Chapter (2) it becomes necessary in the public
5, Subtitle A, Title I, Book V, E.O. No. interest to fill a vacancy
292]. [Sec. 27, Chapter 5, Subtitle A, Title I,
Book V, E.O. No. 292].
Not subject to confirmation by the CA.

Such confirmation, if given erroneously,
Confirmation
Yes, if required by the Constitution. will not make the incumbent a
by CA
permanent appointee [Valencia v.
Peralta, Jr., G.R. No. L-20864 (1963)].
No. Appointment is revocable at will

Security of
Yes. and without the necessity of just cause
Tenure
or a valid investigation.
1. Permanent Presidential Appointments
2. Temporary 1987 Constitution, Article VII, Section 16. The

President shall nominate and, with the consent of
a. “Acting” appointment is a temporary the Commission on Appointments, appoint the
appointment and revocable in character heads of the executive departments, ambassadors,
other public ministers and consuls, or officers of the
[Marohombsar v. Alonto, Jr., G.R. No.
armed forces from the rank of colonel or naval
93711 (1991)]. captain, and other officers whose appointments are
b. Mere designation does not confer security vested in him in this Constitution. He shall also
of tenure, as the person designated appoint all other officers of the Government whose
occupies the position only in an acting appointments are not otherwise provided for by law,
capacity [Sevilla v. CA, 209 SCRA 637]. and those whom he may be authorized by law to
appoint. The Congress may, by law, vest the
c. Shall not exceed 12 months, but the
appointment of other officers lower in rank in the
appointee may be replaced sooner if a President alone, in the courts, or in the heads of
qualified civil service eligible becomes departments, agencies, commissions, or boards.
available [Section 25(b), P.D. No. 807].
The President shall have the power to make
When Temporary Appointments Are appointments during the recess of the Congress,
whether voluntary or compulsory, but such
Not Allowed appointments shall be effective only until after
In no case shall any Member (or Chair) of the disapproval by the Commission on Appointments or
(a) Civil Service Commission, (b) Commission until the next adjournment of the Congress.
on Elections, or (c) Commission on Audit be
appointed or designated in a temporary or
acting capacity [Sec. 1(2), Art. IX-B; Sec. 1(2),
Art. IX-C; Sec. 1(2), Art. IX-D, 1987
Constitution].
Page 180 of 384
Four (4) groups of officers whom the 2. All other officers of the Government whose
President shall appoint: appointments are not otherwise provided
1. (a) Heads of the executive departments, for by law;
ambassadors, (b) other public ministers 3. those whom the President may be
and consuls, (c) officers of the armed authorized by law to appoint;
forces from the rank of colonel or naval 4. Officers lower in rank whose appointments
captain, and (d) other officers whose the Congress may by law vest in the
appointments are vested in him in this President alone
Constitution;
Presidential Appointments
1. Heads of the executive departments;

2. Ambassadors;
1st Group: 3. Other public ministers and consuls;
Specifically 4. Officers of the armed forces from the rank of colonel or naval captain;
enumerated 5. Other officers whose appointments are vested in him by the Constitution:
under Article VII, a. Regular members of the Judicial and Bar Council;
Section 16 of the b. The Chairman and Commissioners of the Civil Service Commission;
Constitution c. The Chairman and Commissioners of the COMELEC;
d. The Chairman and Commissioners of the Commission on Audit;
All other officers of the Government whose appointments are not otherwise
2nd Group:
provided for by law.
Officers whom the President may be authorized by law to appoint.

Examples:
3rd Group: Heads of GOCCs;
Undersecretaries;
Heads of bureaus and offices.
Officers lower in rank whose appointments the Congress may by law vest in
4th Group:
the President alone.
List of Appointments Requiring confirmation by the CA for a public office

Confirmation by Commission on created by statute. This would be
Appointments (CA) Is Exclusive unconstitutional as it expands the powers of
The list of appointments requiring confirmation the CA [Calderon v. Carale, G.R. No. 91636
(1992)].
is exclusive. Congress cannot, by law, require
Commission on Appointments Confirmation Requirement

When CA Confirmation Required When CA Confirmation NOT Required
Those specifically enumerated under the 1st 1. All other officers whose appointments are
sentence of Section 16, Article VII of the not otherwise provided for by law;
Constitution: 2. Officers whom the President may be
1. Heads of the executive departments; authorized by law to appoint;
2. Ambassadors;
3. Other public ministers and consuls;
Page 181 of 384

When CA Confirmation Required When CA Confirmation NOT Required
4. Officers of the armed forces from the rank of 3. Appointments explicitly exempted from the
colonel or naval captain; confirmation requirement under the
5. Other officers whose appointments are Constitution:
vested in him by the Constitution. a. Vice-President as a member of the
cabinet [Sec. 3, Art. VII];
b. Members of the Supreme Court and
judges of lower courts [Sec. 9, Art. VIII];
c. The Ombudsman and his deputies [Sec.
9, Art. XI].
4. The CHR Commissioners [Bautista v.
Salonga, G.R. No. 86439 (1989)].
B. Regular or Ad Interim Appointment
Regular Appointment Ad Interim Appointment
When made by the While Congress is in session [Sec. During the recess of the Congress,
President 16(2), Art. VII]. whether voluntary or compulsory
[Sec. 16(2), Art. VII].
Nature of Permanent Permanent

appointment
Effectivity Upon confirmation by the CA. Immediately effective.
Duration Until the end of the term. Ceases to be valid:

a. If disapproved by the CA; or
b. If bypassed by the CA upon the
next adjournment of Congress.
1. Ad Interim Appointment and While an ad interim appointment is permanent

Appointment in an Acting Capacity and irrevocable except as provided by law, an
appointment or designation in a temporary or
Nature acting capacity can be withdrawn or revoked at
the pleasure of the appointing power. A
1. Permanent in nature – takes effect
immediately and cannot be withdrawn temporary or acting appointee does not enjoy
any security of tenure, no matter how briefly.
once the appointee has qualified into office.
Effective until disapproved by the This is the kind of appointment that the
Constitution prohibits the President from
Commission on Appointments or until the
next adjournment of Congress [Matibag v. making to the three independent constitutional
commissions, including the COMELEC
Benipayo, G.R. No. 149036 (2002)].
2. No condition on the effectivity of an ad [Matibag v. Benipayo, supra].
interim appointment – appointee can at
once assume office and exercise, as a de 2. Disapproval vs. Bypass
jure officer, all the powers pertaining to the
office [Matibag v. Benipayo, supra]. An ad interim appointee disapproved by the
CA cannot be reappointed. But a by-passed
appointee, or one whose appointment was not
Page 182 of 384
acted upon the merits by the CA, may be 2. Eligibility to a public office is of a continuing
appointed again by the President, because nature and must exist both at the
failure by the CA to confirm an ad interim commencement and during the occupancy
appointment is not disapproval. of an office [Aguila v. Genato, 103 SCRA
(1981)].
Renewal of By-Passed Appointment 3. Integrity is a continuing requirement
“A by-passed appointment is one that has not [Republic v. Sereno, G.R. No. 237428
been finally acted upon on the merits by the (2018)].
Commission on Appointments at the close of
the session of Congress. There is no final Ineligibility
decision by the Commission on Appointments 1. Lack of qualifications prescribed by the
to give or withhold its consent to the Constitution or applicable law;
appointment as required by the Constitution. 2. Legally or otherwise disqualified to hold an
Absent such decision, the President is free to office; disqualified to be elected to an
renew the ad interim appointment of a by- office; disqualified to hold an office if
passed appointee” [Matibag v. Benipayo, elected or appointed to it [Topacio v.
supra]. Paredes, 23 Phil. 238-258 (1912)].
C. Midnight Appointments Qualification

1. May refer to endowment or
General Rule: A President or Acting President accomplishment that fits one for office;
shall not make appointments two (2) months
immediately before the next presidential Every particular job in an office calls for both
elections and up to the end of his term [Art. VII, formal and informal qualifications. Formal
Sec. 15]. qualifications such as age, number of
academic units in a certain course, seminars
Exceptions: When prejudicial to public attended, etc., may be valuable but so are such
service/safety; members of judiciary/SC. intangibles as resourcefulness, team spirit,
1. Temporary appointments to executive courtesy, initiative, loyalty, ambition, prospects
positions when continued vacancies for the future, and best interests of the service
therein will prejudice public service or [Gaspar v. CA, 190 SCRA 774 (1990)].
endanger public safety [Sec. 15, Art. VII,
1987 Constitution]; Administrative Code, Book V, Sections 21(1),
2. The prohibition does not apply to Members 21(7), and 22(1).
of the Supreme Court and the judiciary [De
Castro v. JBC, G.R. No. 191002 (2010)]. Section 21. Recruitment and Selection of
Employees. – (1) Opportunity for government
employment shall be open to all qualified citizens
Note: This provision applies only to presidential and positive efforts shall be exerted to attract the
appointments. There is no law that prohibits best qualified to enter the service. Employees shall
local executive officials from making be selected on the basis of fitness to perform the
appointments during the last days of their duties and assume the responsibilities of the
tenure [De Rama v. CA, G.R. No. 131136 positions.
(7) Qualification in an appropriate examination shall
(2001)]; be required for appointment to positions in the first
and second levels in the career service in
accordance with the Civil Service rules, except as
IV. ELIGIBILITY AND otherwise provided in this Title: Provided, That
whenever there is a civil service eligible actually
QUALIFICATION available for appointment, no person who is not
such an eligible shall be appointed even in a
REQUIREMENTS temporary capacity to any vacant position in the
career service in the government or in any
Eligibility government-owned or controlled corporation with
1. State of being legally fitted or qualified to original charter, except when the immediate filling of
the vacancy is urgently required in the public
be chosen [De Leon].
Page 183 of 384
interest, or when the vacancy is not permanent, in liabilities and responsibilities under existing laws of
which cases temporary appointments of non- the Philippines and the following conditions:
eligibles may be made in the absence of eligibles
actually and immediately available. (3) Those appointed to any public office shall
subscribe and swear to an oath of allegiance to the
Section 22. Qualification Standards. – (1) A Republic of the Philippines and its duly constituted
qualification standard expresses the minimum authorities prior to their assumption of office:
requirements for a class of positions in terms of Provided, that they renounce their oath of allegiance
education, training and experience, civil service to the country where they took that oath;
eligibility, physical fitness, and other qualities
required for successful performance. The degree of (5) That right to vote or be elected or appointed to
qualifications of an officer or employee shall be any public office in the Philippines cannot be
determined by the appointing authority on the basis exercised by, or extended to, those who:
of the qualification standard for the particular
position. (a) are candidates for or are occupying any public
office in the country of which they are naturalized
citizens; and/or
R.A. No. 9225, Sections 5(3) and 5(5)
(b) are in active service as commissioned or non-
Section 5. Civil and Political Rights and Liabilities. commissioned officers in the armed forces of the
– Those who retain or re-acquire Philippine country which they are naturalized citizens.
citizenship under this Act shall enjoy full civil and
political rights and be subject to all attendant
Qualifications Prescribed in Constitution for Certain Officers
1. Natural-born citizen;
2. Registered voter;
President and Vice-President.
3. Able to read and write;
(Art. VII, Secs. 2, 3)
4. At least forty years of age on the day of the Election;
5. Resident of the Philippines for at least ten years immediately
preceding such election.
2. On the day of the election, is at least thirty-five years of age;
Senators. (Art. VI, Sec. 3) 3. Able to read and write;
4. Registered voter;
5. Resident of the Philippines for not less than two years
immediately preceding the day of the election.
2. On day of election at least 25 years;
Members of the House of 3. Able to read and write;
Representatives. (Art VI, Sec. 4. Except in party-list elections, registered voter in district
6) where to be elected;
5. Resident for period of not less than one year immediately
preceding day of election.
1. Natural-born citizen of the Philippines;

Members of the Supreme 2. SC: must be at least forty years of age;
Court and lower collegiate 3. Must have been for fifteen or more a judge of lower court or
court. (Art. VIII) engaged in the practice of law in the Philippines;
4. Must be a person of proven competence, integrity, probity,
independence.
Page 184 of 384

Qualifications Prescribed in Constitution for Certain Officers
2. At least 35 at time of appointment;
Chairman and Commissioners
3. Proven capacity for public administration;
of the Civil Service. (Art. IX-B)
4. Must not have been candidates for any elective position in
the elections immediately preceding their appointment.
1. Natural-born citizens;
3. Holder of college degree;
Chairman and Commissioners
4. Must not have been candidates for any elective position in
of the Commission on
the immediately preceding elections;
Elections. (Art. IX-C)
5. Majority, including Chairman, shall be members of the PH
Bar who have been engaged in the practice of law for at least
ten years.
3. Certified public accountants with not less than ten years of
Chairman and Commissioners auditing experience or members of PH Bar who have been
of the Commission on Audit. engaged in practice of law for at least ten years;
(Art. IX-D) 4. Must not have been candidates for any elective positions in
the elections immediately preceding their appointment;
5. At no time shall all Members of the Commission belong to
the same profession.
Chairman and Members of the 1. Natural-born citizens

Commission on Human 2. Majority are members of Bar
Rights. (Art. XIII, Sec. 17) 3. Term/other qualifications and disabilities provided by law.
2. At time of their appointment at least 40;
3. Of recognized probity and independence;
Ombudsman and his deputies. 4. Members of the Bar;
(Art. XI, Sec. 8) 5. Not candidates for any elective office in the immediately
preceding elections;
6. Ombudsman: must have for ten years and more been a
judge or engaged in the practice of law in the Philippines.
Qualifications Prescribed by Law for Certain Officers
Secretaries of Departments (Admin. Code Citizens of PH;

of 1987, Book IV, Chapter 10, Sec. 45.) Not less than 25.
Presiding Justice and Associate Justice of Same qualifications as those provided in the
the CA (B.P. Blg. 129, Sec. 7) Constitution for Justices of the SC.
1. Natural-born citizen of PH;

2. At least 35;
Judges of RTC (B.P. Blg. 129, Sec. 15)
3. At least 10 years engaged in the practice of
law in the PH requiring admission to the
Page 185 of 384

Qualifications Prescribed by Law for Certain Officers
practice of law as an indispensable

requirement.
1. Registered voter in barangay, municipality,

city or province, or in case of a member of the
sangguniang panlalawigan, sangguniang
Judges of Metropolitan Trial Courts, panlungsod, or sangguniang bayan, the
Municipal Trial Courts, and Municipal district where he intends to be elected;
Circuit Trial Courts (B.P. Blg. 129, Sec. 26) 2. Resident therein for at least one (1) year
immediately preceding the day of the election;
3. Able to read and write Filipino or any other
local language or dialect.
1. Registered voter in barangay, municipality,

city or province, or in case of a member of the
sangguniang panlalawigan, sangguniang
panlungsod, or sangguniang bayan, the
Elective local officials, in general district where he intends to be elected;
2. Resident therein for at least one (1) year
immediately preceding the day of the election;
3. Able to read and write Filipino or any other
local language or dialect.
Candidates for the position of governor,

vice-governor or member of the
At least twenty-three (23) years of age on election
sangguniang panlalawigan, or mayor,
day.
vice-mayor or member of the sangguniang
panlungsod of highly urbanized cities
Candidates for the position of mayor or

At least twenty-one (21) years of age on election
vice-mayor of independent component
day.
cities, component cities, or municipalities
Candidates for the position of member of

At least eighteen (18) years of age on election
the sangguniang panlungsod or
day.
sangguniang bayan
Candidates for the position of punong

At least eighteen (18) years of age on election
barangay or member of the sangguniang
day.
barangay
subsidiaries [Sec. 6, Art. IX-B; Sec. 54,

V. DISABILITIES AND Book V, Admin. Code].
INHIBITIONS OF PUBLIC
XPN: Losing candidates in Barangay
OFFICERS elections [Sec. 94 (b) LGC].
General Disqualifications 2. Elective officials: not eligible for

1. Candidate who has lost in any election: appointment or designation in any capacity
cannot be appointed within one year to any to any public office or position during his
office in Govt. or in any GOCCs or
Page 186 of 384
tenure [Sec. 7, Art. IX-B; Sec. 54, Book V, Whether one office is subordinate to the other,
Admin. Code]. in the sense that one office has the right to
interfere with the other. Incompatibility between
XPN: Unless allowed by the Constitution two offices, is an inconsistency in the functions
(e.g., The VP as Cabinet Member [Sec. 3, of the two [Id.].
Art. VII, Const.], the President as Chairman
of NEDA [Sec. 9, Art. XII, Const.], a 4. Nepotism (Sec. 59, Book V, Admin.
representative of Congress as member of Code):
JBC [Sec. 8, Art. VIII, Const.]). a. all appointments in the national,
provincial, city and municipal
3. Appointive officials: cannot hold any governments or in any branch or
other office or employment in Govt. or any instrumentality thereof, including
subdivision, agency or instrumentality government-owned or controlled
thereof, including government-owned or corporations;
controlled corporations or their subsidiaries
unless otherwise allowed by law OR by b. made in favor of a relative of the
the primary functions of position [Sec. appointing or recommending
7, Art. IX-B, Const.; Sec. 54, Book V, authority, or of the chief of the
Admin. Code]. bureau or office, or of the persons
exercising immediate supervision
XPN: Official presidential family [Sec. 13]. over him, are hereby prohibited;
The President, Vice-President, the Members of
the Cabinet, and their deputies or assistants c. Relative/family members: within 3rd
shall not, unless otherwise provided in this degree of affinity or consanguinity.
Constitution, hold any other office or
employment during their tenure. XPN: (a) persons employed in a
confidential capacity, (b) teachers, (c)
It bears repeating though that in order that such physicians, and (d) members of the
additional duties or functions may not Armed Forces of the Philippines.
transgress the prohibition embodied in Section
13, Article VII of the 1987 Constitution, such Restriction not applicable to the case of
additional duties or functions must be required a member of any family who, after his
by the primary functions of the official or her appointment to any position in an
concerned, who is to perform the same in an office or bureau, contracts marriage
ex-officio capacity as provided by law, without with someone in the same office or
receiving any additional compensation bureau, in which event the employment
therefor. Ex-officio posts held by the executive or retention therein of both husband
official concerned without additional and wife may be allowed.
compensation as provided by law and as
required by the primary functions of his office d. Sec. 79, LGC: No person shall be
do not fall under the definition of "any other appointed in the career service of the
office" within the contemplation of the local government if he is related within
constitutional prohibition [Civil Liberties Union the fourth civil degree of consanguinity
v. Executive Secretary, G.R. Nos. 83896 & or affinity to the appointing or
83815 (1991)]. recommending authority.
A government official may occupy two Not applicable to the case of a

government offices and perform the functions member of any family who, after his
of both as long as there is no incompatibility or her appointment to any position in
[Public Interest Center Inc. v. Elma, G.R. No. an office or bureau, contracts
138965 (2006)]. marriage with someone in the same
office or bureau, in which event the
Doctrine of Incompatibility employment or retention therein of
Page 187 of 384

both husband and wife may be Covers appointments made by a group of
allowed. [Section 59, Chapter 8, individuals acting as a body [CSC v. Cortes,
Title I(A), Book V, EO No. 292] G.R. No. 200103 (2014)].
e. The spouse and relatives by Does not require the existence of a

consanguinity or affinity within the government position in the plantilla of an
fourth civil degree of the President shall organization, nor budgetary allocation therefor
not during his tenure be appointed as nor that the appointee received benefits as a
members of the Constitutional result of the appointment for its application
Commissions, or the Office of the [Bagaoisan v. Office of the Ombudsman for
Ombudsman, or as Secretaries, Mindanao, Davao City, G.R. No. 242005
Undersecretaries, chairmen or heads (2019)].
of bureaus or offices, including
government-owned or controlled Designation is included under appointment in
corporations and their subsidiaries [Art. this sense, or else, the rules on nepotism would
VII, Sec. 13, par. 2]. be meaningless as an appointing authority may
just designate a relative to a vacant position.
Covers promotional appointments (not just What cannot be done directly cannot be done
original appointments) [Debulgado v. CSC, 237 indirectly [Laurel V v. CSC, G.R. No. 71562
SCRA 184 (1994)]. (1991)].
Specific Disqualifications
1. No Senator or Member of the House of Representatives

2. May hold any other office or employment in the Government, or
any subdivision, agency, or instrumentality thereof, including
Members of
government-owned or controlled corporations or their subsidiaries
Congress [Const.,
without forfeiting his seat.
Art. VI, Sec. 13]
3. Neither shall he be appointed to any office which may have been
created or the emoluments thereof increased during the term for
which he was elected.
1. President, Vice-President, the Members of the Cabinet, and their

deputies or assistants shall not, unless otherwise provided in this
Constitution, hold any other office or employment during their
tenure.
President, VP,
2. Shall not, during said tenure, directly or indirectly, practice any
Cabinet, deputies,
other profession, participate in any business, or be financially
assistants [Const.,
interested in any contract with, or in any franchise, or special
Art. VII, Sec. 13]
privilege granted by the Government or any subdivision, agency, or
instrumentality thereof, including government-owned or controlled
corporations or their subsidiaries.
3. They shall strictly avoid conflict of interest in the conduct of their office.
Members of SC
and of other courts Shall not be designated to any agency performing quasi-judicial or
[Const., Art. VIII, administrative functions.
Sec. 12]
Members of 1. No Member of a Constitutional Commission shall, during his tenure,

Constitutional hold any other office or employment.
Page 188 of 384

Commissions 2. Neither shall he engage in the practice of any profession or in the

[Const., Art. IX-A, active management or control of any business which in any way be
Sec. 2] affected by the functions of his office,
3. Nor shall he be financially interested, directly or indirectly, in any
contract with, or in any franchise or privilege granted by the
Government, any of its subdivisions, agencies, or instrumentalities,
including government-owned or controlled corporations or their
subsidiaries.
Civil Service
Commission Commissioners must not have been candidates for any elective position in
[Const., Art. IX-B, the elections immediately preceding their appointment.
Sec. 1]
COMELEC [Const., Must not have been candidates for any elective position in the immediately
Art. IX-C, Sec. 1] preceding elections.
Commission on Must not have been candidates for any elective position in the elections
Audit [Const., Art. immediately preceding their appointment. At no time shall all Members of
IX-D, Sec. 1] the Commission belong to the same profession.
Ombudsman
Must not have been candidates for any elective office in the immediately
[Const., Art. XI,
preceding election.
Sec. 8, 2nd par.]
No member of the armed forces in the active service shall, at any time, be
Members of the appointed or designated in any capacity to a civilian position in the
Armed Forces Government including government-owned or controlled corporations or any
[Const., Art. XVI, of their subsidiaries.
Sec. 5[4]]
Note: Members of the Constitutional Commissions and the Ombudsman and Deputies must not have
been candidates (not only losing candidates) in the immediately preceding election.
Sovereignty resides in the people and all

VI. POWERS AND DUTIES government authority emanates from them
OF PUBLIC OFFICERS [Sec. 1, Art. II, 1987 Const.].
A. Scope of Power of a Public The right to be a public officer, then, or to

exercise the powers and authority of a public
Officer office, must find its source in some provision of
the public law.
a. Expressly conferred upon him by law under
which he has been appointed or elected; In the absence of a valid grant, public officials
b. Expressly annexed to the office by law are devoid of power. A public official exercises
which created it or some other law referring power, not rights. The Government itself is
to it; merely an agency through which the will of the
c. Attached to the office as incidents to it. State is expressed and enforced. Its officers
therefore are likewise agents entrusted with the
Source of Powers of Public Officer responsibility of discharging its functions. As
Page 189 of 384

such there is no presumption that they are A purely ministerial act or duty is one which an
empowered to act. There must be a delegation officer or tribunal performs in a given state of
of such authority, either express or implied facts, in a prescribed manner, in obedience to
[Villegas v. Subido, G.R. No. L-26534 (1969)]. the mandate of a legal authority, without regard
to or the exercise of his own judgment upon the
But once the power is expressly granted, it will propriety or impropriety of the act done.
be broadly construed in line with the doctrine of [Espidirion v. CA, G.R. No. 146933 (2006)]
necessary implication [De Leon].
General Rule: Performance of duties of this
Doctrine of Necessary Implication nature may be properly delegated to another.
All powers necessary for the effective exercise
of the express powers are deemed impliedly Exceptions
granted [Nachura]. • Delegation is expressly prohibited by law;
or
Authority can be exercised only during the term • The law expressly requires that the act be
when the public officer is, by law, invested with performed by the officer in person.
the rights and duties of the office.
Mandamus will lie but only upon a clear
Territorial Limitation of Authority of showing of a legal right [Sec. 3, Rule 65, Rules
Public Officers: of Court].
● The authority of public officers is limited to b. Discretionary
territory where law has effect, by virtue of
which they claim, has sovereign force — Acts which necessarily require the exercise of
the authority cannot exist in places where reason in the adaptation of means to an end,
the law has no effect. and discretion in determining how or whether
● Where a public officer authorized by law to the act shall be done or the course pursued.
perform his office at a particular place, his When the law commits to any officer the duty
action at a place not authorized by law is of looking into facts and acting upon them, not
invalid (i.e., judge levying and selling in a way which it specifically directs, but after a
property outside its jurisdiction is invalid) discretion in its nature, the function is
[De Leon]. discretionary (e.g., quasi-judicial acts).
Duration of Authority General Rule: A public officer cannot delegate

Limited to the term during which he is by law his discretionary duties to another.
invested with the rights and duties of the office
[De Leon]. Rationale: In cases where the execution of the
office requires exercise of judgment or
discretion by the officer, the presumption is that
Construction of Grant of Powers he was chosen because he was deemed fit and
Express grants of power are subject to a strict
competent to exercise such judgment.
interpretation and will be construed as
conferring those powers only which are
Exception: The power to substitute another in
expressly imposed or necessarily implied [De
his place has been expressly granted by law.
Leon; Banco Filipino Savings & Mortgage Bank
v. Monetary Board, G.R. 70054 (1991)].
The rule that requires an administrative officer
to exercise his own judgment and discretion
B. Classification of Powers and does not preclude him from utilizing, as a
Duties matter of practical administrative procedure,
the aid of subordinates to investigate and
1. As to Nature report to him the facts, on the basis of which
the officer makes his decisions. It is sufficient
that the judgment and discretion finally
a. Ministerial
exercised are those of the officer authorized by
Page 190 of 384

law [American Tobacco vs Director of Patents, action or step as prescribed by law to make
G.R. No. L-26803 (1975)]. them perform their duties [Mondano, supra]
Mandamus will not lie for the performance of a C. Duties of Public Officers
discretionary duty.
Exception to the Exception: When the There are two kinds of duties exercised by
public officers: the "duty owing to the public
discretion is granted only as to the manner of
its exercise and not the discretion to act or not collectively" (the body politic), and the "duty
to act, the court may require a general action owing to particular individuals, thus:
[BF Homes, Inc. v. National Water Resources
Council, G.R. No. 78529 (1987)]. 1. Of Duties to the Public. The first of these
classes embraces those officers whose duty is
2. As to the Obligation of the Officers owing primarily to the public collectively --- to
the body politic --- and not to any particular
to Perform Their Powers and Duties individual; who act for the public at large, and
who are ordinarily paid out of the public
a. Mandatory treasury.
Powers conferred on public officers are The officers whose duties fall wholly or partially
generally construed as mandatory although the
within this class are numerous and the
language may be permissive, where they are distinction will be readily recognized. Thus, the
for the benefit of the public or individuals.
governor owes a duty to the public to see that
the laws are properly executed, that fit and
b. Permissive competent officials are appointed by him, that
unworthy and ill-considered acts of the
Statutory provisions define the time and mode legislature do not receive his approval, but
in which public officers will discharge their these, and many others of a like nature, are
duties, and those which are obviously designed duties which he owes to the public at large and
merely to secure order, uniformity, system and no one individual could single himself out and
dispatch in public business are generally assert that they were duties owing to him alone.
deemed directory. So, members of the legislature owe a duty to
the public to pass only wise and proper laws,
If the act does not affect third persons and is but no one person could pretend that the duty
not clearly beneficial to the public, permissive was owing to himself rather than to another.
words will not be construed as mandatory [De Highway commissioners owe a duty that they
Leon]. will be governed only by considerations of the
public good in deciding upon the opening or
3. As to the Relationship of the closing of highways, but it is not a duty to any
Officers to Their Subordinates particular individual of the community.
Power of Control – The power of an officer to These illustrations might be greatly extended,
alter or modify or nullify or set aside what a but it is believed that they are sufficient to
subordinate officer had done in the define the general doctrine.
performance of his duties and to substitute the
judgment of the former for that of the latter. 2. Of Duties to Individuals. - The second
[Mondano v Silvosa, G.R. No. L-7708 (1995)] class above referred to includes those who,
while they owe to the public the general duty of
Power of Supervision a proper administration of their respective
offices, yet become, by reason of their
Supervision means overseeing or the power or employment by a particular individual to do
authority of an officer to see that subordinate some act for him in an official capacity, under a
officers perform their duties. If the latter fail orspecial and particular obligation to him as an
neglect to fulfill them the former may take such
Page 191 of 384
individual. They serve individuals chiefly and House concerned of a potential conflict of
usually receive their compensation from fees interest that may arise from the filing of a
paid by each individual who employs them. proposed legislation of which they are authors
[Art. VI, Sec. 12].
A sheriff or constable in serving civil process
for a private suitor, a recorder of deeds in 2. Duties of Public Officers as
recording the deed or mortgage of an Trustees for the Public
individual, a clerk of court in entering up a
private judgment, a notary public in protesting a. In General
negotiable paper, an inspector of elections in
passing upon the qualifications of an elector, 1. Duty to obey the law;
each owes a general duty of official good 2. Duty to accept and continue in office;
conduct to the public, but he is also under a 3. Duty to accept burden of office;
special duty to the particular individual 4. Duty as to diligence and care in the
concerned which gives the latter a peculiar performance of official duties;
interest in his due performance [Vinzons-Chato 5. Duty in choice and supervision of
v. Fortune Tobacco Corp., G.R. No. 141309 subordinates.
(2008)].
b. Ethical Duties
1. General (Constitutional) Duties
Bound to perform honestly, faithfully, and to the
a. To be accountable to the people; to serve best of his ability, and to act primarily for the
them with utmost responsibility, integrity, benefit of the people. An attempt to exercise
loyalty and efficiency; to act with patriotism those powers corruptly for some improper
and justice; and to lead modest lives [Sec. purpose is null and void.
1, Art. IX, 1987 Const.]. a. Duty to refrain from outside activities that
b. To submit a declaration under oath of his interfere with the proper discharge of their
assets, liabilities and net worth (SALN) duties;
upon assumption of office and as often b. Duty not to use his official power to further
thereafter as may be required by law [Sec. his own interest;
17, Art. XI, 1987 Const.]. c. Duty to act with civility [De Leon].
Minor or explainable errors in the SALN,

which cannot be related to an attempt to 3. Specific Duties under the Code of
conceal illicit activities, should not be Conduct and Ethical Standards for
punishable. This Court may relax the rule Public Officials and Employees
on strictly complying with the SALN in
cases where minor errors were committed a. Act promptly on letters and requests;
since these may simply be used to harass b. All public officials shall, within fifteen
and obstruct public officers in the (15) working days from receipt,
performance of their duties [Iglesias v. respond to letters, telegrams or other
Office of the Ombudsman, G.R. No. means of communication sent by the
180745 (2017)]. public. The reply must contain the
c. To owe the State and the Constitution answer taken on the request;
allegiance at all times [Sec. 18, Art. XI, c. Submit annual performance reports;
Const.]. d. All heads or other responsible officers
of agencies of the government or of
Duty to Make Financial Disclosures GOCCs shall, within forty-five (45)
for Members of Congress working days from the end of the year,
All Members of the Senate and the House of render a full and complete report of
Representatives shall, upon assumption of performance and accomplishments, as
office, make a full disclosure of their financial prescribed by existing rules and
and business interest. They shall notify the
Page 192 of 384
regulations of the agency, office or Legal Right to Position Is Protected by
corporation concerned; Security of Tenure upon Assumption
e. Process documents and papers of Office
expeditiously; The moment the appointee assumes a position
f. All official papers and documents must
in the civil service under a completed
be processed and completed within a appointment, he acquires a legal, not merely
reasonable time from the preparation
equitable right (to the position), which is
thereof and must contain, as far as protected not only by statute, but also by the
practicable, not more than three (3)
Constitution [Art. IX-B, Sec. 2, par. (3)] and
signatories therein; cannot be taken away from him either by
g. Act immediately on the public’s
revocation of the appointment, or by removal,
personal transactions; except for cause, and with previous notice and
h. All public officials and employees must
hearing [CSC v. Magnaye, Jr., G.R. No.
attend to anyone who wants to avail
183337 (2010)].
himself of the services of their offices,
and must, at all times, act promptly and
expeditiously;
Security of Tenure Cannot Be
i. Make documents accessible to the Expanded to Grant Right to Office
public; When There Is a Change in the Nature
j. All public documents must be made of the Office
accessible to, and readily available for Security of tenure in public office means that a
inspection by, the public within public officer or employee shall not be
reasonable working hours [Sec. 5, R.A. suspended or dismissed except for cause, as
No. 6713]. provided by law and after due process. It
cannot be expanded to grant a right to public
office despite a change in the nature of the
VII. RIGHTS OF PUBLIC office held.
OFFICERS
Both career and non-career service employees
A. To Office have a right to security of tenure. All permanent
officers and employees in the civil service,
regardless of whether they belong to the career
B. Security of Tenure or non-career service category, are entitled to
this guaranty; they cannot be removed from
1987 Constitution office except for cause provided by law and
after procedural due process [Government of
Article IX-B, Section 2(3). Camarines Norte vs. Gonzales, G.R. No.
(3) No officer or employee of the civil service shall
185740 (2013)].
be removed or suspended except for cause
provided by law.
C. Compensation
Article XIII, Section 3, Paragraph 2. [The State]
shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, 1987 Constitution, Article IX-B, Sections 5 and 8.
and peaceful concerted activities, including the right
to strike in accordance with law. They shall be Section 5. The Congress shall provide for the
entitled to security of tenure, humane conditions of standardization of compensation of government
work, and a living wage. They shall also participate officials and employees, including those in
in policy and decision-making processes affecting government-owned or controlled corporations with
their rights and benefits as may be provided by law. original charters, taking into account the nature of
the responsibilities pertaining to, and the
qualifications required for their positions.
Section 8. No elective or appointive public officer or

employee shall receive additional, double, or
indirect compensation, unless specifically
Page 193 of 384

authorized by law, nor accept without the consent of "(t)he right to self-organization shall not be
the Congress, any present, emolument, office, or denied to government employees."
title of any kind from any foreign government.
With respect to other civil servants, that is,
Pensions or gratuities shall not be considered as employees of all branches, subdivisions,
additional, double, or indirect compensation.
instrumentalities and agencies of the
government including government-owned or
The ex-officio positions held by Cabinet controlled corporations with original charters
officials are not entitled to additional and who are, therefore, covered by the civil
compensation. The ex-officio position being service laws, the guidelines for the exercise of
actually and in legal contemplation part of the their right to organize is provided for under
principal office, it follows that the official Executive Order No. 180 [TUPAS vs. NHA,
concerned has no right to receive additional G.R. No. L-49677 (1989)].
compensation for his services in the said
position. The reason is that these services are F. Retirement Pay
already paid for and covered by the
compensation attached to his principal office Pensions or gratuities shall not be considered
[Civil Liberties Union v. Executive Secretary, as additional, double, or indirect compensation
supra]. [Sec. 8, Art. IX-B, Const.].
This Court, in a long line of cases, has already This provision simply means that a retiree
applied the double compensation prohibition to receiving pension or gratuity can continue to
positions outside the Cabinet [Suratos v. receive such pension or gratuity even if he
Commission on Audit, G.R. No. 253584 accepts another government position to which
(2022)]. another compensation is attached [Santos v.
Court of Appeals, G.R. No. 139792 (2000)].
D. Different/Applicable Leaves
VIII. LIABILITIES OF PUBLIC
E. Self-Organization
OFFICERS
1987 Constitution
1987 Constitution, Article XI, Section 15. The
Article III, Section 8. The right of the people, right of the State to recover properties unlawfully
including those employed in the public and private acquired by public officials or employees, from them
sectors, to form unions, associations, or societies for or from their nominees or transferees, shall not be
purposes not contrary to law shall not be abridged. barred by prescription, laches, or estoppel.
Article XIII, Section 3, 2nd par. [The State] shall

guarantee the rights of all workers to self- Administrative Code, Book I, Section 38. Liability
organization, collective bargaining and negotiations, of Superior Officers. –
and peaceful concerted activities, including the right (1) A public officer shall not be civilly liable for acts
to strike in accordance with law. They shall be done in the performance of his official duties,
entitled to security of tenure, humane conditions of unless there is a clear showing of bad faith,
work, and a living wage. They shall also participate malice or gross negligence.
in policy and decision-making processes affecting (2) Any public officer who, without just cause,
their rights and benefits as may be provided by law. neglects to perform a duty within a period fixed
by law or regulation, or within a reasonable
Article IX-B, Section 2(5). period if none is fixed, shall be liable for
(5) The right to self-organization shall not be denied damages to the private party concerned without
to government employees. prejudice to such other liability as may be
prescribed by law.
(3) A head of a department or a superior officer
With respect to government employees, the shall not be civilly liable for the wrongful acts,
right to unionize is recognized in Paragraph (5), omissions of duty, negligence, or misfeasance
Section 2, Article IX-B which provides that
Page 194 of 384

of his authorized by written order the specific (17) Freedom from being compelled to be a witness
act or misconduct complained of. against one's self, or from being forced to
confess guilt, or from being induced by a
Book I, Section 39. Liability of Subordinate promise of immunity or reward to make such
Officers. – No subordinate officer or employee shall confession, except when the person confessing
be civilly liable for acts done by him in good faith in becomes a State witness;
the performance of his duties. However, he shall be (18) Freedom from excessive fines, or cruel and
liable for willful or negligent acts done by him which unusual punishment, unless the same is
are contrary to law, morals, public policy and good imposed or inflicted in accordance with a
customs even if he acted under orders or statute which has not been judicially declared
instructions of his superiors. unconstitutional; and
(19) Freedom of access to the courts.
Civil Code, Articles 27, 32, and 34. In any of the cases referred to in this article, whether
or not the defendant's act or omission constitutes a
Article 27. Any person suffering material or moral criminal offense, the aggrieved party has a right to
loss because a public servant or employee refuses commence an entirely separate and distinct civil
or neglects, without just cause, to perform his official action for damages, and for other relief. Such civil
duty may file an action for damages and other relief action shall proceed independently of any criminal
against the latter, without prejudice to any prosecution (if the latter be instituted), and may be
disciplinary administrative action that may be taken. proved by a preponderance of evidence.
Article 32. Any public officer or employee, or any The indemnity shall include moral damages.
private individual, who directly or indirectly Exemplary damages may also be adjudicated.
obstructs, defeats, violates or in any manner
impedes or impairs any of the following rights and The responsibility herein set forth is not demandable
liberties of another person shall be liable to the latter from a judge unless his act or omission constitutes
for damages: a violation of the Penal Code or other penal statute.
(1) Freedom of religion;
(2) Freedom of speech; Article 34. When a member of a city or municipal
(3) Freedom to write for the press or to maintain a police force refuses or fails to render aid or
periodical publication; protection to any person in case of danger to life or
(4) Freedom from arbitrary or illegal detention; property, such peace officer shall be primarily liable
(5) Freedom of suffrage; for damages, and the city or municipality shall be
(6) The right against deprivation of property without subsidiarily responsible therefor. The civil action
due process of law; herein recognized shall be independent of any
(7) The right to a just compensation when private criminal proceedings, and a preponderance of
property is taken for public use; evidence shall suffice to support such action.
(8) The right to the equal protection of the laws;
(9) The right to be secure in one's person, house,
papers, and effects against unreasonable Juxtaposed with Article 32 of the Civil Code,
searches and seizures; the principle may now translate into the rule
(10) The liberty of abode and of changing the same; that an individual can hold a public officer
(11) The privacy of communication and personally liable for damages on account of an
correspondence; act or omission that violates a constitutional
(12) The right to become a member of associations
right only if it results in a particular wrong or
or societies for purposes not contrary to law;
(13) The right to take part in a peaceable assembly injury to the former [Vinzons-Chato v. Fortune
to petition the Government for redress of Tobacco Corp., supra].
grievances;
(14) The right to be a free from involuntary servitude See: Articles 203-245 of the Revised Penal
in any form; Code for Title VII - Crimes Committed by Public
(15) The right of the accused against excessive bail;
Officers.
(16) The right of the accused to be heard by himself
and counsel, to be informed of the nature and
cause of the accusation against him, to have a Local Government Code, Section 24. Liability for
speedy and public trial, to meet the witnesses Damages. – Local government units and their
face to face, and to have compulsory process officials are not exempt from liability for death or
to secure the attendance of witness in his injury to persons or damage to property.
behalf;
Page 195 of 384

Presumption of Regularity penal sanction, the erring officer may also be
Such presumption of regularity of performance punished criminally. Finally, such violation may
of official duty stands only when no reason also lead to suspension, removal from office, or
exists in the records by which to doubt the other administrative sanctions [Ramiscal v.
regularity of the performance of official duty. Commission on Audit, G.R. No. 213716
The presumption is rebuttable by affirmative (2017)].
evidence of irregularity or of any failure to
perform a duty [People v. Arposeple y General Rule: The action that may result for
Sanchez, G.R. No. 205787 (2017)]. each liability may proceed independently of
one another, as the quantum of evidence
Liability of Superior Officers required in each case is different.
General Rule: Superior officers are NOT civilly
liable for acts done in the performance of their Exception: Where the very basis of the
official duties. administrative case is conviction in the criminal
action which was later on set aside upon a
Exceptions: categorical and clear finding that the acts for
1. Where there is a clear showing of bad faith, which the officer was administratively held
malice, or gross negligence; liable are not unlawful and irregular, the
2. There is neglect in the performance of a acquittal of the officer in the criminal case
duty within the period fixed by law or necessarily entails the dismissal of the
regulation, or within a reasonable period if administrative action against them [Larin v.
none is fixed; Executive Secretary, G.R. No. 112745 (1997)].
3. Where the superior officer has actually
authorized by written order the specific act IX. IMMUNITY OF PUBLIC
or omission complained of.
OFFICERS
Liability of Subordinate Officers
General Rule: Subordinate officers are NOT 1987 Constitution, Article XVI, Section 3. The
civilly liable for acts done in the performance of State may not be sued without its consent.
their official duties.
Doctrine of State Immunity
Exception: They are liable for willful or
The State’s immunity from suit extends to
negligent acts done by them contrary to law, public officers when they are acting in the
morals, public policy and good customs even if
performance of their duties. The rationale is
they acted under orders of their superiors. that a contrary rule would result in public
officers being unduly hampered, deterred and
Threefold Liability Rule intimidated in the discharge of their duties.
Under the threefold liability rule, a public
officer may be held civilly, criminally, and The rule (on state immunity) applies only when
administratively liable for a wrongful act or the state or its subdivision is actually made a
omission. The administrative liability is party upon the record, or is actually necessary
separate and distinct from the penal and civil to be made a party in order to furnish the relief
liabilities. Thus, the dismissal of an demanded by the suit. It does not apply when
administrative case does not necessarily bar the suit is against an officer or agent of the
the filing of a criminal prosecution for the same state, and the relief demanded by the suit
or similar acts, which were the subject of the requires no affirmative official action on the part
administrative complaint [Tecson v. of the state [Ruiz v. Cabahug, G.R. No. L-9990
Sandiganbayan, G.R. No. 123045 (1999)]. (1957)].
If such violation or wrongful act results in Government immunity from suit will also not
damages to an individual, the public officer shield the public official being sued if the
may be held civilly liable to reimburse the government no longer has an interest to protect
injured party. If the law violated attaches a in the outcome of the suit (i.e., there is no
Page 196 of 384
charge or financial liability against the b. There was a want of power in the
government), or if the liability of the officer is electing or appointing body or of some
personal because it arises from a tortious act in defect or irregularity in its exercise.
the performance of his/her duties [Philippine
Agila Satellite Inc. v. Trinidad-Lichauco, G.R. Such ineligibility, want of power or defect
No. 142362 (2006)]. being unknown to the public.
X. DISTINGUISH: DE 4. Under color of an election or

appointment, by or pursuant to a public
FACTO AND DE JURE unconstitutional law, before the same is
adjudged to be such.
OFFICERS
De Facto Doctrine
A. De Facto Officers Insofar as the public or third persons are
concerned, the actions of a de facto officer,
Definition during the period of such officer’s wrongful
tenure, are accorded validity.
De Jure Officer
A de jure officer is one who is deemed, in all Basis of the De Facto Doctrine
respects, legally appointed and qualified and This principle was born of necessity, as the
whose term of office has not expired [Funa v. public cannot be expected to investigate the
Chairman, Civil Service Commission, G.R. No. right of a public official to an office before
191672 (2014)]. transacting with them.
An officer de jure is one who is exercising the On this basis, it is apparent that the de facto
office as a matter of right or according to law officer doctrine is primarily for protecting those
[Luna v. Rodriguez, G.R. No. L-12647 (1917)]. who rely on the official acts of persons
discharging the duties of a public office, without
De Facto Officer being lawful officers. It is meant to ensure the
A de facto officer is one who has the reputation functioning of the government “despite
of being the officer he assumes to be, and yet technical defects in [the official’s] title to office
is not a good officer in point of law [Torres v. [Arroyo v. CA, G.R. No. 202860 (2019)].
Ribo, G.R. No. L-2051 (1948)].
Usurper
In Luna v. Rodriguez [G.R. No. L-12647 One who takes possession of the office without
(1917)], the Court held that a person is any color of right or authority, either actual or
considered a de facto officer where the duties apparent.
of the office are exercised:
1. Without a known appointment or Elements of De Facto Officership
election, but under such circumstances of
reputation or acquiescence as were 1. There must be a de jure office;
calculated to induce people, without 2. There must be a color of right or general
inquiry, to submit to or invoke his action, acquiescence by the public; and
supposing him to be the officer he 3. There must be actual physical possession
assumed to be; or of the office in good faith [Tuanda v.
2. Under color of a known and valid Sandiganbayan, G.R. No. 110544, (1995)].
appointment or election, but where the
officer has failed to conform to some Note: In Arroyo v. CA [G.R. No. 202860
precedent requirement or condition (e.g., to (2019)], the Court held that good faith is
take an oath, give a bond, etc).; or no longer necessary. The primordial
3. Under the color of a known election or concern that the doctrine seeks to address
appointment, but VOID because: remains to be the protection of the public,
a. The officer was not eligible; who rely on the acts of a person performing
Page 197 of 384

the duties of an office pursuant to an 1. The de facto officer was duly proclaimed
irregular or defective authority. Precluding and assumed office, but was issued due to
its application to cases where there was no the protest by the de jure officer. The de
good faith possession of the office, despite jure officer cannot recover the salary during
having a color of authority or right to the the incumbency of the de facto officer
office, would render the doctrine's purpose [Rodriguez, Sr. v. Tan, G.R. No. L-3913
nugatory [Arroyo v. CA, supra]. (1952)].
2. There is no de jure officer and a de facto
Entitlement to Salary of De Facto officer, who, in good faith has had
Officer possession of the office and has
discharged the duties [Funa v. Chairman,
General rule: The rightful incumbent of a Civil Service Commission, G.R. No.
191672 (2014)].
public office may recover from an officer de
3. The rightful incumbent received
facto the salary received by the latter during the
time of his wrongful tenure, even though he emoluments in a different position. In this
case, the incumbent may only recover back
entered into the office in good faith and under
color of title [Monroy v. CA, G.R. No. L-23258 pay differentials from the de facto officer,
which is the difference in salary between
(1967)].
the rightful position and the position served
[General Manager v. Montserate, G.R. No.
Exceptions: The rightful incumbent, however,
cannot recover the salary from the de facto 129616 (2002)].
officer when:
B. De Facto v. De Jure Officers
De Facto De Jure
An officer de facto is one who has the

reputation or appearance of being the An officer de jure is one who is
officer he assumes to be but who, exercising the office as a matter of
Definition
under the law, has no right or title to the right or according to law [Luna v.
office he assumes to hold [Codilla v. Rodriguez, G.R. No. L- 12647 (1917)].
Martinez, G.R. No. L- 14569 (1960)].
1. Existence of a de jure office;

2. Assumption of office under a color 1. Existence of a de jure office;
of right or general acquiescence by 2. He is legally qualified to the office;
Requisites the public; 3. He is lawfully chosen to the office;
3. Actual physical possession of the 4. He undertakes to perform the
office [Tuanda vs. Sandiganbayan, duties of the office.
G.R. No. 110544 (1995)].
Basis of
Rests on reputation. Matter of right.
Authority
Direct proceeding of quo warranto (but Cannot be ousted even in a direct

How Ousted
seen mandamus, infra). proceeding.
Valid, subject to exceptions (e.g.,

Validity of Valid as to the public until his title to the
acting beyond his scope of authority,
Official Acts office is adjudged insufficient.
etc.).
Page 198 of 384

De Facto De Jure
Conditionally entitled to receive only Rightfully entitled to compensation;

Compensation when no de jure officer is declared and “no work, no pay” principle is
only for actual services rendered. inapplicable to him.
For clarity, the de facto officer doctrine confers

validity to the actions of an officer having
XI. TERMINATION OF
illegitimate title to the office, as if he or she was OFFICIAL RELATION
acting as a de jure officer. Its effect is similar
to the ratification of acts done outside the A. Involuntary Retirement
scope of one's authority [Arroyo v. CA, supra].
[See Re: Ma. Cristina Roco
Remedies Corona, A.M. No. 20-07-10-SC
(2021)]
Distinguish Quo Warranto and
Mandamus Concept
Retirement is the termination of one’s own
1. As to objective employment or career, especially upon
Quo warranto seeks the ouster of a usurper reaching a certain age or for health reasons. To
of a public office, position, or franchise, and withdraw is to withdraw from one’s position or
the entry therein of the person entitled occupation, or to conclude one’s active working
thereto; while mandamus lies to restore the life or professional career.
petitioner into a right or office, and not to try
disputed titles. Retirement is involuntary when one’s
profession is terminated for reasons outside
2. As to who has standing to file the the control and discretion of the worker.
petition Impeachment resulting in removal from holding
Quo warranto may be filed by the Solicitor office falls under the column on involuntary
General, a public prosecutor, or the person retirement.
entitled to the contested office; while
mandamus is available only to one who Having been removed by the Congress from
holds a clear, well-defined, and certain office with a lifetime ban from occupying any
entitlement to a right or office. and all future public posts, but without a
proper determination of or even a basis for
3. As against whom the remedy is directed any recoverable liability under the law due
Quo warranto is directed against an to causes beyond his control, Chief Justice
usurper of a public office, position, or Corona may be considered involuntarily retired
franchise; while mandamus is directed from public service [Re: Ma. Cristina Roco
against one who unlawfully excludes Corona, supra].
another from a right or office [Municipality
of Payao, Zamboanga Sibugay v. B. Death or Permanent Disability
Municipality of Imelda, Zamboanga
Sibugay, G.R. No. 243167 (2021)].
Effect of Death of Respondent Public
Officer
General Rule: Death of the respondent in an
administrative case does not preclude a finding
of administrative liability [Civil Service
Commission v. Juen, G.R. No. 200577 (2016)].
Page 199 of 384

Exception: Death of the respondent in an appointed or chosen and has qualified. The
administrative case precludes the finding of legislative intent of not allowing holdover must
administrative liability when: be clearly expressed or at least implied in the
1. Due process may be subverted; legislative enactment, otherwise it is
2. On equitable and humanitarian reasons; reasonable to assume that the law-making
and body favors the same [Lecaroz vs
3. The penalty imposed would render the Sandiganbayan, G.R.No. 130872 (1999)].
proceedings useless [Civil Service
Commission v. Juen, supra]. The application of the hold-over principle
preserves continuity in the transaction of
A respondent’s death during the pendency of official business and prevents a hiatus in
an administrative proceeding was cause to government pending the assumption of a
dismiss the case, due to the futility of the successor into office. As held in Topacio
imposition of any penalty [Flores-Concepcion Nueno v. Angeles, cases of extreme necessity
v. Castañeda, A.M. No. RTJ-15-2438 (2020)]. justify the application of the hold-over principle
[Sambarini vs. COMELEC, G.R.No. 160427
C. Abolition of Office (2004)].
Abolishing an office also abolishes an
unexpired term. The legislature’s abolition of E. Resignation
an office (e.g., a court) also abolishes the
unexpired term. The legislative power to create Concept
a court carries with it the power to abolish it Resignation implies an expression of the
[Ocampo v. Secretary of Justice, G.R. No. L- incumbent in some form, express or implied, of
7910 (1955)]. the intention to surrender, renounce, and
relinquish the office and the acceptance by
The President has power to reorganize the competent and lawful authority [Gamboa v. CA,
Executive. The President’s power of control G.R. No. L-41054 (1975)].
gives him authority to deactivate the functions
of particular offices. As far as bureaus, Requisites
agencies or offices in the executive department In order for resignation to be complete and
are concerned, the President’s power of control operative, there must be:
may justify him to inactivate the functions of a (a) An intention to relinquish a part of the term;
particular office, or certain laws may grant him (b) The act of relinquishment, and;
the broad authority to carry out reorganization (c) An acceptance by the proper authority
measures [Buklod ng Kawaning EIIB v. [Republic v. Singun, G.R. No. 149356
Zamora, G.R. No. 142801-802 (2001)]. (2008)].
D. Expiration of Term or Tenure Acceptance of Resignation Necessary

Mere presentation of resignation does not work
It is an established rule that the tenure of those as a vacancy. Until acceptance by proper
holding primarily confidential positions ends authority, the tender or offer to resign is
upon loss of confidence, because their term of revocable, unless otherwise provided by
office lasts only as long as confidence in them statute [Joson III v. Nario, G.R. No. 91548
endures. Their termination can be justified on (1990)].
the ground of loss of confidence, in which case,
their cessation from office involves no removal Acceptance is necessary for resignation of a
but the expiration of their term of office public officer to be operative and effective.
[CSC vs. Pilila Water District, G.R. No. 190147 Otherwise, the officer is subject to the penal
(2013)]. provision of Art. 238 of the Revised Penal Code
on Abandonment of Office or Position.
Absent an express or implied constitutional or Although a public officer cannot abandon his
statutory provision to the contrary, an officer is office or position before his resignation is
entitled to stay in office until his successor is accepted, the incumbent official would not be
Page 200 of 384
in a position to determine the acceptance of his holder, with the intention of terminating his
resignation unless he has been duly notified possession and control thereof.
thereof [Gamboa v. CA, supra].
A person holding a public office may abandon
Totality Test such office by nonuser or acquiescence.
Since petitioner Estrada did not write any Non-user refers to a neglect to use a right
formal letter of resignation before he evacuated or privilege or to exercise an office.
Malacañang Palace, whether or not he However, nonperformance of the duties of an
resigned has to be determined from his act and office does not constitute abandonment where
omissions before, during and after January 20, such nonperformance results from temporary
2001, or by the totality of prior, disability or from involuntary failure to perform.
contemporaneous and posterior facts and Abandonment may also result from an
circumstantial evidence bearing a material acquiescence by the officer in his wrongful
relevance on the issue. removal or discharge, for instance, after a
summary removal, an unreasonable delay by
The validity of a resignation is not governed by an officer illegally removed in taking steps to
any formal requirement as to form. It can be vindicate his rights may constitute an
oral. It can be written. It can be express. It can abandonment of the office [Canonizado vs.
be implied. As long as the resignation is clear, Aguirre, G.R. No. 133132 (2001)].
it must be given legal effect [Estrada v.
Desierto, G.R. No. 146710-15 (2001)].
Elements of Abandonment
The two elements of abandonment of office
F. Abandonment of Office
are:
1. An intention to abandon;
Concept 2. An overt or external act by which the
Abandonment of office has been defined as the intention is carried into effect [Canonizado
voluntary relinquishment of an office by the v. Aguirre, supra].
Distinguish Between Resignation and Abandonment

Resignation Abandonment
[Gamboa v. CA, supra].
Resignation implies an expression of Abandonment of office has been

the incumbent in some form, express defined as the voluntary
or implied, of the intention to relinquishment of an office by the
Definition surrender, renounce, and relinquish holder, with the intention of
the office and the acceptance by terminating his possession and control
competent and lawful authority thereof. [Sangguniang Bayan of San
[Gamboa v. CA, supra]. Andres v. CA, supra].
Kind of
Either voluntary or involuntary. Always voluntary.
Relinquishment
1. Intention to relinquish a part of the

term; 1. Intention to abandon;
Elements 2. An act of relinquishment; 2. An overt act by which the intention
3. An acceptance by the proper is carried into effect.
authority.
Page 201 of 384

G. Acceptance of Incompatible Recall under the LGC
The termination of the official relationship of a
Office local elective official for loss of confidence prior
to the expiration of his term through the will of
Concept the electorate [Sec. 69, LGC].
The general rule in Article IX-B, Section 7
permits an appointive official to hold more than
one office only if allowed by law or by the Recall under Recall under LGC
primary functions of his position. There is no Admin. Code
legal objection to a government official The CSC has the Recall under Section
occupying two government offices and power to recall an 69-75 of the Local
performing the functions of both as long as appointment which Government Code is
there is no incompatibility. has been initially a mode of removal
approved when it is of a public official by
Incompatibility exists when one office is shown that the same the people before
subordinate to the other, in the sense that one was issued in the end of his term
office has the right to interfere with the other. disregard of pertinent of office.
[Public Interest Center, Inc. v. Elma, G.R. No. CSC laws, rules and
138965 (2006)]. regulations.
I. Criminal Conviction
H. Recall
See: RPC for Effect of Penalties
Grounds
1. Non-compliance with the
procedures/criteria provided by the
J. Impeachment
agency’s Merit Promotion Plan; See: C. Impeachment v. Quo Warranto under
2. Failure to pass through the agency’s Part XIII of the Law on Public Officers part of
Selection/Promotion Board; the reviewer for a thorough discussion of
3. Violation of existing collective agreement Impeachment.
between management and employees
relative to promotion; Effects of Impeachment
4. Violation of other existing civil service laws, a. Removal from office of the official
rules and regulations [Sec. 20, Rule VI, IRR concerned;
of Administrative Code; De Rama v. CA, b. Disqualification to hold any office;
G.R. No. 131136 (2001)]. c. Impeached officer still liable to prosecution,
trial, and punishment if the impeachable
The CSC may recall an appointment for not offense committed also constitutes a felony
meeting the qualification standard. The recall or crime.
or invalidation of an appointment does not
require a full-blown, trial-type proceeding. In K. Removal through Quo
approving or disapproving an appointment, the Warranto/Prescription of Right
CSC only examines the conformity of the
appointment with applicable provisions of law to Office
and whether the appointee possesses all the See: C. Impeachment vs. Quo Warranto under
minimum qualifications and none of the Part XIII of the Law on Public Officers part of
disqualifications. Thus, in contrast to the reviewer for a thorough discussion of Quo
administrative disciplinary actions, a recall Warranto.
does not require notice and hearing [Civil
Service Commission v. Cutao, G.R. No. L. Dismissal as Penalty of
225151 (2020)]. Disciplinary Action
Page 202 of 384

b. The CSC cannot co-manage or be a
XII. THE CIVIL SERVICE surrogate administrator of government
offices and agencies.
A. Scope c. It cannot change the nature of the
appointment extended by the appointing
1987 Constitution, Article IX-B officer [Luego v. CSC, G.R. No. L-69137
(1986)].
Section 2(1). The Civil Service embraces all
branches, subdivisions, instrumentalities and
agencies of the Government, including B. Appointments to the Civil
government-owned and controlled corporations Service
with original charters.
Section 3. The Civil Service Commission, as the

Appointments in the civil service shall be made
central personnel agency of the Government, shall only according to merit and fitness to be
establish a career service and adopt measures to determined, as far as practicable, and, except
promote morale, efficiency, integrity, to positions which are policy-determining,
responsiveness, progressiveness, and courtesy primarily confidential, or highly technical, by
in the civil service. competitive examination [Const., Art. IX-B,
Sec. 2(2)].
Civil Service laws, rules, and regulations apply
to all branches, subdivisions, instrumentalities Administrative Code of 1987, Book V, Section 7.
and agencies of the government, including Career Service. – The Career Service shall be
GOCCs with original charters [Laya, Jr., v. characterized by:
Philippine Veterans Bank, G.R. No. 205813 (1) Entrance based on merit and fitness to be
determined as far as practicable by competitive
(2018)].
examination, or based on highly technical
qualifications;
Note: As to the power of the CSC to review an (2) Opportunity for advancement to higher career
appointee’s qualifications: The only function of positions; and
the CSC is to review the appointment in the (3) Security of tenure.
light of the requirements of the Civil Service
The Career Service shall include:
Law, and when it finds the appointee to be
(1) Open Career positions for appointment to which
qualified and all other legal requirements have prior qualification in an appropriate examination
been otherwise satisfied, it has no choice but is required;
to attest to the appointment [Lapinid v. CSC, (2) Closed Career positions which are scientific, or
G.R. No. 96298 (1991)]. highly technical in nature; these include the
faculty and academic staff of state colleges and
universities, and scientific and technical
In TIDCORP v. CSC [G.R. No. 182249 (2013)],
positions in scientific or research institutions
the Court clarified that the CSC’s rulemaking which shall establish and maintain their own
power, albeit constitutionally granted, is still merit systems;
limited to the implementation and (3) Positions in the Career Executive Service;
interpretation of the laws it is tasked to namely, Undersecretary, Assistant Secretary,
enforce. Thus, a law which exempts an Bureau Director, Assistant Bureau Director,
Regional Director, Assistant Regional Director,
agency from rules on position classification
Chief of Department Service and other officers
cannot be overridden by a CSC Memorandum of equivalent rank as may be identified by the
Circular. Career Executive Service Board, all of whom
are appointed by the President;
Limitations on the Civil Service (4) Career officers, other than those in the Career
Commission’s Powers Executive Service, who are appointed by the
President, such as the Foreign Service Officers
in the Department of Foreign Affairs;
a. It cannot order the replacement of the (5) Commissioned officers and enlisted men of the
appointee simply because it considers Armed Forces which shall maintain a separate
another employee to be better qualified merit system;
[Lapinid v. CSC, supra].
Page 203 of 384

(6) Personnel of government-owned or controlled (1) Elective officials and their personal or
corporations, whether performing confidential staff;
governmental or proprietary functions, who do (2) Secretaries and other officials of Cabinet rank
not fall under the non-career service; and who hold their positions at the pleasure of the
(7) Permanent laborers, whether skilled, semi- PResident and their personal or confidential
skilled, or unskilled. staff(s);
(3) Chairman and members of commissions and
boards with fixed terms of office and their
1. Career Service personal or confidential staff;
(4) Contractual personnel or those whose
The career service is characterized by: employment in the government is in accordance
with a special contract to undertake a specific
1. Entrance based on merit and fitness to be work or job, requiring special or technical skills
determined by competitive examinations not available in the employing agency, to be
or highly technical qualifications; accomplished within a specific period, which in
2. Opportunity for advancement to higher no case shall exceed one year, and performs or
career positions; accomplishes the specific work or job, under his
3. Security of tenure [Administrative Code, own responsibility with a minimum of direction
and supervision from the hiring agency; and
Book V, Sec. 7]. (5) Emergency and seasonal personnel.
Three Major Levels in the Career

Service The Non-Career service is characterized by:
1. First level - Includes clerical, trades, 1. Entrances on bases other than those of the
crafts, and custodial service positions usual tests of merit and fitness; and
which involve non-professional or 2. Tenure which is limited to:
subprofessional work in a non- a. A period specified by law; or
supervisory or supervisory capacity b. Coterminous with the appointing
requiring less than four years of collegiate authority; or
studies; c. Subject to the pleasure of the
2. Second level - Include professional, appointing authority; or
technical and scientific positions which d. Limited to the duration of a particular
involve professional, technical or project.
scientific work in a non-supervisory or
supervisory capacity requiring at least Includes:
four years of college work up to Division a. Elective officials and their personal or
Chief level; and confidential staff;
3. Third level - Covers positions in the b. Department heads who hold positions at
Career Executive Service [Administrative the pleasure of the President, including
Code, Book V, Sec. 8]. their staff;
c. Chairman and members of commissions
2. Non-Career Service and boards with fixed terms of office,
including their staff;
d. Contractual personnel;
Administrative Code of 1987, Book V, Section 9.
e. Emergency and seasonal personnel
Non-Career Service. – The Non-Career Service
shall be characterized by [Admin. Code, Book V, Sec. 9].
(1) Entrance on bases other than those of the usual
tests of merit and fitness utilized for the career C. Personnel Actions
service; and
(2) Tenure which is limited to a period specified by
law, or which is coterminous with that of the Concept
appointing authority or subject to his pleasure, Any action denoting the movement or progress
or which is limited to the duration of a particular of personnel in the civil service shall be known
project for which purpose employment was as personnel in the civil service shall be known
made.
as personnel action.
The Non-Career Service shall include:
Page 204 of 384

Such action shall include appointment through Subtitle A, Title I, Book V, Administrative
certification, promotion, transfer, Code].
reinstatement, re-employment, detail,
reassignment, demotion and separation. Within the same level, no civil service
examination shall be required for promotion to
All personnel actions shall be in accordance a higher position in one or more related
with such rules, standards, and regulations as occupational groups. A candidate for
may be promulgated by the Commission [Sec. promotion should, however, have previously
26, Par. 2, Chapter 5, Subtitle A, Title I, Book passed the examination for that level [Sec.
V, Administrative Code]. 8(3), Chapter 2, Subtitle A, Title I, Book V,
Administrative Code].
1. Original Appointment or
Appointment through Certification The pendency of an administrative case
against any employee shall not be a bar to
Original promotion.
The initial entry into the career or non-career
service. Next-in-Rank Rule
Appointment through Certification Administrative Code of 1987, Book V, Title I,

An appointment through certification to a Subtitle A, Chapter 5, Section 21(6). … For
position in the civil service, except as herein purposes of this Section, “qualified next-in-rank”
refers to an employee appointed on a permanent
otherwise provided, shall be issued to a person
basis to a position previously determined to be next-
who has been selected from a list of qualified in-rank and who meets the requirements for
persons certified by the Commission from an appointment thereto as previously determined by
appropriate register of an eligible, and who the appointing authority and approved by the
meets all the other requirements of the Commission.
position.
In promotions, the appointing authority must
Six-month Probationary Period automatically consider the employees next in
Original appointees in the career service with rank as candidates for appointment. However,
permanent status of appointment, shall the next-in-rank rule is a rule of preference on
undergo probationary period for a thorough who to consider for the promotion. The rule
assessment of his/her performance and does not give employees next in rank a vested
character. right to the position next higher to theirs should
that position become vacant [Abad v. Dela
A probationer may be dropped from the service Cruz, G.R. No. 207422 (2015)].
for unsatisfactory conduct or want of capacity
any time before the expiration of the 3. Transfer
probationary period: Provided, that such action
is appealable to the Commission [Sec. 26(1), A transfer is a movement from one position
Chapter 5, Subtitle A, Title I, Book V, to another which is of equivalent rank, level,
Administrative Code]. or salary without break in service involving the
issuance of an appointment. It shall not be
2. Promotion considered disciplinary when made in the
interest of public service, in which case, the
A promotion is a movement from one employee concerned shall be informed of the
position to another with an increase in reasons therefor. If the employee believes that
duties and responsibilities as authorized by there is no justification for the transfer, he may
law and usually accompanied by an increase in appeal his case to the Commission.
pay. The movement may be from one
department or agency to another or from one The transfer may be from one department or
organizational unit to another in the same agency to another or from one organizational
department or agency [Sec. 26(2), Chapter 5, unit to another in the same department or
Page 205 of 384
agency: Provided, however, that any 5. Reemployment
movement from the non-career service to the
career service shall not be considered a Names of persons who have been appointed
transfer [Sec. 26(3), Chapter 5, Subtitle A, Title permanently to positions in the career service
I, Book V, Administrative Code]. and who have been separated as a result of
reduction in force or reorganization, shall be
4. Reinstatement entered in a list from which selection for
reemployment shall be made [Sec. 26(5),
Any person who has been permanently Chapter 5, Subtitle A, Title I, Book V,
appointed to a position in the career service Administrative Code].
and who has, through no delinquency or
misconduct, been separated therefrom, may 6. Detail
be reinstated to a position in the same level for
which he is qualified [Sec. 26(4), Chapter 5, A detail is the movement of an employee of one
Subtitle A, Title I, Book V, Administrative agency to another without the issuance of an
Code]. appointment and shall be allowed, only for a
limited period in the case of employees
Note: Pardon does not ipso facto restore a occupying professional, technical and scientific
convicted felon to public office. A new positions.
appointment must be given.
If the employee believes that there is no
However, when a person is acquitted because justification for the detail, he may appeal his
he did not truly commit the offense, he is case to the Commission. Pending appeal, the
relieved from all punitive consequences of the decision to detail the employee shall be
criminal act. He needs no longer apply for executory unless otherwise ordered by the
reinstatement; he is restored to his office ipso Commission [Sec. 26(6), Chapter 5, Subtitle A,
facto upon the issuance of the clemency, and Title I, Book V, Administrative Code].
he is entitled to back wages [Garcia v.
Commission on Audit, G.R. No. 75025 (1993)]. No detail or reassignment whatever shall be
made within three (3) months before any
Reinstatement to Comparable election [Sec. 58, Chapter 8, Subtitle A, Title I,
Position Book V, Administrative Code].
The restoration of a person, as a result of a
decision, to a career position from which 7. Reassignment
he/she has been separated but subject position
is already abolished, requiring the issuance of An employee may be reassigned from one
an appointment to a comparable position to the organizational unit to another in the same
separated employee [Sec. 11(f), par. 1, Rule agency: Provided, that such reassignment
IV, 2017 Omnibus Rules on Appointments and shall not involve a reduction in rank, status or
Other Human Resource Actions]. salary [Sec. 26(7), Chapter 5, Subtitle A, Title
I, Book V, Administrative Code].
No employee of the civil service shall be
removed from office except for cause provided Reassignments differ from transfers, and
by law. An employee illegally dismissed from public employees with appointments that are
office is entitled to reinstatement. Any other not station-specific may be reassigned to
employment he or she obtains while the case another station in the exigency of public
challenging his or her dismissal is pending service. In such instances, the reassignment
does not bar his or her right to be reinstated. may be indefinite and exceed one (1) year
[Campol v Balo-as, G.R. 197634 (2016)] [Yangson v. Department of Education, G.R.
No. 200170 (2019)].
Page 206 of 384

Reassignment should not amount to In cases where the demotion is voluntary or at
constructive dismissal. the instance of the employee, he/she shall be
allowed to receive the same step of the salary
A reassignment may be deemed a constructive grade of the position where he/she voluntarily
dismissal if the employee is moved to a position sought to be appointed. A written consent shall
with a more servile or menial job as compared be secured from the demoted employee [Sec.
to his previous position. It may occur if the 11(g), Rule IV, 2017 Omnibus Rules on
employee was reassigned to an office not in the Appointments and other Human Resource
existing organizational structure, or if he or she Actions].
is not given a definite set of duties and
responsibilities. It may be deemed constructive Demotion and constructive dismissal are never
dismissal if the motivation for the reassignment presumed and must be sufficiently proven
was to harass or oppress the employee on the [Yangson v. Department of Education, supra].
pretext of promoting public interest. This may
be inferred from reassignments done twice 10. Reappointment
within a year, or during a change of
administration of elective and appointive The issuance of an appointment as a result of
officials. However, demotion and constructive reorganization, devolution, salary
dismissal are never presumed and must be standardization, re-nationalization,
sufficiently proven [Yangson v. Department of recategorization, rationalization or similar
Education, supra]. events.
8. Secondment 11. Reclassification

A secondment is a movement of an employee A form of staffing modification and/or position
from one department or agency to another classification action which is applied only when
which is temporary in nature. It may or may not there is a substantial change in the regular
require the issuance of an appointment and duties and responsibilities of the position.
may involve an increase in compensation and
benefits. Acceptance of a secondment is This may result in a change in any or all of the
voluntary on the part of the employee. position attributes: position title, level and/or
salary grade. It generally involves a change in
Payment of salaries of a seconded employee the position title and may be accompanied by
shall be borne by the receiving agency, and the an upward or downward change in salary.
seconded employee shall be on leave without
pay in his mother agency for the duration of his
secondment [Señeres v. Sabido IX, G.R. No.
XIII. ACCOUNTABILITY OF
172902 (2015).] PUBLIC OFFICERS
9. Demotion A. Types of Accountability
The movement of an employee from a higher
1. Administrative
position to a lower position where he/she
qualifies, if a lower position is available/
The purpose of administrative proceedings is
Demotion entails reduction in duties,
mainly to protect the public service, based on
responsibilities, status or rank, which may or
the time-honored principle that a public office is
may not involve a reduction in salary.
a public trust [Ferrer, Jr. v. Sandiganbayan,
G.R. No. 161067 (2008)].
In cases where the demotion is due to
reorganization or rationalization, the employee
The main thrust of the Administrative Code is
shall be allowed to continue to receive the
to exact accountability from public officials in
salary of the higher position,
the performance of official duties. For this
reason, the Administrative Code requires a
Page 207 of 384
clear showing of bad faith, malice, or gross duties or in connection therewith when
negligence on the part of the public officer in such fee, gift, or other valuable thing is
the performance of official duties before given by any person in the hope or
recovery of losses to the government may be expectation of receiving a favor or better
sought [Madera v. Commission on Audit, G.R. treatment than that accorded other
No. 244128 (2020)]. persons, or committing acts punishable
under the anti-graft laws;
Quantum of Evidence Required 10. Conviction of a crime involving moral
In administrative proceedings, only substantial turpitude;
evidence is required [Acuzar v. Jorolan, G.R. 11. Improper or unauthorized solicitation of
No. 177878 (2010)]. contribution from subordinate employees
and by teachers of school officials from
Substantial evidence refers to such relevant school children;
evidence as a reasonable mind might accept 12. Violation of existing Civil Service Law and
as adequate to support a conclusion [Paredes rules or reasonable office regulations;
v. CA, G.R. No. 169534 (2007)]. 13. Falsification of official documents;
14. Frequent unauthorized absences or
2. Criminal tardiness in reporting for duty, loafing or
frequent unauthorized absences from duty
The purpose of criminal prosecution (as during regular office hours;
opposed to administrative proceedings) is the 15. Habitual drunkenness;
punishment of crime [Ferrer v. Sandiganbayan, 16. Gambling prohibited by law;
supra]. 17. Refusal to perform official duty or render
overtime service;
Quantum of Evidence Required 18. Disgraceful, immoral or dishonest conduct
prior to entering the service;
In criminal cases, proof beyond reasonable
doubt is needed [Acuzar v. Jorolan, supra]. 19. Physical or mental incapacity or disability
due to immoral or vicious habits;
Proof beyond reasonable doubt does not mean 20. Borrowing money by superior officers from
subordinates or lending by subordinates to
such a degree of proof as, excluding possibility
superior officers;
of error, produces absolute certainty. Moral
certainty only is required, or that degree of 21. Lending money at usurious rates of
interest;
proof which produces conviction in an
unprejudiced mind [Paredes v. CA, supra]. 22. Willful failure to pay just debts or willful
failure to pay taxes due the government;
23. Contracting loans of money or other
B. Discipline property from persons with whom the office
of the employee concerned has business
1. Grounds relations;
24. Pursuit of private business, vocation or
Grounds for Disciplinary Action under profession without the permission required
the Civil Service Law (P.D. No. 807) by the Civil Service rules and regulations;
1. Dishonesty; 25. Insubordination;
2. Oppression; 26. Engaging, directly or indirectly, in partisan
3. Neglect of duty; political activities by one holding
4. Misconduct; nonpolitical office;
5. Disgraceful and immoral conduct; 27. Conduct prejudicial to the best interest of
6. Being notoriously undesirable; the service;
7. Discourtesy in the course of official duties; 28. Lobbying for personal interest or gain in
8. Inefficiency and incompetence in the legislative halls and offices without
performance of official duties; authority;
9. Receiving for personal use a fee, gift or 29. Promoting the sale of tickets in behalf of
other valuable thing in the course of official private enterprises that are not intended for
Page 208 of 384

charitable or public welfare purposes and 3. Members of the Judiciary
even in the latter cases if there is no prior a. They shall hold office during good
authority; behavior until they reach the age of
30. Nepotism. seventy (70) years or become
incapacitated to discharge the duties of
Grounds for Disciplinary Action under their office [Sec. 11, Art. VIII, 1987
the Local Government Code Constitution];
1. Disloyalty to the Republic of the b. With reference to members of the
Philippines; Supreme Court, it implies that they
2. Culpable violation of the Constitution; have no committed any of the offenses
3. Dishonesty, oppression, misconduct in which are grounds for impeachment;
office and neglect of duty; c. As regards judges of lower courts, the
4. Commission of any offense involving moral determination by the Supreme Court is
turpitude or an offense punishable by at conclusive since it alone has the power
least prision mayor; to order their dismissal [Sec. 11, Art.
5. Abuse of authority; VIII, 1987 Const.].
6. Unauthorized absence for fifteen (15)
consecutive working days except in the 4. Civil Service Officers or Employees
case of members of the sangguniang Can only be removed or suspended for cause
panlalawigan, sangguniang panglunsod, provided by law [Sec. 2(3), Art. IX-B, 1987
sangguniang bayan, and sangguniang Const.].
barangay;
7. Application for, or acquisition of, foreign Negligence
citizenship or residence or the status of an In the case of public officials, there is
immigrant of another country; negligence when there is a breach of duty or
8. Such other grounds as may be provided by failure to perform the obligation, and there is
law an elective local official may be gross negligence when a breach of duty is
removed from office on the grounds flagrant and palpable [Presidential Anti-Graft
enumerated above by order of the proper Commission and the Office of the President v.
court. Pleyto, G.R. No. 176058 (2011)].
Grounds for Removal or Suspension Dishonesty

under the Constitution Dishonesty begins when an individual
1. Members of Congress intentionally makes a false statement in any
material fact or practicing or attempting to
Each House may punish its members for
disorderly behavior; practice any deception or fraud in order to
secure his examination, registration,
a. With the concurrence of ⅔ of all its
members, the House may suspend or appointment or promotion [Office of the
Ombudsman v. Racho, G.R. No. 185685
expel a member;
b. A penalty of suspension shall not (2011)].
exceed 60 days [Sec. 16(3), Art. VI,
1987 Const.]. Dishonesty requires malicious intent to conceal
the truth or to make false statements;
2. Impeachable Officers otherwise, the government employee may only
be held liable for negligence, not for
a. Culpable violation of the Constitution;
b. Treason; dishonesty. Only when the accumulated wealth
becomes manifestly disproportionate to the
c. Bribery;
income of the public officer/employee and
d. Graft and Corruption;
e. Other high crimes; income from other sources, and the public
officer/employee fails to properly account or
f. Betrayal of public trust [Sec. 2, Art. IX,
1987 Const.]. explain these sources of income and
acquisitions, does he or she become
susceptible to dishonesty [Gupilan-Aguilar v.
Page 209 of 384
Office of the Ombudsman, G.R. No. 197307 inattentive and thoughtless men never fail to
(2014)]. take on their own property [Land Bank of the
Philippines v. San Juan Jr., G.R. 186279
Misconduct in Office (2013)].
Refers to “"any unlawful behavior by a public
officer in relation to the duties of his office, 2. Jurisdiction
willful in character. The term embraces acts
which the office holder had no right to perform, a. The Secretaries and heads of agencies
acts performed improperly, and failure to act in and instrumentalities, provinces, cities and
the face of an affirmative duty to act" [Gabon v. municipalities shall have jurisdiction to
Merka, A.M. No. P-11-3000 (2011)]. investigate and decide matters involving
disciplinary action against officers and
To constitute an administrative offense, employees under their jurisdiction [Sec. 47,
misconduct should relate to or be connected Administrative Code].
with the performance of the official functions
and duties of a public officer. To determine b. Under the same section, the decision is
whether a public officer committed misconduct, final in case the penalty imposed is
it is necessary to separate the character of the suspension of not more than 30 days, or
man from the character of the officer fine in an amount not exceeding 30-days
[Villanueva v. CA, G.R. No. 167726 (2006)]. salary.
Grave Misconduct NOTE, however, that decisions of

Consists in a government official’s deliberate administrative agencies which are declared
violation of a rule of law or standard of final and unappealable by law are still
behavior. It is regarded as grave when the subject to judicial review if they fail the
elements of corruption, clear intent to violate test of arbitrariness, or upon proof of gross
the law, or flagrant disregard of established abuse of discretion, fraud or error of law
rules are present [NPC v. CSC, G.R. No. [Maglalang v. PAGCOR, G.R. No. 190566
152093 (2012)]. (2013)].
In grave misconduct, as distinguished from c. In other cases, the decision shall be initially
simple misconduct, the elements of corruption, appealed to the department head and
clear intent to violate the law, or flagrant finally to the Civil Service Commission and
disregard of established rule must be manifest. pending appeal, it shall be executory
Corruption as an element of grave misconduct EXCEPT when the penalty is removal, in
consists in the act of an official or employee which case it shall be executory only after
who unlawfully or wrongfully uses his station or confirmation by the department head.
character to procure some benefit for himself
or for another, contrary to the rights of others d. The Civil Service Commission has
[Gabon v. Merka, supra]. appellate jurisdiction. Cases may be filed
directly with the CSC; it may decide on the
Gross vs. Simple Neglect of Duty case or deputize a department or agency.
Simple neglect of duty is defined as the failure
of an employee to give proper attention to a It cannot be overemphasized that the identity
required task or to discharge a duty due to of the complainant is immaterial to the
carelessness or indifference. acquisition of jurisdiction over an administrative
case by the CSC. The law is quite clear that the
On the other hand, gross neglect of duty is CSC may hear and decide administrative
characterized by want of even the slightest disciplinary cases brought directly before it or it
care, or by conscious indifference to the may deputize any department or agency to
consequences, and in cases involving public conduct an investigation [CSC v. CA, G.R.
officials, by flagrant and palpable breach of Nos. 176162 (2012)].
duty. It is the omission of that care that even
Page 210 of 384
The CSC still retains jurisdiction over the Mandatory preventive suspension under the
school and its employees and has concurrent Anti-Graft and Corrupt Practices Act
original jurisdiction, together with the board of
regents of a state university, over Under Section 13 of the Anti-Graft and Corrupt
administrative cases against state university Practices Act, the suspension of a public officer
officials and employees [Id.]. is mandatory after a determination has been
made of the validity of the information in a pre-
3. Dismissal, Preventive Suspension, suspension hearing conducted for that purpose
Reinstatement and Back Salaries [Segovia v. Sandiganbayan, G.R. No. 124067
(1998)].
Dismissal
Kinds of Preventive Suspension
Republic Act No. 6713 penalizes violations of 1. Preventive suspension pending
its Section 7 with imprisonment and/or a fine, investigation; and
as well as disqualification to hold public office: 2. Preventive suspension pending appeal if
the penalty imposed by the disciplining
Section 11. Penalties. (b) Any violation hereof authority is suspension or dismissal and,
proven in a proper administrative proceeding after review, the respondent is exonerated.
shall be sufficient cause for removal or
dismissal of a public official or employee, Preventive Suspension Pending
even if no criminal prosecution is instituted Investigation
against him. Not considered a penalty, but only a means of
enabling the disciplining authority to conduct
The same explicitly states that dismissal from an unhampered investigation.
the service may be warranted through an
administrative proceeding, even if the erring Cannot be indefinite. Indefinite suspension
officer is not subjected to criminal prosecution. violates due process and equal protection
[Ombudsman vs. Regalado, G.R. Nos. clauses, as well as the right of public officers
208481-82 (2018)] and employees to security of tenure [Baculi v.
Office of the President, G.R. No. 188681
Preventive Suspension (2017)].
Merely a preventive measure, a preliminary
step in an administrative investigation. The Preventive Suspension Pending
purpose of the suspension order is to prevent Investigation of the Subordinate
the accused from using his position and the Officer or Employee Under the
powers and prerogatives of his office to
influence potential witnesses or tamper with
Authority of Proper Disciplining
records which may be vital in the prosecution Authority
of the case against him. Applicable where the charge involves
dishonesty, oppression or grave misconduct,
If after such investigation, the charge is or neglect in the performance of duty, or if there
established and the person investigated is are reasons to believe that the respondent is
found guilty of acts warranting his suspension guilty of charges which would warrant his
or removal, then, as a penalty, he is removal from the service [Sec. 51, Book V,
suspended, removed or dismissed [Villaseñor Administrative Code].
v. Sandiganbayan, G.R. No. 180700 (2008)].
The period to decide is 90 days after the date
Prior notice and hearing not required in the of suspension of the respondent who is not
issuance of a preventive suspension order a presidential appointee.
Settled is the rule that prior notice and hearing
are not required in the issuance of a preventive If there is no decision, the respondent shall be
suspension order [Carabeo v. CA, G.R. Nos. automatically reinstated in the service.
178000 & 178003 (2009)]. Provided, that when the delay in the disposition
Page 211 of 384
of the case is due to the fault, negligence or appeal is punitive in nature although it is in
petition of the respondent, the period of delay effect subsequently considered illegal if the
shall not be counted in computing the period of respondent is exonerated and the
suspension herein provided [Sec. 52, Book V, administrative decision finding him guilty is
Administrative Code]. reversed [Gloria v. CA, G.R. No. 131012
(1999)].
Preventive Suspension Pending
Investigation of an Employee by the Preventive Suspension Pending
Ombudsman Investigation vs. Preventive
Not more than 6 months, without pay, except Suspension Pending Appeal
when the delay in the disposition of the case by In Gloria v. CA [supra], the Court distinguished
the Office of the Ombudsman is due to the preventive suspension from suspension
fault, negligence or petition of the respondent, pending appeal for the purpose of determining
in which case the period of such delay shall not whether an employee is entitled to back
be counted in computing the period of salaries.
suspension herein provided [Sec. 24, R.A. No.
6770]. There is no right to compensation for
preventive suspension pending investigation,
Preventive Suspension Pending even if the employee is eventually exonerated.
Investigation of a Local Elective
Official By: On the other hand, if the respondent is
(1) The President in the case of provincial eventually exonerated while being preventively
suspended pending appeal, he should be
officials, and officials of highly urbanized
cities and independent component cities; reinstated with full pay for the period of the
suspension.
(2) The governor for officials of component
cities and municipalities;
(3) The mayor for barangay officials. Right to Reinstatement and Back
Salaries
Preventive suspension may be imposed at any Any employee illegally dismissed from office is
time after the issues are joined, when the entitled to reinstatement. Any other
evidence of guilt is strong, and given the gravity employment he or she obtains while the case
of the offense, there is great probability that the challenging his or her dismissal is pending
continuance in office of the respondent could does not bar his or her right to be reinstated.
influence the witnesses or pose a threat to the Similarly, he or she is entitled to the payment
safety and integrity of the records and other of his or her backwages from the time of his or
evidence. her dismissal until his or her actual
reinstatement [Campol v. Balao-as, G.R. No.
General Rule: Any single preventive 197634 (2016)].
suspension of local elective officials shall not
extend beyond sixty (60) days. Conditions to Be Entitled to
Backwages
Exception: If there are several administrative 1. The employee must be found innocent of
cases against an elective official, he cannot be the charges against him;
preventively suspended for more than 90 days 2. The suspension must be unjustified [CSC
within a single year on the same ground or v. Cruz, G.R. No. 187858 (2011)].
grounds existing and known at the time of the
first suspension [Sec. 63, LGC]. Entitlement to Back Salaries
General Rule: Any employee illegally
Preventive Suspension Pending dismissed from office is entitled to
Appeal reinstatement. Similarly, he or she is entitled to
As opposed to preventive suspension pending the payment of backwages from the time of
investigation, preventive suspension pending
Page 212 of 384

dismissal until actual reinstatement [Campol v. c. Where suspended employee is later
Balao-as, supra]. found innocent
Backpay may be allowed for the period when
Back wages should include other monetary an employee is not allowed to work without his
benefits attached to the employee's salary fault as when he was preventively suspended
following the principle that an illegally for alleged dishonesty and gross negligence
dismissed government employee who is later but later found innocent of the charges causing
reinstated is entitled to all the rights and his suspension.
privileges that accrue to him/her by virtue of the
office he/she held [NPC Drivers and Mechanics To deny an innocent employee his back wages
Association v. National Power Corp., G.R. No. during his suspension would be tantamount to
156208 (2017)]. punishing him after his exoneration from his
charges which caused his dismissal from
Exception: The award of full back wages in service.
favor of an illegally dismissed civil service A party’s claim for back wages may be the
employee who was subsequently employed in appropriate subject of an ordinary civil action,
another government agency certainly violates NOT mandamus.
the constitutional prohibitions against double
office-holding and double compensation in the However, the mere reduction of the penalty on
civil service [NPC Drivers and Mechanics appeal does not entitle a government
Association v. National Power Corp., supra]. employee to back salaries if he was not
exonerated of the charges [Office of the
Specific Situations Ombudsman v. Espina, G.R. No. 213500
a. When removal or suspension lawful (2018)].
One who has been lawfully separated or
suspended from his office is not entitled to d. Where employee not completely
compensation for the period during which he exonerated or reinstatement not the
was so suspended or separated, even if it be result of exoneration
subsequently determined that the cause for If the employee is not completely exonerated of
which he was suspended was insufficient. the charges (e.g., when the penalty of
dismissal is reduced to mere suspension or to
Denial of salary to an employee during the a fine), the employee would not be entitled to
period of his suspension if he should be later the payment of back salaries.
found guilty is proper because he had given
ground for his suspension. If the exoneration of the employee is relative
(as distinguished from complete exoneration),
b. Where removal or suspension unlawful an inquiry into the factual premise of the
Where an officer entitled to fixed annual salary offense charged and of the offense committed
was unlawfully removed or suspended and was must be made. If the administrative offense
prevented for a time by no fault of his own from found to have been actually committed is of
performing the duties of the office, it was held lesser gravity than the offense charged, the
that he might recover, and that the amount that employee cannot be considered exonerated if
he had earned in other employment during his the factual premise for the imposition of the
unlawful removal should not be deducted from lesser penalty remains the same. The
his unpaid salary. employee found guilty of a lesser offense may
only be entitled to back salaries when the
What is material is not the nature of the offense actually committed does not carry the
appointment but the act of wrongful deprivation penalty of more than one-month suspension or
of office. If the illegal dismissal is found to have dismissal [Civil Service Commission v. Cruz,
been made in bad faith by the superior officers, G.R. No. 187858 (2011)].
then they will be held PERSONALLY
accountable for the back salaries of the illegally
dismissed employee.
Page 213 of 384
e. Where another appointed to position of usual procedure required for new appointment
illegally dismissed or suspended [De Leon].
employee
When a regular employee was illegally What Constitutes Removal
suspended or dismissed, legally speaking, his Removal from office may be express or
position never became vacant and he is implied.
considered as not having left his office.
1. Appointment of another officer
f. Duty of plaintiff seeking reinstatement Generally, where an officer may be removed by
to prove his right to the office a superior officer at the latter’s pleasure, the act
He must establish that when dispossessed, he of removal is accomplished merely by the
was entitled to the office. In a quo warranto appointment of another officer in his place, so
proceeding, the person suing must show that far as the officer himself is concerned, but in
he has a clear right to the office allegedly held order to render the removal effective in all
unlawfully by another. Absent such right, the cases, the incumbent must be notified.
lack of qualification or eligibility of the
supposed usurper is immaterial. 2. Transfer to another office
Transfer of an officer or employee to another
g. Right to reinstatement to former or at office without his consent (regardless of
least comparable position whether it results in promotion or demotion,
When a government official or employee has advancement or reduction in salary) is
been illegally dismissed, and his reinstatement equivalent to his illegal removal or separation
has later been ordered, for all legal purposes from the first office.
he is considered as not having left his office, so
that he is entitled to all the rights and privileges A temporary transfer or assignment of
to accrue to him by virtue of the office he held. personnel is, however, permissible even
without the employee’s prior consent.
h. Duty to act with reasonable diligence in a. However, it cannot be done when the
asserting right to reinstatement transfer is a preliminary step toward his
It is not proper that the title to public office removal, or is a scheme to lure him
should be subjected to continued uncertainty, away from his permanent position, or
and the people’s interest requires that such designed to indirectly terminate his
right should be determined as speedily as service, or force his resignation.
practicable. The laws aid the vigilant and not b. An employee cannot be transferred
those who slumber on their rights. unless for causes provided for by law
and after due process.
A petition for quo warranto and mandamus
affecting titles to public office must be filed Appointments may be allowed to positions
within 1 year from the date the petitioner is without specification of any particular office or
ousted from position. The claim for back station.
salaries and damages is also subject to the
prescriptive period of 1 year. 3. Demotion
Demotion is considered equivalent to removal
i. Where pardon extended to convicted if no cause is shown for it. It requires the
employee issuance of an appointment.
A pardon, unless expressly grounded on the
person’s innocence or unless the right to a 4. Reassignment
public office is expressly restored by it, does A reassignment may be deemed a constructive
NOT ipso facto restore a convicted felon to dismissal if the employee is moved to a position
public office. it merely restores his eligibility for with a more servile or menial job as compared
appointment to that office, and to regain his to his previous position. It may occur if the
former post, he must re-apply and undergo the employee was reassigned to an office not in the
existing organizational structure, or if he or she
Page 214 of 384

is not given a definite set of duties and courts - Not subject to the President’s
responsibilities. It may be deemed constructive power of removal [Sec. 2, Art. XI & Sec. 11,
dismissal if the motivation for the reassignment Art. VIII, 1987 Const.].
was to harass or oppress the employee on the 3. Civil service officers - Only for cause
pretext of promoting public interest. This may [Sec. 2(3), Art. IX-B, 1987 Const.].
be inferred from reassignments done twice 4. Temporary, provisional or acting
within a year, or during a change of appointments - Remove at pleasure, with
administration of elective and appointive or without cause.
officials. However, demotion and constructive 5. Offices created by law, “at pleasure of
dismissal are never presumed and must be the President” - Not a removal but
sufficiently proven [Yangson v. Department of expiration of term. But where it is
Education, supra]. authorized that removal be at pleasure,
removal may only be for cause.
5. Constructive removal or dismissal
Constructive dismissal occurs whether or not 4. Condonation Doctrine
there is diminution in rank, status, or salary
when the employee’s environment has Concept
rendered it impossible for him or her to stay in Under the condonation doctrine, the rule is that
his or her work. a public official cannot be removed for
administrative misconduct committed
It may be due to the agency head's during a prior term, since his re-election to
unreasonable, humiliating, or demeaning office operates as a condonation of the officer’s
actuations, hardship because geographic previous misconduct to the extent of cutting off
location, financial dislocation, or performance the right to remove him therefor [Aguinaldo v.
of other duties and responsibilities inconsistent Santos, G.R. No. 94115 (1992)].
with those attached to the position [Yangson v.
Department of Education, supra]. Application
The condonation only applies to administrative
Power of Removal of the President offenses.
The power of removal vested with the ● It finds no application in criminal cases
President is implied from: [Aguinaldo v. Santos, supra].
1. The President’s power to appoint; ● It does not apply to appointive officials,
2. The power to appoint being executive in since there is no sovereign will of the
nature [Sec. 1, Art. VII, 1987 Consti.]; people involved in this case [CSC v. Sojor,
3. Duty to execute the laws [Secs. 1 & 5, Art. G.R. No. 168766 (2008)].
VII, 1987 Consti.]; ● It is applicable even if the reelection was to
4. Control of all departments, bureaus and another public office, or to an election
offices of government [Sec. 17, Art. VII, year not immediately subsequent, as
1987 Const.]. long as he was elected by the same body
politic or electorate [Ombudsman v.
A presidential appointee who belongs to the Vergara, G.R. No. 216871 (2017)].
career service of the Civil Service comes under
the direct disciplining authority of the President. Doctrine of Condonation Abandoned
The condonation doctrine was abandoned by
Extent of the President’s Power of the Court in Carpio-Morales v. CA [G.R. Nos.
Removal 217126-27 (2015)]. The Court held that the
1. Non-career officers exercising purely doctrine was adopted from one class of US
executive functions whose tenure not rulings way back in 1959 and thus, out of touch
fixed by law - Congress may not restrict from - and now rendered obsolete by - the
power, whether it is removal with or without current legal regime.
cause.
2. Constitutional officers removable by According to the Court, the concept of public
impeachment and judges of lower office is a public trust, and the corollary
Page 215 of 384
requirement of accountability to the people at Impeachment is the power of Congress to
all times, as mandated under the Constitution, remove a public official for serious crimes or
is plainly inconsistent with the idea that an misconduct as provided in the Constitution
elective local official’s administrative liability for [Corona v. Senate of the Philippines, G.R. No.
a misconduct committed during a prior term 200242 (2012)].
can be wiped off by election to a second term
of office, or even another elective post. b. Impeachable Officers
Moreover, condonation presupposes that the 1. President;

condoner (in this case, the electorate) has 2. Vice-President;
actual knowledge of what is to be condoned. 3. Members of the Supreme Court;
4. Members of the Constitutional
No such presumption can be made, especially Commissions;
since, as the Ombudsman correctly points out, 5. Ombudsman .
in reality, most corrupt acts by public officers c. Grounds for Impeachment
are shrouded in secrecy, and concealed from
the public. 1. Culpable violation of the Constitution;
2. Treason;
Abandonment of Condonation 3. Bribery;
Doctrine is Prospective in Application 4. Graft and corruption;
However, the Court, in the case of Herrera v. 5. Other high crimes; or
Mago [G.R. No. 231120, (2020)] clarified that 6. Betrayal of Public Trust.
the abandonment of the condonation doctrine
is prospective in application. d. Effects of Impeachment
● Administrative cases against elective
officials instituted prior to Carpio-Morales v. a. Removal from office of the official
CA are still covered by the condonation concerned;
doctrine. b. Disqualification to hold any office;
● The prospective application should be c. Officer is still liable to prosecution, trial,
reckoned from April 12, 2016, the date on and punishment if the impeachable
which the Court acted upon and decided offense committed also constitutes a
with finality the motion for felony or crime.
clarification/motion for partial
reconsideration in Carpio-Morales. e. Extent of Judgment in Impeachment
C. Impeachment vs. Quo Judgment in cases of impeachment shall not

extend further than removal from office and
Warranto disqualification to hold any office under the
Republic of the Philippines, but the party
1. Impeachment convicted shall nevertheless be liable and
subject to prosecution, trial, and punishment,
a. Concept according to law [Sec. 3, Art. XI, 1987 Const.].
1987 Constitution, Article XI, Section 2. The f. Process of Impeachment

President, the Vice-President, the Members of the
Supreme Court, the Members of the Constitutional At the House of Representatives
Commissions, and the Ombudsman may be
removed from office on impeachment for, and 1. A verified complaint is filed by:
conviction of, culpable violation of the Constitution, a. Any member of the House of
treason, bribery, graft and corruption, other high Representatives; or
crimes, or betrayal of public trust. All other public b. Any citizen upon a resolution of
officers and employees may be removed from office endorsement by a member of the
as provided by law, but not by impeachment
House of Representatives; or
Page 216 of 384

c. A verified complaint or resolution of 2. Each Senator takes an oath or affirmation
impeachment filed by at least one-third before assuming their office as Senator-
(⅓) of all the Members of the House. judges;
2. The Speaker shall include said complaint in 3. After the transmission and the organization
the Order of Business within 10 session of the Senate as an impeachment court, a
days from receipt; writ of summons shall be issued to the
3. The complaint shall then be referred to the impeached officer directing him to:
Committee on Justice within 3 session a. Appear before the Senate at a fixed
days thereafter; date and place; and
4. After due referral, the Committee on b. File an Answer to the Articles of
Justice shall determine whether the Impeachment within 10 days. The
complaint is sufficient in form: prosecutors may file a Reply to the
a. Committee finds complaint answer within 5 days.
insufficient in form: It shall return the 4. The Senate sitting as an impeachment
same to the Secretary General within 3 court shall be presided over by the Senate
session days with a written explanation President;
of the insufficiency;
i. The Secretary General shall return Exception: If the President is the
the complaint to the complainant(s) impeached official, it is the Chief Justice
together with the committee’s who shall preside.
written explanation within 3 session
days from receipt of the committee The presiding officer shall rule on all
resolution finding the complaint questions of evidence, unless a Senator-
insufficient in form; Judge moves that the question be voted
b. Committee finds complaint upon by all the senator-judges.
sufficient in form: It shall then 5. Upon the close of the trial, the Senator-
determine if the complaint is sufficient judges shall vote on each of the articles of
in substance. If deemed insufficient in impeachment separately;
substance, it shall dismiss the 6. In order to convict the impeached official,
complaint and submit its report to the at least ⅔ of all the members of the Senate
House. must concur in one article of impeachment.
5. The Committee, after hearing, and by a
majority vote of all its Members, shall g. One-Year Limit Rule
submit its report to the House within 60
session days from such referral, together Under the Constitution, no impeachment
with the corresponding resolution; proceedings shall be initiated against the same
6. The resolution shall be calendared for official more than once within a period of one
consideration by the House within 10 days year [Sec. 3, par. 5, Art. XI, 1987 Const.].
from receipt;
7. A 1/3 vote is necessary to affirm a When is an impeachment proceeding initiated?
favorable resolution or override a contrary It is initiated or begins when a verified
resolution of the committee; complaint is filed and referred to the Committee
a. But where ⅓ of the House members on Justice for action. In other words, “to initiate”
themselves filed the complaint, no refers to the filing of the impeachment
need to comply with the preceding complaint coupled with Congress’ taking
steps. It shall constitute the Articles of initial action of said complaint [Francisco, Jr.
Impeachment. v. HOR, G.R. No. 160261 (2003)].
At the Senate
1. The Articles of Impeachment is transmitted
to the Senate and trial shall proceed
forthwith;
Page 217 of 384

2. Quo Warranto This follows from the nature of the writ of
quo warranto itself. It is never directed to an
a. Concept officer as such, but always against the
person - to determine whether he is
Quo warranto is a direct proceeding to question constitutionally and legally authorized to
the title of a public officer, or to oust the holder perform any act in, or exercise any function
from its enjoyment, unless a special statutory of the office to which he lays claim
remedy has been substituted in its place. [Mendoza v. Allas, G.R. No. 131977
(1999)].
b. Who May File?
3. Impeachment vs. Quo Warranto
1. The person who claims to be entitled to the In Re: Letter of Mrs. Corona, citing Republic v.
office [Section 5, Rule 66, Rules of Court]; Sereno, the Court differentiated impeachment
● In order for a quo warranto petition to and quo warranto in the following manner:
be successful, the private person suing 1. Impeachment is political; quo warranto is
must show a clear right to the judicial.
contested office [Topacio v. Ong, 2. In impeachment, the Congress is the
G.R. No. 179895 (2008)]. prosecutor, the trier, and the judge,
2. The Republic of the Philippines, whereas quo warranto petitioners are
represented by the Solicitor General or a instituted either by the Solicitor General in
public prosecutor [Sec. 3, Rule 66, ROC]. behalf of the Republic of the Philippines or
c. Prescriptive Period by an individual claiming the public office in
issue, both of which petitions are
General rule: A quo warranto proceeding must cognizable only by the Supreme Court.
be commenced within 1 year after the cause of 3. Impeachment proceedings seek to confirm
such ouster, or after the right of the petitioner and vindicate the breach of the trust
to hold such office or position arose [Sec. 11, reposed by the Filipino people upon the
Rule 66, Rules of Court]. impeachable official, but quo warranto
determines the legal right, title, eligibility or
Exception: When the government is the real qualifications of the incumbent to the
party in interest, and is proceeding mainly to contested public office.
assert its rights, there can be no defense on the 4. The 1987 Constitution, as supplemented
ground of laches or prescription. Thus, by the internal rules of procedure of
prescription does not lie against the State Congress, directs the course of
[Republic v. Sereno, G.R. No. 237428 (2018)]. impeachment proceedings. Quo warranto
cases, on the other hand, are dictated by
d. Effects When Petition is Granted the Rules of Court.
5. The end result of an impeachment
● As against the respondent, the judgment proceeding is the removal of the public
shall have the following effects: officer, and his or her perpetual political
1. The respondent shall be ousted and disqualification from holding public office.
excluded from the office;
2. The petitioner or relator, as the case On the other hand, when a quo warranto
may be, shall recover his costs; and petition is granted, ouster from office is
3. Such further judgment determining the likewise metered, but the Court can
respective rights in and to the public likewise impose upon the public officer
office, position, or franchise of all the additional penalties such as
parties to the action as justice requires. reimbursement of costs pertaining to the
● As against the successor rightful holder of the public office and such
1. A judgment in quo warranto does not further judgment determining the
bind the respondent’s successor in respective rights in and to the public office,
office, even though such successor position, or franchise of all the parties to the
may trace his title to the same source. action as justice requires.
Page 218 of 384

Impeachment Quo warranto
Impeachment, as a remedy, seeks to

remove impeachable officials for acts
Quo warranto is a remedy to oust an
or omissions committed during the
ineligible public official due to acts or
incumbency of a validly
omissions committed prior to or at the time of
appointed/elected official, even if it
Definition appointment or election relating to an
relates to the qualification being a
official’s qualifications to hold office, provided
continuing requirement and the act or
that the requisites for the commencement
omission constitutes an impeachable
thereof are present.
offense, or disciplinary, administrative
or criminal action, if otherwise.
Political process to vindicate the Judicial determination of the eligibility or

violation of the public’s trust. validity of the election or appointment of a
public official based on predetermined rules.
Nature Impeachment presupposes a valid
appointment and exacts accountability Quo warranto tests the qualification of an
for an act done by an official during official based on a cause existing at the time
his/her tenure. of the issuance of the appointment.
Commission of an impeachable offense

Cause of Usurpation or unlawful holding of the
which would render an officer unfit in
Action public office.
exercising the powers of his office.
Removal from office of the official concerned;

Disqualification to hold any office;
Ouster from office due to the public
Effects Officer still liable to prosecution, trialand
officer’s ineligibility to hold said office.
punishment if the impeachable offense
committed also constitutes a felony or crime.
D. The Ombudsman and the Appointment

The Ombudsman and his Deputies shall be
Office of the Special Prosecutor appointed by the President from a list of at least
[Sections 5 to 14, Article XI of the six nominees, prepared by the Judicial and Bar
1987 Constitution in relation to Council, and from a list of three nominees for
every vacancy thereafter. Such appointments
RA No. 6770, otherwise known shall require no confirmation. All vacancies
as “The Ombudsman Act of shall be filled within three months after they
1989”] occur [Sec. 9, Art. XI, 1987 Const.].
The Ombudsman The Ombudsman and his Deputies, including

the Special Prosecutor, shall be appointed by
the President from a list of at least twenty-one
1987 Constitution, Article XI, Section 5. There is (21) nominees prepared by the Judicial and
hereby created the independent Office of the
Ombudsman, composed of the Ombudsman to be
Bar Council, and from a list of three (3)
known as Tanodbayan, one overall Deputy and at nominees for each vacancy thereafter, which
least one Deputy each for Luzon, Visayas and shall be filled within three (3) months after it
Mindanao. A separate Deputy for the military occurs, each of which list shall be published in
establishment may likewise be appointed. a newspaper of general circulation [Sec. 4,
R.A. No. 6770].
Page 219 of 384
Qualifications provided for the removal of the Ombudsman, is
The Ombudsman and his Deputies shall be: unconstitutional.
1. Natural-born citizens of the Philippines;
2. At the time of their appointment, at least The Office of the Special Prosecutor
forty years old; 1987 Constitution, Section 7, Article XI. The
3. Of recognized probity and independence; existing Tanodbayan shall hereafter be known as
4. Members of the Philippine Bar; the Office of the Special Prosecutor. It shall continue
5. Must not have been candidates for any to function and exercise its powers as now or
elective office in the immediately preceding hereafter may be provided by law, except those
conferred on the Office of the Ombudsman created
election.
under this Constitution.
The Ombudsman must have for ten years or

more been a judge or engaged in the practice Qualifications, Rank, and Salary
of law in the Philippines [Sec. 8, Art. XI, 1987 The Special Prosecutor shall have the same
Const.]. qualifications as that of a Deputy Ombudsman
Disqualifications and Prohibitions [Sec. 4, R.A. No. 6770].
The Ombudsman cannot:
a. Hold any other office or employment during The Special Prosecutor also has the same rank
his tenure; and salary as a Deputy Ombudsman [Sec. 11,
b. Engage in the practice of any profession or R.A. No. 6770].
in the active management or control of any
business which may be affected by the Powers
functions of his office; The Office of the Special Prosecutor shall,
c. Be financially interested, directly or under the supervision and upon the authority of
indirectly, in any contract with or in any the Ombudsman, have the following powers:
franchise or privilege granted by the a. To conduct preliminary investigation and
Government, any of its subdivisions, prosecute criminal cases within the
agencies or instrumentalities, including jurisdiction of the Sandiganbayan;
GOCCs or their subsidiaries. b. To enter into plea bargaining agreements;
and
Independence c. To perform such other duties assigned to it
To subject the Deputy Ombudsman to by the Ombudsman. [Sec. 11(4), R.A. No.
discipline and removal by the President, whose 6770].
own alter-egos and officials in the Executive
Department are subject to the Ombudsman’s Independence
disciplinary authority, would place at risk the In Gonzales v. Office of the President [supra],
independence of the Office of the Ombudsman the Court held that Section 8(2) of R.A. No.
itself. The Ombudsman cannot be expected to 6770, insofar as it allows the President to
place her complete trust in her subordinate remove the Special Prosecutor from office for
officials if they are not as independent as she any of the grounds provided for the removal of
is [Gonzales III v. Office of the President of the the Ombudsman, was upheld by the Supreme
Philippines, G.R. No. 196231 (2014)]. Court. The Court did not consider the Office of
Thus, Section 8(2) of R.A. No. 6770, insofar as the Special Prosecutor to be constitutionally
it allows the President to remove Deputy within the Office of the Ombudsman and is,
Ombudsmen from office for any of the grounds hence, not entitled to the independence the
latter enjoys under the Constitution.
Page 220 of 384

1. Functions of the Office of the Ombudsman
1987 Constitution Ombudsman Act of 1989 (R.A. No. 6770)
Article XI, Section 13. The Office of the Section 15. Powers, Functions and Duties. -
Ombudsman shall have the following powers, The Office of the Ombudsman shall have the
functions, and duties: following powers, functions and duties:
(1) Investigate on its own, or on complaint by (1) Investigate and prosecute on its own or on
any person, any act or omission of any public complaint by any person, any act or omission of
official, employee, office or agency, when such any public officer or employee, office or agency,
act or omission appears to be illegal, unjust, when such act or omission appears to be illegal,
improper, or inefficient. unjust, improper or inefficient. It has primary
jurisdiction over cases cognizable by the
Sandiganbayan and, in the exercise of his
primary jurisdiction, it may take over, at any
stage, from any investigatory agency of
Government, the investigation of such cases;
(2) Direct, upon complaint or at its own (2) Direct, upon complaint or at its own
instance, any public official or employee of the instance, any officer or employee of the
Government, or any subdivision, agency or Government, or of any subdivision, agency or
instrumentality thereof, as well as of any instrumentality thereof, as well as any
government-owned or controlled corporation government-owned or controlled corporations
with original charter, to perform and expedite with original charter, to perform and expedite
any act or duty required by law, or to stop, any act or duty required by law, or to stop,
prevent, and correct any abuse or impropriety in prevent, and correct any abuse or impropriety in
the performance of duties. the performance of duties;
(3) Direct the officer concerned to take (3) Direct the officer concerned to take
appropriate action against a public official or appropriate action against a public officer or
employee at fault, and recommend his removal, employee at fault or who neglect to perform an
suspension, demotion, fine, censure, or act or discharge a duty required by law, and
prosecution, and ensure compliance therewith. recommend his removal, suspension, demotion,
fine, censure, or prosecution, and ensure
compliance therewith; or enforce its disciplinary
authority as provided in Section 21 of this Act:
Provided, That the refusal by any officer without
just cause to comply with an order of the
Ombudsman to remove, suspend, demote, fine,
censure, or prosecute an officer or employee
who is at fault or who neglects to perform an act
or discharge a duty required by law shall be a
ground for disciplinary action against said
officer;
(4) Direct the officer concerned, in any (4) Direct the officer concerned, in any
appropriate case, and subject to such appropriate case, and subject to such
limitations as may be provided by law, to furnish limitations as it may provide in its rules of
it with copies of documents relating to contracts procedure, to furnish it with copies of
or transactions entered into by his office documents relating to contracts or transactions
involving the disbursement or use of public entered into by his office involving the
funds or properties, and report any irregularity disbursement or use of public funds or
Page 221 of 384

to the Commission on Audit for appropriate properties, and report any irregularity to the
action. Commission on Audit for appropriate action;
(5) Request any government agency for (5) Request any government agency for
assistance and information necessary in the assistance and information necessary in the
discharge of its responsibilities, and to examine, discharge of its responsibilities, and to examine,
if necessary, pertinent records and documents. if necessary, pertinent records and documents;
(6) Publicize matters covered by its (6) Publicize matters covered by its
investigation when circumstances so warrant investigation of the matters mentioned in
and with due prudence. paragraphs (1), (2), (3) and (4) hereof, when
circumstances so warrant and with due
prudence: Provided, That the Ombudsman
under its rules and regulations may determine
what cases may not be made public: Provided,
further, That any publicity issued by the
Ombudsman shall be balanced, fair and true;
(7) Determine the causes of inefficiency, red (7) Determine the causes of inefficiency, red
tape, mismanagement, fraud, and corruption in tape, mismanagement, fraud, and corruption in
the Government and make recommendations the Government, and make recommendations
for their elimination and the observance of high for their elimination and the observance of high
standards of ethics and efficiency. standards of ethics and efficiency;
(8) Promulgate its rules of procedure and

exercise such other powers or perform such
functions or duties as may be provided by law.
(8) Administer oaths, issue subpoena and

subpoena duces tecum, and take testimony in
any investigation or inquiry, including the power
to examine and have access to bank accounts
and records;
(9) Punish for contempt in accordance with the

Rules of Court and under the same procedure
and with the same penalties provided therein;
(10) Delegate to the Deputies, or its

investigators or representatives such authority
or duty as shall ensure the effective exercise or
performance of the powers, functions, and
duties herein or hereinafter provided;
(11) Investigate and initiate the proper action for

the recovery of ill-gotten and/or unexplained
wealth amassed after February 25, 1986 and
the prosecution of the parties involved therein.
Page 222 of 384

(12) The Ombudsman shall give priority to

complaints filed against high-ranking
government officials and/or those occupying
supervisory positions, complaints involving
grave offenses as well as complaints involving
large sums of money and/or properties.
The law does not qualify the nature of the illegal Ombudsman’s Decision is Appealable
act or omission of the public official or Generally, appeals from decisions of the Office
employee that the Ombudsman may of the Ombudsman in administrative
investigate. It does not require that the act or disciplinary cases should be taken to the CA
omission be related to or be connected with or under the provisions of Rule 43 of the Rules of
arise from the performance of official duty. Civil Procedure [Tsunami Management Corp.
Since the law does not distinguish, neither v. Ombudsman, G.R. No. 232712 (2021)].
should we [Santos v. Rasalan, G.R. No.
155749 (2007)]. In cases where the respondent is not
exonerated, and the penalty imposed is not
The Office of the Ombudsman is empowered merely public censure or reprimand, or
to determine if there exists probable cause or suspension of not more than one (1) month’s
"whether there exists a reasonable ground to salary, the Ombudsman's decision is
believe that a crime has been committed, and appealable. The proper remedy is to file an
that the accused is probably guilty thereof and, appeal under Rule 43 of the Rules of Court
thereafter, to file the corresponding information before the Court of Appeals [Yatco v. Office
with the appropriate courts." This of the Ombudsman, G.R. No. 244775 (2020)].
determination is done by means of a
preliminary investigation [Morales, Jr. v. Ombudsman’s Decision is
Carpio-Morales, G.R. No. 208086 (2016)]. Unappealable
Pursuant to Section 27 of the Ombudsman Act,
Notwithstanding the term "recommend," [under
any order, directive or decision of the
Sec. 13 (3), Art. XI of the Const.], the said Ombudsman “imposing the penalty of public
provision, construed together with the pertinent
censure or reprimand, or suspension of not
provisions in Republic Act No. 6770, is not only more than one (1) month’s salary shall be final
advisory in nature but is actually mandatory
and unappealable.
within the bounds of law [Office of the
Ombudsman v. Court of Appeals, G.R. No.
Case law has also explained that Ombudsman
160675 (2006)]. rulings which exonerate the respondent from
administrative liability are, by implication, also
2. Judicial Review in Administrative considered final and unappealable.
Proceedings
The proper remedy to appeal decisions in In these cases, although such decisions are
administrative proceedings before the Office of considered final and unappealable, they are
the Ombudsman depends on whether the still subject to judicial review on the ground of
decision of the Ombudsman is appealable or grave abuse of discretion. Thus, the correct
unappealable. procedure is to file a petition for certiorari
under Rule 65 of the Rules of Court before
Page 223 of 384

the CA [Yatco v. Office of the Ombudsman, ii. City mayors, vice-mayors,
supra]. members of the sangguniang
panlungsod, city treasurers,
3. Judicial Review in Penal assessors, engineers, and other
Proceedings city department heads;
With respect to criminal charges, the Court has iii. Officials of the diplomatic service
settled that the remedy of an aggrieved party occupying the position of consul
from a resolution of the Ombudsman finding and higher;
the presence or absence of probable cause is iv. Philippine army and air force
to file a petition for certiorari under Rule 65 colonels, naval captains, and all
of the Rules of Court with the Supreme officers of higher rank;
Court (not the Court of Appeals) [Yatco v. v. Officers of the Philippine National
Office of the Ombudsman, supra]. Police while occupying the position
of provincial director and those
holding the rank of senior
E. The Sandiganbayan superintendent and higher;
vi. City and provincial prosecutors and
1. Nature and Composition their assistants, and officials and
It is a special court, of the same level as the prosecutors in the Office of the
Court of Appeals, and possessing all the Ombudsman and special
inherent powers of a court of justice. It is prosecutor;
composed of a Presiding Justice and fourteen vii. Presidents, directors or trustees, or
Associate Justices who shall be appointed by managers of government-owned or
the President [Sec. 1, P.D. No. 1606 as controlled corporations, state
amended by R.A. No. 8249]. universities or educational
institutions or foundations.
2. Jurisdiction b. Members of Congress and officials
thereof classified as Grade 27 and
a. Exclusive Original Jurisdiction higher under the Compensation and
The Sandiganbayan shall exercise exclusive Position Classification Act of 1989;
original jurisdiction in all cases involving: c. Members of the judiciary without
1. Violations of RA No. 3019, as amended, prejudice to the provisions of the
otherwise known as the Anti-Graft and Constitution;
Corrupt Practices Act, RA No. 1379, and d. Chairmen and members of the
Chapter II, Section 2, Title VII, Book II of Constitutional Constitutions, without
the Revised Penal Code, where one or prejudice to the provisions of the
more of the accused are officials occupying Constitution; and
the following positions in the government, e. All other national and local officials
whether in a permanent, acting or classified as Grade 27 and higher
interim capacity, at the time of the under the Compensation and Position
commission of the offense: Classification Act of 1989.
a. Officials of the executive branch 2. Other offenses or felonies whether simple
occupying the positions of regional or complexed with other crimes committed
director and higher, otherwise by the public officials and employees
classified as Grade 27 and higher, of mentioned in subsection a. of this Section
the Compensation and Classification in relation to their office
Act of 1989, specifically including: 3. Civil and criminal cases filed pursuant to
i. Provincial governors, vice- and in connection with Executive Order
governors, members of the Nos. 1, 2, 14 and 14-A, issued in 1986
sangguniang panlalawigan, and [Sec. 4, P.D. No. 1606 as amended by R.A.
provincial treasurers, assessors, No. 10660].
engineers, and other provincial
department heads:
Page 224 of 384

Requisites Sandiganbayan did not err in thus decreeing
In Lacson v. Executive Secretary [GR. No. the assailed preventive suspension order
128096 (1999)], the Court held that to fall under [Defensor-Santiago v. Sandiganbayan, G.R.
the exclusive original jurisdiction of the No. 128055 (2001)].
Sandiganbayan, the following requisites must
concur: Petitioner mayor's position having been
1. The offense committed is a violation of: classified as Grade 27 in accordance with R.A.
a. R.A. No. 3019, as amended (the Anti- No. 6758, and having been charged with
Graft and Corrupt Practices Act); violation of Section 3 (e) of R.A. 3019,
b. R.A. No. 1379 (the law on ill-gotten petitioner is subject to the jurisdiction of the
wealth); Sandiganbayan, as defined by Section 4 a. of
c. Chapter II, Section 2, Title VII, Book II P.D. No. 1606, as amended by Section 2 of
of the RPC (the law on bribery); R.A. No. 7975. By virtue of the same Section 4
d. Executive Order Nos. 1, 2, 14, and 14- a., as amended, his co-accused are also
A, issued in 1986 (sequestration subject to the Anti-Graft Court's jurisdiction
cases); or [Rodrigo, Jr. v. Sandiganbayan, G.R. No.
e. Other offenses or felonies whether 125498 (1999)].
simple or complexed with other crimes.
2. The offender committing the offenses in The exclusive original jurisdiction over
items (a), (b), (c) and (e) is a public official violations of RA 9165 is not transferred to the
or employee holding any of the positions Sandiganbayan whenever the accused
enumerated in paragraph a of Section 4; occupies a position classified as Grade 27 or
and higher, regardless of whether the violation is
3. The offense committed is in relation to the alleged as committed in relation to office. RA
office. 9165 is the special law excluding from the
Sandiganbayan's jurisdiction violations of RA
An offense is said to have been committed in 9165 committed by such public officers. In the
relation to the office if it (the offense) is latter case, jurisdiction is vested upon the
“intimately connected” with the office of the RTCs designated by the Supreme Court as
offender and perpetrated while he was in the drugs court, regardless of whether the violation
performance of his official functions. This of RA 9165 was committed in relation to the
intimate relation between the offense charged public officials' office [De Lima v. Guerrero,
and the discharge of official duties “must be G.R. No. 229781 (2017)].
alleged in the information” [People v. Montejo,
G.R. No. L-14595 (1960)]. b. Exclusive Appellate Jurisdiction
The Sandiganbayan shall exercise exclusive
Section 16 (3), Article VI of the Constitution — appellate jurisdiction over final judgments,
which deals with the power of each House of resolutions or orders of regional trial courts
Congress inter alia to 'punish its Members for whether in the exercise of their own original
disorderly behavior, and 'suspend or expel a jurisdiction or of their appellate jurisdiction as
Member' by a vote of two-thirds of all its herein provided [Sec. 4, P.D. No. 1606 as
Members subject to the qualification that the amended by R.A. No. 10660].
penalty of suspension, when imposed, should
not exceed sixty days — is unavailing, as it c. Jurisdiction Over Private Individuals
appears to be quite distinct from the In case private individuals are charged as co-
suspension spoken of in Section 13 of RA principals, accomplices or accessories with the
3019, which is not a penalty but a preliminary, public officers or employees, including those
preventive measure, prescinding from the fact employed in government-owned or controlled
that the latter is not being imposed on petitioner corporations, they shall be tried jointly with said
for misbehavior as a Member of the House of public officers and employees in the proper
Representatives. Republic Act No. 3019 does courts which shall exercise exclusive
not exclude from its coverage the members of jurisdiction over them [Sec. 4, P.D. No. 1606 as
Congress and that, therefore, the amended by R.A. No. 10660].
Page 225 of 384

XIV. TERM LIMITS shall begin at noon on the thirtieth day of June next
following the day of the election and shall end at
noon of the same date six years thereafter. The
The term means the time during which the President shall not be eligible for any reelection.
officer may claim to hold the office as of No person who has succeeded as President and
right, and fixes the interval after which the has served as such for more than four years shall
several incumbents shall succeed one be qualified for election to the same office at any
another. The tenure represents the term time.
during which the incumbent actually holds
No Vice-President shall serve for more than two
the office. The tenure may be shorter than the consecutive terms. Voluntary renunciation of the
term for reasons within or beyond the power of office for any length of time shall not be considered
the incumbent [Fetalino v COMELEC, G.R. No. as an interruption in the continuity of the service for
191890 (2012)]. the full term for which he was elected.xxx
A. Legislative Department Judicial Department
1. Senators 2. Supreme Court Justices and

Judges of Lower Courts
1987 Constitution, Article VI, Section 4. The term
of office of the Senators shall be six years and shall 1987 Constitution, Article VIII, Section 11. The
commence, unless otherwise, provided by law, at Members of the Supreme Court and judges of lower
noon on the thirtieth day of June next following their courts shall hold office during good behavior
election. until they reached the age of seventy years or
become incapacitated to discharge the duties of
No Senator shall serve for more than two their office. The Supreme Court en banc shall have
consecutive terms. Voluntary renunciation of the the power to discipline judges of lower courts, or
office for any length of time shall not be considered order their dismissal by a vote of a majority of the
as an interruption in the continuity of his service for Members who actually took part in the deliberations
the full term for which he was elected. on the issues in the case and voted thereon.
2. Members of the House of C. Constitutional Commissions

Representatives
1987 Constitution, Article VI, Section 7. The
Members of the House of Representatives shall be
elected for a term of three years which shall begin, 1987 Constitution, Article IX-B, Section 1(2). The
unless otherwise provided by law, at noon on the Chairman and the Commissioners shall be
thirtieth day of June next following their election. appointed by the President with the consent of the
Commission on Appointments for a term of seven
No member of the House of Representatives years without reappointment. Of those first
shall serve for more than three consecutive appointed, the Chairman shall hold office for seven
terms. Voluntary renunciation of the office for any years, a Commissioner for five years, and another
length of time shall not be considered as an Commissioner for three years, without
interruption in the continuity of his service for the full reappointment. Appointment to any vacancy shall
term for which he was elected. be only for the unexpired term of the predecessor.
In no case shall any Member be appointed or
designated in a temporary or acting capacity.
B. Executive Department
2. Commission on Elections
1. President and Vice-President
1987 Constitution, Article IX-C, Section 1(2). The
1987 Constitution, Article VII, Section 4. The Chairman and the Commissioners shall be
President and the Vice-President shall be elected by appointed by the President with the consent of the
direct vote of the people for a term of six years which Commission on Appointments for a term of seven
Page 226 of 384

years without reappointment. Of those first position: Provided, however, That the term of office
appointed, three Members shall hold office for seven shall be reckoned from the 1994 barangay elections.
years, two Members for five years, and the last Voluntary renunciation of office for any length of time
Members for three years, without reappointment. shall not be considered as an interruption in the
Appointment to any vacancy shall be only for the continuity of service for the full term for which the
unexpired term of the predecessor. In no case shall elective official was elected.
any Member be appointed or designated in a
temporary or acting capacity.
3. Commission on Audit
1987 Constitution, Article IX-D, Section 1(1. The

Chairman and the Commissioners shall be
appointed by the President with the consent of the
Commission on Appointments for a term of seven
years without reappointment. Of those first
appointed, the Chairman shall hold office for seven
years, one Commissioner for five years, and the
other Commissioner for three years, without
reappointment. Appointment to any vacancy shall
be only for the unexpired portion of the term of the
predecessor. In no case shall any Member be
appointed or designated in a temporary or acting
capacity.
D. The Office of the Ombudsman
1987 Constitution, Article XI, Section 11, Article

XI. The Ombudsman and his Deputies shall serve
for a term of seven years without reappointment.
They shall not be qualified to run for any office in the
election immediately succeeding their cessation
from office.
E. Local Governments
1987 Constitution, Article X, Section 8. The term

of office of elective local officials, except barangay
officials, which shall be determined by law, shall be
three years and no such official shall serve for
more than three consecutive terms. Voluntary
renunciation of the office for any length of time shall
not be considered as an interruption in the continuity
of his service for the full term for which he was
elected.
Barangay Officials and Sangguniang

Kabataan Officials
R.A. No. 9164, Section 2. The term of office of all

barangay and sangguniang kabataan officials after
the effectivity of this Act shall be three (3) years. No
barangay elective official shall serve for more
than three (3) consecutive terms in the same
Page 227 of 384

ADMINISTRATIVE LAW
INTERNATIONAL LAW
ADMINISTRATIVE LAW POLITICAL LAW
Administrative functions are those which
involve the regulation and control over the
ADMINISTRATIVE conduct and affairs of individuals for their own
welfare and the promulgation of rules and
LAW regulations to better carry out the policy of the
legislature or such as are devolved upon the
administrative agency by the organic law of its
I. GENERAL PRINCIPLES existence [In Re: Rodolfo v. Manzano, A.M.
No. 88-7-1861-RTC (1988)].
A. Definition of Administrative
Law II. ADMINISTRATIVE AGENCIES
Administrative law belongs to the field of
public law, and is generally understood as “that
part of the law which governs the organization,
A. Definition of Administrative
functions, and procedures of administrative Agency
agencies of the government to which (quasi) Administrative Code of 1987
legislative powers are delegated and (quasi)
judicial powers are granted, and the extent and Section 2(1), Book VII. Definitions. – As used in this
manner of which such agencies are subject to Book: (1) “Agency” includes any department,
control by the courts” [De Leon]. bureau, office, commission, authority or officer of the
National Government authorized by law or executive
order to make rules, issue licenses, grant rights of
B. Separation of Powers and privileges, and adjudicate cases; research
institutions with respect to licensing functions;
Administrative Functions government corporations with respect to functions
In Pangasinan Transportation Co., Inc. v. PSC, regulating private right, privileges, occupation, or
G.R. No. 47065 (1940), the Supreme Court business; and officials in the exercise of disciplinary
held that the challenged law, passed by the power as provided by law.
then National Assembly, did not constitute a
complete and total abdication by the “Administrative agency” is the term used
Legislature of its functions because all that was generally to describe an agency exercising
delegated to the Public Service Commission some significant combination of executive,
(PSC) was the administrative function, legislative, and judicial powers. It is a
involving the use of discretion to carry out the government body charged with administering
will of the legislature. and implementing particular legislation [De
Leon].
According to the Court in Pangasinan,
“apparent in the development of the principle
of separation of powers…is that the maxim B. Historical Considerations
of delegatus non potest delegari or delegata The emergence of administrative agencies
potestas non potest delegari…has been made can be attributed to:
to adapt itself to the complexities of modern 1. Growing complexity of modern life;
governments, giving rise to the adoption, within 2. Multiplication of the subjects of
certain limits, of the principle of ‘subordinate governmental regulation; and
legislation,’ not only in the United States and 3. Increased difficulty of administering laws
England but in practically all modern [Pangasinan Transportation Co., Inc. v.
governments. Accordingly, with the growing PSC, supra].
complexity of modern life, the multiplication of
the subjects of governmental regulation, and Except for Constitutional Commissions and
the increased difficulty of administering the other bodies directly created by the
laws, there is a constantly growing tendency Constitution, administrative agencies are
toward the delegation of greater powers by the generally are creations of the legislature. In
legislature, and toward the approval of the theory, Congress can create, divide, merge,
practice by the court.” modify, or even abolish agencies. The reality,
however, is more on the side of creation rather
Page 229 of 384
than abolition, considering the multiplication of details. The regulation should be germane to
regulatory agencies [Carlota]. the objects and purposes of the law and should
not be in contradiction to but in conformity with
the standards prescribed by the law [Sigre v.
III. POWERS OF CA, G.R. Nos. 109568 & 113454 (2002)].
ADMINISTRATIVE AGENCIES
This is effected by the promulgation of
administrative bodies of what are known as
A. Quasi-Legislative (Rule- supplementary regulations, such as
Making Power) implementing rules and regulations which have
the force and effect of law [Eastern Shipping
The authority delegated by the law-making Lines, Inc. v. POEA, G.R. No. 76633 (1988)].
body to the administrative agency to adopt
rules and regulations intended to carry out the Administrative issuances may be distinguished
provisions of a law and implement a legislative according to their nature and substance:
policy [Cruz]. legislative and interpretative. A legislative rule
is in the matter of subordinate legislation,
The grant of rule-making is a relaxation of the designed to implement a primary legislation by
separation of powers principle and is an providing the details thereof. An interpretative
exception to the non-delegation of legislative rule, on the other hand, is designed to provide
powers. But such administrative regulations guidelines to the law which the administrative
must be consistent with the law and be for the agency is in charge of enforcing [BPI Leasing
sole purpose of enforcing its provisions and not Corporation v. Court of Appeals, G.R. No.
to transcend the limits marked by the law. The 127624 (2003)].
details and the manner of carrying out the law
are oftentimes left to the administrative agency Non-delegation Doctrine Potestas delegata
entrusted with its enforcement [People v. non delegare potest
Maceren, G.R. No. L- 32166 (1977)].
As a general rule, the law prohibits the further
Administrative regulations enacted by delegation of a power or function already
administrative agencies to implement and assigned and delegated by the Constitution to
interpret the law which they are entrusted to a specific body such as the legislature. The
enforce have the force of law and are entitled rationale.
to respect. Such rules and regulations partake
of the nature of a statute and are just as binding One of the settled maxims in constitutional law
as if they have been written in the statute itself. is that the power conferred upon the legislature
As such, they have the force and effect of law to make laws cannot be delegated by that
and enjoy the presumption of constitutionality department to any body or authority. This
and legality until they are set aside with finality doctrine is based on the ethical principle that
in an appropriate case by a competent court. such a delegated power constitutes not only a
Congress, in the guise of assuming the role of right but a duty to be performed by the delegate
an overseer, may not pass upon their legality by the instrumentality of his judgment acting
by subjecting them to its stamp of approval immediately upon the matter of legislation and
without disturbing the calculated balance of not through the intervening mind of another
powers established in the Constitution. Hence, [United States v. Barrias, G.R. No. 4349
legislative vetoes are unconstitutional (1908)].
[Abakada Guro Party List v. Hon. Cesar
Purisima, G.R. No. 166715 (2008)]. The general rule barring delegation of
legislative powers is subject to recognized
Power of Subordinate Legislation limitations or exceptions, one of which is
The power of subordinate legislation allows delegation to administrative bodies [Abakada
administrative bodies to implement the broad v. Ermita, G.R. No. 168056 (2005)].
policies laid down in a statute by “filling in” the
Page 230 of 384
Permissible Delegation administrative authority is that the rate be
In every case of permissible delegation, there reasonable and just. However, it has been held
must be a showing that the delegation itself is that even in the absence of an express
valid. requirement as to reasonableness, this
standard may be implied [PHILCOMSAT v.
It is valid only if the law (a) is complete in itself, Alcuaz, G.R. No. 84818 (1989)].
setting forth therein the policy to be executed,
carried out, or implemented by the delegate; Filling in the Details
and (b) fixes a standard — the limits of which With the power of subordinate legislation,
are sufficiently determinate and determinable administrative bodies may implement the
— to which the delegate must conform in the broad policies laid down in a statute by “filling
performance of his functions [Defensor in” the details which the Congress may not
Santiago v. COMELEC, G.R. No. 127325 have the opportunity or competence to provide
(1997)]. [Eastern Shipping Lines, Inc. v. POEA, supra].
a. Completeness Test Test to Determine Invalidity of

The law must be complete in all its terms and Administrative Rules
conditions when it leaves the legislature such 1. If it exceeds the authority conferred to it;
that when it reaches the delegate the only thing 2. If it conflicts with the governing statute;
he will have to do is enforce it [Eastern 3. If it extends or modifies the statute;
Shipping Lines, Inc. v. POEA, supra]. 4. If it has no reasonable relationship to the
statutory purpose; and
To determine whether there is an undue 5. If it is arbitrary or unreasonable or
delegation of legislative power, the inquiry unconstitutional.
must be directed to the scope and definiteness
of the measure enacted. The legislature does Where a rule or regulation has a provision not
not abdicate its functions when it describes expressly stated or contained in the statute
what job must be done, who is to do it, and being implemented, that provision does not
what is the scope of his authority [Edu v. Ericta, necessarily contradict the statute. A legislative
GR No. L-32096 (1970)]. rule is in the nature of subordinate legislation,
designed to implement a primary legislation by
b. Sufficient Standard Test providing the details thereof. All that is required
The law must fix a standard, the limits of which is that the regulation should be germane to the
are sufficiently determinate or determinable, to objects and purposes of the law; that the
which the delegate must conform. A sufficient regulation be not in contradiction to but in
standard is one which: conformity with the standards prescribed by the
1. Defines legislative policy, marks its limits, law [Holy Spirit Homeowners Association, Inc.
maps out its boundaries and specifies the v. Defensor, G.R. No. 163980 (2006)].
public agency to apply it;
2. Indicates the circumstances under which General Rule-making Power
the legislative command is to be effected a. Every administrative agency is to file with
[Abakada v. Ermita, supra]. the University of the Philippines Law
Center three (3) certified copies of every
A legislative standard need not be expressed. rule adopted by it.
It may simply be gathered or implied. Nor need b. Each rule shall become effective fifteen
it be found in the law challenged because it (15) days from the date of filing as above
may be embodied in other statutes on the same provided unless a different date is fixed by
subject as that of the challenged legislation law, or specified in the rule in cases of
[Chiongbian v. Orbos, G.R. No. 96754 (1995)]. imminent danger to public health, safety
and welfare, the existence of which must
In case of a delegation of rate-fixing power, the be expressed in a statement
only standard which the legislature is required accompanying the rule.
to prescribe for the guidance of the
Page 231 of 384

c. Every rule establishing an offense or
Legislative Interpretive
defining an act which, pursuant to law, is Rules Rules
punishable as a crime or subject to a
penalty shall in all cases be published in As to Need Need not be
full text. publicatio Publication. published.
d. If not otherwise required by law, an agency n
shall, as far as practicable, publish or
circulate notices of proposed rules and So long as the At best
afford interested parties the opportunity to court finds merely
submit their views prior to the adoption of that the advisory; the
any rule. legislative court may
e. In the fixing of rates, no rule or final order rules are review the
shall be valid unless the proposed rates within the correctness
shall have been published in a newspaper power of the of the
of general circulation at least two (2) administrative interpretation
weeks before the first hearing thereon agency to of the law
[Secs. 3, 4, 6, & 9, Chapter 2, Book VII, pass, as seen given by the
Administrative Code]. in the primary administrativ
law, then the e body, and
1. Kinds of Administrative Rules and rules bind the substitute its
Regulations court. The own view of
court cannot what is
As to question the correct.
a. Supplementary Legislation Binding wisdom or
Pertains to rules and regulations that fix details Effect correctness of If it is not
in the execution of a policy in the law; This is
the policy within the
also called a legislative rule or subordinate
contained in scope of the
legislation. e.g., IRRs of the Labor Code.
the rules. administrativ
e agency, the
b. Interpretative Legislation court may, in
Pertains to rules and regulations construing or addition to
interpreting the provisions of a statute to be invalidating
enforced and they are binding on all concerned the same,
until they are changed, e.g., BIR Circulars. also
substitute its
Legislative rules v. Interpretative rules decision or
Legislative Interpretive interpretation
Rules Rules or give its
own set of
Promulgated Promulgated rules.
pursuant to its pursuant to
As to quasi- its quasi- Procedural Due process
source legislative/rule judicial due process involves
-making capacity. means that whether the
functions. the body parties were
observed the afforded the
Create a new Merely clarify As to Due proper opportunity to
law, a new the meaning Process procedure in be notified
policy, with of a passing rules. and heard
As to
the force and preexisting Substantive before the
function
effect of law. law by due process, issuance of
inferring its on the other the ruling.
implications. hand, deals
Page 232 of 384

Legislative Interpretive c. Reasonable Relation to the purposes

Rules Rules If shown to bear no reasonable relation to the
purposes [using the means-purpose or rational
with the relation test] for which they are authorized to be
limitations issued, then they must be held to be invalid
posed by [Lupangco v. CA, G.R. No. 77372 (1988)].
constitutional
and d. Promulgated in Accordance with
fundamental Prescribed Procedure
rights to
rulemaking. B. Quasi-Judicial (Adjudicatory)
Power
2. Requisites for Validity
a. Within the scope or authority of law; It is the power of an administrative agency to
b. Authorized by law; hear and determine, or to ascertain facts and
c. Reasonable relation to the purposes; decide by the application of rules to the
d. Promulgated in accordance with ascertained facts. By this power, administrative
prescribed procedure. authorities are enabled to interpret and apply
not only implementing rules and regulations
a. Within the Scope or Authority of Law promulgated by them but also the laws
The administrative body may not make rules entrusted to their administration [De Leon].
and regulations which are inconsistent with the
provisions of the Constitution or a statute, Note: The use of the term quasi-judicial is to
particularly the statute it is administering, or designate the character of the proceedings or
which created it, or which are in derogation of, powers exercised, in that such must be
or defeat, the purpose of a statute [Dagan v. accompanied with certain formalities and
Philippine Racing Commission, G.R. No. safeguards characteristic of the judicial
175220 (2009)]. process [De Leon].
b. Authorized by Law This is the power of an administrative agency

The rule is that what has been delegated to determine questions of fact to which the
cannot be delegated. The grant of rule-making legislative policy is to apply, in accordance with
power to administrative agencies is a the standards laid down by the law itself [Smart
recognized exception to this rule. They have v. NTC, G.R. No. 151908 (2003)].
been granted by Congress with the authority to
issue rules to regulate the implementation of a An agency is said to be exercising judicial
law entrusted to them [Dagan v. Philippine function where it has the power to determine
Racing Commission, supra]. what the law is and what the legal rights of the
parties are, and then undertakes to determine
The function of promulgating rules and these questions and adjudicate upon the rights
regulations may be legitimately exercised only of the parties. Quasi-judicial function is a term
for the purpose of carrying the provisions of the which applies to the action, discretion, etc. of
law into effect. The power of administrative public administrative officers or bodies, who
agencies is thus confined to implementing the are required to investigate facts or ascertain
law or putting it into effect. Corollary to this is the existence of facts, hold hearings, and draw
that administrative regulations cannot extend conclusions from them as a basis for their
the law and amend a legislative enactment official action and to exercise discretion of a
[Land Bank of the Philippines v. Court of judicial nature [Civil Service Commission v.
Appeals, G.R. No. 118712 (1995)]. Magoyag, G.R. No. 197792 (2015)].
Page 233 of 384

Source property right. Persons intending to use a
Incidental to the power of regulation but is often firearm can only either accept or decline the
expressly conferred by the legislature through government's terms for its use.
specific provisions in the charter of the agency.
The grant of license, however, is without
Distinguished from Judicial Proceedings prejudice to the inviolability of the home. The
right of the people against unreasonable
Administrative Judicial
searches and seizures remains paramount,
and the government, in the guise of regulation,
Nature of Inquisitorial Adversarial
Proceedings cannot conduct inspections of applicants for
firearm licenses unless armed with a search
Liberally Follow warrant.”
applied but technical
Rules of 1. Administrative Due Process
subject to Ang rules in the
Procedure
Tibay Rules of While administrative agencies are free from the
requirements Court rigidity of certain procedural requirements, they
cannot entirely ignore or disregard the
Decision Decision fundamental and essential requirements of due
generally includes process in trials and investigations of an
limited to matters administrative character [Ang Tibay v. CIR,
matters of brought as G.R. No. L-46496 (1940)].
general issue by
Nature and
concern, but the parties Administrative due process cannot be fully
Extent of
Decision
also resolves equated with due process in its strict judicial
the issues sense, as in the former a formal trial-type
raised by the hearing is not always necessary and technical
parties in a rules of procedure are not strictly applied [Vivo
specific v. PACGOR, G.R. No. 187854 (2013)].
dispute
Due process is satisfied when a person is
The agency Only the notified of the charge against him and given an
itself may be a private opportunity to explain or defend himself. The
Parties party to the parties essence of due process is simply to be heard,
proceedings or as applied to administrative proceedings, an
before it opportunity to explain one’s side, or an
opportunity to seek a reconsideration of the
action or ruling complained of [NAPOLCOM
Warrants of Arrest; Administrative
National Appellate Board v. Bernabe, G.R. No.
Searches
129914 (2000)].
Under Art. III, Section 2 of the 1987
Constitution, it is only judges, and no other,
Effect of Decisions Rendered Without Due
who may issue warrants of arrest and search.
Process
The exception is in cases of deportation of
A decision rendered without due process is
illegal and undesirable aliens, whom the
void ab initio the apparent lack of such may be
President or the Commissioner of Immigration
raised at any time since due process is a
may order arrested, following a final order of
jurisdictional requisite that all tribunals,
deportation, for the purpose of deportation
including administrative ones are bound to
[Salazar v. Achacoso, G.R. No. 81510 (1990)].
serve [Apo Cement Corporation v. Mingson
Mining Industries Corporation, G.R. No.
In the case of Acosta vs. Ochoa [G.R. Nos.
206728 (2014)].
211559, 211567, 212570 & 215634 (2019)],
“
the Supreme Court said “[t]here is no
Decisions rendered without due process may
constitutional right to bear arms. Neither is the
likewise be attacked directly or collaterally by
ownership or possession of a firearm a
Page 234 of 384
means of a separate action or proceeding 3. A tribunal vested with competent
where it is invoked [Salva v. Valle, G.R. No. jurisdiction and so constituted as to afford
193773 (2013)]. a person charged administratively a
reasonable guarantee of honesty as well
Cardinal Primary Rights as impartiality; and
Ang Tibay v. CIR, supra, lays down the cardinal 4. A finding by said tribunal which is
primary rights: supported by substantial evidence
1. Right to a hearing (includes the right of a submitted for consideration during the
party to present his own case and submit hearing or contained in the records or
evidence in support thereof); made known to the parties affected [Vivo
2. The tribunal must consider the evidence v. PAGCOR, supra].
presented;
3. Decision must be supported by evidence; Due process does not require that actual taking
4. Evidence must be substantial; of testimony be before the same officer who will
5. Decision must be rendered on the decide the case. As long as a party is not
evidence presented at the hearing or at deprived of his right to present his own case
least contained in the record and disclosed and submit evidence in support thereof, and
to the parties affected; the decision is supported by the evidence in the
6. The judge must act on its or his own record, there is no question that the
independent consideration of the law and requirements of due process and fair trial are
facts of the controversy (not simply accept fully met [American Tobacco Co. v. Director of
the views of a subordinate in arriving at a Patents, G.R. No. L-26803 (1975)].
decision);
7. Decision must be rendered in such a The observance of fairness in the conduct of
manner as to let the parties know the any investigation is at the very heart of
various issues involved and the reasons procedural due process. The essence of due
for the decision rendered. process is to be heard, and, as applied to
administrative proceedings, this means a fair
The 1st right mentioned above pertains to the and reasonable opportunity to explain one’s
substantive rights of a party at the hearing side, or an opportunity to seek a
stage of the proceedings, while the 2nd to 6th reconsideration of the action or ruling
requirements are those rights applicable at the complained off [Vivo v. PAGCOR, G.R. no.
deliberative stage. These thus set the guiding 187854 (2013)].
considerations in deliberating on the case and
are the material and substantial components of The actual exercise of the disciplining
decision making. Lastly, the 7th requirement is authority’s prerogative requires a prior
similar to the constitutional requirement that a independent consideration of the law and the
decision of a court must state distinctly the facts. Failure to comply with this requirement
facts and the law upon which it is based results in an invalid decision. The disciplining
[Magcamit v. Internal Affairs Service-Philippine authority should not merely and solely rely on
Drug Enforcement Agency, G.R. NO. 198140 an investigator's recommendation, but must
(2016). personally weigh and assess the evidence
gathered [DOH v. Camposano, G.R. No.
In administrative proceedings, procedural due 157684 (2005)].
process has been recognized to include the
following: a. Quantum of proof required – substantial
1. The right to actual or constructive notice of evidence
the institution of proceedings which may In administrative cases, only substantial
affect a respondent’s legal rights; evidence is required [Paredes v. CA, G.R. No.
2. A real opportunity to be heard personally 169534 (2007)].
or with the assistance of counsel, to
present witnesses and evidence in one’s Substantial evidence is defined as evidence
favor, and to defend one’s rights; which is more than a mere scintilla, meaning
Page 235 of 384

the amount of relevant evidence which a reconsideration [A.Z. Arnaiz Realty Inc. v.
reasonable mind might accept as adequate to Office of the President, G.R. No. 170623
justify a conclusion [Sec. 5, Rule 133, Rules of (2010)].
Court; Reyes v. Nieva, A.C. No. 8560 (2016)].
Is trial necessary?
An administrative proceeding is different from No. Due process does not necessarily mean or
a criminal case and may proceed require a trial-type hearing, but simply an
independently thereof. The quantum of proof in opportunity or a right to be heard [Vinta
the latter is different (proof beyond reasonable Maritime Co., Inc. v. NLRC, G.R. No. 113911
doubt), such that the verdict in one need not (1998)].
necessarily be the same as in the other. A
finding of guilt in the criminal case will not The presence of a party at a trial is not always
necessarily result in a finding of liability in the the essence of due process. All that the law
administrative case [Miralles v. Go, G.R. No. requires to satisfy adherence to this
139943 (2001)]. constitutional precept is that the parties be
b. Right to Counsel given notice of the trial, an opportunity to be
The right to counsel is not imperative in heard. Where the defendant failed to appear on
administrative investigations because such the date set for the trial, of which he was
inquiries are conducted merely to determine previously notified, he is deemed to have
whether there are facts that merit disciplinary forfeited his right to be heard in his defense
measures against erring public officers and [Asprec v. Itchon, G.R. No. L- 21685 (1966)].
employees, with the purpose of maintaining the
dignity of government service [Lumiqued v. Even a trial is not always necessary for
Exevea, G.R. No. 117565 (1997)]. administrative due process to be satisfied
given that its essence is simply an opportunity
c. Opportunity to be Heard or a right to be heard [Vinta Maritime Co., Inc.
“To be heard” does not mean only verbal v. NLRC, supra].
arguments in court as one may be heard
through pleadings. Defects in procedural due The requirements [of notice and hearing] are
process may be cured when the party is given followed where parties are given fair
the opportunity to appeal. Hence, when one is opportunity to explain their side. Such cases
given the opportunity to be heard either may be resolved based solely on documentary
through oral arguments or pleadings, then evidence submitted by parties as affidavits may
there can be no denial of due process [Ebdane take the place of their direct testimony [Samalio
v. Aporillo, G.R. No. 204172 (2015)]. v. CA, G.R. No. 140079 (2005)].
The principle that a person cannot be Right to Cross-examine

prejudiced by a ruling rendered in an action or Under Sec. 12 (3), Chapter 3, Book VII of the
proceeding in which he was not made a party Administrative Code, it is provided that in
conforms to the constitutional guarantee of due contested cases, every party has the right to
process of law. Since respondent was not cross-examine witnesses presented against
impleaded in the HLURB case, he could not be him and to submit rebuttal evidence.
bound by the decision rendered therein.
Because he was not impleaded in said case, The right of a party to confront and cross-
he was not given the opportunity to present his examine an opposing witness is a fundamental
case therein [Aguilar v. O’Pallick, G.R. No. right which is part of due process. If without his
182280 (2013)]. fault, this right is violated, he is entitled to have
the direct examination stricken off the record
Any seeming defect in the observance of due for such is considered an incomplete testimony
process is cured by the filing of a motion for which is considered incompetent [Bachrach
reconsideration. Denial of due process cannot Motor Co., Inc. v. CIR, G.R. No. L-26136
be successfully invoked by a party who has had (1978)].
the opportunity to be heard on his motion for
Page 236 of 384

While the right to cross-examine is a vital satisfied with the report of its examiner or
element of procedural due process, the right referee which already contains a full discussion
does not necessarily require an actual cross of the evidence and the findings of fact based
examination but merely an opportunity to thereon. The situation differs if the court
exercise this right if desired by the party entitled disagrees with the report in which case it
to it [Gannapao v. CSC, G.R. No. 180141 should state the reasons for its disagreement.
(2011)]. If it is in full accord with the report, it is
purposeless to repeat what the examiner has
Evidence on record must be fully disclosed to already found in it [Indias v. Philippine Iron
the parties [American Inter-Fashion v. Office of Mines, G.R. No. L-9987 (1957)].
the President, G.R. No. 92422 (1991)], but
respondents in administrative cases are not Note: In Indias, the “court” being referred to
entitled to be informed of findings of was the Court of Industrial Relations which was
investigative committees but only of the an administrative agency.
decision of the administrative body [Pefianco v. However, in the Administrative Code, it is
Moral, G.R. No. 132248 (2000)]. provided that:
Decision - Every decision rendered by the
On Decisions Rendered agency in a contested case shall be in writing
Section 14, Article VIII of the 1987 Constitution and shall state clearly and distinctly the facts
(i.e., “No decision shall be rendered by any and the law on which it is based. The agency
court without expressing therein clearly and shall decide each case within thirty (30) days
distinctly the facts and the law on which it is following its submission. The parties shall be
based”) need not apply to decisions rendered notified of the decision personally or by
in administrative proceedings. Said section registered mail addressed to their counsel of
applies only to decisions rendered in judicial record, if any, or to them [Sec. 14, Chap. 3,
proceedings. The constitutional mandate does Book VII, Administrative Code].
not preclude the validity of “memorandum
decisions,” which adopt by reference the Further note that in Magcamit v. Internal Affairs
findings of fact and conclusions of law Service-Philippine Drug Enforcement Agency,
contained in the decisions of inferior tribunals G.R. No. 198140 (2016), the Court
[Solid Homes, Inc. v. Laserna, G.R. No. characterized the 7th requirement in Ang Tibay
166051 (2008)]. as one “similar in substance to the
constitutional requirement that a decision of a
There is no requirement in Ang Tibay v. CIR court must state distinctly the facts and the law
that the decision must express clearly and upon which it is based.”
distinctly the facts and the law on which it is
based for as long as the administrative Due Process is Violated When:
decision is grounded on evidence and 1. There is failure to sufficiently explain the
expressed in a manner that sufficiently informs reason for the decision rendered; or
the parties of the factual and legal bases of the 2. If not supported by substantial evidence;
decision, the due process requirement is or
satisfied [Solid Homes, Inc. v. Laserna, supra]. 3. Imputation of a violation and imposition of
This is not understood as abandoning the a fine despite absence of due notice and
requirement in the Constitution and the hearing [Globe Telecom v. NTC, G.R. No.
Administrative Code with respect to explaining 143964 (2004)].
the factual and legal bases of judgment, only
that the decision is sufficient even if it is not a. Notice and Hearing
written in the same extended manner as in The essence of procedural due process is
judicial decisions. embodied in the basic requirement of notice
and a real opportunity to be heard. In
The order, it is true, does not make its own administrative proceedings, procedural due
discussion of the evidence or its own findings process simply means the opportunity to
of fact, but such is not necessary if the court is explain one’s side or the opportunity to seek a
Page 237 of 384

reconsideration of the action or ruling Where the establishment affected by an ex
complained of [Vivo vs. PAGCOR, G.R. No. parte cease and desist order contests the
187854 (2013)]. correctness of the prima facie findings of the
[Pollution Adjudication Board], the Board must
Notice is necessary as this gives parties the hold a public hearing where such
opportunity to be heard and to present establishment would have an opportunity to
evidence, and such is not a mere technicality controvert the basis of such ex parte order.
but is an indispensable ingredient of due That such an opportunity is subsequently
process [Uy, et al., v. COA, G.R. No. 130685 available is really all that is required by the due
(2000)]. process clause of the Constitution [Pollution
Adjudication Board v. CA, supra].
Aside from that prescribed by statute, the
necessity of notice and hearing in an Required Notice and Hearing under the
administrative proceeding would depend on Administrative Code
the character of the proceeding and the 1. Contested cases [Sec. 11, Chap. 3, Book
circumstances involved [De Leon]. VII, Administrative Code].
2. Insofar as practicable, to certain licensing
When Not Required procedures, involving grant, renewal,
1. When an administrative agency merely denial or cancellation of a license; i.e.,
passed upon the sufficiency of the when the grant, renewal, denial or
evidence presented before an office under cancellation of a license is required to be
it in which the petitioner was heard preceded by notice and hearing [Sec.
[Arocha vs. Vivo, L-24844 (1967)]; 17(1), Chap. 3, Book VII, Administrative
2. When there is urgent need for immediate Code].
action [Secretary of Justice v. Lantion, 3. All licensing procedures, when a license is
G.R. No. 139465 (2000)]; withdrawn, suspended, revoked or
3. Discretion is exercised by an officer vested annulled [Sec. 17(2), Chap. 3, Book VII,
with it upon an undisputed fact [Suntay v. Administrative Code].
People, G.R. No. L-9430 (1957)] and there
is no grave abuse; Exceptions
4. When it involves rules to govern future Notice and hearing not required in cases of:
conduct of persons or enterprises, unless 1. Willful violation of pertinent laws, rules,
law provides otherwise; and regulations; or
5. When there is tentativeness of 2. When public security, health, or safety
administrative action, i.e., the person require otherwise [Sec. 17(2), Chap. 3,
affected is not precluded from enjoying the Book. VII, Administrative Code].
right to notice and hearing at a later time
without prejudice to them such as when an b. Application of Rules of Evidence in
ex parte order issued is contested and a Administrative Proceedings
public hearing is held where the In administrative proceedings, technical rules
opportunity to be heard may be exercised of procedure and evidence are not strictly
[Pollution Adjudication Board v. CA, G.R. applied; administrative due process cannot be
No. 93891 (1991)]; or fully equated with due process in its strict
6. When action is necessary to protect vital judicial sense [Vinta Maritime Co., Inc. v.
public interests, through the exercise of NLRC, supra].
police power [Pollution Adjudication Board
v. CA, supra]. Administrative rules of procedure are
construed liberally to promote their objective
Meetings in the nature of consultation and and to assist parties in obtaining just, speedy
conferences may not be valid substitutes for and inexpensive determination of their
the proper observance of notice and hearing respective claims and defenses. As a general
[Equitable Banking Corp. v. NLRC, G.R. No. rule, a finding of guilt in administrative cases, if
102467 (1997)]. supported by substantial evidence will be
Page 238 of 384

sustained by the Court [Civil Service or the agency concerned. This is to ensure that
Commission v. Colanggo, G.R. No. 174935 when the issue reaches the Court, the
(2008)]. administrative agency has already fully
exercised its jurisdiction and the Court may
2. Administrative Appeal and Review thus focus on the questions of law presented
In administrative appeal and review, there is a before it [Kilusang Mayo Uno v. Aquino III,
hierarchy of authorities, meaning by express supra].
provision of statute or otherwise:
a. A review may be had within the Effect of appeal
administrative system itself of the action of The appeal shall stay the decision appealed
lower administrative authorities by their from unless otherwise provided by law, or the
superiors; or appellate agency directs execution pending
b. A particular administrative body is appeal, as it may deem just, considering the
authorized to hear and decide appeals nature and circumstances of the case [Sec. 21,
from, and review the determinations of, Chap. 3, Book VII, of the Administrative Code].
certain other administrative bodies or
officers [De Leon]. Different kinds of administrative appeal and
review [De Leon]:
Note: To be entitled to appeal and review by an 1. That which inheres in the relation of
appellate administrative body of the administrative superior to administrative
determination of a subordinate or another subordinate where determinations are
administrative body, a party must prove that it made at lower levels of the same
has been affected or aggrieved by the decision administrative system;
issued by the subordinate/other administrative 2. That embraced in statutes which provide
body [De Leon]. for a determination to be made by a
particular officer of body subject to appeal,
Unless otherwise provided by law or executive review, or redetermination by another
order, an appeal from a final decision of an officer or body in the same agency or in
agency may be taken to the Department Head the same administrative system;
[Sec. 19, Chap. 4, Book VII, of the 3. That in which the statute attempts to make
Administrative Code]. a court a part of the administrative scheme
by providing in terms or effect that the
To avail of the above: court, on review of the action of an
● Who files: Party adversely affected by the administrative agency, shall exercise
decision complained of. powers of such extent that they differ from
● Where to file: With the agency which ordinary judicial functions and involve a
adjudicated the case. trial de novo of matters of fact or discretion
● What should be filed: A notice of appeal. and application of the independent
● When: Within 15 days from the receipt of judgment of the court;
a copy of the decision complained of. 4. That in which the statute provides that an
● Other procedural matters: Copies of order made by a division of a Commission
such notice must be served upon the or Board has the same force and effect as
prevailing party AND the appellate if made by the Commission subject to a
agency, and paying the required fees rehearing by the full Commission, for the
[Sec. 20, Chap. 4, Book VII, of the ‘rehearing’ is practically an appeal to
Administrative Code]. another administrative tribunal;
5. That in which the statute provides for an
An agency’s administrative process must appeal to an officer on an intermediate
always be exhausted before external remedies level with subsequent appeal to the head
can be applied, meaning that even if a of the department or agency; and
governmental entity committed a grave abuse 6. That embraced in statutes which provide
of discretion, litigants must first ask for for appeal at the highest level, namely, the
reconsideration or a review from the body itself President.
Page 239 of 384

The appellate administrative agency may Commission v. Magoyag, G.R. No. 197792
conduct additional hearings in the appealed (2015)].
case, if deemed necessary [Reyes v. Zamora,
G.R. No. L-46732 (1979)]. Scope of application
The doctrine of res judicata does not apply
In order that the review of the decision of a exclusively to courts but may be extended to
subordinate officer might not turn out to be a decisions of bodies upon whom judicial powers
farce, the reviewing officer must perforce be have been conferred [Ipekdijan Merchandising
other than the officer whose decision is under v. CTA, G.R. No. L-14791 (1963)].
review; otherwise, there could be no different
view or there would be no real review of the It applies only to judicial or quasi-judicial
case [Zambales Chromite Mining v. CA, G.R. proceedings and not to the exercise of purely
No. L-49711 (1979)]. administrative in nature. When the
administrative proceedings take on an
The law, in prescribing a process of appeal to adversary character, the doctrine of res
a higher level, contemplates that the reviewing judicata applies [Heirs of Maximo Derla v. Heirs
officer is a person different from the one who of Catalina Derla vda. De Hipolito, G.R. No.
issued the appealed decision. Otherwise, the 157717 (2011)].
review becomes a farce; it is rendered
meaningless [Rivera v. CSC, G.R. No. 115147 It may not be invoked in labor relations
(1995)]. proceedings considering that such
proceedings are non-litigious and summary in
Doctrine of Qualified Political Agency nature without regard to legal technicalities
Under the doctrine of qualified political agency obtaining in courts of law [Nasipit Lumber Co.
[Villena v. Secretary of Interior, G.R. No. L- v. NLRC, G.R. No. L-54424 (1989)].
46570 (1939)], a decision of the department
head generally need not be appealed to the Requisites:
Office of the President, since the department 1. The former judgment must be final;
head (e.g., Secretary) is the alter ego of the 2. It must have been rendered by a court
President, and the former’s acts are having jurisdiction over the subject matter
presumably the President’s. However, the and the parties;
doctrine does not apply when: 3. It must be a judgment on the merits; and
1. The act is repudiated by the President; or 4. There must be identity of parties, subject
2. The act is required (by law) to be matter and cause of action [Ipekdijan
performed specifically by the department Merchandising v. CTA, supra].
head.
Res judicata is not defeated by a minor
3. Administrative Res Judicata difference of parties, as it does not require
Res judicata lays the rule that an existing final absolute but only substantial identity of parties
judgment or decree rendered on the merits, [Manila Electric Co. v. Phil. Consumers
without fraud or collusion, by a court of Foundation, G.R. No. 101783 (2002)].
competent jurisdiction, upon any matter within
its jurisdiction, is conclusive of the rights of the Concepts
parties or their privies, in all other actions or Res judicata has two (2) concepts:
suits in the same or any other judicial tribunal 1. Bar by prior judgment;
of concurrent jurisdiction on the points and 2. Conclusiveness of judgment.
matters in issue in the first suit [Civil
Aeronautics Administration v. Yu, G.R. No. Bar by prior judgment
157557 (2006)]. Bar by prior judgment exists when, as between
Nothing is more settled in law than that once a the first case where the judgment was
judgment attains finality it thereby becomes rendered and the second case that is sought to
immutable and unalterable [Civil Service be barred, there is identity of parties, subject
matter, and causes of action.
Page 240 of 384

Decisions and orders of administrative
This is enunciated in Rule 39, Section 47(b) of agencies rendered pursuant to their quasi-
the Rules of Civil Procedure: judicial authority, have, upon their finality, the
“(b) In other cases, the judgment or final order force and binding effect of a final judgment
is, with respect to the matter directly adjudged within the purview of the doctrine of res
or as to any other matter that could have been judicata, which forbids the reopening of a
raised in relation thereto, conclusive between matter once judicially determined by competent
the parties and their successors in interest by authority [Dulay v. Minister of Natural
the title subsequent to the commencement of Resources, G.R. No. L-48766 (1993)].
the action or special proceeding, litigating for
the same thing and under the same title and in For res judicata to be applied in cases of
the same capacity.” citizenship, the following must be present:
1. A person's citizenship must be raised as a
Conclusiveness of Judgment material issue in a controversy where said
Conclusiveness of judgment applies when a person is a party;
fact or question has been squarely put in issue, 2. The Solicitor General or his authorized
judicially passed upon, and adjudged in a representative took active part in the
former suit by a court of competent jurisdiction. resolution thereof; and
This only requires identity of parties and issues 3. The finding or citizenship is affirmed by SC
to apply [Emerald Garment Manufacturing [Board of Commissioners v. De la Rosa,
Corp., G.R. No. 210693 (2017)]. G.R. Nos. 95122-23 (1991)].
Under the doctrine of conclusiveness of Due to the difference between the quantum of
judgment, facts and issues actually and directly evidence, procedure, and sanctions imposed in
resolved in a former suit cannot again be raised criminal and administrative proceedings, the
in any future case between the same parties, findings and conclusions in one should not
even if the latter suit may involve a different necessarily be binding on the other [Ocampo v.
claim or cause of action. The identity of causes Office of the Ombudsman, G.R. No. 114683
of action is not required but merely identity of (2000)].
issues [Civil Aeronautics Administration v. Yu,
supra]. The basis of administrative liability differs from
criminal liability. The purpose of administrative
This is enunciated in Rule 39, Section 47(c) of proceedings is mainly to protect the public
the Rules of Civil Procedure: service, based on the time-honored principle
“(c) In any other litigation between the same that a public office is a public trust. On the other
parties or their successors in interest, that only hand, the purpose of criminal prosecution is the
is deemed to have been adjudged in a former punishment of crime [Ferrer v. Sandiganbayan,
judgment or final order which appears upon its G.R. No. 161067 (2008)].
face to have been so adjudged, or which was
actually and necessarily included therein or Forum Shopping
necessary thereto.” There is forum shopping whenever, as a result
of an adverse opinion in one forum, a party
Effect of Res judicata seeks a favorable opinion (other than by
The doctrine of res judicata provides that a final appeal or certiorari) in another. The principle
judgment on the merits rendered by a court of applies not only with respect to suits filed in the
competent jurisdiction, is conclusive as to the courts but also in connection with litigation
rights of the parties and their privies and commenced in the courts while an
constitutes an absolute bar to subsequent administrative proceeding is pending, in order
actions involving the same claim, demand, or to defeat administrative processes and in
cause of action [Civil Aeronautics anticipation of an unfavorable administrative
Administration v. Yu, supra]. ruling and a favorable court ruling.
Page 241 of 384

The test for determining whether a party has 2. Investigative Powers
violated the rule against forum shopping is Administrative agencies’ power to conduct
where a final judgment in one case will amount investigations and hearings, and make findings
to res judicata in the action under consideration and recommendations thereon is inherent in
[Fortich v. Corona, G.R. No. 131457 (1998), their functions as administrative agencies.
citing First Philippine International Bank v. CA,
G.R. No. 115849 (1996)]. The investigative powers of an administrative
agency must be exercised within the limits
The rule against forum shopping applies only prescribed and bear a reasonable and
to judicial cases or proceedings, not to legitimate relationship to the general powers
administrative cases [Office of the granted, which includes the authority to obtain
Ombudsman v. Rodriguez, G.R. No. 172700 information necessary to discharge its proper
(2010)]. functions [De Leon].
C. Fact-Finding, Investigative, General Rule: Findings of fact by

administrative agencies and quasi-judicial
Licensing, and Rate-Fixing bodies, which have acquired expertise
Powers because of their jurisdiction is confined to
specific matters, are generally accorded not
1. Ascertainment of Fact only great respect but even finality, absent a
The preliminary ascertainment of facts as basis showing of grave abuse of discretion [Marlow
for the enactment of legislation is not of itself a Navigation Philippines Inc. vs. Heirs of Ricardo
legislative function but is simply ancillary to S. Ganal, G.R. No. 220168 (2017)].
legislation. Thus, the duty of correlating
information and making recommendations is Exception: One of the exceptions to the above
the kind of subsidiary activity which the rule is when the factual findings of the quasi
legislature may perform through its members, judicial agencies concerned are conflicting or
or which it may delegate to others to perform contrary with those of the CA.
[Abakada v. Ermita, supra].
“Investigate” means to examine, explore,
The mere fact that an officer is required by law inquire, or delve or probe into, research on,
to inquire the existence of certain facts and to study. The purpose of investigation is to
apply the law thereto in order to determine what discover, to find out, to learn, obtain
his official conduct shall be and the fact that information. Nowhere included or intimated is
these acts may affect private rights do not the notion of settling, deciding or resolving a
constitute an exercise of judicial powers. controversy involved in the facts inquired into
by application of the law to the facts
A statute may: established by the inquiry [Cariño v. CHR, G.R.
1. Give non-judicial officers the power to No. 96681 (1991)].
declare the existence of facts which call
into operation the statute’s provisions; and 3. Licensing Function
2. Grant commissioners and other A license is in the nature of a special privilege,
subordinate officers the power to ascertain of a permission or authority to do what is within
and determine appropriate facts as a basis its terms. It is not any way vested, permanent,
for procedure in the enforcement of or absolute. It is not a contract between the
particular laws. sovereignty and the licensee, and is not a
property in any constitutional sense.
Such functions are merely incidental to the
exercise of powers conferred by law upon A license granted by the State is always
executive officials provided the party affected revocable. As a necessary consequence of its
is given the opportunity to be heard [Lovina v. main power to grant license or permit, the State
Montilla, G.R. No. L-17821 (1963)]. or its instrumentalities have the correlative
power to revoke or recall the same. This power
Page 242 of 384
can only be restrained by an explicit contract Notice and hearing; when required
upon good consideration to that effect Notice and hearing are required if it is a
[Gonzalo Sy Trading v. Central Bank, G.R. No. contested case. Otherwise, it can be dispensed
L-41480 (1976)]. with (e.g., driver’s licenses).
Definition of License “Contested case” means any proceeding,

“License” includes the whole or any part of any including licensing, in which the legal rights,
agency permit, certificate, passport, clearance, duties or privileges asserted by specific parties
approval, registration, charter, membership, as required by the Constitution or by law are to
statutory exemption or other form of be determined after hearing [Sec. 2, Chap. 1,
permission, or regulation of the exercise of a Book VII, Administrative Code].
right or privilege [Sec. 2, Chap. 1, Book VII,
Administrative Code]. When discretion is exercised by an officer
vested with it upon are undisputed fact, hearing
Definition of Licensing may be dispensed with by such officer; lack of
“Licensing” includes agency process involving such hearing does not violate the due process
the grant, renewal, denial, revocation, clause and the exercise of the discretion
suspension, annulment, withdrawal, limitation, vested in him cannot be deemed whimsical and
amendment, modification or conditioning of a capricious because of the absence of such
license [Sec. 2, Chap. 1, Book VII, hearing [Suntay v. People, G.R. No. L-9430
Administrative Code]. (1957)].
Procedure 4. Fixing of Rates, Wages, and Prices

1. When the grant, renewal, denial or Generally, the power to fix rates is a quasi-
cancellation of a license is required to be legislative function, i.e., it is meant to apply to
preceded by notice and hearing, the all. However, it becomes quasi-judicial when
provisions concerning contested cases the rate is applicable only to a particular party,
shall apply insofar as practicable. predicated upon a finding of fact
2. Except in cases of willful violation of [PHILCOMSAT v. Alcuaz, supra, citing Vigan
pertinent laws, rules and regulations or Electric Light Co. v. Public Service
when public security, health, or safety Commission, G.R. No. L-19850 (1964)].
require otherwise, no license may be
withdrawn, suspended, revoked or Where the determination of the issue
annulled without notice or hearing [Sec. complained of partakes of the nature of a
17, Chap. 3, Book VII, Administrative quasi-judicial function, previous notice and
Code]. hearing is required [Vigan Electric Light Co. v.
Public Service Commission, supra].
Non-expiration
Where the licensee has made timely and However, an administrative agency may be
sufficient application for the renewal of a empowered by law to approve rates of public
license with reference to any activity of a utilities provisionally without a hearing when
continuing nature, the existing license shall not demanded by urgent public need [Padua v.
expire until the application shall have been Ranada, G.R. No. 141949 (2002)].
finally determined by the agency [Sec. 18,
Chap. 3, Book VII, Administrative Code]. If the fixing of rates were a legislative function,
the giving of prior notice and hearing to the
The absence of an expiry date in a license does affected parties is not a requirement, except
not make it perpetual. Notwithstanding that where the legislature itself requires it [De
absence, the license cannot last beyond the life Leon].
of the basic authority under which it was issued
[Gonzalo Sy Trading v. Central Bank, supra]. Note: The old doctrine is if the rate-fixing power
is quasi-legislative, it need not be accompanied
by prior notice and hearing. Under the
Page 243 of 384

Administrative Code, the distinction seems to What is a just and reasonable rate is a question
have been disregarded, since the provision did of fact calling for the exercise of discretion,
not qualify the character of the rate-fixing, and good sense, and a fair, enlightened, and
now requires prior notice (via publication) independent judgment [Republic v. Meralco,
before the hearing. G.R. No. 141314 (2002)].
In a 2023 decision penned by Justice Jhosep A rate should not be confiscatory as would
Lopez, the Supreme Court clarified that while place an operator in a situation where he will
under the 1964 case of Vigan Electric Light Co. continue to operate at a loss. It is essential also
v. PSC, no notice and hearing are required in to consider the given situation, requirements
the administrative agencies’ exercise of quasi- and opportunities of the utility [KMU Labor
legislative functions, this rule does not apply Center v. Garcia, G.R. No. 115381 (1994);
when there is a law that expressly requires Republic v. Meralco, supra)].
notice and hearing. In the case of fixing rates,
while this is considered a quasi-legislative A rate must be reasonable and fair and must
function, the Administrative Code of 1987 be affordable to the end user who will utilize the
expressly requires that there be prior notice services. The purpose of a hearing is to
and hearing in rate-fixing, with the notice to be determine what a just and reasonable rate is
published at least two weeks before the [KMU Labor Center v. Garcia, supra].
hearing. Hence, such requirements must be
complied with for any increase in LRT and MRT In fixing the rate, it would not be fair to the
fairs to be valid. public to base it upon a peak cost, and it would
not be fair to the owner of the property to place
Note, however, that this decision is not it upon a minimum cost [Ynchausti Steamship
included within the June 30, 2022 cut-off date Co. v. Public Utility Commissioner, G.R. No.
for the September 2023 Bar Examinations. 17665 (1922)].
Definition of Rate Nowhere under law are the regulatory bodies,

“Rate” means any charge to the public for a the Public Service Commission and LTFRB
service open to all and upon the same terms, alike, authorized to delegate the power of
including individual or joint rates, tolls, route-fixing and rate-making for the transport
classifications, or schedules thereof, as well as sector to a common carrier, a transport
commutation, mileage, kilometerage and other operator, or other public service [KMU Labor
special rates which shall be imposed by law or Center v. Garcia, supra].
regulation to be observed and followed by any
person [Sec. 2, Chap. 1, Book VII, Republic v. Meralco, supra, laid down three (3)
Administrative Code]. major factors considered in the fixing of rates:
1. Rate of return
Publication requirement 2. Rate base
In the fixing of rates, no rule or final order shall 3. The return itself
be valid unless the proposed rates shall have
been published in a newspaper of general Rate of return
circulation at least two (2) weeks before the first The rate of return is a judgment percentage
hearing thereon [Sec. 9, Chap. 2, Book VII, prescribed by administrative and judicial
Administrative Code]. pronouncements. The Court has consistently
adopted a 12% rate of return for public utilities.
Factors considered in fixing of rates
In the fixing of rates, the only standard which Rate Base
the legislature is required to prescribe for the The rate base is an evaluation of the property
guidance of the administrative authority is that devoted by the utility to the public service or the
the rate be reasonable and just. Even in the value of invested capital or property which the
absence of an express requirement as to utility is entitled to a return.
reasonableness, this standard may be implied.
Page 244 of 384

The Return Itself judicial or legislative power, there is an
The return itself is the computed revenue to be underlying power in the courts to scrutinize the
earned by the public utility, achieved by acts of such agencies on questions of law and
multiplying the rate of return with the rate base. jurisdiction even though no right of review is
given by statute. Judicial review is proper in
case of lack of jurisdiction, grave abuse of
IV. JUDICIAL RECOURSE discretion, error of law, fraud or collusion [San
Miguel Corp. v. Secretary of Labor, G.R. No. L-
AND REVIEW 39195 (1975), citing Timbancaya v. Vicente,
G.R. No. L-19100 (1963)].
Judicial Review
Judicial review may embrace any form of Rationale
judicial scrutiny of a matter which arises when The purpose of judicial review is to keep the
such action is brought into question before a administrative agency within its jurisdiction and
court. It is ordinarily available only for final protect the substantial rights of the parties.
administrative action. Its underlying purpose is
to assure – on petitioner of interested parties – A primary purpose of judicial review is to
by the intervention of ordinary courts that ensure that agencies do not go beyond their
administrative power is exercised according to statutory or constitutional powers in carrying
law [De Leon]. out their tasks [De Leon].
General Rule It is that part of the checks and balances which

1987 Constitution restricts the separation of powers and forestalls
arbitrary and unjust adjudications [St. Martin’s
ARTICLE IX-A, SECTION 7. Each Commission Funeral Homes v. NLRC, G.R. No. 130866
shall decide by a majority vote of all its Members any (1998)].
case or matter brought before it within sixty days
from the date of its submission for decision or
resolution. A case or matter is deemed submitted for Note: Rule 43 of the Rules of Court provides
decision or resolution upon the filing of the last that the Court of Appeals shall have appellate
pleading, brief, or memorandum required by the jurisdiction over awards, judgments, final
rules of the Commission or by the Commission itself. orders or resolutions of or authorized by any
Unless otherwise provided by this Constitution or by quasi-judicial agency in the exercise of its
law, any decision, order, or ruling of each
quasi-judicial functions.
Commission may be brought to the Supreme Court
on certiorari by the aggrieved party within thirty days
from receipt of a copy thereof. Extent of Judicial Review
1. Questions of Law
Judicial review may be granted or withheld as
a. Constitutionality of the law creating the
Congress chooses, except when the
agency and granting it powers;
Constitution requires or allows it. Thus, a law
b. Validity of agency action if these transcend
may provide that the decision of an
limits established by law;
administrative agency shall be final and not
c. Correctness of interpretation or
reviewable and it would still not offend due
application of the law.
process.
A decision of an administrative agency on a
However, Sec. 1, par. 2, Art. VIII of the
question of law is in no sense conclusive upon
Constitution provides that judicial review of
the courts, but is subject to review [Ortua v.
administrative decisions cannot be denied
Encarnacion, G.R. No. 39919 (1934)].
when there is an allegation of grave abuse of
discretion [Nachura].
2. Questions of Fact
Review shall be made on the basis of the
It is generally understood that as to
record taken as a whole. The findings of fact of
administrative agencies exercising quasi-
the agency when supported by substantial
Page 245 of 384
evidence shall be final except when specifically 3. Questions of Discretion
provided otherwise by law [Sec. 25, Chap. 4, General Rule: Administrative and
Book VII, Administrative Code]. discretionary functions may not be interfered
with by the courts.
A decision rendered by the Director of Lands
and approved by the Secretary of Agriculture Rationale: Courts have none of the technical
and Commerce, upon a question of fact is and economic or financial competence which
conclusive and not subject to be reviewed by specialized administrative agencies have at
the courts, in the absence of a showing that their disposal, and in particular must be wary of
such decision was rendered in consequence of intervening in matters which are at their core
fraud, imposition, or mistake, other than error technical and economic in nature [PLDT v.
of judgment in estimating the value or effect of National Telecommunications Commission,
evidence, regardless of whatever or not it is G.R. No. 94374 (1995)].
consistent with the preponderance of the
evidence, so long as there is some evidence Exceptions
upon which the finding in question could be 1. When there is a grave abuse of discretion;
made [Ortua v. Encarnacion, supra]. 2. Where the power is exercised in an
arbitrary or despotic manner [Banco
General Rule: Findings of fact by the agency Filipino Savings and Mortgage Bank v.
are final when supported by substantial Monetary Board, G.R. No. 70054 (1991)];
evidence. 3. If without reasonable support in the
evidence;
Exceptions 4. Rendered against law; or
1. Specifically allowed otherwise by law; ● An administrative agency entrusted
2. Fraud, imposition, mistake, or other error with the enforcement of a regulatory
of judgment in evaluating the evidence statute is vested with discretion. Such
[Ortua v. Singson Encarnacion, supra]; discretion, however is not
3. Error in appreciation of pleadings and unbounded. Where, as in this case,
interpretation of the documentary the Labor Code itself sets limits, they
evidence presented by the parties [Tan must be observed. [Federation of
Tiong Teck v. SEC, G.R. No. L-46472 Free Workers v. Noriel, G.R. Nos. L-
(1940)]; 47182-83, (1978)]
● In the past, this Court has held that 5. Issued without jurisdiction [Laguna
there is a question of fact when the Tayabas Bus Company v. Public Service
issue presented before this Court is Commission, G.R. No. 10903 (1957)].
the correctness of the lower courts'
appreciation of the evidence
presented by the parties. When the A. Doctrine of Primary
findings by the appellate court are Administrative Jurisdiction (or
contrary to those of the RTC, this Prior Resort)
Court is called upon to reevaluate
such factual findings [Bacani v. The doctrine of primary jurisdiction applies only
Madio, G.R. No. 218637, (2023)]. where the administrative agency exercises its
4. Decision of the agency was rendered by quasi-judicial or adjudicatory function. Thus, in
an almost divided agency and that the cases involving specialized disputes, the
division was precisely on the facts as practice has been to refer the same to an
borne out by the evidence [Gonzales v. administrative agency of special competence
Victory Labor Union, G.R. No. L-23256 pursuant to the doctrine of primary jurisdiction.
(1969)]. The courts will not determine a controversy
involving a question which is within the
jurisdiction of the administrative tribunal prior to
the resolution of that question by the
administrative tribunal, where the question
Page 246 of 384
demands the exercise of sound administrative The doctrine of primary jurisdiction does not
discretion requiring the special knowledge, warrant a court to arrogate unto itself authority
experience and services of the administrative to resolve a controversy the jurisdiction over
tribunal to determine technical and intricate which is initially lodged with an administrative
matters of fact, and a uniformity of ruling is body of special competence [Vidad v. RTC,
essential to comply with the premises of the G.R. No. 98084 (1993)].
regulatory statute administered [Smart
Communications v. NTC, supra]. Rationale
Two (2) reasons have been given for the rule:
It can only occur where there is a concurrence 1. To take full advantage of administrative
of jurisdiction between the court and the expertness; and
administrative agency. 2. To attain uniformity of application of
regulatory laws which can be secured only
It is a question of the court yielding to the if determination of the issue is left to the
agency because of the latter’s expertise, and administrative body [De Leon].
does not amount to ouster of the court [Texas
& Pacific Railway v. Abilene, 204 U.S. 426 In this era of clogged docket courts, the need
(1907)]. for specialized administrative boards with the
special knowledge and capability to hear and
It may occur that the Court has jurisdiction to determine promptly disputes on technical
take cognizance of a particular case, which matters has become well-nigh indispensable.
means that the matter involved is also judicial Between the power lodged in an administrative
in character. However, if the determination of body and a court, the unmistakable trend has
the case requires the expertise, specialized been to refer it to the former [GMA v. ABS CBN,
skills and knowledge of the proper G.R. No. 160703 (2005)].
administrative bodies because technical
matters or intricate questions of facts are The objective of the doctrine of primary
involved, then relief must first be obtained in an jurisdiction is to guide a court in determining
administrative proceeding before a remedy will whether it should refrain from exercising its
be supplied by the courts even though the jurisdiction until after an administrative agency
matter is within the proper jurisdiction of a court has determined some question or some aspect
[Industrial Enterprises, Inc. v. CA, G.R. No. of some question arising in the proceeding
88550 (1990)]. before the court [Smart v. NTC, supra].
Administrative agencies are given a wide Requisites

latitude in the evaluation of evidence and in the 1. An administrative body and a regular court
exercise of their adjudicative functions, latitude have concurrent and original jurisdiction;
which includes the authority to take judicial 2. Question to be resolved requires expertise
notice of facts within their special competence of administrative agency;
[Quiambao v. CA, G.R. No. 128305 (2005)]. 3. Legislative intent on the matter is to have
uniformity in rulings;
The doctrine of primary jurisdiction applies 4. Administrative agency is performing a
where a claim is originally cognizable in the quasi-judicial or adjudicatory function (not
courts, and comes into play whenever rulemaking or quasi-legislative function)
enforcement of the claim requires the [Smart v. NTC, supra].
resolution of issues which, under a regulatory
scheme, have been placed within the special Effect
competence of an administrative body; in such The judicial process is suspended pending
case, the judicial process is suspended referral of such issues to the administrative
pending referral of such issues to the body for its view [Smart v. NTC, supra].
administrative body for its view [Industrial
Enterprises, Inc. v. CA, supra]. Failing to exhaust administrative remedies
affects the party's cause of action as these
Page 247 of 384

remedies refer to a precedent condition which performance of its quasi-legislative
must be complied with prior to filing a case in function [Smart v. NTC, supra].
court [Republic v. Gallo, G.R. No. 207074,
(2018)]. c. When the issue involved is clearly a
factual question that does not require
All the proceedings of the court in violation of specialized skills and knowledge for
the doctrine and all orders and decisions resolution to justify the exercise of primary
rendered thereby are null and void [Province of jurisdiction.
Aklan v. Jody King Construction and
Development Corp., G.R. Nos. 197592 B. Doctrine of Exhaustion of
& 202623 (2013)].
Administrative Remedies
Does not per se have the effect of restraining
or preventing the courts from the exercise of General Rule
their lawfully conferred jurisdiction. A contrary Recourse through court action cannot prosper
rule would unduly expand the doctrine of until after all such administrative remedies
primary jurisdiction [Conrad and Co., Inc. v. have first been exhausted. If remedy is
CA, G.R. No. 115115 (1995)]. available within the administrative machinery,
this should be resorted to before resort can be
While no prejudicial question strictly arises made to courts [Teotico v. Baer, G.R. No.
where one is a civil case and the other is an 147464 (2006)].
administrative proceeding, in the interest of
good order, it behooves the court to suspend Under the doctrine of exhaustion of
its action on the cases before it pending the administrative remedies, a party must first avail
final outcome of the administrative proceedings of all administrative processes available before
[Vidad v. RTC, supra]. seeking the courts' intervention. The
administrative officer concerned must be given
Note: The court may raise the issue of primary every opportunity to decide on the matter within
jurisdiction sua sponte and its invocation his or her jurisdiction [Republic v. Gallo, supra].
cannot be waived by the failure of the parties to
argue it as the doctrine exists for the proper Where the law has delineated the procedure by
distribution of power between judicial and which administrative appeal or remedy could
administrative bodies and not for the be effected, the same should be followed
convenience of the parties [Euro-Med before recourse to judicial action can be
Laboratories Phil., Inc. v. Province of initiated [Pascual v. Provincial Board, G.R. No.
Batangas, G.R. No. 148106 (2006)]. L-11959 (1959)].
When applicable Requisites

The doctrine applies only where the 1. The administrative agency is performing a
administrative agency exercises its quasi- quasi-judicial function;
judicial or adjudicatory function [Smart v. NTC, 2. Judicial review is available; and
supra]. 3. The court acts in its appellate jurisdiction.
When not applicable Rationale

a. When the issue is not within the One of the reasons for exhaustion of
competence of the administrative body to administrative remedies is the well-entrenched
act on (e.g., pure questions of law, over doctrine on separation of powers, which
which the expertise is with the courts); enjoins upon the Judiciary a policy of non-
interference with matters falling primarily (albeit
b. Regular courts have jurisdiction in cases not exclusively) within the competence of other
where what is assailed is the validity or departments. Courts, for reasons of law, comity
constitutionality of a rule or regulation and convenience, should not entertain suits
issued by the administrative agency in the unless the available administrative remedies
Page 248 of 384

have first been resorted to and the proper apply when the issue deals with a
authorities have been given an appropriate question of law [Philippine Ports
opportunity to act and correct their alleged Authority v. Pambansang Tinig at
errors, if any, committed in the administrative Lakas ng Pantalan (PANTALAN),
forum [Antolin v. Domondon, G.R. No. 165036 G.R. Nos. 192836 & 194889 (2022)].
(2010)]. 3. No other plain, speedy, and adequate
remedy.
1. Legal Reason
The law prescribes a procedure. This list has been expanded by case law to
include:
2. Practical Reason 1. Purely legal questions [Castro v.
To ensure that disputes involving technical and Secretary, G.R. No. 132174 (2001)]
specialized matters are first resolved by the 2. There is grave doubt as to the availability
body which has the expertise and competence of the administrative remedy [Pascual v.
to resolve them, and, in most cases, to give the Provincial Board, supra].
agency a chance to correct its own errors and 3. Steps to be taken are merely matters of
prevent unnecessary and premature resort to form [Pascual v. Provincial Board, supra].
the courts. It also entails lesser expenses and 4. The administrative remedy not exclusive
provides for a speedier disposition of but merely cumulative or concurrent to a
controversies. judicial remedy [Pascual v. Provincial
Board, supra].
3. Reasons of Comity 5. There are circumstances indicating
Expedience, courtesy, convenience. urgency of judicial intervention [DAR v.
Apex Investment, G.R. No. 149422
The doctrine of exhaustion of administrative (2003)].
6. The rule does not provide plain, speedy,
remedies requires that, for reasons of law,
comity and convenience, where the enabling adequate remedy [Information
Technology Foundation v. COMELEC,
statute indicates a procedure for administrative
review and provides a system of administrative G.R. No. 159139 (2004)].
7. Resort to exhaustion will only be
appeal or reconsideration, the courts will not
oppressive and patently unreasonable
entertain a case unless the available
administrative remedies have been resorted to [Cipriano v. Marcelino, G.R. No. L-27793
(1972)].
and the appropriate authorities have been
given an opportunity to act and correct the 8. Where the administrative remedy is only
permissive or voluntary and not a
errors committed in the administrative forum
[Obiasca v. Basallote, G.R. No. 176707, prerequisite to the institution of judicial
proceedings [Corpus v. Cuaderno, Sr.,
(2010)].
G.R. No. L-17860 (1962)].
9. Application of the doctrine will only cause
4. Separation of Powers great and irreparable damage which
Enjoins upon the Judiciary a policy of non-
cannot be prevented except by taking the
interference with matters falling primarily (albeit
appropriate court action [De Lara, Jr. v.
not exclusively) within the competence of other
Cloribel, G.R. No. L-21653 (1965)].
departments.
10. When it involves the rule-making or
quasi-legislative functions of an
Exceptions administrative agency [Smart v. NTC,
The exceptions may be condensed into three: supra].
1. Grave abuse of discretion; 11. When the administrative agency is in
2. Pure question of law; or estoppel [Republic v. Sandiganbayan,
● We held that the issue on the proper supra].
interpretation of Section 12 of RA 12. Doctrine of qualified political agency
6758 involves a question of law. The (respondent is a department secretary
doctrine of exhaustion of whose acts as an alter ego of the
administrative remedies does not
Page 249 of 384
President bears the implied and assumed if a remedy within the administrative machinery
approval of the latter) [Demaisip v. CA, can still be resorted to by giving the
G.R. No. L-13000 (1959); Pagara v. CA, administrative officer concerned every
G.R. No. 96882 (1996)]. opportunity to decide on a matter that comes
13. The subject of controversy is private land within his jurisdiction then such remedy should
in land case proceedings [Soto v. Jareno, be exhausted first before the court's judicial
G.R. No. L-38962 (1986)]. power can be sought. The premature
14. Violation of due process [Pagara v. CA, invocation of court's intervention is fatal to
supra]. one's cause of action. Accordingly, absent any
15. Where there is unreasonable delay or finding of waiver or estoppel the case is
official inaction that will irretrievably susceptible of dismissal for lack of cause of
prejudice the complainant [Republic v. action [Montanez v. Provincial Agrarian Reform
Sandiganbayan, supra]. Adjudicator et. al., G.R. No. 183142 (2009)].
16. Administrative action is patently illegal
amounting to lack or excess of jurisdiction Failure to observe the doctrine of exhaustion of
[DAR v. Apex Investment, supra]. administrative remedies does not affect the
17. Resort to administrative remedy will Court’s jurisdiction. The only effect of non-
amount to a nullification of a claim [Paat compliance with this rule is that it will deprive
v. CA, G.R. No. 111107 (1997); Alzate v. the complainant of a cause of action, which is
Aldana, G.R. No. L- 14407 (1960)]. a ground for a motion to dismiss. If not invoked
18. There is no administrative review at the proper time, this ground is deemed
provided for by law [Estrada v. CA, G.R. waived and the court can then take cognizance
No. 137862 (2004)]. of the case and try it [Soto v. Jareno, G.R. No.
19. The issue of non-exhaustion of L-38962 (1986)].
administrative remedies has been
rendered moot [included in the Must be raised at the earliest time
enumeration in Estrada v. CA, supra]. possible
20. When the claim involved is small Exhaustion must be raised at the earliest time
21. When strong public interest is involved. possible, even before filing the answer to the
22. In quo warranto proceedings [included in complaint or pleading asserting a claim, by a
the enumeration in Lopez v. City of motion to dismiss [Calub v. Court of Appeals,
Manila, G.R. No. 127139 (1999)]. G.R. No. 115634 (2000)].
23. The law expressly provides for a different
review procedure [Samahang If not invoked at the proper time, this ground is
Magbubukid v. CA, G.R. No. 103953 deemed waived and the court can take
(1999)]. cognizance of the case and try it [Republic v.
24. When there is no express legal provision Sandiganbayan, G.R. Nos. 112708-09 (1996)].
requiring such administrative step as a
condition precedent to taking action in When appeals to the Office of the
court [CSC v. DBM, G.R. No. 158791 President are required
(2005)]. A decision or order issued by a department or
agency need not be appealed to the Office of
Effect of failure to exhaust administrative the President (OP) when there is a special law
remedies that provides for a different mode of appeal. If
A direct action in court without prior exhaustion the law does not provide for a specific relief,
of administrative remedies, when required, is appeals may be taken to the Office of the
premature, warranting its dismissal on a motion President [Moran v. Office of the President,
to dismiss grounded on lack of cause of action. G.R. No. 192957 (2014)].
Before a party is allowed to seek the When OP is not exercising quasi-judicial

intervention of the court, it is a pre-condition functions
that he should have availed of all the means of When the OP itself represents a party, i.e., the
administrative processes afforded him. Hence, Republic, to a contract, it merely exercises a
Page 250 of 384
contractual right by cancelling/revoking said longer premature that we ascertain in proper
agreement — a purely administrative action cases whether the administrative findings are
which should not be considered quasi-judicial not in violation of law, whether they are free
in nature. Thus, absent the OP's proper from fraud or imposition and whether they find
exercise of a quasi-judicial function, the CA has substantial support from the evidence.
no appellate jurisdiction over the case [Narra [Matienzo v. Abellera, G.R. No. L-45839
Nickel Mining and Development Corp. v. (1988)]
Redmont Consolidated Mines Corp., G.R. No.
202877 (2015)]. Where administrative agencies have original
jurisdiction in the premises, the court's
interference with administrative action is
Doctrine of Doctrine of
necessarily limited. A review thereof cannot be
Exhaustion of Primary
done through an ordinary civil action if
Administrative Administrativ
constitutional or legislative authority therefor is
Remedies e
wanting. The remedies that can be availed of
Jurisdiction
where the statute is silent are the special civil
Appellate Concurrent actions for certiorari, prohibition and/or
original mandamus specified in the Rules of Court.
Jurisdictio [Macailing v. Andrada, G.R. No. L-21607
jurisdiction
n of Court (1970)].
with admin
body
Exhaustion The court

of yields to the Effect
administrativ jurisdiction of We dismissed Jose's petition primarily
Ground for because it was "clearly premature, speculative,
e remedy is the
Non- and purely anticipatory, based merely on
a condition administrative
exercise of newspaper reports which do not show any
precedent. agency
Jurisdictio direct or threatened injury," it appearing that
because of its
n the reorganization of the Bureau of Customs
specialized
knowledge or had not been, then, set in motion [Dario v.
expertise. Mison, G.R. No. 81954, 8196, 85335, 86241
(1989) citing Jose v. Arroyo, G.R. L-78435,
Court Dismiss. Suspend (1987)].
Action judicial action.
Purely Administrative Matters
General Rule: It is a well-recognized rule that
Waivable. Cannot be purely administrative and discretionary
Waivability
waived. functions may not be interfered by the courts.
[De Leon].
Note: Both do not apply where the issue
involves purely a question of law there being no In general, courts have no supervising power
question of fact and no question requiring over the proceedings and actions of the
expert judgment [De Leon]. administrative departments of the government.
This is generally true with respect to acts
involving the exercise of judgment or
C. Doctrine of Finality of discretion, and findings of act. Findings of fact
Administrative Action by an administrative board, agency or official,
following a hearing, are binding upon the courts
General Rule and will not be disturbed [Lianga Bay Logging,
The court does not interfere, as a rule, with Co., Inc. v. Enage, G.R. No. L-30637, (1987)].
administrative action prior to its completion or
finality. It is only after judicial review is no
Page 251 of 384
Exception: Where the board, agency or official
has gone beyond his statutory authority,
exercised unconstitutional powers or clearly
acted arbitrarily and without regard to his duty
or with grave abuse of discretion [Lianga Bay
Logging, Co., Inc. v. Enage, supra].
Exception to Doctrine of Finality [De Leon]:

1. An interlocutory order affecting the merits
of a controversy;
2. To grant relief to preserve the status quo
pending further action by the
administrative agency;
3. When it is essential to the protection of the
rights asserted from the injury threatened;
4. Where an administrative officer assumes
to act in violation of the Constitution and
other laws;
5. Where such order is not reviewable in any
other way and the complainant will suffer
great and obvious damage if the order is
carried out;
6. To an order made in excess of power,
contrary to specific prohibition in the
statute governing agency and thus
operating as a deprivation of a right
assured by the statute;
7. When statutory provisions provide for an
exception.
Page 252 of 384

ELECTION LAW
INTERNATIONAL LAW
ELECTION LAW POLITICAL LAW
i. Initiative on the Constitution which refers
to a petition proposing amendments to the
ELECTION LAW Constitution
Amendments to the Constitution may likewise

I. SUFFRAGE be directly proposed by the people through
initiative upon a petition of at least twelve per
A. Concept centum of the total number of registered voters,
of which every legislative district must be
1. Definition represented by at least three per centum of the
Suffrage is the right to vote in the election of registered voters therein. No amendment to the
officers chosen by the people and in the Constitution shall be authorized within five
determination of questions submitted to the years following its ratification nor oftener than
people. once every five years thereafter.
2. Scope The Congress shall provide for the

implementation of the exercise of this right
[Sec. 2, Art. XVII, 1987 Constitution].
a. Election
The means by which the people choose their
The constitutional provision on people’s
officials for a definite and fixed period and to
initiative to amend the Constitution can only be
whom they entrust for the time being the
implemented by law to be passed by Congress.
exercise of the powers of government.
No such law has been passed. R.A. No. 6735
is incomplete, inadequate, or wanting in
Elections may either be:
essential terms and conditions insofar as
a. Regular: One provided by law for the
initiative on amendments to the Constitution is
election of officers either nationwide or in
concerned [Defensor-Santiago v. COMELEC,
certain subdivisions thereof, after the
G.R. No. 127325 (1997)].
expiration of the full term of the former
officers.
Sec. 2, Art. XVII of the Constitution is limited to
b. Special: One held to fill a vacancy before
proposals to amend—not to revise—the
the expiration of the term for which the
Constitution [Lambino v. COMELEC, G.R. No.
incumbent was elected.
174153 (2006)].
Note: The SK election is not a regular election
ii. Initiative on statutes which refers to a
(whether national or local) because it is
petition proposing to enact a national
participated in by the youth with ages ranging
legislation
from 15 to 21, many of whom are not qualified
to vote in a regular election [Paras v.
iii. Initiative on local legislation which refers
COMELEC, G.R. No. 123169 (1996)].
to a petition proposing to enact a regional,
provincial, city, municipal, or barangay law,
b. Plebiscite resolution, or ordinance.
The electoral process by which an initiative on
the Constitution is approved or rejected by the
d. Referendum
people [Sec. 3(e), R.A. 6735].
The power of the electorate to approve or reject
c. Initiative
a legislation through an election called for the
The power of the people to propose
purpose. It may be of two classes.
amendments to the Constitution or to propose
and enact legislations through an election
i. Referendum on statutes which refers to a
called for the purpose. There are three (3)
petition to approve or reject an act or law,
systems of initiative [Sec. 3(a), R.A. 6735].
or part thereof, passed by Congress
Page 254 of 384

ii. Referendum on local law which refers to if failure to comply with the biometrics
a petition to approve or reject a law, validation requirement will result in the
resolution or ordinance enacted by regional deactivation of the voter’s registration (under
assemblies and local legislative bodies R.A. No. 10367 or the Biometrics Law of 2013),
[Sec. 3(c), R.A. No. 6735] it is not unconstitutional. The requirement is a
“mere aspect of the registration procedure, of
e. Recall which the State has the right to reasonably
regulate” [Kabataan Partylist v. COMELEC,
The termination of the official relationship of a supra].
local elective official for loss of confidence prior
to the expiration of his term through the will of 2. Qualifications in General
the electorate [Sec. 69, LGC].
a. Filipino citizen by birth or
B. Qualification and naturalization
Disqualification of Voters
b. At least 18 years of age at the time of
1. Under Sec. 1, Art. V, 1987 the election
Any person, who, on the day of registration
Constitution
may not have reached the required age or
period of residence but, who, on the day of the
Suffrage may be exercised by all citizens of the
election shall possess such qualifications, may
Philippines, not otherwise disqualified by law,
register as a voter [Sec. 9, R.A. No. 8189].
who are at least eighteen years of age, and
who shall have resided in the Philippines for at
least one year and in the place wherein they
c. Resident of the Philippines for at
propose to vote, for at least six months least one (1) year
immediately preceding the election. No
literacy, property, or other substantive There is nothing wrong in an individual
requirement shall be imposed on the exercise changing residence so he could run for an
of suffrage [Sec. 1, Art. V, 1987 Constitution]. elective post, for as long as he is able to prove
that he has effected a change of residence for
The Congress is prohibited under the the period required by law [Aquino v.
Constitution from imposing additional COMELEC, G.R. No. 120265 (1995)].
substantive requirements for voting like
education, sex, and taxpaying ability, but A candidate does not automatically regain his
Congress may add procedural requirements by residence after the retention or reacquisition of
promulgation of the necessary laws. Philippine citizenship under R.A. No. 9225. He
must still establish the fact of residence
Congress may impose limitations on the [Caballero v. COMELEC, G.R. No. 209835
statutory right of suffrage. The provision under (2015)].
Sec. 1, Art. V, 1987 Constitution (that no
literacy, property, or other substantive d. Resident of the place wherein they
requirement shall be imposed on the exercise propose to vote for at least six (6)
of suffrage) is merely “geared towards the months immediately preceding the
elimination of irrelevant standards that are election
purely based on socio-economic
considerations that have no bearing on the Any person who temporarily resides in another
right of a citizen to intelligently cast his vote and city, municipality, or country solely by any of the
to further the public good” [Kabataan Partylist following reasons shall not be deemed to have
v. COMELEC, G.R. No. 221318 (2015)]. lost his original residence:
i. Occupation, profession, employment in
Biometrics validation requirement is not an private or public service;
unconstitutional substantive requirement. Even ii. Educational activities;
Page 255 of 384

iii. Work in the military or naval reservations Note: The right to vote shall be automatically
within the Philippines; reacquired upon expiration of five (5) years
iv. Service in the Armed Forces of the after service of sentence.
Philippines or the National Police Forces;
v. Confinement or detention in government iii. Insane or incompetent persons declared as
institutions in accordance with law [Sec. 9, such by competent authority.
R.A. No. 8189].
Exception: Unless subsequently declared by
It is not necessary that a person should have a proper authority that such person is no longer
house in order to establish his residence or insane or incompetent.
domicile in a municipality. It is enough that he
should live there, provided that his stay is C. Registration and Deactivation
accompanied by his intention to reside therein
permanently [Romualdez-Marcos v.
1. Registration of Voters
COMELEC, G.R. No. 119976 (1995)].
The act of accomplishing and filing of a sworn
application for registration by a qualified voter
In election cases, the Court treats domicile and
before the election officer of the city or
residence as synonymous terms. Both import
municipality wherein he resides and including
not only an intention to reside in a fixed place
the same in the book of registered voters upon
but also personal presence in that place,
approval by the Election Registration Board
coupled with conduct indicative of such
[Sec. 3(a), R.A. No. 8189].
intention [Pundaodaya v. COMELEC, G.R. No.
179313 (2009)].
It is essential to the exercise of the right of
suffrage, not the possession thereof. It is part
e. Not otherwise disqualified by law of the right to vote and an indispensable
element in the election process.
3. Disqualifications in General
The following shall be disqualified from Condition Precedent
registering [Sec. 11, R.A. No. 8189]: Registration does not confer the right to vote
but it is a condition precedent to the exercise of
i. Any person who has been sentenced by the right [Yra v. Abano, G.R. No. L-30187
final judgment to suffer imprisonment of not (1928)].
less than one (1) year, such disability not
having been removed by plenary pardon or Registered voter
amnesty. In order that a qualified elector may vote in any
election, plebiscite, or referendum, he must be
Note: The right to vote shall be automatically registered in the Permanent List of Voters for
reacquired upon expiration of five (5) years after the city or municipality in which he resides
service of sentence. [Sec. 115, B.P. Blg. 881].
ii. Any person who has been adjudged by final Rationale for registration requirements,
judgment by a competent court or tribunal of qualifications, and disqualifications
having committed any crime: The right to vote is a right created by law.
a. Involving disloyalty to the duly Suffrage is a privilege granted by the State to
constituted government such as such persons or classes as are most likely to
rebellion, sedition, violation of the exercise it for the public good [People v. Corral,
firearms laws; or G.R. No. L-42300 (1936)].
b. Against national security Exception:
Unless restored to his full civil and Proceeding from the significance of registration
political rights in accordance with law. as a necessary requisite to the right to vote, the
State undoubtedly, in the exercise of its
inherent police power, may then enact laws to
safeguard and regulate the act of voter’s
Page 256 of 384
registration for the ultimate purpose of degree of consanguinity or affinity. If in
conducting honest, orderly and peaceful succeeding elections, any of the newly elected
election [Akbayan-Youth v. COMELEC, G.R. city or municipal officials is related to a member
No. 147066 (2001)]. of the board within the fourth civil degree of
consanguinity or affinity, such member is
Qualification must be distinguished from automatically disqualified to preserve the
registration integrity of the Election Registration Board
Registration regulates the exercise of the right [Sec. 15, R.A. No. 8189].
of suffrage and is not a qualification for such
right. Registration is only one step towards Board of Election Inspectors
voting, and it is not one of the elements that The body which conducts the election in the
makes a citizen a qualified voter. Thus, polling place of the precinct usually composed
although one is deemed to be a “qualified of three (3) public school teachers appointed
elector,” he must nonetheless still comply with by the Commission [Sec. 3(o), R.A. No. 8189].
the registration procedure in order to vote
[Kabataan Party List v. COMELEC, G.R. No. b. System of Continuing Registration of
221318 (2015)]. Voters
The personal filing of application of registration
a. Election Registration Board (ERB) of voters shall be conducted daily in the office
The body constituted to act on all applications of the Election Officer during regular office
for registration [Sec. 3(g), R.A. No. 8189]. hours [Sec. 8, R.A. No. 8189].
There shall be in each city and municipality as Exception (when registration is prohibited):
many ERBs as there are election officers Within 120 days before a regular election and
therein [Sec. 15, R.A. No. 8189]. 90 days before a special election. COMELEC
Resolution 8585, which set the deadline for
Composition of the ERB [Sec. 15, R.A. No. voter registration to Oct. 31, 2009 (election was
8189] May 10, 2010, or more than 120 days), was
1. Election Officer, who serves as the declared null and void because Sec. 8 of R.A.
Chairman. If disqualified, COMELEC shall 8189 has determined that the period of 120
designate an acting Election Officer; days before a regular election and 90 days
2. Public school official most senior in rank; before a special election is enough time for the
and COMELEC to make all the necessary
3. Local civil registrar, or in his absence, the preparations with respect to the coming
city or municipal treasurer. If neither are elections. COMELEC is granted the power to
available, any other appointive civil fix other periods and dates for preelection
service official from the same locality as activities only if the same cannot be reasonably
designated by the COMELEC [Sec. 15, held within the period provided by law. There is
R.A. No. 8189]. no ground to hold that the mandate of
continuing voter registration cannot be
In case of disqualification of the Election reasonably held within the period provided by
Officer, the Commission shall designate an Sec. 8 of R.A. 8189 [Palatino v. COMELEC,
acting Election Officer who shall serve as G.R. No. 189868 (2009)].
Chairman of the Election Registration Board. In
case of disqualification or non-availability of the c. Validation
Local Registrar or the Municipal Treasurer, the The process of taking the biometrics of
Commission shall designate any other registered voters whose biometrics have not
appointive civil service official from the same yet been captured [Sec. 2(d), R.A. No. 10367,
locality as substitute. An Act Providing for Mandatory Biometrics
Voter Registration].
No member of the Board shall be related to
each other or to any incumbent city or
municipal elective official within the fourth civil
Page 257 of 384

d. Manner of Registration for Illiterate or 4. Annulment of Book of Voters [Sec. 39,
Disabled Voters [Sec. 14, R.A. No. 8189] R.A. No. 8189]
5. New voters [Sec. 10, R.A. No. 8189]
Illiterate Persons 6. Transfer of Residence [Sec. 12-13, R.A.
With the assistance of the Election Officer or No. 8189]
any member of an accredited citizen’s arms.
1. Deactivation
Physically Disabled Persons Process of deactivating the registration of
Application for registration may be prepared certain persons, removing their registration
by: records from the corresponding precinct book
1. Any relative within the 4th civil degree of of voters and placing the same in the inactive
consanguinity or affinity; file, properly marked “deactivated” and dated in
2. The Election Officer; or indelible ink [Sec. 27, R.A. 8189].
3. Any member of an accredited citizen’s arm
2. Reactivation [Sec. 28, R.A. 8189]
Note: Definition of disabled voter under the Any voter whose registration has been
Automated Election System (AES): A person deactivated may file with the Election Officer a
with impaired capacity to use the AES [Sec. sworn application for reactivation of his
2(11), R.A. No. 9369]. registration in the form of an affidavit stating
that the grounds for the deactivation no longer
Book of Voters exist.
The compilation of all registration records in a
precinct [Sec. 3(c), R.A. No. 8189]. The application for reactivation may be filed
any time but not later than one hundred twenty
List of Voters (120) days before a regular election and ninety
An enumeration of names of registered voters (90) days before a special election.
in a precinct duly certified by the Election
Registration Board for use in the election [Sec. The Election Officer shall submit said
3(c), R.A. No. 8189]. application to the Election Registration Board
for appropriate action. In case the application
The ERB shall prepare and post a certified list is approved, the Election Officer shall retrieve
of voters 90 days before a regular election and the registration record from the inactive file and
60 days before a special election [Sec. 30, R.A. include the same in the corresponding precinct
No. 8189]. book of voters.
Copies of the certified list along with a certified Local heads or representatives of political
list of deactivated voters categorized by parties shall be properly notified on approved
precinct per barangay, within the same period applications.
shall be posted in the office of the Election
Officer and in the bulletin board of each Ground for Specific Mode of
city/municipal hall. Upon payment of the fees Deactivation Reactivation
as fixed by the Commission, the candidates
and heads shall also be furnished copies Sec. 27, R.A. No. 8189
thereof [Sec. 30, R.A. No. 8189].
e. When the List of Voters will be Altered Any person who has Right to vote is
been sentenced by automatically
1. Deactivation/Reactivation [Secs. 27- 28,
final judgment to reacquired upon
R.A. No. 8189]
suffer imprisonment expiration of five (5)
2. Exclusion/Inclusion [Secs. 34-35, R.A. No.
for not less than one years after service of
8189]
(1) year. sentence as certified
3. Cancellation of Registration [Sec. 29, R.A.
by the clerks of
No. 8189]
Except: If such courts of the
Page 258 of 384

Ground for Specific Mode of Ground for Specific Mode of

Deactivation Reactivation Deactivation Reactivation
disability is removed Municipal, Municipal preceding regular

by plenary pardon or Circuit, Metropolitan, elections as shown
amnesty. Regional Trial by their voting
Courts, and the records.
Sandiganbayan.
Note: For this
Any person who has General mode of purpose, regular
been adjudged by reactivation. elections do not
final judgment by a include the
competent court or Sangguniang
tribunal of having Kabataan (SK)
caused/committed: elections
(i) any crime Any person whose

involving disloyalty registration has
to the duly been ordered
constituted excluded by the
government such as Court.
rebellion, sedition,
violation of the anti- Any person who has
subversion and lost his Filipino
firearms laws; or citizenship.
(ii) any crime against 3. Cancellation of Registration

national security. The Board shall cancel the registration records
of those who have died as certified by the Local
Except: If full civil Civil Registrar [Sec. 29, R.A. No. 8189].
and political rights is
restored in The Local Civil Registrar shall:
accordance with law. i. Submit each month a certified list of persons
who died during the previous month to the
Any person declared
Election Officer of the place where the
by competent
deceased are registered or in the absence
authority to be
of information thereof, to the Election Officer
insane or
of the city or municipality of the deceased’s
incompetent.
residence as appearing in his death
certificate;
Exception: If such
ii. Furnish a copy of this list to the national
disqualification has
central file and the proper provincial file.
been subsequently
removed by a
The Election Officer shall:
declaration of a
i. Post in the bulletin board of his office a list
proper authority that
of those persons who died whose
such person is no
registrations were cancelled;
longer insane or
ii. Furnish copies thereof to the local heads of
incompetent.
the political parties, the national central file,
Any person who did and the provincial file
not vote in the two
(2) successive
Page 259 of 384

4. Annulment of Book of Voters change of address involves a change in
The COMELEC shall, upon verified petition of precinct, the Board shall transfer his
any voter or election officer or duly registered registration record to the precinct book of
political party, and after notice and hearing, voters of his new precinct and notify the voter
annul any book of voters that is: of his new precinct [Sec. 13, R.A. No. 8189].
a. Not prepared in accordance with R.A.
8189 or the Voters’ Registration Act of Challenges to Right to Register
1996; Oppositions to contest a registrant’s
b. Prepared through fraud, bribery, forgery, application for inclusion in the voter’s list [Sec.
impersonation, intimidation, force, or any 13, R.A. No. 8189].
similar irregularity; or
c. Contains data that are statistically By: Any voter, candidate, or representative of
improbable. a registered political party.
No order, ruling or decision annulling a book of Form:

voters shall be executed within 90 days before i. In writing, stating the grounds therefor;
an election [Sec. 39, R.A. No. 8189]. ii. Under oath;
iii. Attached to the application, together with
5. New Voters the proof of notice of hearing to the
A qualified voter shall be registered in the challenger and the applicant.
permanent list of voters in a precinct of the city
or municipality wherein he resides to be able to When filed: Not later than the second Monday
vote in any election [Sec. 10, R.A. No. 8189]. of the month in which the application is
scheduled to be heard or processed by the
6. Transfer of Residence Election Registration Board. Should the
second Monday of the month fall on a
The precinct assignment of a voter in the nonworking holiday, oppositions may be filed
permanent list of voters shall not be on the next following working day.
changed/altered/transferred to another
precinct without the express written consent of The hearing on the challenge shall be heard on
the voter. Provided, however, that the voter the third Monday of the month and the decision
shall not unreasonably withhold such consent. shall be rendered before the end of the month.
Any violation thereof shall constitute an Election Period

election offense [Sec. 4, R.A. No. 8189]. Shall commence 90 days before the day of the
election and shall end 30 days thereafter [Sec.
In case of change of residence to another city 9, Art. IX-C, 1987 Constitution].
or municipality, the registered voter may apply
with the Election Officer of his new residence Exception: Special cases, when otherwise
for the transfer of his registration records. The fixed by the COMELEC.
application for transfer of registration shall be
subject to the requirements of notice and Precinct
hearing and the approval of the Election The basic unit of territory established by the
Registration Board. Upon approval, the Commission for the purpose of voting [Sec.
Election Officer of the former residence of the 3(j), R.A. No. 8189].
voter shall transmit by registered mail the
voter’s registration record to the Election Polling Place
Officer of the voter’s new residence [Sec. 12, The place where the Board of Election
R.A. No. 8189]. Inspectors conducts its proceeding and where
the voters cast their votes [Sec. 3(l), R.A. No.
In case of change of address in the same 8189].
municipality or city, the voter shall immediately Voting Center
notify the Election Officer in writing. If the
Page 260 of 384

The building or place where the polling place is had been held had been held [Domino v.
located [Sec. 3(m), R.A. No. 8189]. COMELEC, supra].
D. Inclusion and Exclusion 2. Petition for Inclusion and Exclusion

Proceedings of Voters in the List [Secs. 34-35, R.A.
No. 8189]
1. Jurisdiction in Inclusion and
Exclusion Case [Sec. 33, R.A. No. Petition for Petition for
8189] Inclusion of Voters Exclusion of
in the List [Sec. 34, Voters in the List
The Municipal and Metropolitan Trial Courts R.A. No. 8189] [Sec. 35, R.A. No.
shall have original and exclusive jurisdiction 8189]
over all cases of inclusion and exclusion of
voters in their respective cities or When to file
municipalities.
Any time except one Any time except one
Decisions of the Municipal or Metropolitan Trial
hundred five (105) hundred (100) days
Courts may be appealed by the aggrieved
days prior to a prior to a regular
party to the Regional Trial Court within five (5)
regular election or election or sixty-five
days from receipt of notice thereof. Otherwise,
seventy-five (75) (65) days before a
said decision shall become final and executory.
days prior to a special election.
special election.
The RTC shall decide the appeal within ten (10)
days from the time it is received, and the Who may file
decision shall immediately become final and
executory. No motion for reconsideration shall
be entertained. Any person whose Any registered
application for voters,
The nature of the MTC’s jurisdiction is limited. registration has representative of a
The jurisdiction of the MTC “over exclusion been disapproved by political party or the
cases is limited only to determining the right of the Board or whose Election Officer.
the voter to (a) remain in the list of voters or (b) name has been
to declare that the challenged voter is not stricken out from the
qualified to vote in the precinct in which he is list.
registered, specifying the ground of the voters’
disqualification.” Hence, the trial court has no
power to order the change or transfer of Form
registration from one place of residence to
another for it is the function of the ERB as
provided under Section 12 of R.A. No. 8189 A petition to include A sworn petition for
[Domino v. COMELEC, G.R. No. 134015 his name in the the exclusion of a
(1999)]. permanent list of voter from the
voters in his permanent list of
Generally, no res judicata: A decision in an precinct, supported voters giving the
exclusion or inclusion proceeding, even if final by a certificate of name, address and
and unappealable, does not acquire the nature disapproval of his the precinct of the
of res judicata [Domino v. COMELEC, supra]. application and proof challenged voter,
of service of notice accompanied by
Exception: The decision is res judicata as to of his petition upon proof of notice to the
the right to remain in the list of voters or for the Board. Board and to the
being excluded therefrom for the particular challenged voter.
election in relation to which the proceedings
Page 261 of 384

Petition for Petition for Petition for Petition for

Inclusion of Voters Exclusion of Inclusion of Voters Exclusion of
in the List [Sec. 34, Voters in the List in the List [Sec. 9.3, Voters in the List
R.A. No. 8189] [Sec. 35, R.A. No. R.A. 9189 as [Sec. 9.1, R.A. 9189
8189] inserted by R.A. as inserted by R.A.
10590] 10590]
Period to Decide
proper MTC in the the City of Manila or
City of Manila or where the overseas
Within fifteen (15) Within ten (10) days where the overseas voter resides in the
days after its filing. from its filing. voter resides in the Philippines, at the
Philippines, at the petitioner’s option.
Procedure if Petition is Approved
petitioner’s option.
The Board shall The Board shall, Note: If the

place the application upon receipt of the application has been
for registration final decision, disapproved, the
previously remove the voter’s applicant or his
disapproved in the registration record authorized
corresponding book from the representative may
of voters and corresponding book file a MR before the
indicate in the of voters, enter the Resident Election
application for order of exclusion Registration Board
registration the date therein, and (RERB) within a
of the order of thereafter place the period of five (5)
inclusion and the record in the inactive days from receipt of
court which issued file. the notice of
the same. disapproval. The MR
shall be decided
within five (5) days
3. Special Rules on Overseas after its filing but not
Absentee Voters [Sec. 9.3, R.A. No. later than one
9189 as inserted by R.A. 10590; Sec. hundred twenty
9.1, R.A. 9189 as inserted by R.A. (120) days before
the start of the
10590]
overseas voting
period. The
Petition for Petition for resolution of the
Inclusion of Voters Exclusion of Resident Election
in the List [Sec. 9.3, Voters in the List Registration Board
R.A. 9189 as [Sec. 9.1, R.A. 9189 (RERB) shall be
inserted by R.A. as inserted by R.A. immediately
10590] 10590] executory, unless
reversed or set
When to file aside by the Court.
Who may file

Within ten (10) days Not later than one
from receipt of hundred eighty (180)
notice denying the days before the start Applicant. Any interested
Motion for of the overseas person.
Reconsideration voting period with
(MR), with the the proper MTC in
Page 262 of 384

c. Members of media, media practitioners,
Petition for Petition for
including the technical and support staff
Inclusion of Voters Exclusion of
who are duly registered voters and who,
in the List [Sec. 9.3, Voters in the List
on election day, may not be able to vote
R.A. 9189 as [Sec. 9.1, R.A. 9189
due to the performance of their functions
inserted by R.A. as inserted by R.A.
in covering and reporting on the elections.
10590] 10590]
Provided, that they shall be allowed to vote
Period to decide only for the positions of President, Vice
President, Senators, and Party-List
Representative [Sec. 2, R.A. No. 10380 or
Within 15 days after Within 15 days after An Act Providing for Local Absentee
its filing, but not later its filing, but not later Voting for Media];
than 120 days than 120 days d. All citizens of the Philippines abroad, who
before the start of before the start of are not otherwise disqualified by law, at
the overseas voting the overseas voting least eighteen (18) years of age on the day
period. period. of elections, may vote for President, Vice-
President, Senators and Party-List
Should the Court fail Should the Court fail Representatives, as well as in all national
to render a decision to render a decision referenda and plebiscites [Sec. 3, R.A. No.
within the prescribed within the prescribed 10590].
period, the RERB period, the ruling of
ruling shall be the RERB shall be Overseas Voting
considered affirmed. considered affirmed. Process by which qualified citizens of the
Philippines abroad exercise their right to vote
[Sec. 3(a), R.A. No. 9189, The Overseas
E. Local and Overseas Absentee Absentee Voting Act, as amended by R.A. No.
Voting [Sec. 3(a), R.A. No. 9189, 10590, The Overseas Voting Act of 2013].
The Overseas Absentee Voting Overseas Voter
Act, as amended by R.A. No. Citizen of the Philippines who is qualified to
10590, The Overseas Voting Act register and vote under this Act, not otherwise
disqualified by law, who is abroad on the day of
of 2013] elections [Sec. 3(f), R.A. No. 9189, as
amended by Sec. 2, R.A. No. 10590].
1. General Rule
A person must be physically present in the An overseas voter is presumed to be abroad
polling place whereof he is a registered voter to until she/he applies for transfer of her/his
be able to vote. registration records or requests that her/his
name be cancelled from the NROV [Sec. 12,
2. Exceptions R.A. No. 9189, as amended by Sec. 11, R.A.
a. Members of the Board of Election No. 10590].
Inspectors [Sec. 169, Omnibus Election
Code]; Covered Elections
b. Government officials and employees, Elections for President, Vice-President,
including members of AFP and PNP, who, Senators and Party-list representatives, as well
by reason of public functions and duties, as in all national referenda and plebiscites
are not in his/her place of registration on [Sec. 4, R.A. No. 9189, as amended by R.A.
election day, may vote in the No. 10590].
city/municipality where he/she is assigned
on election day. Provided, that he/she is a Personal Overseas Registration and/or
duly registered voter [Sec. 1, E.O. No. 157 Certification
or the Absentee Voting by Officers and Registration and/or certification as an overseas
Employees of Government]; voter shall be done in person at any post
Page 263 of 384

abroad or at designated registration centers Exception: If such disability has been
outside the post or in the Philippines approved removed by plenary pardon or amnesty
by the Commission [Sec. 6, R.A. No. 9189, as Provided that: the right to vote shall be
amended by R.A. No. 10590]. automatically reacquired upon the
expiration of five (5) years after service of
National Registry of Overseas Voters sentence.
(NROV)
The consolidated list prepared, approved and d. Citizen previously declared insane or
maintained by the COMELEC, of overseas incompetent by competent authority in the
voters whose applications for registration as Philippines or abroad, as verified by the
absentee voters, including those registered Philippine embassies, consulates or
voters under R.A. No. 8189 who have applied Foreign Service establishments
to be certified as absentee voters, have been concerned.
approved by the Election Registered Board,
indicating the post where the overseas voter is Exception: if such competent authority
registered [Sec. 3(e), R.A. No. 9189, as subsequently certifies that such person is
amended by R.A. No. 10590]. no longer insane or incompetent.
Resident Election Registration Board Note: R.A. No. 10590 removed the
(RERB) disqualification under RA No. 9189 of an
The in-house Election Registration Board in immigrant or a permanent resident who is
every post and in the Office for Overseas recognized as such in the host country unless
Voting, which processes, approves or he/she executes, upon registration, an affidavit
disapproves all applications for registration prepared for the purpose by the Commission
and/or certification as overseas voters, declaring that:
including the deactivation, reactivation and 1. He/she shall resume actual physical
cancellation of registration records [Sec. 3(m), permanent residence in the Philippines
R.A. No. 9189, as amended by R.A. No. not later than three (3) years from approval
10590]. of his/her registration; and
2. He/she has not applied for citizenship in
3. Qualifications another country.
a. Filipino citizen;
b. Abroad on the day of the election; F. Detainee Voting
c. At least 18 years of age on the day of the Detainee voting (either through the special
election; polling place inside jails or escorted voting)
d. Not otherwise disqualified by law [Secs. may be availed of by any registered detainee
3(f)-4, R.A. No. 9189, as amended by R.A. whose registration record is not transferred /
No. 10590]. deactivated / cancelled / deleted [Sec. 1, Rule
1, COMELEC Resolution No. 9371 (2012)].
4. Disqualifications
a. Lost their Filipino citizenship in Detainee
accordance with Philippine laws; Any person:
a. Confined in jail, formally charged for any
b. Expressly renounced their Philippine crime/s and awaiting/undergoing trial;
citizenship and who have pledged b. Serving a sentence of imprisonment for
allegiance to a foreign country [Sec. 5, less than one (1) year; or
R.A. No. 9189, as amended by R.A. No. c. Whose conviction of a crime involving
10590]; disloyalty to the duly constituted
government such as rebellion, sedition,
c. Committed and are convicted in a final violation of the firearms laws or any crime
judgment by a Philippine court or tribunal against national security or for any other
of an offense punishable by imprisonment crime is on appeal [Sec. 2, Rule 1,
of not less than one (1) year; COMELEC Resolution No. 9371 (2012)].
Page 264 of 384
Detainees who shall be eighteen years of age of the campaign period for which he filed his
on the day of election and/or are committed certificate of candidacy [Sec. 13, R.A. No.
inside the detention centers for at least six (6) 9369].
months immediately preceding the election day
may be registered as a voter. This includes any registered national, regional,
or sectoral party, organization or coalition
Detainees who are already registered voters thereof that has filed a manifestation to
may apply for transfer of registration records as participate under the party-list system which
warranted by the circumstances [Sec. 3, Rule has not withdrawn, or which has not been
2, COMELEC Resolution No. 9371 (2012)]. disqualified before the start of the campaign
period [COMELEC Res. 8758 (2010)].
Special Polling Place Inside Jail
The polling places established in jails where 1. Qualifications
detainee voters cast their votes [Sec. 2, Rule 1, Qualifications prescribed by law are continuing
COMELEC Resolution No. 9371 (2012)]. requirements and must be possessed for the
duration of the officer’s active tenure [Frivaldo
G. Escorted Voting v. COMELEC, supra; Labo v. COMELEC,
Voting Mechanism: supra].
1. For detainee voters who are residents / Constitutional Officers
registered voters of municipalities/cities a. For President and Vice-President [Secs.
other than the town/city of incarceration; 2-3 Art. VII, 1987 Constitution]
and/or 1. Natural-born citizen;
2. For detainee voters in jail facilities where 2. Registered voter;
no special polling places are established 3. Able to read and write;
[Sec. 2, Rule 1, COMELEC Resolution No. 4. At least 40 years old on day of election;
9371 (2012)]. 5. Resident of the Philippines for at least
ten (10) years immediately preceding
Requirements for Escorted Voting election day.
1. Detainee voters obtained court orders
allowing them to vote in the polling place b. For Senator [Sec. 3, Art. VI, 1987
where they are registered. Constitution]
2. It is logistically feasible on the part of the 1. Natural-born citizen;
jail/prison administration to escort the 2. 35 years old on election day;
detainee voter to the polling place where 3. Able to read and write;
he is registered. 4. Registered voter;
3. Reasonable measures shall be 5. Resident of the Philippines for at least
undertaken by the jail/prison two (2) years immediately preceding
administration to secure the safety of election day.
detainee voters, prevent their escape and
ensure public safety [Sec. 1, Rule 7, c. For Members of the House of
COMELEC Resolution No. 9371 (2012)]. Representatives [Sec. 6, Art. VI, 1987
Constitution]
II. CANDIDACY 2. 25 years old on election day;
3. Able to read and write;
4. Registered voter in district in which he
A. Qualifications and shall be elected;
Disqualifications of Candidates 5. Resident thereof for not less than one
year immediately preceding election
Candidate day.
Any person who files his certificate of d. Local Elective [Sec. 39, LGC]
candidacy within the prescribed period shall 1. Citizen of the Philippines;
only be considered as a candidate at the start
Page 265 of 384

2. Registered voter in the Barangay, On Residency
municipality, city or province, or district There is no hard and fast rule to determine a
where he intends to be elected; candidate’s compliance with residency
3. Resident therein for at least one year requirement since the question of residence is
immediately preceding election day; a question of intention. Still, jurisprudence has
4. Able to read and write Filipino or any laid down the following guidelines: (a) every
other local language or dialect; person has a domicile or residence
5. Age requirement: [See table below]. somewhere; (b) where once established, that
domicile remains until he acquires a new one;
On Citizenship and (c) a person can have but one domicile at
The law does not specify any particular date or a time [Jalosjos v. COMELEC, G.R. No.
time when the candidate must possess 191970 (2012)].
citizenship unlike that for residence and age. It
must be possessed upon proclamation or on
the day that the term begins [Frivaldo v.
COMELEC, supra].
President VP Senate House Local
Citizenship Natural-born Citizen Citizen
Registration Registered voter Registered where he/she intends to be

elected
Age 40 y.o. 35 y.o. 25 y.o. Gov/VG Mayor / Sang. SK

/Sang. VM Panlung
Panlala (ICC, sod
wigan/ CC, (ICC,
Mayor Mun.) CC,
(HUC)/ Mun)/
VM Sang.
(HUC)/ Bayan/
Sang. P.Brgy./
Panlung Sang.
sod Brgy.
(HUC)
23 y.o. 21 y.o. 18 y.o. 18-24

y.o.
Residence 10 years 2 years 1 year
Qualifications Able to read and write
Term 6 years 3 years
No. of Terms None 2 2 3
2. Disqualifications Sec. 12. Disqualifications to be a candidate

and to hold any office
Under the Omnibus Election Code (B.P. Blg. Any person who has been:
881) a. Declared by competent authority insane or
incompetent; or
b. Sentenced by final judgment:
Page 266 of 384

1. For subversion, insurrection, rebellion; participation in any campaign, or the
2. For any offense for which he has been casting of any vote, or any promise of
sentenced to a penalty of more than such registration, campaign, vote, or
eighteen months; or omission therefrom [Sec. 261(e)];
3. For a crime involving moral turpitude. 6. Unlawful electioneering [Sec. 261(k)];
7. Violated the prohibition against
Note: As to disqualifications under Sec. 12: release, disbursement or expenditure
a. These will not apply if the person has been of public funds 45 days before a regular
given plenary pardon or amnesty. election or 30 days before a special
b. These are deemed removed upon election [Sec. 261(v)];
declaration by competent authority that 8. Solicited votes or undertook
the insanity/incompetence has been propaganda on election day for or
removed, or after the expiration of a period against any candidate or any political
of 5 years from service of sentence. party within the polling place or within a
30m radius [Sec. 261(k)];
Sec. 68. Disqualifications from continuing f. Is a permanent resident of or an immigrant
as a candidate, or if he has been elected, to a foreign country [unless he has waived
from holding the office such status in accordance with the
Any candidate who, in an action or protest in residency requirement for the concerned
which he is a party is declared by final decision position].
of a competent court guilty of, or found by the
Commission of: Under the Local Government Code [Sec. 40,
a. Having given money or other material R.A. No. 7160]
consideration to influence, induce or a. Sentenced by final judgment for an
corrupt voters or public officials performing offense:
electoral functions; 1. Involving moral turpitude; or
b. Committed acts of terrorism to enhance 2. Punishable by at least 1-year
his candidacy; imprisonment.
c. Spent in his election campaign an amount
in excess of that allowed; b. Removed from office as a result of an
d. Solicited, received or made prohibited administrative case
contributions; This disqualification does not retroactively
e. Violated provisions of the Omnibus apply to those who were removed from
Election Code, specifically: office as a result of an administrative case
1. Engaged in election campaign or before the effectivity of the LGC [Grego v.
partisan political activity outside the COMELEC, G.R. No. 125955 (1997)].
campaign period and not pursuant to a
political party nomination [Sec. 80]; c. Convicted by final judgment for
2. Removed, destroyed, defaced lawful violating the oath of allegiance to the
election propaganda [Sec. 83]; Republic of the Philippines
3. Engaged in prohibited forms of election
propaganda [Sec. 85]; d. Dual citizenship
4. Violated election rules and regulations Dual citizenship as a disqualification under
on election propaganda through mass Section 40(d) of the Local Government
media [Sec. 86]; Code has been interpreted to refer to
5. Threatened, intimidated, caused, citizens with dual allegiance. For
inflicted or produced any violence, candidates with mere dual citizenship, the
injury, punishment, damage, loss or filing of certificate of candidacy is
disadvantage upon any person or of considered as an election of Filipino
the immediate members of his family, citizenship and renunciation of foreign
his honor or property, or used fraud to citizenship [Mercado v. Manzano, supra].
compel, induce or prevent the
registration of any voter, or the
Page 267 of 384

For a natural born Filipino, who reacquired In addition to the disqualifications mentioned in
or retained his Philippine citizenship under Secs. 12 and 68 of the Omnibus Election Code
R.A. No. 9225, to run for public office, he and Sec. 40 of R.A. No. 7160, otherwise known
must: as the Local Government Code, whenever the
1. Meet the qualifications for holding evidence of guilt is strong, the following
such public office as required by the persons are disqualified to run in a special
Constitution and existing laws; and election called to fill the vacancy in an elective
2. Make a personal and sworn office, to wit:
renunciation of any and all foreign i. Any elective official who has resigned from
citizenships before any public officer his office by accepting an appointive office
authorized to administer oath or for whatever reason which he previously
[Japzon v. COMELEC, G.R. No. occupied but has caused to become vacant
180088 (2009)] due to his resignation; and
ii. Any person who, directly or indirectly,
Based on jurisprudence, the mere filing of coerces, bribes, threatens, harasses,
certificate of candidacy is a sufficient form intimidates, or actually causes, inflicts or
of renunciation for dual citizens but not for produces any violence, injury, punishment,
those who reacquired/retained Filipino torture, damage, loss or disadvantage to
citizenship under R.A. No. 9225. any person or persons aspiring to become a
candidate or that of the immediate member
While the act of using a foreign passport is of his family, his honor or property that is
not one of the acts constituting meant to eliminate all other potential
renunciation and loss of Philippine candidate [Sec. 4, R.A. No. 8295].
citizenship, it is nevertheless an act which
repudiates the very oath of renunciation B. Filing of Certificates of
required for a former Filipino citizen who is
also a citizen of another country to be Candidacy
qualified to run for a local elective position No person shall be eligible for any elective
[Maquiling v. COMELEC, G.R. 195649 public office unless he files a sworn certificate
(2013)]. of candidacy within the period fixed herein
[Sec. 73, B.P. Blg. 881].
e. Fugitive from justice in criminal and
nonpolitical cases here and abroad Certificate of Candidacy
“Fugitive from justice” includes: A certificate of candidacy is in the nature of a
1. Those who flee after conviction to avoid formal manifestation to the whole world of the
punishment; and candidate’s political creed or lack of political
2. Those who, after being charged, flee to creed. It is a statement of a person seeking to
avoid prosecution. This presupposes run for a public office certifying that he
knowledge by the fleeing subject of announces his candidacy for the office
either an already instituted indictment mentioned and that he is eligible for the office,
or of a promulgated judgment of the name of the political party to which he
conviction [Rodriquez v. COMELEC, belongs, if he belongs to any, and his post
G.R. No. 120099 (1996)]. office address for all election purposes being
as well stated [Engle v. COMELEC, G.R. No.
f. Permanent residents in a foreign 215995 (2016)].
country or those who have acquired the
right to reside abroad and continue to By who: The certificate of candidacy shall be
avail of the same right after the filed by the candidate (a) personally or (b) by
effectivity of this Code his duly authorized representative.
g. Insane or feeble-minded When: Any day from the commencement of

the election period but not later than the day
Disqualification in Special Election before the beginning of the campaign period. In
cases of postponement or failure of election, no
Page 268 of 384
additional certificate of candidacy shall be deadline for filing of certificates of
accepted except in cases of substitution of candidacy; and
candidates. ii. Cancel the certificate of candidacy for
the other office/s [Sec. 73, B.P. Blg.
1. Effect of Filing 881].
a. Appointive Officials Ministerial Duty of COMELEC

Officials holding appointive offices including General Rule: The COMELEC shall have the
active members of the AFP and officers of ministerial duty to receive and acknowledge
GOCCs shall be considered ipso facto receipt of the certificates of candidacy provided
resigned upon the filing of his certificate of said certificates are: under oath and contain all
candidacy [Sec. 66, B.P. Blg. 881]. the required data and in the form prescribed by
the Commission [Sec. 76, B.P. Blg. 881].
b. Elective Officials
Any person holding an elective office or COMELEC has no discretion to give or not to
position shall not be considered resigned upon give due course to a certificate of candidacy
the filing of his certificate of candidacy for the filed in due form [Abcede v. Imperial, G.R. No.
same or any other elective office or position L-13001 (1958)].
[Sec. 4, COMELEC Resolution No. 8678,
Guidelines on the Filing of Certificates of Exception: COMELEC may go beyond the
Candidacy and Nomination of Official face of the certificate of candidacy:
Candidates of Registered Political Parties in i. Nuisance candidates;
Connection with the May 10, 2010 National and ii. Petition to deny due course to or cancel
Local Elections]. a certificate of candidacy [See
Romualdez-Marcos v. COMELEC,
The SC upheld the validity of the COMELEC supra].
Resolution in Sec. 67, B.P. Blg. 881. The Court
deemed the rule that elective officials The Court also held that even without a petition
automatically resigned from office upon filing of to deny course to or cancel a certificate of
their certificate of candidacy, repealed by Sec. candidacy, the COMELEC is under a legal duty
14 R.A 9006, Fair Election Act. On the to cancel the COC of anyone suffering from the
allegation that the rule was violative of equal accessory penalty of perpetual special
protection, the Court found substantial disqualification to run for public office by virtue
distinctions among appointive and elective of a final judgment of conviction. The final
officials [Quinto v. COMELEC, G.R. No. judgment of conviction is notice to the
189698 (2010)]. COMELEC of the disqualification of the convict
from running for public office [Jalosjos v.
Effect of Filing of Two (2) Certificates of COMELEC, G.R. No. 193237 (2012)].
Candidacy (COC)
No person shall be eligible for more than one Lone Candidate in a Special Election
office to be filled in the same election. Upon the expiration of the deadline for the filing
of the certificates of candidacy in a special
If he files a certificate of candidacy for more election called to fill a vacancy in an elective
than one office, he shall not be eligible for position other than for President and Vice
either. President, when there is only one (1) qualified
candidate for such position, the lone candidate
Exception: Before the expiration of the period shall be proclaimed elected to the position by
for the filing of certificates of candidacy, the proper proclaiming body of the Commission on
person who has filed more than one certificate Elections without holding the special election
of candidacy, may: upon certification by the Commission on
i. Declare under oath the office for which Elections that he is the only candidate for the
he desires to be eligible before the office and is thereby deemed elected [Sec. 2,
R.A. No. 8295].
Page 269 of 384

In the absence of any lawful ground to deny c. Is disqualified for any cause
due course or cancel the certificate of He may be substituted by a candidate
candidacy in order to prevent such belonging to and nominated by the same
proclamation, as provided for under Secs. 69 political party.
and 78 of Batas Pambansa Blg. 881 also
known as the Omnibus Election Code of the When:
Philippines, the candidate referred to in the a. The substitute candidate nominated by the
preceding paragraph shall assume office not political party concerned may file his
earlier than the scheduled election day… [Sec. certificate of candidacy for the office
3, R.A. No. 8295] affected in accordance with the preceding
sections not later than midday of the day
2. Substitution and Withdrawal of of the election.
Candidates b. If the death, withdrawal or disqualification
should occur between the day before the
Withdrawal of Certificate of Candidacy election and mid-day of election day said
A person who has filed a certificate of certificate may be filed with any board of
candidacy may, prior to the election, withdraw election inspectors in the political
the same by submitting to the office concerned subdivision where he is a candidate, or, in
a written declaration under oath [Sec. 73, B.P. the case of candidates to be voted for by
Blg. 881]. the entire electorate of the country, with
the Commission [Sec. 77, B.P. Blg. 881].
Any person who withdraws shall not be eligible Note: For there to be a valid substitution of a
whether as a substitute candidate or not, for candidate, the latter must have filed a valid
any other position. certificate of candidacy.
Effects of Filing or Withdrawal of a A person who is disqualified under Sec. 68

Certificate of Candidacy OEC is only prohibited from continuing as a
a. Filing or withdrawal shall not affect candidate, but his COC remains valid. He may
whatever civil, criminal or administrative therefore be substituted.
liabilities which a candidate may have On the other hand, a person whose COC is
incurred [Sec. 73, B.P. Blg. 881]. cancelled or denied due course under Sec. 78
b. If the candidate who withdraws is the for false material representation is considered
official candidate of a registered or to have a COC that is void ab initio. Thus, he
accredited political party, “the same cannot be validly substituted [Talaga v.
political party may file a certificate of COMELEC, G.R. No. 196804 (2012)].
candidacy to replace the candidate.” The
substitute must file his COC not later than No substitute shall be allowed for any
mid-day of election day [Sec. 77, B.P. Blg. independent candidate [Recabo, Jr. v.
881]. COMELEC, G.R. No. 134293 (1999);
c. The withdrawal of a certificate of COMELEC Resolution No. 10430].
candidacy does not necessarily render the
certificate void ab initio. Once filed, the 3. Nuisance Candidates
permanent legal effects produced thereby The Commission may motu proprio or upon a
remain even if the certificate itself be verified petition of an interested party, refuse to
subsequently withdrawn [Limbona v. give due course to or cancel a certificate of
COMELEC, G.R. No. 181097 (2008)]. candidacy if it is shown that said certificate has
been filed to put the election process in
Substitution mockery or disrepute or to cause confusion
Grounds: If after the last day for filing of the among the voters by the similarity of the names
certificates of candidacy, an official candidate of the registered candidates or by other
of a registered political party: circumstances or acts which clearly
a. Dies; demonstrate that the candidate has no bona
b. Withdraws; or fide intention to run for the office for which the
Page 270 of 384

certificate of candidacy has been filed and thus and receive evidence. The proceeding
prevent a faithful determination of the true will shall be summary in nature.
of the electorate [Sec. 69, B.P Blg. 881]. a. In lieu of oral testimonies, the parties
may be required to submit position
Grounds papers together with affidavits or
The Certificate of Candidacy has been filed: counter-affidavits and other
1. To put the election process in mockery, or documentary evidence.
disrepute; b. The hearing officer shall immediately
2. To cause confusion among the voters by submit to the Commission his findings,
the similarity of the names of the reports, and recommendations within
registered candidates; or five (5) days from the completion of
3. Clearly demonstrate that the candidate such submission of evidence.
has no bona fide intention to run for the c. The Commission shall render its
office for which the certificate of candidacy decision within five (5) days from
has been filed and thus prevent a faithful receipt thereof.
determination of the true will of the
electorate [Sec. 69, B.P. Blg. 881]. 5. The decision, order, or ruling of the
Commission shall, after five (5) days from
Procedure [R.A. No. 6646 or The Electoral receipt of a copy thereof by the parties, be
Reforms Law of 1987] final and executory unless stayed by the
Supreme Court.
Sec. 5. Procedure in Cases of Nuisance 6. The Commission shall within twenty-four
Candidates hours, through the fastest available
1. A verified petition to declare a duly means, disseminate its decision or the
registered candidate as a nuisance decision of the Supreme Court to the city
candidate under Section 69 of Batas or municipal election registrars, boards of
Pambansa Blg. 881: election inspectors and the general public
a. Filed personally or through duly in the political subdivision concerned.
authorized representative with the
Commission by any registered Who May Initiate:
candidate for the same office; 1. COMELEC motu proprio;
b. Within five (5) days from the last day for 2. Any interested party;
the filing of certificates of candidacy; 3. Any registered candidate for the same
c. Filing by mail shall not be allowed. office.
2. Within three (3) days from the filing of the The denial or cancellation of COCs of nuisance
petition, the Commission shall issue candidates may be “motu proprio or upon a
summons to the respondent candidate verified petition of an interested party, subject
together with a copy of the petition and its to an opportunity to be heard” [Timbol v.
enclosures, if any. COMELEC, G.R. No. 206004 (2015)].
3. The respondent shall be given three (3) Rules on Counting Votes Cast for Nuisance
days from receipt of the summons within Candidates
which to file his verified answer to the 1. If the person declared as a nuisance
petition, serving copy thereof upon the candidate and whose certificate of
petitioner. candidacy has been cancelled or denied
due course does not have the same name
Grounds for a motion to dismiss may be and/or surname as a bona fide candidate
raised as affirmative defenses. for the same office - the votes cast for such
nuisance candidate shall be deemed stray
4. The Commission may designate any of its pursuant to Section 9 of Rule 23.
officials who are lawyers to hear the case
Page 271 of 384

2. If the person declared as a nuisance 4. Effect of Disqualification
candidate and whose certificate of
candidacy has been cancelled or denied Disqualification under Sec. 68 differs from
due course has the same name and/or grounds for Petition to Deny or Cancel under
surname as a bona fide candidate for the Sec. 78.
same office - the votes cast shall not be
considered stray but shall be counted and Disqualification (under Sec. 68, among others)
tallied for the bona fide candidate. does not void a certificate of candidacy (COC),
i.e., the candidate is merely prohibited from
3. However, if there are two or more bona continuing as a candidate. In contrast,
fide candidates with the same name Cancellation (under Sec. 78) results in the
and/or surname as the nuisance COC being void ab initio, i.e., the person was
candidate - the votes cast for the nuisance never a valid candidate.
candidate shall be considered as stray
votes [COMELEC Resolution No. 9599, Rules if the Candidate is Disqualified
amending Sec. 5 of Rule 24 of the 1. If the disqualification becomes final before
COMELEC Rules of Procedure, as election day:
amended by COMELEC Resolution No. a. Any candidate who has been declared
9523]. by final judgment to be disqualified:
i. shall not be voted for; and
A petition to cancel or deny a COC under ii. the votes cast for him shall not be
Section 69 of the OEC should be counted.
distinguished from a petition to disqualify b. Hence, generally, if Candidate X has
under Section 68. Hence, the legal effect already been disqualified before
of such cancellation of a COC of a election day but still garnered the
nuisance candidate cannot be equated highest number of votes, those votes
with a candidate disqualified on grounds are considered as stray votes. The
provided in the OEC and Local candidate with the next highest number
Government Code. of votes will be proclaimed [See Codilla
v. De Venecia, G.R. No. 150605
4. In a multi-slot office, all votes cast in favor (2002)].
of the nuisance candidate whose name is
confusingly similar to a bona fide 2. If the disqualification is not yet final on
candidate shall not be automatically election day:
credited in the latter's favor. If the ballot a. If a candidate is not declared by final
contains one (1) vote for the nuisance judgment before any election to be
candidate and no vote for the bona fide disqualified and he is voted for and
candidate, that vote will be counted in the receives the winning number of votes in
latter's favor. However, if the nuisance such election:
candidate and the bona fide candidate i. the Court or COMELEC shall
each gets a vote, only one (1) vote will be continue with the trial and hearing of
counted in the latter's favor [Zapanta v. the action, inquiry, or protest; and
COMELEC, G.R. No. 233016 (2019)]. ii. upon motion of the complainant or
any intervenor, may during the
5. Candidate may not be disqualified as a pendency thereof, order the
nuisance candidate for the sole reason suspension of the proclamation of
that he failed to show proof of his financial such candidate whenever the
capacity to wage a nationwide campaign evidence of his guilt is strong [Sec.
[Marquez v. COMELEC, G.R. No. 244274 6, R.A. No. 6646].
(2019)].
3. If the disqualification is adjudged and
becomes final after election day:
Page 272 of 384

a. The second-placer in the vote count is placer is disqualified or declared ineligible
actually the first-placer among the should be limited to situations where the
qualified candidates, if disqualified due certificate of candidacy of the first-placer was
to Sec. 75 or 78 (COC void ab initio). valid at the time of filing but subsequently had
to be cancelled because of a violation of law
Maquiling v. COMELEC, G.R. No. 195649 that took place, or a legal impediment that took
(2013) abandoned the rule in Labo, Jr. v. effect, after the filing of the certificate of
COMELEC, supra, that when the voters are candidacy.
well aware within the realm of notoriety of a
candidate’s disqualification and still cast their If the certificate of candidacy is void ab initio,
votes in favor said candidate, then the eligible then legally the person who filed such a void
candidate obtaining the next higher number of certificate of candidacy was never a candidate
votes may be deemed elected. in the elections at any time. All votes for such a
noncandidate are stray votes and should not
The electorate’s awareness of the candidate’s be counted. Thus, such noncandidate can
disqualification is not a prerequisite for the never be a first-placer in the elections
disqualification to attach to the candidate. The [Jalosjos, Jr. v. COMELEC, supra].
very existence of a disqualifying circumstance
makes the candidate ineligible. Knowledge by 5. Duties of the Commission on
the electorate of a candidate’s disqualification Elections (COMELEC)
is not necessary before a qualified candidate
who placed second to a disqualified one can be Ministerial Duty of COMELEC to receive
proclaimed as the winner. Certificates of Candidacy:
That the disqualified candidate has already General Rule: The COMELEC shall have the
been proclaimed and has assumed office is of ministerial duty to receive and acknowledge
no moment. The subsequent disqualification receipt of the certificates of candidacy.
based on a substantive ground that existed Provided, that said certificates are under oath
prior to the filing of the certificate of candidacy and contain all the required data and in the
voids not only the COC but also the form prescribed by the Commission [OEC,
proclamation. Sec. 7; Cerafica v. COMELEC, G.R. No.
205136 (2014)].
Note: The purpose of a disqualification
proceeding is to prevent the candidate (a) from Exception: COMELEC may go beyond the
running or, if elected, (b) from serving, or (c) to face of the COC in the following:
prosecute him for violation of the election laws a. Nuisance candidates [OEC, Sec. 69];
[Ejercito v. COMELEC, G.R. No. 212398 b. Petition to deny due course or to cancel a
(2014)]. COC [OEC, Sec. 78]; or
c. Filing of a disqualification case on any of
Rule if the COC is Cancelled the grounds enumerated in Sec. 68, OEC.
A cancelled certificate of candidacy cannot
give rise to a valid candidacy, and much less to Powers and functions of the COMELEC
valid votes. Whether the COC is cancelled under Sec. 2, Art. IX-C of the 1987
before or after the elections is immaterial Constitution
because the cancellation on such ground 1. Enforce and administer all laws and
means he was never a candidate from the very regulations relative to the conduct of an
beginning, his certificate of candidacy being election, plebiscite, initiative, referendum,
void ab initio [Aratea v. COMELEC, G.R. No. and recall.
195229 (2012); Jalosjos, Jr. v. COMELEC, 2. Exercise exclusive original jurisdiction
supra]. over all contests relating to the elections,
returns, and qualifications of all elective
Decisions of the Court holding that the second- regional, provincial, and city officials, and
placer cannot be proclaimed winner if the first- appellate jurisdiction over all contests
Page 273 of 384
involving elective municipal officials constituting election frauds, offenses, and
decided by trial courts of general malpractices.
jurisdiction, or involving elective barangay 7. Recommend to the Congress effective
officials decided by trial courts of limited measures to minimize election spending,
jurisdiction. Decisions, final orders, or including limitation of places where
rulings of the Commission on election propaganda materials shall be posted,
contests involving elective municipal and and to prevent and penalize all forms of
barangay offices shall be final, executory, election frauds, offenses, malpractices,
and not appealable. Decide, except those and nuisance candidacies.
involving the right to vote, all questions 8. Recommend to the President the removal
affecting elections, including of any officer or employee it has
determination of the number and location deputized, or the imposition of any other
of polling places, appointment of election disciplinary action, for violation or
officials and inspectors, and registration of disregard of, or disobedience to, its
voters. directive, order, or decision.
3. Deputize, with the concurrence of the 9. Submit to the President and the Congress,
President, law enforcement agencies and a comprehensive report on the conduct of
instrumentalities of the Government, each election, plebiscite, initiative,
including the Armed Forces of the referendum, or recall.
Philippines, for the exclusive purpose of
ensuring free, orderly, honest, peaceful, III. CAMPAIGN
and credible elections.
4. Register, after sufficient publication,
political parties, organizations, or A. Concept
coalitions which, in addition to other
requirements, must present their platform 1. Definition
or program of government; and accredit The term “election campaign” or “partisan
citizens’ arms of the Commission on political activity” refers to an act designed to
Elections. Religious denominations and promote the election or defeat of a particular
sects shall not be registered. Those which candidate or candidates to a public office [Sec.
seek to achieve their goals through 79, B.P. Blg. 881].
violence or unlawful means, or refuse to
uphold and adhere to this Constitution, or It includes:
which are supported by any foreign a. Forming organizations, associations,
government shall likewise be refused clubs, committees or other groups of
registration. persons for the purpose of soliciting votes
5. Financial contributions from foreign and/or undertaking any campaign for or
governments and their agencies to against a candidate;
political parties, organizations, coalitions, b. Holding political caucuses, conferences,
or candidates related to elections, meetings, rallies, parades, or other similar
constitute interference in national affairs, assemblies, for the purpose of soliciting
and, when accepted, shall be an additional votes and/or undertaking any campaign or
ground for the cancellation of their propaganda for or against a candidate;
registration with the Commission, in c. Making speeches, announcements or
addition to other penalties that may be commentaries, or holding interviews for or
prescribed by law. against the election of any candidate for
6. File, upon a verified complaint, or on its public office;
own initiative, petitions in court for d. Publishing or distributing campaign
inclusion or exclusion of voters; literature or materials designed to support
investigate and, where appropriate, or oppose the election of any candidate; or
prosecute cases of violations of election e. Directly or indirectly soliciting votes,
laws, including acts or omissions pledges or support for or against a
candidate.
Page 274 of 384

Campaign does not include: b. Civil service officers or employees [Sec. 2
a. Acts performed for the purpose of (4), Art. IX-B, 1987 Constitution];
enhancing the chances of aspirants for c. Members of the military [Sec. 5 (3), Art.
nomination for candidacy to a public office XVI, 1987 Constitution];
by a political party, aggroupment, or d. Foreigners, whether juridical or natural
coalition of parties [e.g., primaries, persons [Sec. 81, B.P. Blg. 881].
conventions];
b. Public expressions of opinions or 4. Period
discussions of probable issues in a Campaign Periods [Sec. 5, R.A. No. 7166]
forthcoming election or on attributes or a. President, Vice President, Senators
criticisms of probable candidates (i.e., offices with national
proposed to be nominated in a constituencies): 90 days before the day
forthcoming political party convention of the election.
[Sec. 79, B.P. Blg. 881].
b. Members of the House of
2. Regulations Representatives, Elective Local
Regulation of Speech in the Context of Government Officials: 45 days before
Electoral Campaigns [The Diocese of the day of election.
Bacolod v. COMELEC, G.R. No. 205728
(2015)] c. Barangay Election: 15 days before the
a. If made by candidates or the members of day of election.
their political parties or their political
parties it may be regulated as to time, In the preparation of the election calendar, the
place, and manner. Commission may exclude the day before the
b. If made by persons who are not day of the election itself, Maundy Thursday and
candidates or who do not speak as Good Friday.
members of a political party which are,
taken as a whole, principally advocacies of Note: Election period is not the same with
a social issue that the public must consider campaign period. The former includes the 30
during elections, such regulation is days after election while the latter can only
unconstitutional. include the 90 days prior to election day [De
Leon].
Regulation of election paraphernalia will still be
constitutionally valid if it reaches into speech of 5. Equal Access to Media, Time, and
persons who are not candidates or who do not Space
speak as members of a political party if they are
not candidates, only if what is regulated is a. Print advertisements [Sec. 6.1, R.A.
declarative speech that, taken as a whole, has
No. 9006]
for its principal object the endorsement of a
i. Shall not exceed 1/4 page, in broad
candidate only. The regulation:
sheet and 1/2 page in tabloids thrice a
i. Should be provided by law;
week per newspaper, magazine or
ii. Reasonable;
other publications.
iii. Narrowly tailored to meet the objective of
enhancing the opportunity of all
b. TV advertisements [Sec. 6.2, R.A.
candidates to be heard and considering
the primacy of the guarantee of free No. 9006]
expression; and i. Shall not exceed 120 mins for bona fide
iv. Demonstrably the least restrictive means candidates and registered political
to achieve that object parties running for nationally elective
office, whether by purchase or
donation;
3. Prohibitions
ii. Shall not exceed 60 mins for bona fide
a. Members of the board of election
candidates and registered political
inspections [Sec. 173, B.P. Blg. 881];
parties running for locally elective
Page 275 of 384
office, whether by purchase or No franchise or permit to operate a radio
donation. or TV station shall be granted or issued,
suspended or cancelled during the
c. Radio advertisements [Sec. 6.2, election period [Sec. 6.4, R.A. No. 9006].
R.A. No. 9006]
i. Shall not exceed 180 mins for bona fide Any mass media columnist, commentator,
candidates and registered political announcer, reporter, on-air correspondent
parties running for nationally elective or personality who is a candidate for any
office, whether by purchase or elective public office or is a campaign
donation; volunteer for or employed or retained in
ii. Shall not exceed 90 mins for bona fide any capacity by any candidate or political
candidates and registered political party shall:
parties running for locally elective a. Be deemed resigned, if so required by
office, whether by purchase or their employer; or
donation. b. Take a leave of absence from his/her
work as such during the campaign
6. Right to Reply period [Sec. 6.6, R.A. No. 9006].
All registered parties and bona fide candidates No movie, cinematograph or documentary
shall have the right to reply to charges shall be publicly exhibited in a theater,
published against them. The reply shall be television station or any public forum during
given publicity by the newspaper, television the campaign period which:
and/or radio station which first printed or aired a. Portrays the life or biography of a
the charges with the same prominence or in the candidate [Sec. 6.7, R.A. No. 9006];
same page or section or in the same time slot b. Is portrayed by an actor or media
as the first statement [Sec. 10, R.A. No. 9006]. personality who is himself a candidate
[Sec. 6.8, R.A. No. 9006].
Note: The airtime rules are applied on a per
station basis. COMELEC Resolution No. 9615, Election Surveys
which adopts the “aggregate-based” airtime The measurement of opinions and perceptions
limits (i.e., applying the limits to all TV and radio of the voters as regards a candidate’s
stations taken as a whole) unreasonably popularity, qualifications, platforms or a matter
restricts the guaranteed freedom of speech of public discussion in relation to the election,
and of the press [GMA Network, Inc. v. including voters’ preference for candidates or
COMELEC, G.R. No. 205357 (2014)]. publicly discussed issues during the campaign
period.
7. Required Submissions to the
Note: Sec. 5.4 of R.A. No. 9006 providing that
COMELEC [Sec. 6.2 and 6.3, R.A. No. surveys affecting national candidates shall not
9006] be published 15 days before an election and
surveys affecting local candidates shall not be
1. Broadcast stations or entities - Copies published 7 days before an election is
of their broadcast logs and certificates of unconstitutional because:
performance for the review and a. It imposes a prior restraint on the freedom
verification of the frequency, date, time of expression;
and duration of advertisement broadcast b. It is a direct and total suppression of a
for any candidate or political party. category of expression even though such
suppression is only for a limited period;
2. All mass media entities - Copy of all c. The governmental interest sought to be
contracts for advertising, promoting or promoted can be achieved by means other
opposing any political party or the than the suppression of the freedom of
candidacy of any person for public office expression [Social Weather Stations, Inc.
within 5 days after its signing. v. COMELEC, G.R. No. 147571 (2001)].
Page 276 of 384

Exit Polls B. Premature Campaigning
Exit polls may only be taken subject to the
following requirements: General Rule: Any election campaign or
a. Pollsters shall not conduct their surveys partisan political activity for or against any
within 50m from the polling place, whether candidate outside of the campaign period is
said survey is taken in a home, dwelling prohibited and shall be considered as an
place and other places; election offense [Sec. 80, B.P. Blg. 881].
b. Pollsters shall wear distinctive clothing;
c. Pollsters shall inform the voters that they Exception: Political parties may hold political
may refuse to answer; and conventions to nominate their official
d. The result of the exit polls may be candidates within 30 days before the start of
announced after the closing of the polls on the period for filing a certificate of candidacy
election day and must clearly identify the [Sec. 15, R.A. No. 9369].
total number of respondents, and the
places where they were taken. Said In Penera v. COMELEC, G.R. No. 181613
announcement shall state that the same is (2009), at the time the supposed premature
unofficial and does not represent a trend campaigning took place, Penera was not
[Sec. 5.5, R.A. No. 9006]. officially a “candidate” although she already led
her certificate of candidacy. Under Section 15
The holding of exit polls and the dissemination of R.A. No. 9369, a person who files his
of their results through mass media constitute certificate of candidacy is considered a
an essential part of the freedoms of speech and candidate only at the start of the campaign
of the press. Hence, the COMELEC cannot period, and unlawful acts applicable to such
ban them totally in the guise of promoting candidate take effect only at the start of such
clean, honest, orderly and credible elections campaign period. Thus, a candidate is liable for
[ABS-CBN Broadcasting Corp. v. COMELEC, an election offense only for acts done during
G.R. No. 133486 (2000)]. the campaign period, not before. Before the
start of the campaign period, such election
8. Application for Rallies, Meetings offenses cannot be committed and any
and Other Political Activity partisan political activity is lawful.
All applications for permits must immediately
be posted in a conspicuous place in the city or C. Contributions
municipal building, and the receipt thereof Gift, donation, subscription, loan, advance or
acknowledged in writing. deposit of money or anything of value, or a
contract, promise or agreement to contribute
Applications must be acted upon in writing by (1) whether or not legally enforceable, (2)
local authorities concerned within 3 days after made for influencing the results of the
their filing. If not acted upon within said period, elections.
they are deemed approved.
Definition [Sec. 94, B.P. Blg. 881]
The only justifiable ground for denial of the i. Excludes services rendered without
application is when a prior written application compensation by individuals volunteering
by any candidate or political party for the same their time in behalf of a candidate or political
purpose has been approved. party;
ii. Includes the use of facilities voluntarily
Denial of any application for said permit is donated by other persons, the money value
appealable to the provincial election supervisor of which can be assessed based on the
or to the COMELEC whose decision shall be rates prevailing in the area.
made within 48 hours and which shall be final
and executory [Sec. 87, B.P. Blg. 881].
1. Prohibited Contributions
No contribution for purposes of partisan
political activity shall be made directly or
Page 277 of 384

indirectly by any of the following [Sec. 95 and i. Dances;
96, B.P. Blg. 881]: ii. Lotteries;
iii. Cockfights;
From public or private financial institutions iv. Games;
provided, however, that nothing herein shall v. Boxing bouts;
prevent the making of any loan: vi. Bingo;
a. By financial institutions which are legally in vii. Beauty contests;
the business of lending money; viii. Entertainments, or cinematographic,
i. The loan is made in accordance with theatrical or other performances.
laws and regulations; and
ii. The loan is made in the ordinary course b. For any person or organization, civic or
of business. religious, directly or indirectly, to solicit
b. Natural and juridical persons operating a and/or accept from:
public utility or in possession of or i. Any candidate; or
exploiting any natural resources of the ii. From his campaign manager, agent or
nation; representative; or
c. Natural and juridical persons who hold iii. Any person acting in their behalf, any
contracts or subcontracts to supply the gift, food, transportation, contribution or
government or any of its divisions, donation in cash or in kind from the
subdivisions or instrumentalities, with start of the election period up to and
goods or services or to perform including election day.
construction or other works;
d. Grantees of exemptions, incentives, or Exception: Normal and customary religious
similar concessions by the government or stipends, tithes, or collections on Sundays
any of its divisions, subdivisions or and/or other designated collection days
instrumentalities, including GOCCs;
e. Grantees, within 1 year prior to the date of 3. Prohibited Donations [Sec. 104. B.P.
the election, of loans or other Blg. 881]
accommodations in excess of P100,000
by the government or any of its divisions,
subdivisions or instrumentalities including Whether made directly or indirectly:
GOCCs; a. Donations, contribution or gift in cash or in
f. Educational institutions which have kind;
received grants of public funds amounting b. Undertaking or contribution to the
to no less than P100,000; construction or repair of roads, bridges,
g. Officials or employees in the Civil Service, school buses, puericulture centers,
or members of the Armed Forces of the medical clinics and hospitals, churches or
Philippines; chapels, cement pavements, or any
h. Foreigners and foreign corporations, structure for public use or for the use of
including foreign governments any religious or civic organization.
N.B. The underlying commonality is conflict of Made by a candidate, spouse, relative within
interest in sensitive government operations, or 2nd civil degree of consanguinity or affinity,
areas where government grants licenses and campaign manager, agent or representative;
special permits. treasurers, agents or representatives of
political party.
2. Prohibited Fund-Raising Activities
During campaign period, day before and day of
[Sec. 97, B.P. Blg. 881] the election.
a. The following are prohibited if held for
raising campaign funds or for the support Exceptions:
of any candidate from the start of the a. Normal and customary religious dues or
election period up to and including election contributions;
day:
Page 278 of 384
b. Periodic payments for legitimate or the Fair Election Act of 2001 [Sec. 3,
scholarships established and school R.A. No. 9006].
contributions habitually made before the
prohibited period. 2. Prohibited Acts
a. For any foreigner: [Sec. 81, B.P. Blg.
D. Lawful and Prohibited 881]
Election Propaganda i. Aid any candidate or political party,
directly or indirectly;
ii. Take part or influence in any manner in
1. Lawful Election Propaganda
any election;
a. Pamphlets, leaflets, cards, decals,
iii. Contribute or make any expenditure in
stickers, or other written or printed
connection with any election campaign
materials not larger than 8.5x14 inches;
or partisan political activity.
b. Handwritten or printed letters urging
voters to vote for or against any political b. For any person during the
party or candidate; campaign period: [Sec. 83, B.P. Blg.
c. Cloth, paper or cardboard posters, framed 881]
or posted, not larger than 2x3 feet; i. Remove, destroy, obliterate or in any
d. Streamers not larger than 3x8 feet are manner deface or tamper with lawful
allowed at a public meeting or rally or in election propaganda;
announcing the holding of such. May be ii. Prevent the distribution of lawful
displayed 5 days before the meeting or election propaganda.
rally and shall be removed within 24 hours c. For any candidate, political party,
after such; organization or any person: [Sec.
e. Paid advertisements in print or broadcast 89, B.P. Blg. 881]
media: i. Give or accept, directly or indirectly,
i. Bear and be identified by the free of charge, transportation, food or
reasonably legible or audible words drinks or things of value during the five
“political advertisement paid for” hours before and after a public
followed by the true and correct name meeting, on the day preceding the
and address of the candidate or party election, and on the day of the election;
for whose benefit the election ii. Give or contribute, directly or indirectly,
propaganda was printed or aired [Sec. money or things of value for such
4(1), R.A. No. 9006]. purpose.
ii. If the broadcast is given free of charge
by the radio or TV station, identified by Note: Sec. 85 “Prohibited Election
the words “airtime for this broadcast Propaganda” of B.P. Blg. 881 was
was provided free of charge by” repealed by Sec. 14 of R.A. No. 9006.
followed by the true and correct name
and address of the broadcast entity E. Limitations on Expenses
[Sec. 4(2), R.A. No. 9006].
iii. Print, broadcast or outdoor
advertisements donated to the
1. Lawful Expenditures
a. For travelling expenses of the candidates
candidate or political party shall not be
and campaign personnel in the course of
printed, published, broadcast or
the campaign and for personal expenses
exhibited without the written
incident thereto;
acceptance by said candidate or
b. For compensation of campaigners, clerks,
political party. Written acceptance must
stenographers, messengers, and other
be attached to the advertising contract
persons actually employed in the
and submitted to the COMELEC within
campaign;
5 days after its signing [Sec. 4.3, R.A.
c. For telegraph and telephone tolls,
No. 9006, cf. Sec. 6.3, R.A. No. 9006].
postage, freight and express delivery
f. All other forms of election propaganda not
charges;
prohibited by the Omnibus Election Code
Page 279 of 384
d. For stationery, printing and distribution of F. Statement of Contributions
printed matters relative to candidacy;
e. For employment of watchers at the polls; and Expenses (SOCE) [Sec. 14,
f. For rent, maintenance and furnishing of R.A. No. 7166]
campaign headquarters, office or place of
meetings; The SOCE shall:
g. For political meetings and rallies and the a. Contain the full, true and itemized
use of sound systems, lights and statement of all contributions and
decorations during said meetings and expenditures in connection with the
rallies; election;
h. For newspaper, radio, television and other b. Be filed by every candidate and treasurer
public advertisements; of the political party;
i. For employment of counsel c. Be filed with the COMELEC in duplicate
j. For copying and classifying list of voters, within 30 days after the day of the election.
investigating and challenging the right to
vote of persons registered in the lists; Section 14 of R.A. No. 7166 states that “every
k. For printing sample ballots in such color, candidate” has the obligation to file his
size and maximum number as may be statement of contributions and expenditures.
authorized by the Commission [Sec. 102, … The term “every candidate” must be deemed
BP Blg 881]. to refer not only to a candidate who pursued his
campaign, but also to one who withdrew his
Note: The cost of (i), (j), (k) shall not be taken candidacy [Pilar v. COMELEC, G.R. No.
into account in the computation of the 115245 (1995)].
candidate’s allowable limit of election Effect of Failure to File Statement [Sec. 14,
expenses [Sec. 102, B.P. Blg. 881]. R.A. No. 7166]
1. The person elected to any public office
The amount contributed by a donor shall be cannot enter upon the duties of his office.
included in the computation of the candidate’s
allowable limit of election expenses [Ejercito v. Note: The same prohibition applies if the
COMELEC, G.R. No. 212398 (2014)]. political party which nominated the
winning candidate fails to file the
2. For Candidates [Sec. 13, R.A. No. statements.
7166]
a. President and VP: P10 for every voter 2. Imposition of administrative fines (except
currently registered. candidates for elective barangay office).
b. Other candidates: P3 for every voter i. 1st offense P1,000 to 30,000 in the
currently registered in the constituency discretion of the Commission.
where he filed his certificate of candidacy.
To be paid within 30 days from receipt
Exception: A candidate without any political of notice of failure to file; Otherwise, it
party and without support from any political shall be enforceable by a writ of
party may be allowed to spend P5 for every execution issued by the Commission
such voter. against the properties of the offender.
3. For Political Parties ii. 2nd or subsequent offense P2,000 to

60,000 in the discretion of the
P5 for every voter currently registered in the
Commission.
constituency or constituencies where it has
official candidates.
Perpetual disqualification to hold public
office.
Page 280 of 384

It shall be the duty of every city or municipal candidacy if it is shown that said certificate has
election registrar to advise in writing, by been filed:
personal delivery or registered mail, within five a. To put the election process in mockery or
(5) days from the date of election all candidates disrepute;
residing in his jurisdiction to comply with their b. To cause confusion among the voters by
obligation to file their statements of the similarity of the names of the
contributions and expenditures. registered candidates or by other
circumstances or acts which clearly
demonstrate that the candidate has no
IV. REMEDIES AND bona fide intention to run for the office for
which the certificate of candidacy has
JURISDICTION been filed and thus prevent a faithful
determination of the true will of the
A. Petition to Deny Due Course electorate.
or Cancel a Certificate of
Candidacy B. Petition for Disqualification
An action or protest filed against any candidate
1. For any False Material where he/she may be declared by final
Representation [Sec. 78, OEC] decision of a competent court guilty of, or found
A verified petition to deny due course or to by the Commission of being disqualified based
cancel a certificate of candidacy. on the grounds below. In effect, he/she shall be
disqualified from continuing as a candidate, or
Grounds: Any material representation if he/she has been elected, from holding the
contained in the COC as required under office.
Section 74 hereof is false.
1. Grounds under Par. 1, Sec. 68, OEC
The material misrepresentation contemplated a. Given money or other material
by Section 78 of the Code refers to consideration to influence, induce or
qualifications for elective office. corrupt the voters or public officials
performing electoral functions;
Aside from the requirement of materiality, a b. Committed acts of terrorism to enhance
false representation under Section 78 must his candidacy;
consist of a “deliberate attempt to mislead, c. Spent in his election campaign an amount
misinform, or hide a fact which would otherwise in excess of that allowed by this Code;
render a candidate ineligible.” In other words, it d. Solicited, received or made any
must be made with an intention to deceive the contribution prohibited under Sections 89,
electorate as to one’s qualifications for public 95, 96, 97 and 104; or
office [Villafuerte v. COMELEC, G.R. No. e. Violated any of Sections 80, 83, 85, 86,
206698 (2014)]. and 261, paragraphs d, e, k, v, and cc,
subparagraph 6.
When to file: Any time not later than 25 days
from the time of the filing of the certificate of 2. Grounds under Par. 2, Sec. 68, OEC
candidacy. Any person who is a permanent resident of or
an immigrant to a foreign country, unless said
How decided: After due notice and hearing, person has waived his status as permanent
not later than fifteen days before the election. resident or immigrant of a foreign country in
accordance with the residence requirement
2. For Nuisance Candidates [Sec. 69, provided for in the election laws.
OEC]
A verified petition of an interested party or a 3. Grounds under Sec. 12, OEC
motu proprio decision of the Commission to a. Any person who has been declared by
deny due course or cancel a certificate of competent authority insane or
incompetent;
Page 281 of 384
b. Any person who has been sentenced by that the candidate is guilty of an election
final judgment for: offense and second, it is the Commission itself
i. Subversion; that found that the candidate committed any of
ii. Insurrection; the enumerated prohibited acts. Noteworthy is
iii. Rebellion; that in the second scenario, it is not required
iv. Any offense for which he has been that there be a prior final judgment; it is
sentenced to a penalty of more than 18 sufficient that the Commission itself made the
months; or determination. The conjunction “or” separating
v. A crime involving moral turpitude. “competent court” and “the Commission” could
only mean that the legislative intent was for
Exception: If the person has been given both bodies to be clothed with authority to
plenary pardon or granted amnesty. ascertain whether or not there is evidence that
the respondent candidate ought to be
Note: The disqualifications to be a candidate disqualified [Francisco v. COMELEC, G.R. No.
under this section shall be deemed removed: 230249 (2018)].
1. Upon the declaration by competent
authority that said insanity or Note: In Francisco v. COMELEC, supra, the
incompetence had been removed; or court rectified its ruling in Poe-Llamanzares v.
2. After the expiration of a period of 5 years COMELEC [G.R. Nos. 221697 & 221698-700
from his service of sentence, unless within (2016)] where it held that to disqualify a
the same period he again becomes candidate there must be a declaration by a final
disqualified. judgment of a competent court and that the
COMELEC has no jurisdiction to determine the
4. Grounds under Sec. 40, LGC for qualification of a candidate.
Local Elective Positions
a. Sentenced by final judgment for an
offense involving moral turpitude or for an Petition for Petition to Deny
Disqualification Due Course or
offense punishable by one (1) year or
[Sec. 68] Cancel COC [Sec.
more of imprisonment, within two (2) years 69 and 78]
after serving sentence;
b. Removed from office as a result of an Grounds
administrative case;
c. Convicted by final judgment for violating i. Sec. 12, OEC i. False material
the oath of allegiance to the Republic; representation in the
d. With dual citizenship; ii. Sec. 68, OEC COC;
e. Fugitives from justice in criminal or
nonpolitical cases here or abroad; iii. Sec. 40, LGC ii. Nuisance
candidate.
f. Permanent residents in a foreign country
or those who have acquired the right to Effect
reside abroad and continue to avail of the
same right after the effectivity of the LGC;
Person is prohibited Person is not treated
and to continue as a as a candidate at all,
g. Insane or feeble-minded. candidate or if as if he/she never
he/she has been filed a COC.
A prior court judgment is not required before elected, he is
the remedy under Sec. 68 of the OEC can prohibited from
prosper. This is highlighted by the provision holding the office.
itself, which contemplates two scenarios: first,
there is a final decision by a competent court
Page 282 of 384
Jurisdiction
Petition for Petition to Deny
Disqualification Due Course or The postponement, declaration of failure of
[Sec. 68] Cancel COC [Sec. election and the calling of special elections
69 and 78] shall be decided by the Commission sitting en
banc by a majority vote of its members. The
Substitution causes for the declaration of a failure of
election may occur before or after the casting
of votes or on the day of the election [Sec. 4,
Allowed (Rule of Not allowed R.A. No. 7166].
succession shall be (Candidate with the
observed). second highest
Conditions
number of votes
The following must concur:
shall assume office).
a. No voting has taken place in the precincts
Period for Filing concerned on the date fixed by law, or
even if there was voting, the election
nonetheless resulted in a failure to elect;
Any time before i. For false material and
proclamation of the representation in the b. The votes not cast would affect the results
winning candidate. COC: within 25 days of the election.
from filing of COC;
Procedure
ii. For nuisance 1. Petitioner files verified petition with the
candidates: within 5
Law Department of the COMELEC.
days from the last
2. Unless a shorter period is deemed
day of filing COCs.
necessary by circumstances, within 24
hours, the Clerk of Court concerned
C. Failure of Election, Call for serves notices to all interested parties,
indicating therein the date of hearing,
Special Election through the fastest means available.
3. Unless a shorter period is deemed
1. Failure of Election necessary by the circumstances, within 2
days from receipt of the notice of hearing,
Declaration of failure of election any interested party may file an opposition
It is neither an election case nor a pre- with the Law Department of the
proclamation controversy [Borja v. COMELEC, COMELEC.
G.R. No. 133495 (1998)]. 4. The COMELEC proceeds to hear the
petition. The COMELEC may delegate the
The COMELEC does not exercise its quasi- hearing of the case and the reception of
judicial functions when it declares a failure of evidence to any of its officials who are
elections pursuant to R.A. No. 7166. Rather, members of the Philippine Bar.
the COMELEC performs its administrative 5. The COMELEC then decides whether to
function when it exercises such power [Abayon grant or deny the petition. This lies within
v. HRET, G.R. No. 222236 & 223032 (2016)]. the exclusive prerogative of the
COMELEC.
The grounds for failure of election clearly
involve questions of fact. It is for this reason Postponement of Election [Sec. 5, OEC]
that they can only be determined by the The Commission, motu proprio or upon a
COMELEC en banc after due notice and verified petition by any interested party, after
hearing to the parties [Loong v. COMELEC, due notice and hearing, whereby all interested
G.R. No. 133676 (1999)]. parties are afforded equal opportunity to be
heard postpones the election upon a finding
that:
1. The following grounds are present:
Page 283 of 384

a. Violence; i. The Commission shall call a special
b. Terrorism; election to be held within 60 days after the
c. Loss or destruction of election vacancy occurs to elect the Member to
paraphernalia or records; serve the unexpired term.
d. Force majeure.
Any serious cause analogous to the foregoing. 2. In case of the dissolution of the Batasang
Pambansa:
2. As a result of the above grounds, the holding
of a free, orderly and honest election should i. The President shall call an election which
become impossible in any political subdivision. shall not be held earlier than 45 nor later
than 60 days from the date of such
Instances when there is Failure of Election dissolution.
[Sec. 6, OEC]
There is failure of elections when: The date of the special election shall be
1. The following grounds are present: reasonably close to the date of the election not
a. Force majeure; held, suspended or which resulted in a failure
b. Violence; to elect. The date shall not be later than 30
c. Terrorism; days after the cessation of the cause of such
d. Fraud; postponement or suspension of the election or
e. Other analogous causes. failure to elect.
2. The grounds resulted in any of the following: 2. Annulment of Election Results

a. Election has not been held on the date
fixed; Requisites [Abayon v. HRET, supra]
b. Election had been suspended before the 1. The illegality of the ballots must affect
hour fixed by law for the closing of the more than 50% of the votes cast on the
voting; or specific precinct or precincts sought to be
c. Election had been suspended after the annulled, or in case of the entire
voting and during the preparation and municipality, more than 50% of its total
the transmission of the election returns precinct and the votes cast therein; and
or in the custody or canvass thereof. 2. It is impossible to distinguish with
reasonable certainty between the lawful
3. In any of such cases, the failure or and unlawful ballots.
suspension would affect the result of the
election. Note: It must be concretely and directly
established (1) that the protestee was the one
Instances when Special Elections may be who had induced or actually perpetuated the
Called [Sec. 7, OEC] commission of the acts complained of and
Any interested party may file a verified petition demonstrated (2) that those incidents were part
to call for special elections. In case of of a scheme to frustrate the free expression of
postponement, the Commission may take the will of the electorate [Abayon v. HRET,
action motu proprio. In both cases, there shall supra].
be due notice and hearing. After which, the
Commission shall call for the holding or Failure of Election vs. Annulment of
continuation of the election not held, Election Results [Abayon v. HRET, supra]
suspended or which resulted in a failure to
elect. Failure of Election Annulment of
Election Results
Special Elections may also be called in the
Following Cases [Sec. 7, OEC] Who exercises
1. In case a vacancy arises in the Batasang
Pambansa 18 months or more before a regular Exercise of Incident of the
election: COMELEC’s judicial function of
Page 284 of 384
1. Illegal composition or proceedings of the
Failure of Election Annulment of
board of canvassers;
Election Results
2. The canvassed election returns are
administrative electoral tribunals. incomplete, contain material defects,
function. appear to be tampered with or falsified, or
contain discrepancies in the same returns
or in other authentic copies thereof as
Scope mentioned in Sections 233, 234, 235 and
236 of this Code;
3. The election returns were prepared under
Relates to the entire Only extends to duress, threats, coercion, or intimidation,
election in the election results or they are obviously manufactured or not
concerned precinct connected with the authentic; and
or political unit. election contest 4. When substitute or fraudulent returns in
before the electoral controverted polling places were
tribunal. canvassed, the results of which materially
affected the standing of the aggrieved
Objective candidate or candidates [Sec. 243, B.P.
Blg. 881].
To hold or continue To determine who
the elections, which among the In Rule 3, Sec. 1 of COMELEC Resolution No.
were not held or candidates garnered 8804 (2010) there are only two issues covered
were suspended, or a majority of the in a pre-proclamation controversy:
if there was one, legal votes cast. 1. Illegal composition of the BOC; and
resulted in a failure 2. Illegal proceedings of the BOC.
to elect.
Jurisdiction [Sec. 2, Rule 3, COMELEC
Resolution No. 8804]
D. Pre-Proclamation COMELEC has exclusive jurisdiction in pre-
Controversy proclamation controversies arising from
Any question pertaining to or affecting the national, regional or local elections.
proceedings of the board of canvassers which
may be raised by any candidate or by any A pre-proclamation controversy may be raised
registered political party or coalition of political by any candidate or by any registered political
parties before the board or directly with the party, organization, or coalition of political
Commission, or any matter raised under the parties before the BOC, or directly with the
following sections in relation to the preparation, Commission.
transmission, receipt, custody and appreciation
of the election returns [Sec. 241, B.P. Blg. 881]: Issues affecting the composition or
1. Sec. 233 (delayed, lost, or destroyed proceedings of the Boards may be initiated by
election returns); filing a verified petition before the Board or
2. Sec. 234 (material defects in the election directly with the Commission.
results);
3. Sec. 235 (tampered with or falsified If the petition is filed directly with the Board, its
election returns); and decision may be appealed to the Commission
4. Sec. 236 (discrepancies in election within three (3) days from issuance thereof.
returns). However, if commenced directly with the
Commission, the verified petition shall be filed
Issues that May be Raised in a Pre- immediately when the board begins to act
Proclamation Controversy illegally, or at the time of the appointment of the
The following shall be proper issues that may member of the board whose capacity to sit as
be raised in a pre-proclamation controversy: such is objected to.
Page 285 of 384

Nature of Proceedings correction of “manifest errors in the certificate
Heard summarily by the COMELEC after due of canvass or election returns.” To be manifest,
notice and hearing. This is because canvass the errors must appear on the face of the
and proclamation should be delayed as little as certificates of canvass or election returns
possible. sought to be corrected and/or objections
thereto must have been made before the board
When Not Allowed [Sec. 15, R.A. No. 7166 as of canvassers and specifically noted in the
revised by R.A. No. 9369] minutes of their respective proceedings
For the positions of President, Vice-President, [Chavez v. COMELEC, G.R. No. 105323
Senator, and Member of the House of (1992), but note that the correction of manifest
Representatives. errors is no longer part of the grounds for pre-
proclamation controversy as per COMELEC
Exceptions Reso 8804 (2010)].
However, this does not preclude the authority
of the appropriate canvassing body motu A pre-proclamation case under Sec. 30 is
propio or upon written complaint of an allowed only as an exception to the prohibition
interested person to correct manifest errors in under Section 15 of R.A. No. 7166, as
the certificate of canvass or election returns amended by R.A. No. 9369. xxx And, in this
before it [Sec. 15, R.A. No. 7166 as revised by case, the exception applies only to Congress
R.A. No. 9369]. or the COMELEC en banc acting as the NBC,
and not to local boards of canvassers who must
Questions affecting the composition or still be deemed covered by the prohibition on
proceedings of the board of canvassers may pre-proclamation controversies [Pimentel III v.
be initiated in the board or directly with the COMELEC, G.R. No. 178413 (2008)].
Commission in accordance with Section 19
hereof [Sec. 15, R.A. No. 7166 as revised by Issues that Cannot be Raised
R.A. No. 9369]. 1. Appreciation of ballots, as this is
performed by the BEI at the precinct level
The procedure on pre-proclamation and is not part of the proceedings of the
controversies shall be adopted when it appears BOC [Sanchez v. COMELEC, G.R. No.
that any certificate of canvass or supporting 78461 (1987)];
statement of votes by city/municipality or by 2. Technical examination of the signatures
precinct bears erasures or alterations which and thumb marks of voters [Matalam v.
may cast doubt as to the veracity of the number COMELEC, G.R. No. 123230 (1997)];
of votes stated herein and may affect the result 3. Prayer for re-opening of ballot boxes
of the election [Sec. 30, R.A. No. 7166 as [Alfonso v. COMELEC, G.R. No. 107847
revised by R.A. No. 9369]. (1994)];
1. Upon request of the presidential, vice 4. Padding of the Registry List of Voters of a
presidential or senatorial candidate municipality, massive fraud and terrorism
concerned or his party; [Ututalum v. COMELEC, G.R. No. 84843-
2. Congress or the Commission en banc, as 44 (1990), citing Espaldon v. COMELEC,
the case may be, shall, for the sole G.R. No. L-78987 (1987)];
purpose of verifying the actual number of 5. Challenges directed against the Board of
votes cast for President and Vice- Election Inspectors [Ututalum v.
President or senator, count the votes as COMELEC, supra];
they appear in the copies of the election 6. Fraud, terrorism and other illegal electoral
returns submitted to it. practices. These are properly within the
office of election contests over which
It is clear from Section 15 of R.A. No. 7166 that electoral tribunals have sole, exclusive
“pre-proclamation cases are not allowed in jurisdiction [Loong v. COMELEC, G.R. No.
elections for President, Vice-President, 133676 (1996)].
Senator and Member of the House of
Representatives.’’ What is allowed is the
Page 286 of 384

1. Illegal Composition of the Board of Procedure for Contested Composition or
Canvassers Proceedings of the Board [Rule 4, Sec. 5,
There is illegal composition of the BOC when, COMELEC Resolution No. 8804]
among other similar circumstances, any of the
members do not possess legal qualifications a. In case the petition is filed before the
and appointments. The information technology BOC:
capable person required to assist the BOC by 1. Upon receipt of the verified petition, the
R.A. No. 9369 shall be included as among BOC shall immediately announce the fact
those whose lack of qualifications may be of the filing of said petition and the
questioned [Sec. 1, Rule 4, COMELEC ground/s raised therein.
Resolution No. 8804]. 2. The BOC shall immediately deliberate on
the petition, and within a period of twenty-
2. Illegal Proceedings of the Board of four (24) hours, make a prompt resolution
thereon, which resolution shall be reduced
Canvassers into writing.
There are illegal proceedings of the BOC when
3. Should the BOC decide in favor of the
the canvassing is a sham or mere ceremony,
petition, it shall immediately inform the
the results of which are pre-determined and
Commission of its resolution. Thereafter,
manipulated as when any of the following
the Commission shall make the
circumstances are present:
appropriate action thereon.
a. Precipitate canvassing;
4. In no case shall the receipt by the BOC of
b. Terrorism;
the electronically transmitted precinct,
c. Lack of sufficient notice to the members of
municipal, city, or provincial results, be
the BOCs;
suspended by the filing of said petition.
d. Improper venue [Sec. 2, Rule 4,
5. The petitioner may appeal an adverse
COMELEC Resolution No. 8804].
resolution by the BOC to the COMELEC,
by notifying the BOC of his or her intent to
3. When and Where to File Pre- appeal, through a verbal, and a written and
Proclamation Controversy verified Notice of Appeal. The notice on
the BOC shall not suspend the formal
Ground: Composition or Proceedings of the proclamation of the official results of the
Board of Canvassers. election, until the final resolution of the
appeal.
Where to File: In the BOC or directly with the 6. Within forty-eight (48) hours from such
Commission, with a verified petition, clearly notice to the BOC, the petitioner shall
stating the specific ground/s for the illegality of submit before the Board a Memorandum
the composition and/or proceedings of the on Appeal stating the reasons why the
board [Sec. 3, Rule 4, COMELEC Resolution resolution being questioned is erroneous
No. 8804]. and should be reversed.
7. Upon receipt by the BOC of the petitioner’s
When to File: The petition questioning the memorandum on appeal, the Board shall
illegality, or the composition and/or forward the entire records of the petition at
proceedings of the BOC shall be filed the expense of the petitioner.
immediately when the BOC begins to act as 8. Upon receipt of the records herein referred
such, or at the time of the appointment of the to, the petition shall be docketed by the
member whose capacity to sit as such is Clerk of Commission and submitted to the
objected to, if it comes after the canvassing of COMELEC en banc for consideration and
the Board, or immediately when the decision.
proceedings become illegal [Sec. 4, Rule 4, 9. Within five (5) days therefrom the
COMELEC Resolution No. 8804]. COMELEC en banc shall render its
No law provides for a reglementary period decision on the appeal.
within which to file a petition for the annulment
of an election if there is as yet no proclamation
[Loong v. COMELEC, supra].
Page 287 of 384
b. If filed directly with the Commission: Effect of Proclamation of Winning
The petition shall be heard by the COMELEC Candidate
en banc under the following procedures. Upon A pre-proclamation controversy shall no longer
receipt of the petition by the COMELEC, the be viable after the proclamation and
Clerk of the Commission shall docket the same assumption into office by the candidate whose
and forthwith send summons to the BOC election is contested. The remedy is an
concerned with an order directing it to submit, election protest before the proper forum.
through the fastest verifiable means available,
its answer within forty-eight (48) hours. However, the prevailing candidate may still be
unseated even though he has been proclaimed
The COMELEC en banc shall resolve the and installed in office if:
petition within five (5) days from the filing of the a. The opponent is adjudged the true winner
answer, or upon the expiration of the period to of the election by final judgment of court in
file the same. an election contest;
b. The prevailing party is declared ineligible
4. Effect of Filing of Pre- Proclamation or disqualified by final judgment of a court
Controversy in a quo warranto case; or
The filing with the Commission of a petition to c. The incumbent is removed from office for
annual or to suspend the proclamation of any cause.
candidate shall suspend the running of the
period within which to file an election protest or When the proclamation is null and void, since
quo warranto proceedings [Sec. 248, B.P. Blg. the proclamation is no proclamation at all and
881]. the proclaimed candidate’s assumption of
office cannot deprive the COMELEC of the
The recourse by certiorari to the Supreme power to declare such nullity and annul the
Court, which is a right secured to the defeated proclamation.
party under Section 7, Title A, Article IX of the Illegal Proceedings Discovered After
1987 Constitution, is part of the annulment Proclamation [Sec. 4, Rule 4, COMELEC
proceeding. The case is not over until the Resolution No. 8804]
Supreme Court has given its verdict, hence, If the illegality of the proceedings of the BOC is
the computation of the ten-day-period for filing discovered after the official proclamation of the
an election contest does not begin until that supposed results, a verified petition to annul
verdict has been handed down by the Supreme the proclamation may be filed before the
Court [Gallardo v. Rimando, G.R. No. 91718 COMELEC within ten (10) days after the day of
(1990)]. proclamation.
The right of the prevailing party in the pre- Upon receipt of the verified petition, the Clerk
proclamation contest to the execution of of the Commission shall have the same
COMELEC’s decision does not bar the losing docketed and forthwith issue summons to the
party from filing an election contest [Gallardo v. parties to be affected by the petition, with a
Rimando, supra]. directive for the latter to file their answer within
five (5) days from receipt.
Partial Proclamation
Despite the pendency of a pre-proclamation Thereafter the case shall be deemed submitted
contest, the COMELEC may, motu proprio or for resolution, which shall not be later than
upon the filing of a verified petition and after seven (7) days from receipt of the answer.
due notice and hearing order the proclamation
of other winning candidates whose election will
not be affected by the outcome of the
controversy [Sec. 247, B.P. Blg. 881].
Page 288 of 384

E. Election Contest people in the choice of public officials may not
be defeated by mere technical objections
A contest between the defeated and winning [Saquilayan v. COMELEC, G.R. No. 157249
candidates on the ground of frauds or (2003)].
irregularities in the casting and counting of the
ballots, or in the preparation of the returns. It 1. Election Protest
raises the question of who actually obtained A petition contesting the elections or returns of
the plurality of the legal votes and therefore is an elective regional, provincial, or city official
entitled to hold the office [Samad v. shall be filed with the Commission by any
COMELEC, G.R. No. 107854 (1993)]. candidate who was voted for in the same office
and who Commission by any candidate who
General Rule was voted for in the same office and who
The filing of an election protest or a petition for received the second or third highest number of
quo warranto precludes the subsequent filing votes or, in a multi-slot position, was among the
of a pre-proclamation controversy, or amounts next four candidates following the last ranked
to the abandonment of one earlier filed, thus winner duly proclaimed, as reflected in the
depriving the COMELEC of the authority to official results of the election contained in the
inquire into and pass upon the title of the Statement of Votes. The party filing the protest
protestee or the validity of his proclamation. shall be designated as the protestant; the
adverse party shall be known as the protestee
The reason is that once the competent tribunal [Rule 6, COMELEC Reso 8804].
has acquired jurisdiction of an election protest
or a petition for quo warranto, all questions Who May File: A candidate who has duly filed
relative thereto will have to be decided in the a certificate of candidacy and has been voted
case itself and not in another proceeding for the same office.
[Samad v. COMELEC, supra].
When: Within 10 days after the proclamation of
Exceptions: the results of the election.
1. The board of canvassers was improperly
constituted; Note: This prescriptive period is suspended
2. Quo warranto was not the proper remedy; during the pendency of a pre-proclamation
3. What was filed was not really a petition for controversy between the same parties.
quo warranto or an election protest but a
petition to annul a proclamation; Grounds
a. The filing of a quo warranto petition or 1. Fraud;
an election protest was expressly made 2. Terrorism;
without prejudice to the pre- 3. Irregularities;
proclamation controversy or was made 4. Illegal acts committed before, during, or
ad cautelam; and after the casting and counting of votes.
b. The proclamation was null and void
[Samad v. COMELEC, supra]. Payment of Docket fee
Protestant has to pay a docket fee of P300 and
Nature an additional docket fee if there is a claim for
Summary proceeding of a political character damages. Failure to pay the basic docket fee
[Gardiner v. Romulo, G.R. No. L-8921 (1914)]. shall result in the dismissal of the protest [Soller
v. COMELEC, G.R. No. 139853 (2000)].
Purpose
To ascertain the candidate lawfully elected to 2. Quo Warranto
office [De Castro v. Ginete, G.R. No. L-30058 A sworn petition that can be filed by any voter
(1969)]. to contest the election of any member of
Congress or local government official on the
Laws governing election contests must be ground of ineligibility or of disloyalty to the
liberally construed to the end that the will of the
Page 289 of 384
Republic of the Philippines [Sec. 253, B.P. Blg.
Election Protest Quo Warranto
881].
obtained the majority but not to install the
It is a proceeding to unseat the respondent of the legal votes protestant in place.
from office but not necessarily to install the and therefore is
petitioner in his place [Samad v. COMELEC, entitled to hold the
supra]. office.
In a quo warranto proceeding, the petitioner is Can only be filed by Can be filed by any
not occupying the position in dispute [Samad v. a candidate who has voter.
COMELEC, supra]. duly filed a
certificate of It is not considered a
Who May File: Any voter. candidacy and has contest where the
been voted for. parties strive for
When to File: Within 10 days after the supremacy.
proclamation of the results of the election.
A protestee may be While the
Grounds ousted and the respondent may be
1. Ineligibility; protestant seated in unseated, the
2. Disloyalty to the Republic. the office vacated. petitioner will not be
seated.
In quo warranto proceedings referring to offices
filled by election, what is to be determined is
Execution Pending Appeal
the eligibility of the candidate elect, while in quo
COMELEC Rules of Procedure, Section 2,
warranto proceedings referring to offices filled
Rule 39 of the Rules of Court allows Regional
by appointment, what is determined is the
Trial Courts to order execution pending appeal
legality of the appointment. In the first case
upon good reasons stated in a special order
when the person elected is ineligible, the court
which may be made to apply suppletorily or by
cannot declare that the candidate occupying
analogy to election cases decided by them.
the second place has been elected, even if he
While execution pending appeal may be
were eligible, since the law only authorizes a
allowed under the foregoing rule, the said
declaration of election in favor of the person
provision must be strictly construed against the
who has obtained a plurality of votes, and has
movant as it is an exception to the general rule
presented his certificate of candidacy. In the
on execution of judgments. Following civil law
second case, the court determines who has
jurisprudence, the reason allowing for
been legally appointed and can and ought to
immediate execution must be of such urgency
declare who is entitled to occupy the office
as to outweigh the injury or damage of the
[Nuval v. Guray, G.R. No. L-30241 (1928)].
losing party should it secure a reversal of the
judgment on appeal [Camilian v. COMELEC,
Distinction between Election Protest and
G.R. No. 124169 (1997)].
Quo Warranto [Lokin v. COMELEC, G.R. No.
179431-32 and G.R. No. 180443 (2010)]
The trial court may grant a motion for execution
pending appeal based on “valid and special
Election Protest Quo Warranto reasons.”
Strictly a contest Refers to questions a. The public interest is involved or the will of
between the of disloyalty or the electorate;
defeated and ineligibility of the b. The shortness of the remaining portion of
winning candidates winning candidate. the term;
based on grounds of c. The length of time that the election contest
election frauds or It is a proceeding to has been pending [Santos v. COMELEC,
irregularities as to unseat the ineligible G.R. No. 155618 (2003)].
who actually person from office,
Page 290 of 384
Actual or Compensatory Damages ii. The MTC decision may be appealed to the
Actual or compensatory damages may be RTC within 10 days from receipt of a copy
granted in all election contests or in quo thereof by the aggrieved party;
warranto proceedings in accordance with law
iii. The RTC should decide the appeal within 30
[Sec. 259, B.P. Blg. 881].
days after filing.
Effect of Filing Petition to Annul or to
Suspend the Proclamation Summary of Rules on Jurisdiction
The filing with the Commission of a petition to
annul or to suspend the proclamation of any Elective Election Appeal Certiorar
candidate shall suspend the running of the Position Protest i
period within which to file an election protest or or Quo
quo warranto proceedings [Sec. 248, B.P. Blg. Warranto
881].
President PET N/A SC
Jurisdiction and Vice
1. SC (acting as PET): Over all contests President
relating to the election, returns, and
Senators SET N/A SC
qualifications of the President or Vice President
[Sec. 4, Art VII, 1987 Constitution].
Members HRET N/A SC
of the
2. HRET/SET: Over all contests relating to the House of
election, returns, and qualifications of their Reps
respective Members [Sec. 17, Art VI, 1987
Constitution]. Regional/ COMELE N/A SC
Provincial C
3. COMELEC: Over all contests relating to the City
elections, returns and qualifications of all Officials
elective regional, provincial and city officials
[Sec. 250, B.P. Blg. 881]. Municipal RTC COMELE SC
Officials C
4. RTC: Over contests involving municipal
Barangay MTC COMELE SC
officials [Sec. 251, B.P. Blg. 881].
Officials C
i. The RTC decision may be appealed to the
COMELEC within 5 days from promulgation
or receipt of a copy thereof by the aggrieved F. Recall
party [Sec. 22, R.A. No. 7166]; Recall is a mode of removal of a public officer
ii. The COMELEC shall decide the appeal by the people before the end of his term of
within 60 days after it is submitted for office [Garcia v. Commission on Elections,
G.R. No. 111511, October 5, 1993].
decision, but not later than 6 months after
the filing of the appeal, which decision shall Who may exercise: registered voters of a
be final, unappealable and executory [Sec. local government unit to which the local
22, R.A. No. 7166]. elective official subject to such belongs [Sec.
69, LGC].
5. MTC: Over election contests involving
barangay officials [Sec. 252, B.P. Blg. 881]. Ground: Loss of confidence [Sec. 69, LGC].
i. The MTC should decide within 15 days after When recall election is held:
a. Barangay, city, or municipal officials:
the filing;
not later than 30 days from completion.
b. Provincial officials: not later than 45
days from completion [Sec. 71, LGC].
Page 291 of 384
Initiation of recall process: supported by the necessary number of
By a petition of a registered voter supported by: registered voters.
a. 25% of registered voters if LGU has voting 2. COMELEC’s Certification of
population of not more than 20,000. Sufficiency. Within 15 days from filing of
b. 20% of registered voters if LGU has voting the petition, the COMELEC must certify
population of 20,000 to 75,000. In no case the sufficiency of the required number of
shall petitioners be less than 5,000. signatures. Failure to obtain the required
c. 15% of registered voters if LGU has voting number shall result in the automatic
population of 75,000 to 300,000. In no nullification of the petition.
case shall petitioners be less than 15,000. 3. Notice, Publication, and Posting. Within
d. 10% of registered voters if LGU has voting 3 days from certification of sufficiency,
population of more than 300,000. In no COMELEC shall:
case shall petitioners be less than 45,000. a. Provide the official subject of recall
[Sec. 70, LGC] with a copy of the petition;
b. Cause the publication of the petition for
Effects on official sought to be recalled: 3 weeks in a national newspaper and a
a. Automatically considered as candidate local newspaper of general circulation;
and is entitled to be voted upon [Sec. 71, and
LGC]; c. c. Cause its posting for 10 to 20 days at
b. Not allowed to resign while recall process conspicuous places.
is in progress [Sec. 73, LGC]. 4. Verification and Authentication of
Signatures. COMELEC verifies and
Effectivity of recall authenticates the signatures.
Upon election and proclamation of a successor 5. Filing of Candidacies. COMELEC
or the candidate receiving the highest number announces the acceptance of candidates
of votes cast during the election on recall [Sec. for the recall election, the official subject of
72, LGC]. the recall being automatically included in
the list.
Signature Requirement: The law states “upon 6. Setting of Election. COMELEC shall set
petition of at least 25% of registered voters” the election within 30 days upon
and not “signed by 25% of the registered completion of the above procedure in
voters.” The petition must be filed not by one barangays, cities, and municipalities; or
person but at least by 25% of the total number within 45 days in provinces.
of registered voters. While the initiatory recall
petition may not yet contain the signatures of at Limitations
least 25% of the total number of registered 1. Any local elective official may be the
voters, the petition must contain the names of subject of recall election only once during
at least 25% of the total number of registered his term of office for loss of confidence
voters in whose behalf only one person may [Sec. 74(a), LGC].
sign the petition in the meantime [Angobung vs 2. No recall election shall take place within
COMELEC, G.R. No. 126576 (1997)]. one (1) year from the date of the official’s
assumption to office or one (1) year
Note: The Angobung decision is likely no immediately preceding a regular local
longer good law as it was decided under the election [Sec. 74(b), LGC].
LGC’s original provisions on recall. As
amended by R.A. No. 9244, Sec. 70 of the LGC The phrase “regular local election” refers to an
seems to require that the petition already election where the office held by the local
contains the required number of signatures elective official sought to be recalled will be
upon the filing thereof [Gatmaytan]. contested and be filled by the electorate [Paras
v. COMELEC, G.R. No. 123169 (1996)].
Procedure
1. Petition. Filed by a registered voter in the As used in Sec. 74(b), LGC, “recall” refers to
LGU concerned to the COMELEC, the election itself by means of which voters
Page 292 of 384

decide whether they should retain their local prosecuting the alleged offenders before the
official or elect his replacement. Hence, recall regular courts of justice [Codilla, Sr. v. De
proceedings may be initiated within 1 year from Venecia, supra].
the official’s assumption of office as long as the
recall election is set outside such period Trial and decision
[Claudio v. COMELEC, G.R. No. 140560 General Rule: RTCs have exclusive original
(2000)]. jurisdiction to try and decide any criminal
actions or proceedings for violation of election
The phrase “immediately preceding a regular laws [Sec. 268, B.P. Blg. 881].
local election” in Sec. 74(b), LGC refers to the
day of the regular election, not the election Exception: MTCs exercise jurisdiction only
period which is normally at least 45 days over offenses relating to failure to register or to
immediately preceding the day of the election vote.
[Claudio v. COMELEC, supra].
Note: Failure to register to vote is no longer an
offense.
V. PROSECUTION OF
ELECTION OFFENSES B. Preferential Disposition of
Election Offenses
A. Jurisdiction over Election The investigating officer shall resolve the case
Offenses within 5 days from submission.
COMELEC has exclusive jurisdiction to
investigate and prosecute cases involving The courts shall give preference to election
violation of election laws [Sec. 2 (6), Art. IX-C, cases over all other cases except petitions for
Constitution]. writ of habeas corpus.
However, it may validly delegate the power to 1. Election Offenses

the Provincial Prosecutor or to the
Ombudsman. Registration
1. Failure of the Board of Election Inspectors
In the event that the COMELEC fails to act on to post the list of voters in each precinct
any complaint within 4 months from its filing, [Sec. 9, R.A. 7166];
the complainant may file the complaint with the 2. Change or alteration or transfer of a
fiscal or the Department of Justice, if warranted voter’s precinct assignment in the
[Sec. 265, B.P. Blg. 881]. permanent list of voters without the
express written consent of the voter [Sec.
It is not the duty of the COMELEC, as 4, R.A. 8189].
investigator and prosecutor, to gather proof in
support of a complaint filed before it Certificate of candidacy
[Kilosbayan v. COMELEC, G.R. No. 128054 1. Continued misrepresentation or holding
(1997)]. out as a candidate of a disqualified
candidate or one declared by final and
The jurisdiction of the COMELEC to disqualify executory judgment to be a nuisance
candidates is limited to those enumerated in candidate [Sec. 27f, R.A. 6646];
section 68 of the Omnibus Election Code. All 2. Knowingly inducing or abetting such
other election offenses are beyond the ambit of misrepresentation of a disqualified or
COMELEC jurisdiction. They are criminal and nuisance candidate [Sec. 27f, R.A. 6646];
not administrative in nature. Pursuant to 3. Coercing, bribing, threatening, harassing,
sections 265 and 268 of the Omnibus Election intimidating, terrorizing, or actually
Code, the power of the COMELEC is confined causing, inflicting or producing violence,
to the conduct of preliminary investigation on injury, punishment, torture, damage, loss
the alleged election offenses for the purpose of or disadvantage to discourage any other
Page 293 of 384
person or persons from filing a certificate Counting of votes
of candidacy in order to eliminate all other 1. Tampering, increasing, decreasing votes,
potential candidates from running in a or refusal to correct tampered votes after
special election [Sec. 5, R.A. 8295]. proper verification and hearing by any
member of the board of election inspectors
Election campaign [Sec. 27b, R.A. 6646];
1. Appointment or use of special policemen, 2. A special election offense to be known as
special agents or the like during the electoral sabotage and the penalty to be
campaign period [Sec. 261m, B.P. Blg. imposed shall be life imprisonment [Sec.
881]; 42, RA 9369];
2. Use of armored land, water or aircraft 3. Refusal to issue to duly accredited
during the campaign period [Sec. 261r, watchers the certificate of votes cast and
B.P. Blg. 881]; the announcement of the election, by any
3. Unlawful electioneering [Sec. 261k, B.P. member of the board of election inspectors
Blg. 881]; [Sec. 27c, R.A. 6646].
4. Acting as bodyguards or security in the
case of policemen and provincial guards Canvassing
during the campaign period [Sec. 261t, Any chairperson of the board of canvassers
B.P. Blg. 881]; who fails to give notice of meeting to other
5. Removal, destruction, obliteration, or members of the board, candidate or political
tampering of lawful election propaganda, party as required [Sec. 27e, R.A. 6646].
or preventing the distribution thereof [Sec.
83, B.P. Blg. 881 vis-à-vis Sec. 262, B.P. Acts of government or public officers
Blg. 881]. 1. Appointment of new employees, creation
of new positions, promotion, or giving
Voting salary increases within the election period
1. Vote-buying and vote-selling [Sec. 261a, [Sec. 261g, B.P. Blg. 881];
B.P. Blg. 881]; 2. Transfer of officers and employees in the
2. Conspiracy to bribe voters [Sec. 261b, civil service within the election period
B.P. Blg. 881]: A disputable presumption without the prior approval of the
of a conspiracy to bribe voters is created COMELEC [Sec. 261h, B.P. Blg. 881];
when there is proof that at least 1 voter in
different precincts representing at least Transfer and detail must be construed in
20% of the total precincts in any their legal and technical meaning. The act
municipality, city or province has been of the Mayor of physically transferring the
offered, promised or given money, office area of the municipal civil registrar
valuable consideration or other from its old location to the Office of the
expenditure by a candidate’s relatives, Mayor “some little steps” away does not
leaders and/or sympathizers for the constitute an election offense under this
purpose of promoting the election of such provision [Causing v. COMELEC, G.R.
candidate [Sec. 28, R.A. 6646]; No. 199139 (2014)].
3. Coercion of subordinates to vote for or 3. Intervening of public officers and
against any candidate [Sec. 261d, B.P. employees in the civil service in any
Blg. 881] – expressly repealed by R.A. No. partisan political activity [Sec. 261i, B.P.
7890 [see Javier v. COMELEC, G.R. No. Blg. 881];
215847 (2016)]; 4. Use of public funds for an election
4. Dismissal of employees, laborers, or campaign [Sec. 261o, B.P. Blg. 881];
tenants for refusing or failing to vote for 5. Illegal release of prisoners before and
any candidate [Sec. 261d(2), B.P. Blg. after election [Sec. 261n, B.P. Blg. 881];
881] – expressly repealed by R.A. No. 6. Release, disbursement or expenditure of
7890 [see Javier v. COMELEC, supra]; public funds during the prohibited period
5. Being a flying voter [Sec. 261z (2), B.P. [Sec. 261v, B.P. Blg. 881];
Blg. 881].
Page 294 of 384

7. Construction of public works, etc. during constitutes a ground for cancellation or
the prohibited period [Sec. 261w, B.P. Blg. revocation of the franchise.
881];
8. Suspension of elective local officials Note: Good faith is not a defense, as election
during the election period without prior offenses are generally mala prohibita.
approval of the COMELEC [Sec. 261x,
B.P. Blg. 881]. 2. Penalties
Coercion, intimidation, violence For individuals
1. Coercion of election officials and 1. Imprisonment of not less than 1 year but
employees; not more than 6 years, without probation
2. Threats, intimidation, terrorism, use of [Sec. 264, B.P. Blg. 881];
fraudulent devices or other forms of 2. Disqualification to hold public office;
coercion [Sec. 261e, B.P. Blg. 881]; 3. Deprivation of the right of suffrage.
3. Use of undue influence [Sec. 261j, B.P.
Blg. 881]; For a Foreigner
4. Carrying deadly weapons within the 1. Imprisonment of not less than 1 year but
prohibited area [Sec. 261p, B.P. Blg. 881]; not more than 6 years (without probation);
5. Carrying firearms outside residence or 2. Deportation after service of sentence.
place of business [Sec. 261q, B.P. Blg.
881]; For a Political Party
6. Organization or maintenance of reaction Payment of a fine not less than P10,000 after a
forces, strike forces, or similar forces criminal conviction.
during the election period [Sec. 261u, B.P.
Blg. 881]. Persons Required by Law to Keep
Prisoners in their Custody
Other prohibitions For prisoners illegally released from any
1. Unauthorized printing of official ballots and penitentiary or jail during the prohibited period,
election returns with printing where such prisoners commit any act of
establishments that are not under contract intimidation, terrorism or interference in the
with the COMELEC [Sec. 27a, R.A. 6646]; election, prison mayor in its maximum period
2. Wagering upon the results of elections [Sec. 264, B.P. Blg. 881].
[Sec. 261c, B.P. Blg. 881];
3. Sale, etc. of intoxicating liquor on the day C. Arrests in Connection with
fixed by law for the registration of voters in
the polling place, or the day before the Election Campaign
election or on election day [Sec. 261dd (1), Only upon a warrant of arrest issued by a
B.P. Blg. 881]; competent judge after all the requirements of
4. Opening booths or stalls within 30 meters the Constitution have been strictly complied
of any polling place [Sec, 261dd (2), B.P. with.
Blg. 881];
5. Holding fairs, cockfights, etc. on Election D. Prescription
Day [Sec. 261dd (3), B.P. Blg. 881]; Five years from the date of their commission. If
6. Refusal to carry election mail during the the discovery of the offense be made in an
election period [Sec. 261dd (4), B.P. Blg. election contest proceeding, the period of
881]. In addition to the prescribed penalty, prescription shall commence on the date on
such refusal constitutes a ground for which the judgment in such proceedings
cancellation or revocation of certificate of becomes final and executory [Sec. 267, B.P.
public convenience or franchise; Blg. 881].
7. Discrimination in the sale of airtime [Sec.
261dd (5), B.P. Blg. 881] In addition to the
prescribed penalty, such refusal
Page 295 of 384

E. Grant of Transactional Penalties
Immunity General Rule:
Any person guilty of violations of Sec. 261a a. Imprisonment of 8 years and one day to 12
(Votebuying and vote-selling) and 261b years without possibility of parole
(Conspiracy to bribe voters) of B.P. Blg. 881 b. Perpetual disqualification to hold public
who voluntarily gives information and willingly and any non-elective public office and
testifies on any violation of said sections in any c. Deprivation of the right of suffrage.
official investigation or proceeding shall be
exempt from prosecution and punishment for Exceptions: Those convicted of the crime of
the offenses with reference to which his electoral sabotage, which includes acts or
information and testimony were given, without offenses committed in any of the following
prejudice to his liability for perjury or false instances:
testimony [Sec. 28, RA 6646]. a. National elective office: When the
tampering, increase and/or decrease of
F. Prohibited Acts under R.A. votes perpetrated or the refusal to credit
9369 the correct votes or to deduct tampered
a. Utilizing without authorization, tampering votes is/are committed in the election of a
with, damaging, destroying or stealing: national elective office which is voted upon
1. Official ballots, election returns, and nationwide and the tampering, increase
certificates of canvass of votes used in and/ or decrease of votes or refusal to
the system; and credit the correct votes or to deduct
2. Electronic devices or their components, tampered votes, shall adversely affect the
peripherals or supplies used in the AES results of the election to the said national
such as counting machine, memory office to the extent that losing candidate/s
pack/diskette, memory pack receiver is /are made to appear the winner/s
and computer set. b. Regardless of the elective office involved:
b. Interfering with, impeding, absconding for When the tampering, increase and/or
purpose of gain, preventing the installation decrease of votes committed or the refusal
or use of computer counting devices and to credit the correct votes or to deduct
the processing, storage, generation and tampered votes perpetrated is
transmission of election results, data or accomplished in a single election
information; document or in the transposition of the
c. Gaining or causing access to using, figure / results from one election document
altering, destroying or disclosing any to another and involved in the said
computer data, program, system software, tampering increase and/or decrease or
network, or any computer-related devices, refusal to credit correct votes or deduct
facilities, hardware or equipment, whether tampered votes exceed 5,000 votes, and
classified or declassified; that the same adversely affects the true
d. Refusal of the citizens’ arm to present for results of the election
perusal its copy of election return to the c. Any and all other forms or tampering
board of canvassers; increase/s and/ or decrease/s of votes
e. Presentation by the citizens’ arm of perpetuated or in cases of refusal to credit
tampered or spurious election returns; the correct votes or deduct the tampered
f. Refusal or failure to provide the dominant votes, where the total votes involved
majority and dominant minority parties or exceed 10,000 votes
the citizens’ arm their copy of election
returns; and Any and all other persons or individuals
g. The failure to post the voters’ list within the determined to be in conspiracy or in
specified time, duration and in the connivance with the members of the BEIs or
designated location shall constitute an BOCs involved shall be meted the same
election offense on the part of the election penalty of life imprisonment.
officer concerned.
Page 296 of 384
LOCAL GOVERNMENTS
INTERNATIONAL LAW
LOCAL GOVERNMENTS POLITICAL LAW
A quasi-public corporation is a private
corporation that renders public service or
LOCAL supplies public wants, such as utility
companies. It combines the elements of both
GOVERNMENTS public and private. Though organized for
private profit, they are compelled by law or
contract to render public services.
I. PUBLIC
CORPORATIONS Government-Owned or Controlled
Corporation (GOCC) refers to any agency
organized as a stock or nonstock corporation,
A. Concept; Distinguished from vested with functions relating to public needs
Government-Owned or whether governmental or proprietary in nature,
Controlled Corporations and owned by the Government of the Republic
of the Philippines directly or through its
A corporation may be classified as either instrumentalities either wholly or, where
public (municipal), private, or quasi-public applicable as in the case of stock corporations,
corporations. to the extent of at least a majority of its
outstanding capital stock: Provided, however,
A public corporation is one that is organized That for purposes of this Act, the term “GOCC”
for the government of a portion of a state, such shall include GICP/GCE and GFI as defined
as a local government unit. It is created for herein [Sec. 3(o), R.A. No. 10149].
public use [Roger W. Cooley, Handbook of the
Law of Municipal Corporations, (1914)]. Non-chartered GOCC refers to a GOCC
organized and operating under Batas
A private corporation is one that is formed by Pambansa Bilang 68, or “The Corporation
some private purpose, benefit, aim, or end Code of the Philippines” [Sec. 3(p), R.A. No.
formed and organized under a general law on 10149].
corporation (e.g., Corporation Code of the
Philippines).
Public Private GOCC
Purpose Administration of For private Conducts both commercial and non-

civil or local aims, gain or commercial activity.
governments. benefits.
Operation Created by general Created by Created by special law or organized under the
of Law or special act. general law. Corporation Code.
Relations As state’s own Not state’s State-owned enterprise; The Government,

to the agency or agency or directly or indirectly, has ownership of the
State instrumentality. instrumentality. majority of the capital or has voting control.
B. Classifications private profit, they are compelled by law or

contract to render public services.
Examples of these corporations are utility,
Quasi-Corporations
railroad, warehouse, telegraph, telephone,
water supply corporations and transportation
Private corporations that render public service
companies. It must be stressed that a quasi-
or supply public wants, such as utility
public corporation is a species of private
companies. It combines the elements of both
corporations, but the qualifying factor is the
public and private. Though organized for
Page 298 of 384
type of service the former renders to the public: 2. Existence/nonexistence of a charter;
if it performs a public service, then it becomes 3. Whether the purpose of the corporation is
a quasi-public corporation [COA v. Pampilo, solely as a governmental agency or one for
Jr., G.R. No. 188760 (2020)]. self-government.
Municipal Corporations a. Elements

1. Legal Corporation/Incorporation;
Municipal Corporation is a body politic and 2. Corporate Name;
corporate constituted by the incorporation of 3. Inhabitants;
the inhabitants for the purpose of local 4. Territory.
government thereof. Established by law partly
as an agency of the state to assist in the civil 1. Legal Corporation or Incorporation
government of the country but chiefly to
regulate and administer the local or internal Refers to the law creating or authorizing the
affairs of the city, town, or district which is creation or incorporation of a municipal
incorporated. corporation.
Municipal Corporation vs. Public Refers to the statute creating the local
Corporation: government unit or, in case of barangays, the
Municipal Corporation applies to incorporated ordinance of a Province, or a Highly Urbanized
villages, towns and cities; with power of local City creating it, although a barangay may also
administration. be created through a statute.
Public Corporation connotes a broader term, 2. A Corporate Name by Which the

established for purposes connected with the Artificial Personality Is Known and in
administration of civil/ local government. Which All Corporate Acts Are Done
Municipal Corporation vs. Quasi- Under the Code [Sec. 13, LGC], the
Municipal Corporation: Sangguniang Panlalawigan may, in
The object of municipal corporation is public, consultation with the Philippine Historical
although incidents connected with it may be of Institute, change the name of the component
private nature, and so far it is subject to the cities and municipalities, upon the
rules of liability controlling private corporations recommendation of the Sanggunian
in the ownership of property. concerned, provided that the same shall be
effective only upon the ratification in a
Meanwhile, the quasi-public corporation is of a plebiscite, conducted for the purpose in the
private nature and object, with incidents only political unit directly affected.
that are public. The municipal corporation is the
only corporation standing as the representative 3. Inhabitants Constituting the
of the purely public corporation. Population
1. Municipal Corporation Proper – Refers to The Code has prescribed the minimum number
incorporated cities, towns, or villages of inhabitants in the creation of a local
invested with the power of local legislation; government unit. MCs are created for the civil
government of inhabitants and the
2. Quasi-Municipal Corporation – Quasi- administration of their local affairs; therefore,
corporation, operates directly as an agency MCs cease to have functions if there are no
of the state to help in the administration of inhabitants.
public functions.
4. Territory Within Which Local Civil
Tests: Government/Corporate Functions Are
1. Voluntary/involuntary nature of the Exercised
corporation;
Page 299 of 384
As a rule, territorial boundaries of municipal agency of the community in the administration
corporations must be definite, fixed or certain. of local affairs, a local government must be
An incorporation is void where the boundaries self-sufficient to exercise its corporate powers
of the municipal corporation are not described and serve its constituents [Lidasan v.
with certainty. COMELEC, G.R. No. L-28089 (1967)].
b. Dual Nature and Functions c. Requisites for Creation, Conversion,

Division, Merger or Dissolution
Local Government Code, Section 15. Political and
Corporate Nature of Local Government Units. – 1. Creation and Conversion
Every local government unit created or recognized
under this Code is a body politic and corporate General Requirements
endowed with powers to be exercised by it in
conformity with law. As such, it shall exercise
powers as a political subdivision of the national
Law and Ordinance
government and as a corporate entity representing A local government unit may be created,
the inhabitants of its territory. divided, merged, abolished or its boundaries
substantially altered either by law enacted by
Congress in the case of province, city,
Political and Corporate Nature: As ordinarily
municipality, or any other political subdivision,
constituted, municipal corporations (and this
or by ordinance passed by the Sangguniang
may be said of the National Government) have
Panlalawigan or Sangguniang Panglungsod
dual character: one governmental,
concerned in the case of a barangay located
legislative, or public; the other, proprietary
within its territorial jurisdiction, subject to such
or private.
limitations and requirements prescribed in the
Code.
Governmental and Proprietary Functions: A
municipal corporation has twin functions:
The creation of a municipal corporation is the
governmental (public or political) and
appropriate and exclusive function of sovereign
proprietary (private, patrimonial or corporate).
legislative power.
Governmental Function:
The power to create a municipal corporation
a. Administration of the power of the state;
cannot, in the absence of constitutional
b. Promoting the public welfare.
provisions permitting it, be delegated by the
Legislature to any inferior and subordinate
Proprietary Function: tribunal or board.
a. For the special benefit and advantage of
the community; Plebiscite
b. For the attainment of collective needs.
Note: Characterizing these dual functions is not 1987 Constitution, Article X, Section 10. No
province, city, municipality, or barangay may be
just for academic purposes. The importance of
created, divided, merged, abolished, or its boundary
this distinction can be exemplified in at least 2 substantially altered, except in accordance with the
respects: criteria established in the local government code and
a. Liability of municipalities for their own acts subject to approval by a majority of the votes cast in
and the acts of their officers; a plebiscite in the political units directly affected.
b. In the extent of legislative control over the
same. The Constitution specifically requires that a
plebiscite should be held in order to lawfully
The characterization also provides the legal create a municipal corporation [Sec. 10, Art. X,
basis for resolving issues brought before 1987 Constitution].
courts:
A cluster of 9 barangays cannot compose a Plebiscite affords those registered voters of a
municipality. The SC states that because of the locality affected by the creation, division,
second function of the LGU, i.e., serving as the
Page 300 of 384
merger, abolition, or alteration of the as they altered boundaries and diminished
boundaries of a local government unit to check the areas of territorial jurisdiction of the
the power of the Congress or the local City of Taguig without the benefit of a
government unit to carry out such actions. plebiscite as required in Section 10, Article
X of the 1987 Constitution. 3. Making the Writ
Plebiscite is required in the cases of downward of Preliminary Injunction dated August 2, 1994
conversion of an independent component city issued by this Court, explicitly referring to
to a mere component city of a province Parcels 3 and 4, Psu-2031 comprising Fort
[Miranda v. Aguirre, G.R. No. 133064 (1999)]. Bonifacio, be made PERMANENT.
The common denominator in Sec. 10, Art. X of
the 1987 Constitution is the material change in On September 28, 2022, the Supreme Court
the political and economic rights of the local has put an end to the land dispute between the
government units directly affected as well as city governments of Makati and Taguig in
the people therein. connection with the Fort Bonifacio Military
Reservation where the Bonifacio Global City
Taguig v Makati Complex is now located. The ruling affirmed
the Pasig RTC Branch 153's decision on July
On November 22, 1993, Taguig, then a 8, 2011 that “Fort Bonifacio Military
municipality, filed before the Regional Trial Reservation is confirmed to be part of the City
Court of Pasig City a Complaint against Makati of Taguig”.
(then also a municipality), Former Executive
Secretary Teofisto P. Guingona, Jr., Former How:
Department of Environment and Natural • Downward conversion - city-wide plebiscite
Resources Secretary Angel Alcala, and Former only;
Director of the Lands Management Bureau • Upward conversion - province-wide
Abelardo Palad, Jr. plebiscite is needed (because substantial
changes in boundaries take place, not just
The Complaint (Territorial Dispute Case) was in the physical boundaries but also
denominated as one for "Judicial Confirmation political) [Umali v COMELEC, G.R. No.
of the Territory and Boundary Limits of Tagig 203974 (2014)].
[sic] and Declaration of the Unconstitutionality
and Nullity of Certain Provisions of Presidential Who, Where:
Proclamations 2475 and 518, with Prayer for The plebiscite requirement requires the
Writ of Preliminary Injunction and Temporary participation of residents of the original local
Restraining Order." This was docketed as Civil government not just those residing in the local
Case No. 63896 and raffled to Branch 153 of government unit sought to be created.
the Regional Trial Court of Pasig City. In this
Complaint, Taguig asserted that the areas When:
comprising the Enlisted Men's Barangays, or Plebiscite schedule set by LGC 1991 is 120
EMBOs, as well as the area referred to as Inner days from the effectivity of the law; COMELEC
Fort in Fort Bonifacio, were within its territory however can postpone this if circumstances
and jurisdiction. warrant such.
In the Decision dated July 8, 2011, the COMELEC has the exclusive charge of the
Regional Trial Court, through Judge Briccio C. enforcement and administration of all laws
Ygaña (Judge Ygaña), ruled in favor of Taguig: relative to the conduct of elections for the
1. Fort Bonifacio Military Reservation purpose of ensuring free, orderly, and honest
consisting of Parcels 3 and 4, Psu-2031, is elections.
confirmed part of the territory of the plaintiff City
of Taguig; 2. Proclamation No. 2475, Series of
1986 and Proclamtion [sic] No. 518, Series of
1990 are hereby declared
UNCONSTITUTIONAL and INVALID, insofar
Page 301 of 384

Compliance with Criterion on Income, substantial compliance with the law is generally
Population, and/or Land Area held sufficient already.
General Rule: Creation of local government Specific Requirements

unit or its conversion from one level to another
shall be based on verifiable indicators or (1) Barangay
viability and projected capacity.
A barangay may be created, divided, merged,
a. Income abolished, or the boundaries substantially
1. Sufficient; altered:
2. Based on acceptable standards; a. by law or by an ordinance of the
3. Provide for all essential government Sangguniang Panlalawigan or
facilities and services and special Sangguniang Panlungsod;
functions commensurate with size of its b. subject to approval by a majority of the
population. votes cast in a plebiscite to be conducted
b. Population by the COMELEC in the local government
1. Be determined as the total number of unit or units directly affected;
inhabitants within the territorial c. Within such a period of time as may be
jurisdiction of the LGU concerned. determined by the laws or ordinance
creating said barangay.
c. Land Area
1. Contiguous (unless it comprises 2 or In the case of the creation of Barangays by the
more islands or is separated by a LGU Sangguniang Panlalawigan, the
independent of others); recommendation of the Sangguniang Bayan
2. Properly identified by metes and concerned shall be necessary.
bounds with technical descriptions;
3. Sufficient to provide for such basic Requirements:
services and facilities to meet the 1. Contiguous territory (need not be
requirements of its populace. contiguous IF it comprises of 2 or more
islands);
Compliance with the foregoing indicators shall 2. Population of at least 2000 inhabitants as
be attested to by the Department of Finance certified by the NSO, now PSA (outside
(DOF), National Statistics Office (NSO), now MM);
Philippine Statistics Authority (PSA) and the 3. Population of 5000 inhabitants for cities
Land Management Bureau of the Department and municipalities within Metro Manila and
of Environment and Natural Resources other metropolitan political subdivisions or
(DENR). in highly urbanized cities;
4. Territorial jurisdiction of the new barangay
Compliance is a question of fact. In shall be properly identified by metes and
administrative law, findings of facts by the bounds or by more or less permanent
administrative agencies are generally binding natural boundaries;
and conclusive. Findings of facts by DOF, PSA, 5. No income requirement; and
and DENR are accorded with respect and 6. The creation thereof shall not reduce the
presumption of regularity (unless there is grave land area, population or income of the
abuse of discretion). original barangay or barangays to less than
the minimum requirements prescribed in
Exception: “de minimis non curat lex”; The the Code.
erection of the municipality is not academic but
political. The courts shall apply, in cases Process:
challenging the existence of corporations, 1. The governor or city mayor may prepare a
those larger rules of life and action which consolidation plan for barangays based on
pertain to public affairs and give substantial the criteria prescribed in Sec 386 of the
justice. Above provisions are directory and LGC, within his territorial jurisdiction.
Page 302 of 384

2. The plan shall be submitted to the (3) City
Sangguniang Panlalawigan or
Sangguniang Panglungsod concerned for A city may be created, divided, merged,
appropriate action. abolished, or the boundaries substantially
3. For municipalities within the Metropolitan altered:
Manila area and other metropolitan political ● Only by Act of Congress;
divisions, the plan shall be prepared and ● Subject to approval by a majority of the
approved by the Sangguniang Bayan votes cast in a plebiscite to be conducted
concerned. by the COMELEC in the local government
unit or units directly affected;
(2) Municipality ● Held within 120 days from the date of its
effectivity, except as may otherwise be
A municipality may be created, divided, provided in the said Act.
merged, abolished, or the boundaries
substantially altered: A municipality or a cluster of barangays may be
● Only by Act of Congress; converted into a component city if:
● Subject to approval by a majority of the 1. It has locally generated average annual
votes cast in a plebiscite to be conducted income as certified by the DOF of at least
by the COMELEC in the local government P100 million for the last consecutive years
unit or units directly affected; based on 2,000 constant prices (limited to
● Held within 120 days from the date of its generally generated, excluding internal
effectivity, except as may otherwise be revenue allotments);
provided in the said Act. 2. If it has either of the following:
a. A contiguous territory of at least 100 sq.
Requirements: km, as certified by the LMB;
1. Average annual income of at least b. A population of not less than 150,000
P2,500,000 for the last two consecutive inhabitants, as certified by the NSO
years based on the 1991 constant prices, now PSA.
as certified by the provincial treasurer. 3. The creation thereof shall not reduce the
land area, population or income of the
The average annual income shall include original unit or units at the time of said
the income accruing to the general fund of creation to less than the minimum
the municipality, exclude the special funds, requirements prescribed in the Code;
transfers, and non-recurring income. 4. Territorial jurisdiction of the new
2. Population of 25,000 inhabitants as municipality shall be properly identified by
certified by the NSO now PSA. metes and bounds. Need not be
3. Contiguous territory of at least 50 sq. contiguous IF it comprises 2 or more
kilometers as certified by the LMB (need islands.
not be contiguous IF it comprises 2 or more
islands). (4) Highly Urbanized City
4. The creation thereof shall not reduce the
land area, population or income of the Have minimum population of 200,000
original municipality or municipalities at the inhabitants and latest annual income of at least
time of said creation to less than the P50 million.
minimum requirements prescribed in the
Code. The president has the duty to declare a city as
5. Territorial jurisdiction of the new highly urbanized within 30 days after meeting
municipality shall be properly identified by the minimum requirements, upon proper
metes and bounds. application and ratification through plebiscite.
Page 303 of 384

(5) Province municipal boundaries) or adjacent (lying near
to, but not actually touching).
A province may be created, divided, merged,
abolished, or the boundaries substantially Where 2 or more municipal corporations are
altered: consolidated under one government, the old
● Only by Act of Congress; corporation become extinct unless otherwise
● Subject to approval by a majority of the provided.
votes cast in a plebiscite to be conducted
by the COMELEC in the local government If there is consolidation, the ordinances of the
unit or units directly affected; 2 former cities will be and remain in force within
● Held within 120 days from the date of its the territory of the old cities, respectively UNTIL
effectivity, except as may otherwise be the common council of the consolidated city
provided in the said Act. shall enact a code of ordinances for the
government of the new municipality.
Requirements:
1. Average annual income as certified by the Once a municipal corporation is legislated out
DOF, of not less than P20 million based on of existence and its territory annexed to
1991 constant prices; another, the latter becomes:
2. Either of the following requisites: ● Entitled to all of its assets, property, and
a. A contiguous territory of at least 2000 immunities;
sq. km, as certified by the LMB; ● Severally liable for a proportionate share of
b. A population of not less than 250,000 all its then subsisting legal debts;
inhabitants, as certified by the NSO ● Vested with the power to raise revenue
now PSA. with which to pay them by levying taxes on
3. The territory need not be contiguous if it the property transferred and on the
comprises 2 or more islands or is persons residing there.
separated by a chartered city or cities
which do not contribute to the income of the The annexed territory:
province. ● Would be dissolved and becomes part of
and fall under the jurisdiction of the
(6) Merger and Division annexing corporation;
● Its officers or the agents would terminate
The division and merger of existing local their official relations with their offices;
government units shall comply with the same ● Title to properties would be passed on or
requirements prescribed for their creation. transferred without compensation;
● Debts and obligations contracted prior to
The division however: annexation will be assumed by the
● Shall NOT reduce the income, population, annexing corporation unless otherwise
or land area of the local government unit or provided in the law.
units concerned to less than the minimum
requirements prescribed in the Code; (7) Substantial Alteration of Boundaries
● Should not have income classification fall
below its current income classification No substantial alteration of boundaries of local
(prior to the division). government units shall take effect unless
approved by a majority of the votes cast in a
The income classification of local government plebiscite called for the purpose, conducted by
units shall be updated within 6 months from the the COMELEC, 120 days from effectivity of the
Code’s effectivity. This will reflect the changes law or ordinance of such action, unless said law
in their financial position resulting from the or ordinance fixes another date.
increased revenues.
General Rule: Territory to be annexed to a

municipality must be contiguous (touch the
Page 304 of 384

Nature of Boundaries - Physical and Any party may elevate the decision of the
Political sanggunian to the RTC having jurisdiction over
Boundaries - not limited to geographical the area in dispute. The RTC shall decide the
configuration, or physical changes in the metes appeal 1 year from the filing.
and bounds of the territory BUT ALSO a
modification of demarcation lines between (8) Abolition
political subdivisions.
The Legislature has the power to dissolve a
A resolution of a City Council mandating that municipal corporation and terminate its
the Real Property Tax Declaration of a existence.
taxpayer be transferred from one barangay to
another, effectively alters the boundaries of the When is a local government abolished?
barangays concerned. This is NOT permitted a. When its income, population or land area
unless there be a law/ordinance and a has been irreversibly reduced to less than
plebiscite as required by the Code [City of the minimum standards prescribed for its
Parañaque v. Katipunan ng mga Mamamayan creation under the Code;
ng Bagong Parañaque, Inc., G.R. No. 225158 b. The reduction must be certified by the
(2015)]. national agencies mentioned in Sec. 17 to
the Congress of the Sanggunian
Settlement of Boundary Disputes concerned.
Boundary disputes between and among local
government units shall, as much as possible, Congress may carry out the abolition in the
be settled amicably. case of a province, city, municipality or any
other political subdivision.
Local Government
Referred to: The Sangguniang Panlalawigan or
Units Involved
Sangguniang Panlungsod may carry out the
2 or more barangays in Sangguniang same in the case of a barangay except in
the same city or Panlungsod or Metropolitan Manila area and in cultural
municipality. Sangguniang Bayan communities.
concerned.
2 or more Sangguniang No abolition shall take effect unless approved
municipalities within Panlalawigan by a majority of the votes cast in a plebiscite
the same province. concerned. called for the purpose.
Municipalities or Jointly to the Irreversible reduction to less than the minimum
component cities of Sanggunians of the standards does NOT ipso facto abolish the
different provinces. provinces concerned. local government unit. It is merely a ground and
a further act, law or ordinance is required for
Component city or Component city or abolition to be effected.
municipality vs. highly municipality on the
urbanized city or highly one hand. (9) Autonomous Regions (Muslim
urbanized city vs. Mindanao and the Cordilleras)
highly urbanized city.
The 1987 Constitution itself mandates the
creation autonomous regions in Muslim
If the sanggunian fails to issue an amicable Mindanao and in the Cordilleras consisting of
settlement 60 days from referral, it shall issue provinces, cities, municipalities, and
a certificate to that effect. Thereafter, the geographical areas sharing common and
dispute shall be formally tried by the distinctive historical and cultural heritage,
sanggunian concerned which shall decide the economic, and social structures, and other
issue 60 days from the date of the certificate. relevant characteristics within the framework of
the Constitution.
Page 305 of 384

The creation of the autonomous region shall be (10) Beginning of Corporate Existence
effective when approved by the majority of the
votes cast by the constituent units in a Under the Local Government Code of 1991,
plebiscite, provided that only provinces, cities, when a new local government unit is created,
and geographical areas voting favorably in its corporate existence shall commence upon
such plebiscite shall be included in the the election and qualification of its chief
autonomous region. executive and a majority of the members of its
Sanggunian, unless some other time is fixed by
Region connotes more than one constitutional the law or ordinance creating it.
unit. Only one province favoring the creation of
the Cordillera Autonomous Region cannot In other words, the beginning of the corporate
validly constitute such region [Ordillo v. existence is what is fixed by the law or
COMELEC, 192 SCRA 100 (1990)]. ordinance. If silent, then it shall be upon the
election and qualification of the local chief and
majority of the Sanggunian members.
II. PRINCIPLES OF LOCAL AUTONOMY

1987 Constitution, Article X, Section 2. The
territorial and political subdivisions shall enjoy local
(c) It is likewise the policy of the State to require all
autonomy.
national agencies and offices to conduct periodic
consultations with appropriate local government
Local Government Code, Section 2. Declaration units, nongovernmental and people’s organizations,
of Policy. – (a) It is hereby declared the policy of the and other concerned sectors of the community
State that the territorial and political subdivisions of before any project or program is implemented in
the State shall enjoy genuine and meaningful local their respective jurisdictions.
autonomy to enable them to attain their fullest
development as self-reliant communities and make
them more effective partners in the attainment of A. Autonomy and
national goals. Toward this end, the State shall
provide for a more responsive and accountable local
Decentralization; Devolution
government structure instituted through a system of
decentralization whereby local government units Decentralization v. Devolution
shall be given more powers, authority,
responsibilities, and resources. The process of Decentralization refers to either
decentralization shall proceed from the national
government to the local government units.
● decentralization of administration
(b) It is also the policy of the State to ensure the (deconcentration); or
accountability of local government units through the ● decentralization of power (devolution).
institution of effective mechanisms of recall, initiative
and referendum.
Decentralization of Administration Decentralization of Power
Occurs when the central government delegates administrative

Abdication of political power in
powers to political subdivision in order to make it more
favor of LGUs declared to be
responsive [Limbona v. Mangellin, G.R. No. 80391 (1989)].
autonomous regions, making
the latter no longer accountable
Relieves the central government of the burden of managing
to the National government, but
local affairs and enables it to concentrate on national concerns.
to its constituency [Ganzon v.
CA, G.R. No. 93252 (1991)].
The President exercises “general supervision” over them
Page 306 of 384

Decentralization of Administration Decentralization of Power
only to “ensure that local affairs are administered according to

law.” He has no control over their acts in the sense that he can
substitute their judgments with his own [Ganzon v. CA, supra].
Devolution is the act by which the national throughout the State. A reason advanced for
government confers power and authority upon this view is that such ordinances are in excess
the various local government units to perform of the powers granted to the municipal
specific functions and responsibilities [Sec. 17, corporation [Batangas CATV, Inc. v. CA, G.R.
LGC]. No. 138810 (2004)].
The principle of local autonomy under the 1987 Local Autonomy and Decision Making
Constitution simply means decentralization
[Basco v. PAGCOR, G.R. No. 91649 (1991)]. Police power is the power to prescribe
regulations to promote the health, morals,
Note: Basco was decided prior to the LGC. peace, education, good order, safety, and
Basco holds that the Constitution guarantees general welfare of the people. As an inherent
decentralization but says nothing which attribute of sovereignty, police power primarily
precludes devolution. The Court later rests with the State. In furtherance of the
recognized that “the centerpiece of LGC is the State’s policy to foster genuine and meaningful
system of decentralization. Indispensable local autonomy, the national legislature
thereto is devolution and the LGC expressly delegated the exercise of police power to local
provides that “any provision on a power of a government units (LGUs) as agents of the
local government unit shall be liberally State. Such delegation can be found in Section
interpreted in its favor, and in case of doubt, 16 of the LGC, which embodies the general
any question thereon shall be resolved in favor welfare clause. Since LGUs exercise
of devolution of powers and of the lower local delegated police power as agents of the State,
government unit” [Tano v. Socrates, G.R. No. it is incumbent upon them to act in conformity
110249 (1997), citing Sec. 5(a), LGC]. to the will of their principal, the State.
Necessarily, therefore, ordinances enacted
The Constitution provides for political pursuant to the general welfare clause may not
autonomy (and not merely administrative subvert the State’s will by contradicting
autonomy) for autonomous regions [Cordillera national statutes [City of Batangas v. Phil. Shell
Broad Coalition v. COA, G.R. No. 79956 Petroleum Corp., G.R. No. 195003 (2017)].
(1990)].
Power of Supervision v. Power
Local Autonomy and National
Accountability
of Control
Where there is no express power in the charter 1987 Constitution, Article X, Section 4. The
of a municipality authorizing it to adopt President of the Philippines shall exercise general
supervision over local governments. Provinces with
ordinances regulating certain matters which
respect to component cities and municipalities, and
are specifically covered by a general statute, a cities and municipalities with respect to component
municipal ordinance, insofar as it attempts to barangays, shall ensure that the acts of their
regulate the subject which is completely component units are within the scope of their
covered by a general statute of the legislature, prescribed powers and functions.
may be rendered invalid.
Where the subject is of statewide concern, and The Constitution confines the President’s
the legislature has appropriated the field and power over local governments to one of
declared the rule, its declaration is binding general supervision.
Page 307 of 384
Supervision Control
Overseeing; the power or authority of an officer Power of an officer to alter or modify or nullify
to see that subordinate officers perform their or set aside what a subordinate officer has
duties. done in the performance of his duties.
If a subordinate fails, the superior may take If a subordinate fails, the superior may
such action or step as prescribed by law to substitute the judgment of the latter for that of
make them perform their duties. the former.
Supervising officials merely see to it that the

rules are followed, but they themselves do not Officers in control lay down the rules in the
lay down such rules, nor do they have the performance or accomplishment of an act. If
discretion to modify or replace them. If the rules these rules are not followed, they may, in their
are not observed, they may order the work discretion, order the act undone or redone by
done or redone, but only to conform to such their subordinates or even decide to do it
rules. They may not prescribe their own themselves.
manner of execution of the act.
[Pimentel, Jr. v. Aguirre, G.R. No. 132988 (2000)]
B. Local Fiscal Autonomy involves the delivery of basic services within

the jurisdiction of the LGU [Pimentel, Jr. v.
Ochoa, G.R. No. 195770 (2012)].
1987 Constitution, Article X, Section 5. Each
local government unit shall have the power to create
its own sources of revenues and to levy taxes, fees,
Under existing laws, LGUs enjoy not only
and charges subject to such guidelines and administrative autonomy, but also local fiscal
limitations as the Congress may provide, consistent autonomy.
with the basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to the This means that LGUs have the power to
local governments. create their own sources of revenue in addition
to their equitable share in the national taxes
Fiscal Autonomy and Self–Reliance: In order released by the national government, as well
to fully secure to the LGUs the genuine and as the power to allocate their resources in
meaningful autonomy that would develop them accordance with their own priorities.
into self-reliant communities and effective
partners in the attainment of national goals, It extends to the preparation of their budgets,
Section 17 of the Local Government Code and local officials in turn have to work within the
vested upon the LGUs the duties and functions constraints thereof. They are not formulated at
pertaining to the delivery of basic services and the national level and imposed on local
facilities. Paragraph (c) of the same provision governments, whether they are relevant to
provides a categorical exception of cases local needs and resources or not.
involving nationally funded projects, facilities,
programs and services. Local fiscal autonomy does not rule out any
manner of national government intervention by
The essence of this express reservation of way of supervision, to ensure that local
power by the national government is that, programs, fiscal and otherwise, are consistent
unless an LGU is particularly designated as the with national goals [Pimentel, Jr. v. Aguirre,
implementing agency, it has no power over a supra].
program for which funding has been provided
by the national government under the annual
general appropriations act, even if the program
Page 308 of 384
Sources of LGU Funds evaluation by the Development Budget
Coordinating Committee of the emerging fiscal
● Taxes, fees, and charges which accrue situation” is invalid and unconstitutional. The
exclusively for their use and disposition; “temporary” nature of the retention by the
● Just share in national taxes which shall be national government does not matter. Any
automatically and directly released to retention is prohibited [Pimentel, Jr. v. Aguirre,
them; supra].
● Equitable share in the proceeds from
utilization and development of national Since under Sec. 6, Art X of the Constitution,
wealth and resources within their territorial only the just share of local governments is
jurisdiction [Sec. 18, LGC]. qualified by the words “as determined by law,”
and not the release thereof, the plain
a. Internal Revenue Allotments implication is that Congress is not authorized
by the Constitution to hinder or impede the
automatic release of the IRA [ACORD, Inc. v.
1987 Constitution, Article X, Section 6. Local
Zamora, G.R. No. 144256 (2005)].
government units shall have a just share, as
determined by law, in the national taxes which shall
be automatically released to them. c. Consultation
General Rule: LGUs shall have a 40% share Local Government Code, Section 26. Duty of
in the national internal revenue taxes based on National Government Agencies in the Maintenance
of Ecological Balance. – It shall be the duty of every
the collection of the third fiscal year preceding national agency or GOCC authorizing or involved in
the current fiscal year [Sec. 284(c), LGC]. the planning and implementation of any project or
program that may cause pollution, climatic change,
Exception: When the national government depletion of non-renewable resources, loss of
incurs an unmanageable public sector deficit, cropland, rangeland, or forest cover, and extinction
the President is authorized to reduce the IRA of animal or plant species, to consult with the LGUs,
NGOs, and other sectors concerned and explain the
to 30% [Sec. 284, LGC]. goals and objectives of the project or program, its
impact upon the people and the community in terms
Requisites for the Exception of environmental or ecological balance, and the
1. Unmanageable public sector deficit; measures that will be undertaken to prevent or
2. Recommendation of the Secretaries of minimize the adverse effects thereof.
a. Finance;
b. Internal and Local Government; and
Local Government Code, Section 27. Prior
c. Budget and Management; and
Consultations Required. – No project or program
3. Consultation with shall be implemented by government authorities
a. Heads of both Houses of Congress; unless the consultations in Sections 2(c) and 26
and hereof are complied with, and prior approval of the
b. Presidents of the Liga [Sec. 284, LGC]. Sanggunian concerned is obtained.
b. Automatic Release Section 27 of the Code should be read in

conjunction with Section 26 thereof. Thus, the
The share of each LGU shall be released, projects and programs mentioned in Section 27
without need of any further action, directly to should be interpreted to mean projects and
the respective treasurer on a quarterly basis programs whose effects are among those
within 5 days after the end of each quarter, and enumerated in Sections 26 and 27, to wit, those
which shall not be subject to any lien or that: (1) may cause pollution; (2) may bring
holdback that may be imposed by the national about climatic change; (3) may cause the
government for whatever purpose [Sec. depletion of non-renewable resources; (4) may
286(a), LGC]. result in loss of crop land, rangeland, or forest
cover; (5) may eradicate certain animal or plant
Sec. 4 of A.O. 372, withholding 10% of the species; and (6) other projects or programs
LGUs’ IRA “pending the assessment and
Page 309 of 384
that may call for the eviction of a particular their own local executives and legislative
group of people residing in the locality where assemblies. The jurisdiction of the metropolitan
these will be implemented [Bangus Fry authority that will hereby be created shall be limited
Fisherfolk v. Lanzanas, G.R. No. 131442 to basic services requiring coordination.
(2003)].
Article X, Section 12. Cities that are highly
urbanized, as determined by law, and component
As to Subic Special Economic Zone (SSEZ): cities whose charters prohibit their voters from voting
Consultations are not required when the very for provincial elective officials, shall be independent
law unambiguously provides that the LGUs do of the province. The voters of component cities within
not retain their basic autonomy and identity a province, whose charters contain no such
when it comes to matters specified by the law prohibition, shall not be deprived of their right to vote
for elective provincial officials.
as falling under the powers, functions, and
prerogatives of the SBMA. Under R.A. No.
7227, the power to approve or disapprove 2. Under the LGC
projects within the SSEZ is one such power
over which the SBMA’s authority prevails over
Local Government Code, Section 3. Operative
the LGU’s authority [Paje v. Casiño, G.R. No. Principles of Decentralization. – The formulation
207257 (2015)]. and implementation of policies and measures on
local autonomy shall be guided by the following
Accountability operative principles:
(a) There shall be an effective allocation among the
different local government units of their
Local Government Code, Section 2(b). It is also respective powers, functions, responsibilities,
the policy of the State to ensure the accountability of and resources;
local government units through the institution of (b) There shall be established in every local
effective mechanisms of recall, initiative and government unit an accountable, efficient, and
referendum. dynamic organizational structure and operating
mechanism that will meet the priority needs and
service requirements of its communities;
a. Basic Principles (c) Subject to civil service law, rules and
regulations, local officials and employees paid
1. Under the 1987 Constitution wholly or mainly from local funds shall be
appointed or removed, according to merit and
fitness, by the appropriate appointing authority;
Article X, Section 1. The territorial and political (d) The vesting of duty, responsibility, and
subdivisions of the Republic of the Philippines are accountability in local government units shall be
the provinces, cities, municipalities, and barangays. accompanied with provision for reasonably
There shall be autonomous regions in Muslim adequate resources to discharge their powers
Mindanao and the Cordilleras as hereinafter and effectively carry out their functions; hence,
provided. they shall have the power to create and
broaden their own sources of revenue and the
Article X, Section 3. The Congress shall enact a right to a just share in national taxes and an
local government code which shall provide for a equitable share in the proceeds of the utilization
more responsive and accountable local government and development of the national wealth within
structure instituted through a system of their respective areas;
decentralization with effective mechanisms of recall, (e) Provinces with respect to component cities and
initiative, and referendum, allocate among the municipalities, and cities and municipalities with
different local government units their powers, respect to component barangays, shall ensure
responsibilities, and resources, and provide for the that the acts of their component units are within
qualifications, election, appointment and removal, the scope of their prescribed powers and
term, salaries, powers and functions and duties of functions;
local officials, and all other matters relating to the (f) Local government units may group themselves,
organization and operation of the local units. consolidate or coordinate their efforts, services,
and resources for purposes commonly
Article X, Section 11. The Congress may, by law, beneficial to them;
create special metropolitan political subdivisions, (g) The capabilities of local government units,
subject to a plebiscite as set forth in Section 10 especially the municipalities and barangays,
hereof. The component cities and municipalities shall shall be enhanced by providing them with
retain their basic autonomy and shall be entitled to opportunities to participate actively in the
Page 310 of 384

implementation of national programs and 3. The general welfare provisions in this Code
projects; shall be liberally interpreted to give more
(h) There shall be a continuing mechanism to powers to local government units in
enhance local autonomy not only by legislative accelerating economic development and
enabling acts but also by administrative and upgrading the quality of life for the people
organizational reforms;
in the community;
(i) Local government units shall share with the
national government the responsibility in the 4. Rights and obligations existing on the date
management and maintenance of ecological of effectivity of this Code and arising out of
balance within their territorial jurisdiction, contracts or any other source of prestation
subject to the provisions of this Code and involving a local government unit shall be
national policies; governed by the original terms and
(j) Effective mechanisms for ensuring the
conditions of said contracts or the law in
accountability of local government units to their
respective constituents shall be strengthened in force at the time such rights were vested;
order to upgrade continually the quality of local and
leadership; 5. In the resolution of controversies arising
(k) The realization of local autonomy shall be under this Code where no legal provision
facilitated through improved coordination of or jurisprudence applies, resort may be had
national government policies and programs and
to the customs and traditions in the place
extension of adequate technical and material
assistance to less developed and deserving where the controversies take place.
local government units;
(l) The participation of the private sector in local Effectivity Date of the Local Government
governance, particularly in the delivery of basic Code: January 1, 1992
services, shall be encouraged to ensure the
viability of local autonomy as an alternative
strategy for sustainable development; and Local Government Code, Section 5(d). Rights and
(m) The national government shall ensure that obligations existing on the date of effectivity of this
decentralization contributes to the continuing Code and arising out of contracts or any other source
improvement of the performance of local of prestation involving a local government unit shall
government units and the quality of community be governed by the original terms and conditions of
life. said contracts or the law in force at the time such
rights were vested;
Rules of Interpretation of the provisions

of the LGC [Sec. 5, LGC] Local Government Code, Sec. 536. Effectivity
1. Any provision on a power of a local Clause. – This Code shall take effect on January first,
government unit shall be liberally Nineteen Hundred Ninety-Two, unless otherwise
provided herein, after its complete publication in at
interpreted in its favor;
least one (1) newspaper of general circulation.
● In case of doubt, any question thereon
shall be resolved in favor of devolution
of powers and of the lower local
government unit. III. AUTONOMOUS
● Any fair and reasonable doubt as to the
existence of the power shall be
REGIONS AND THEIR
interpreted in favor of the local RELATION TO THE
government unit concerned.
2. In case of doubt, any tax ordinance or
NATIONAL GOVERNMENT
revenue measure shall be construed
strictly against the local government unit 1987 Constitution, Article X, Section 11. The
enacting it, and liberally in favor of the Congress may, by law, create special metropolitan
political subdivisions, subject to a plebiscite as set
taxpayer;
forth in Section 10 hereof. The component cities and
● Any tax exemption, incentive or relief municipalities shall retain their basic autonomy and
granted by any local government unit shall be entitled to their own local executive and
pursuant to the provisions of this Code legislative assemblies. The jurisdiction of the
shall be construed strictly against the metropolitan authority that will thereby be created
person claiming it.
Page 311 of 384
shall be limited to basic services requiring An Autonomous Region Is Considered a

coordination. Form of Local Government in Section 1,
Article X of the Constitution
1987 Constitution, Article X, Section 15. There From the perspective of the Constitution,
shall be created autonomous regions in Muslim
autonomous regions are considered one of the
Mindanao and in the Cordilleras consisting of
provinces, cities, municipalities, and geographical forms of local governments, as evident from
areas sharing common and distinctive historical and Article X of the Constitution entitled “Local
cultural heritage, economic and social structures, Government.” Autonomous regions are
and other relevant characteristics within the established and discussed under Sections 15
framework of this Constitution and the national to 21 of this Article — the article wholly devoted
sovereignty as well as territorial integrity of the
to Local Government. That an autonomous
Republic of the Philippines.
region is considered a form of local
government is also reflected in Section 1,
The autonomous regions must consist of Article X of the Constitution [Kida v. Senate of
provinces, cities, municipalities and the Philippines, G.R. No. 196271 (2011)].
geographical areas sharing:
1. Common and distinctive historical and The organic act of autonomous regions shall
cultural heritage; provide for legislative powers over:
2. Economic and social structures; ● Administrative organization;
3. Other relevant characteristics. ● Creation of sources of revenues;
● Ancestral domain and natural resources;
1987 Constitution, Article X, Section 16. The ● Personal, family, and property relations;
President shall exercise general supervision over ● Regional urban and rural planning
autonomous regions to ensure that laws are development;
faithfully executed. ● Economic, social, and tourism
development;
1987 Constitution, Article X, Section 17. All
● Educational policies;
powers, functions, and responsibilities not granted
by this Constitution or by law to the autonomous ● Preservation and development of cultural
regions shall be vested in the National heritage; and
Government. ● Such other matters as may be authorized
by law for the promotion of the general
1987 Constitution, Article X, Section 21. The welfare of the people of the region [Sec. 20,
preservation of peace and order within the regions
Art. X, 1987 Constitution].
shall be the responsibility of the local police
agencies which shall be organized, maintained,
supervised, and utilized in accordance with Note: The autonomous governments of
applicable laws. The defense and security of the Mindanao are subject to the jurisdiction of our
regions shall be the responsibility of the National national courts [Limbona v. Mangellin, G.R. No.
Government. 80391 (1989)].
An autonomous region is created via the Plebiscite Required

enactment of an organic act by Congress with
participation of the regional consultative
1987 Constitution, Article X, Section 18(2). The
commission. The organic act shall: creation of autonomous region shall be effective
1. Define the basic structure of government when approved by a majority of the votes cast by the
for the region consisting of the executive constituent units in a plebiscite called for the
department and legislative assemblies, purpose, provided that only provinces, cities, and
both of which shall be elective and geographic areas voting favorably in such plebiscite
shall be included in the autonomous region.
representative of the constituent political
units; and,
2. Provide for special courts with personal, Majority Requirement: What is required by
family, and property law jurisdiction [Sec. the Constitution is a simple majority of votes
18, Art. X, 1987 Const.]. approving the Organic Act in individual
constituent units.
Page 312 of 384
A double majority in (1) all constituent units put Within their respective territorial
together, (2) as well as in the individual jurisdictions, LGUs shall ensure and
constituent units is not required [Abbas v. support:
COMELEC, G.R. No. 89651 (1989)]. 1. Preservation and enrichment of culture;
2. Promotion of health and safety;
Sole province cannot validly constitute an 3. Enhancement of the right of the people to
autonomous region: An autonomous region a balanced ecology;
cannot be created if only one province 4. Development of self-reliant scientific and
approved of its creation in the plebiscite called technological capabilities;
for the purpose [Ordillo v. COMELEC, G.R. No. 5. Improvement of public morals;
93054 (1990), on the plebiscite concerning the 6. Enhancement of economic prosperity and
Cordilleras]. social justice;
7. Promotion of full employment among
Not all amendments require plebiscite: Only residents;
amendments to, or revisions of, the Organic 8. Maintenance of peace and order;
Act constitutionally essential to the 9. Preservation of the comfort and
creation of autonomous regions — those convenience of its inhabitants [Sec. 16,
aspects specifically mentioned in the LGC].
Constitution which Congress must provide for
in the Organic Act — require ratification 1. Police Power
through a plebiscite.
General Welfare
Rationale: If all amendments to the Organic
Act have to undergo the plebiscite requirement
before becoming effective, this would hamper Local Government Code, Section 16. General Welfare.
– Every local government unit shall exercise the powers
the ARMM’s progress by impeding Congress expressly granted, those necessarily implied therefrom,
from enacting laws that timely address as well as powers necessary, appropriate, or incidental
problems as they arise in the region, as well as for its efficient and effective governance, and those which
weighing down the ARMM government with the are essential to the promotion of the general welfare.
costs that unavoidably follow the holding of a Within their respective territorial jurisdictions, local
plebiscite [Kida v. Senate of the Philippines, government units shall ensure and support, among other
things, the preservation and enrichment of culture,
G.R. No. 196271 (2011)]. promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support
IV. LOCAL GOVERNMENT the development of appropriate and self-reliant scientific
and technological capabilities, improve public morals,
UNIT (LGU) enhance economic prosperity and social justice, promote
full employment among their residents, maintain peace
and order, and preserve the comfort and convenience of
A. Powers their inhabitants.
Sources of Power
Police power is vested primarily with the
1. 1987 Constitution;
national legislature, which may delegate the
2. Local Government Code and special laws;
same to local governments through the
3. Charter of the LGU.
enactment of ordinances through their
legislative bodies (Sanggunian). This
Four Categories of Powers Exercised by
delegation is provided by the general welfare
LGUs
clause under Sec. 16 of the LGC.
1. Powers expressly granted;
2. Powers necessarily implied therefrom; Accordingly, the police power is exercised by
3. Powers necessary, appropriate, or
the Sangguniang Barangay, not the punong
incidental for efficient and effective barangay. The latter merely executes the laws
governance;
and ordinances already enacted [Cruz v.
4. Powers essential to the promotion of the Pandacan Hikers Club, Inc., G.R. No. 188213
general welfare [Sec. 16, LGC].
(2016)].
Page 313 of 384
It is a general rule that ordinances passed by interfere with personal liberty, with property,
virtue of the implied power found in the general and with business and occupations. Thus,
welfare clause must be reasonable, consonant persons may be subjected to certain kinds of
with the general powers and purposes of the restraints and burdens to secure the general
corporation, and not inconsistent with the laws welfare of the state and to this fundamental aim
or policy of the State [U.S. v. Salaveria, G.R. of government, the rights of the individual may
No. 13678 (1918)]. be subordinated. The ordinance which
regulates the location of funeral homes has
The exercise of police power must not violate been adopted as part of comprehensive zoning
the equal protection clause of the Constitution plans for the orderly development of the area
[Viray v. Caloocan, G.R. No. 23118 (1967)]. covered thereunder [Patalinghug v. Court of
Appeals, G.R. No. 104786 (1994)].
To properly invoke police power, not only must
it appear that the interest of the public generally The exercise of police power by the local
requires an interference with private rights, but government is valid unless it contravenes the
the means adopted must be reasonably fundamental law of the land, or an act of the
necessary for the accomplishment of the legislature, or unless it is against public policy,
purpose and not unduly oppressive upon or is unreasonable, oppressive, partial,
individuals [Balacuit v. Court of First Instance discriminating, or in derogation of a common
of Agusan del Norte and Butuan City, Br. II, right [Tayaban y Caliplip v. People, G.R. No.
G.R. No. L-38429 (1988)]. 150194 (2007)].
Municipal corporations are clothed with Test of a Valid Ordinance

authority to “enact such ordinances and issue For an ordinance to be deemed valid, it must
such regulations as may be necessary to carry meet the following test:
out and discharge the responsibilities 1. The interests of the public require an
conferred upon it by law, and such as shall be interference with private rights;
necessary and proper to provide for the health, 2. The means must be reasonably necessary
safety, comfort and convenience, maintain for the accomplishment of the purpose and
peace and order, improve public morals, not unduly oppressive of private rights;
promote the prosperity and general welfare of 3. No other alternative for the
the municipality and the inhabitants thereof, accomplishment of the purpose less
and insure the protection of property therein intrusive of private rights can work;
[Binay v. Domingo, G.R. No. 92389 (1991)]. 4. A reasonable relation must exist between
the purposes of the measure and the
Police power is usually exercised in the form of means employed for its accomplishment;
mere regulation or restriction in the use of
liberty or property for the promotion of the Thus, an ordinance that unduly oppresses
general welfare. It does not involve the taking private rights and other legitimate private
or confiscation of property with the exception of activities, even if originally sought to curtail
a few cases where there is a necessity to immorality in furtherance of general welfare,
confiscate private property in order to destroy it cannot be valid [White Light Corp. v. City of
for the purpose of protecting the peace and Manila, G.R. No. 122846 (2009)].
order and of promoting the general welfare
[City Government of Quezon City v. Ericta, To be considered as a valid police power
G.R. No. L-34915 (1983)]. measure, an ordinance must pass a two-
pronged test: the formal (whether the
The declaration of the said area as a ordinance is enacted within the corporate
commercial zone through a municipal powers of the LGU, and whether it is passed in
ordinance is an exercise of police power to accordance with the procedure prescribed by
promote the good order and general welfare of law); and the substantive (involves the inherent
the people in the locality. Corollary thereto, the merit, like the conformity of the ordinance with
state, to promote the general welfare, may the limitations under the Constitution and
Page 314 of 384

statutes as well as the requirements of fairness 3. Rational Basis Test
and reason, and its consistency with public Applies to all other subjects not covered by the
policy). first two tests.
Considering that the right to travel is a
The formalities in enacting an ordinance are fundamental right in our legal system
laid down in Section 53 and 54 of the LGC. guaranteed no less by our Constitution, the
These provisions require the ordinance to be strict scrutiny test is the applicable test. Under
passed by the majority of the members of the strict scrutiny test, a legislative
the Sanggunian concerned, and to be classification that interferes with the exercise of
presented by the mayor for approval. a fundamental right or operates to the
disadvantage of a suspect class is presumed
In order to declare it as a valid piece of local unconstitutional. Thus, the government has the
legislation, it must also comply with the burden of proving that the classification:
following substantive requirements, namely:
● It must not contravene the Constitution 1. Necessary to achieve a compelling State
or any statute; interest; and
● It must be fair, not oppressive; 2. Least restrictive means to protect such
● It must not be partial or discriminatory; interest or the means chosen is narrowly
● It must not prohibit but may regulate tailored to accomplish the interest
trade; [Samahan ng mga Progresibong
● It must be general and consistent with Kabataan v. Quezon City, G.R. No.
public policy; and 225442 (2017)].
● It must not be unreasonable.
2. Eminent Domain
An LGU is considered to have properly
exercised its police powers only if it satisfies
Local Government code, Section 19. Eminent
the following requisites to wit: (1) the interests Domain. – A local government unit may, through its
of the public generally, as distinguished from chief executive and acting pursuant to an ordinance,
those of a particular class, require the exercise the power of eminent domain for public use,
interference of the state (Equal Protection); or purpose or welfare for the benefit of the poor and
and (2) the means employed are reasonably the landless, upon payment of just compensation,
pursuant to the provisions of the Constitution and
necessary for the attainment of the object
pertinent laws: Provided, however, That the power
sought to be accomplished and not unduly of eminent domain may not be exercised unless a
oppressive (Due Process) [Mosqueda v. valid and definite offer has been previously made to
Pilipino Banana Growers & Exporters the owner, and such offer was not accepted:
Association, Inc., G.R. No. 189185 (2016)]. Provided, further, That the local government unit
may immediately take possession of the property
upon the filing of the expropriation proceedings and
Three tests of judicial scrutiny to determine
upon making a deposit with the proper court of at
reasonableness of classifications: least fifteen percent (15%) of the fair market value of
the property based on the current tax declaration of
1. Strict Scrutiny Test the property to be expropriated: Provided, finally,
When a classification either (i) interferes with That, the amount to be paid for the expropriated
the exercise of fundamental rights, including property shall be determined by the proper court,
based on the fair market value at the time of the
the basic liberties guaranteed under the
taking of the property.
Constitution; or (ii) burdens suspect classes.
*Cross-refer with RULES OF COURT (1997),
2. Intermediate Scrutiny Test Rule 67 on Expropriation.
Applies when a classification does not involve
suspect classes or fundamental rights, but a. Nature
requires heightened scrutiny, such as in
classifications based on gender and legitimacy. It is the government’s right to appropriate, in
the nature of a compulsory sale to the State,
private property for public use or purpose.
Page 315 of 384

Inherently possessed by the national government to serve the common need and
legislature, the power of eminent domain may advance the general welfare. Thus, the right of
be validly delegated to local governments, eminent domain appertains to every
other public entities and public utilities [Moday independent government without the necessity
v. CA, G.R. No. 107916 (1997)]. for constitutional recognition. The provisions
found in modern constitutions of civilized
b. Requisites for the Exercise of countries relating to the taking of property for
Eminent Domain by an LGU the public use do not by implication grant the
power to the government, but limit the power
In determining whether the power of eminent which would, otherwise, be without limit. Thus,
domain has been exercised by local our own Constitution provides that “[p]rivate
government units in accordance with law, the property shall not be taken for public use
following requisites must be present: without just compensation.” Furthermore, the
1. An ordinance is enacted by the local due process and equal protection clauses act
legislative council authorizing the local as additional safeguards against the arbitrary
chief executive, on behalf of the LGU unit, exercise of this governmental power.
to exercise the power of eminent domain or
pursue expropriation proceedings over a The exercise of the right of eminent domain,
particular private property. whether directly by the State or by its
2. The power of eminent domain is exercised authorized agents, is necessarily in derogation
for public use, purpose or welfare, or for the of private rights. It is one of the harshest
benefit of the poor and the landless. proceedings known to the law. Consequently,
3. There is payment of just compensation, as when the sovereign delegates the power to a
required under Art. III, Sec. 9 of the political unit or agency, a strict construction will
Constitution, and other pertinent laws. be given against the agency asserting the
4. A valid and definite offer has been power. The authority to condemn is to be
previously made to the owner of the strictly construed in favor of the owner and
property sought to be expropriated, but against the condemnor. When the power is
said offer was not accepted [Heirs of granted, the extent to which it may be
Suguitan v. City of Mandaluyong, G.R. No. exercised is limited to the express terms or
135087 (2000)]. clear implication of the statute in which the
grant is contained [Jesus is Lord Christian
c. Jurisdiction School Foundation, Inc. v. Municipality (now
City) of Pasig, G.R. No. 152230 (2005)].
An expropriation suit falls under the jurisdiction
of the RTCs. The subject of an expropriation e. Public Use, Purpose, or Welfare
suit is the government’s exercise of eminent
domain, a matter that is incapable of pecuniary The very foundation of the right to exercise
estimation [Barangay San Roque v. Heirs of eminent domain is a genuine necessity and
Pastor, G.R. No. 138896 (2000)]. that necessity must be of a public character.
Moreover, the ascertainment of the necessity
d. Ultimate Right of Sovereign Power must precede or accompany and not follow, the
taking of the land. Necessity does not mean an
The right of eminent domain is usually absolute, but only a reasonable or practical
understood to be an ultimate right of the necessity, such as would combine the greatest
sovereign power to appropriate any property benefit to the public with the least
within its territorial sovereignty for a public inconvenience and expense to the condemning
purpose. The nature and scope of such power party and the property owner consistent with
has been comprehensively described as such benefit [Masikip v. City of Pasig, G.R. No.
follows: 136349 (2006)].
“It is an indispensable attribute of sovereignty; Presently, there has been a shift from the literal
a power grounded in the primary duty of to a broader interpretation of “public purpose”
Page 316 of 384

or “public use” for which the power of eminent In expropriation cases, the determination of the
domain may be exercised. The old concept existence of a public purpose is NOT
was that the condemned property must actually necessary for a writ of possession to be issued
be used by the general public (e.g., roads, in favor of the expropriator [Francia, Jr. v.
bridges, public plazas, etc.) before the taking Municipality of Meycauayan, G.R. No. 170432
thereof could satisfy the constitutional (2008)].
requirement of “public use”. Under the new
concept, “public use” means public advantage, Eminent domain is generally described as “the
convenience, or benefit, which tends to highest and most exact idea of property
contribute to the general welfare and the remaining in the government” that may be
prosperity of the whole community, like a resort acquired for some public purpose through a
complex for tourists or housing project [Heirs of method in the nature of a forced purchase by
Ardona v. Reyes, G.R. Nos. L-60549, 60553 to the State. Also often referred to as
60555 (1983)]. expropriation and, with less frequency, as
condemnation, it is, like police power and
f. Ordinance Requirement taxation, an inherent power of sovereignty and
need not be clothed with any constitutional
LGUs must pass an ordinance, not a mere gear to exist; instead, provisions in our
resolution, to initiate an expropriation Constitution on the subject are meant more to
proceeding [Sps. Yusay v. CA, G.R. No. regulate, rather than to grant, the exercise of
156684 (2011)]. the power. It is a right to take or reassert
dominion over property within the state for
g. Just Compensation public use or to meet a public exigency and is
said to be an essential part of governance even
“Compensation” means an equivalent for the in its most primitive form and thus inseparable
value of the land (property) taken. The word from sovereignty [Air Transportation Office v.
“just” is used to intensify the meaning of the Gopuco, Jr., G.R. No. 158563 (2005)].
word “compensation;” to convey the idea that
the equivalent to be rendered for the property An expropriation suit is incapable of pecuniary
taken shall be real, substantial, full, and ample. estimation, accordingly, it falls within the
“Just compensation,” therefore, means a fair jurisdiction of the RTC, regardless of the value
and full equivalent for the loss sustained [City of the property. In expropriation proceedings,
of Manila v. Estrada, G.R. No. 7749 (1913)]. the requisites for authorizing immediate entry
are as follows: (1) the filing of a complaint for
Just compensation is determined as of the time expropriation sufficient in form and substance;
of taking [Sec. 19, LGC]. It is based on the fair and (2) the deposit of the amount equivalent to
market value of the property at the time of the 15 percent of the fair market value of the
taking of the property. property to be expropriated based on its
current tax declaration [Bardillon v. Masili of
h. Writ of Execution and Expropriation Calamba, Laguna, G.R. No. 146886 (2003)].
Suit
i. Valid and Definite Offer
A writ of execution may be issued by the court
upon filing a complaint for expropriation and The offer must be complete, indicating with
upon deposit, but this is not tantamount to sufficient clearness the kind of contract
condemnation of land. A hearing must first be intended and definitely stating the essential
held to determine whether the petitioner conditions of the proposed contract. An offer
complied with the provisions of the law (e.g., would require, among other things, a clear
that expropriation shall be resorted to only certainty on both the object and the cause or
when other modes of acquisition have been consideration of the envisioned contract [Jesus
exhausted) [City of Manila v. Serrano, G.R. No. is Lord Christian School Foundation Inc. v.
142304 (2001)]. Municipality (now City) of Pasig, G.R. No.
152230 (2005)].
Page 317 of 384

National Local Government

The offer to buy shall be in writing, and must Government Unit
specify the property sought to be acquired, the
reasons for its acquisition, and the price offered the expropriation
[Sec 35(a), IRR of the LGC]. case or the taking of
property, whichever
j. Requisites for the Immediate Entry comes first.
by the LGU
Assessed value of 15% FMV required
1. Filing of the complaint for expropriation property required to to be deposited in
sufficient in form and substance; and be deposited in order order to take
2. Deposit of an amount equivalent to 15% of to take immediate immediate
the fair market value of the property to be possession. possession.
expropriated based on the current tax
declaration [Sec. 19, LGC]. No formal and A formal and
definite offer definite offer is
Upon compliance with the requisites, the required. required.
issuance of a writ of possession becomes
ministerial. There is no need for a hearing for Socialized Housing (Urban Development
the writ to issue [City of Iloilo v. Legaspi, G.R. and Housing Act, R.A. No. 7279)
No. 154614 (2004)]. Under the Urban Development and Housing
Act, expropriation by an LGU for purposes of
k. Returning the Property urban land reform and socialized housing shall
occur only as a last resort. It must be shown by
When private land is expropriated for a the LGU that other methods of acquisition
particular public use and that purpose is (community mortgage, land swapping, land
abandoned, there is no “implied contract” that assembly or consolidation, land banking,
the properties will be used only for the public donation to the Government, joint venture
purpose for which they were acquired. agreements, and negotiated purchase) have
been exhausted [Sec. 10, R.A. No. 7279].
Property is to be returned only when it is
expropriated with the condition that when said If all the other methods have been exhausted
purpose is ended or abandoned, the former and expropriation to continue, the LGU shall
owner reacquires the property so expropriated, acquire lands for socialized housing in the
and not when the expropriation decree gives to following order:
the entity a fee simple which makes the land a. Government lands;
the expropriator the absolute owner of the b. Alienable lands of the public domain;
property [Air Transportation Office v. Gopuco, c. Unregistered or abandoned and idle lands;
Jr., G.R. No. 158563 (2005)]. d. Lands within Areas for Priority
Development;
National Government v. LGU Powers on e. Unacquired BLISS sites;
Eminent Domain f. Private lands [Sec. 9, R.A. No. 7279].
National Local Government
Government Unit Moreover, lands of small-property owners are
exempt from expropriation for purposes of
Inherent Power Delegated Power socialized housing.
An ordinance is Small Property Owners

No law is needed.
always required. “Small-property owners” are defined by two
elements:
Fair Market Value a. Owners of real property which consists of
FMV determined at
(FMV) determined at residential lands with an area of not more
the time of taking.
the time of filing of than 300 sq. meters in highly urbanized
Page 318 of 384
cities, and 800 sq. meters in other urban e. Not be contrary to law, public policy,
cities; and national economic policy, or in the
b. Do not own real property other than the restraint of trade;
same [Sec. 3(q), R.A. No. 7279]. f. The collection of local taxes, fees,
charges and other impositions shall in
3. Taxing Power no case be let to any private person;
g. The revenue collected pursuant to the
a. Fundamental Principles of Local and provisions of this Code shall inure
Real Property Taxation solely to the benefit of, and be subject
to the disposition by, the local
1. Power to Create Revenues government unit levying the tax, fee,
charge or other imposition unless
LGUs have the power to create their own otherwise specifically provided herein;
sources of revenues and to levy taxes, fees, and
and charges which shall accrue exclusively for h. Each local government unit shall, as far
their use and disposition and which shall be as practicable, evolve a progressive
retained by them [Sec. 18, LGC]. system of taxation.
The grant of taxing powers to LGUs under the
Constitution and the LGC does not affect the 4. Common Limitations on the Taxing
power of Congress to grant exemptions to Power of the LGU
certain persons, pursuant to a declared
national policy. The legal effect of the Generally, LGUs cannot impose taxes that are
constitutional grant to local governments already imposed by the National Government
simply means that in interpreting statutory such as:
provisions on municipal taxing powers, doubts 1. Income tax, except when levied on banks
must be resolved in favor of municipal and other financial institutions;
corporations [PLDT v. City of Davao, G.R. No. 2. Documentary stamp tax;
143867 (2001)]. 3. Taxes on estates, inheritance, gifts,
legacies and other acquisitions mortis
2. Local Taxing Authority [Sec. 132, causa, except as otherwise provided
LGC] herein;
4. Customs duties, registration fees of vessel
The power to impose a tax, fee, or charge or to and wharfage on wharves, tonnage dues,
generate revenue under this Code shall be and all other kinds of customs fees,
exercised by the Sanggunian of the local charges and dues except wharfage on
government unit concerned through an wharves constructed and maintained by
appropriate ordinance. the local government unit concerned;
5. Taxes, fees, and charges and other
3. Fundamental Principles [Sec. 130, impositions upon goods carried into or out
LGC] of, or passing through, the territorial
jurisdictions of local government units in
the guise of charges for wharfage, tolls for
a. Taxation shall be uniform in each local
government unit; bridges or otherwise, or other taxes, fees,
or charges in any form whatsoever upon
b. Taxes, fees, charges and other
impositions shall: such goods or merchandise;
6. Taxes, fees or charges on agricultural and
a. Be equitable and based as far as
practicable on the taxpayer’s ability aquatic products when sold by marginal
to pay; farmers or fishermen;
7. Taxes on business enterprises certified to
c. Be levied and collected only for public
purposes; by the Board of Investments as pioneer or
non-pioneer for a period of six (6) and four
d. Not be unjust, excessive, oppressive,
or confiscatory; (4) years, respectively from the date of
registration;
Page 319 of 384

8. Excise taxes on articles enumerated under instrumentality and not being a GOCC, is
the National Internal Revenue Code, as exempt from local taxation [MIAA v. CA, G.R.
amended, and taxes, fees or charges on No. 155650 (2006)].
petroleum products;
9. Percentage or value-added tax (VAT) on However, GOCCs are [generally] not exempt
sales, barters or exchanges or similar from local taxation [MIAA v. CA, supra].
transactions on goods or services except
as otherwise provided herein; 6. Requirements for a Valid Tax
10. Taxes on the gross receipts of Ordinance
transportation contractors and persons
engaged in the transportation of
Local Government Code, Section 186. Power To
passengers or freight by hire and common Levy Other Taxes, Fees or Charges. – Local
carriers by air, land or water, except as government units may exercise the power to levy
provided in this Code; taxes, fees or charges on any base or subject not
11. Taxes on premiums paid by way or otherwise specifically enumerated herein or taxed
reinsurance or retrocession; under the provisions of the National Internal
Revenue Code, as amended, or other applicable
12. Taxes, fees or charges for the registration
laws: Provided, That the taxes, fees, or charges
of motor vehicles and for the issuance of all shall not be unjust, excessive, oppressive,
kinds of licenses or permits for the driving confiscatory or contrary to declared national policy:
thereof, except tricycles; Provided, further, That the ordinance levying such
13. Taxes, fees, or other charges on Philippine taxes, fees or charges shall not be enacted without
products actually exported, except as any prior public hearing conducted for the purpose.
otherwise provided herein;
Local Government Code, Section 186. Procedure
14. Taxes, fees, or charges, on Countryside for Approval and Effectivity of Tax, Ordinances and
and Barangay Business Enterprises and Revenue Measures; Mandatory Public Hearings. –
cooperatives duly registered under R.A. The procedure for approval of local tax ordinances
No. 6810 and Republic Act Numbered and revenue measures shall be in accordance with
Sixty-nine hundred thirty-eight (R.A. No. the provisions of this Code: Provided, That public
hearings shall be conducted for the purpose prior to
6938) otherwise known as the
the enactment thereof: Provided, further, That any
“Cooperative Code of the Philippines” question on the constitutionality or legality of tax
respectively; and ordinances or revenue measures may be raised on
15. Taxes, fees or charges of any kind on the appeal within thirty (30) days from the effectivity
National Government, its agencies and thereof to the Secretary of Justice who shall render
instrumentalities, and local government a decision within sixty (60) days from the date of
receipt of the appeal: Provided, however, That such
units [Sec. 133, LGC].
appeal shall not have the effect of suspending the
effectivity of the ordinance and the accrual and
5. Persons Exempted from LGU’s Taxing payment of the tax, fee, or charge levied therein:
Power Provided, finally, That within thirty (30) days after
receipt of the decision or the lapse of the sixty-day
period without the Secretary of Justice acting upon
LGUs cannot impose taxes, fees, and charges
the appeal, the aggrieved party may file appropriate
on: proceedings with a court of competent jurisdiction.
1. Countryside and barangay business
enterprises;
2. Cooperatives duly registered under the The power to impose a tax, fee, or charge or to
Cooperative Code; and generate revenue under the LGC shall be
3. The National Government, its agencies exercised by the Sanggunian concerned
and instrumentalities, and local through an appropriate ordinance [Sec. 132,
government units [Sec. 133(n) to (o), LGC]. LGC].
An instrumentality of the State or National Tests of a Valid Ordinance:

Government is exempt from local taxation 1. It must not contravene the Constitution or
[Sec. 133(o), LGC]. Hence, the Manila any statute;
International Airport Authority, being such an 2. It must not be unfair or oppressive;
3. It must not be partial or discriminatory;
Page 320 of 384
4. It must not prohibit but may regulate trade; ordinance shall be deemed
5. It must be general and consistent with approved [Art. 108, LGC IRR].
public policy; and
6. It must not be unreasonable [Magtajas v. Note: The LCE, except the Punong
Pryce Properties Corp., Inc., G.R. No. Barangay, may veto any ordinance
111097 (1994)] on the ground that it is ultra vires or
prejudicial to public welfare. His
Note: An ordinance is presumed valid unless reasons shall be stated in writing.
declared otherwise by a court in an appropriate The LCE may veto an ordinance only
proceeding [Rural Bank of Makati, Inc., v. once [Art. 109, LGC IRR].
Municipality of Makati, G.R. No. 150763 f. The Sanggunian may override the veto
(2004)]. of the LCE by 2/3 vote of all its
members, thereby making the
7. Procedure for Approval and ordinance effective [Art. 109(c), LGC
Effectivity of Tax Ordinances IRR].
g. Once approved, the ordinance shall be
a. Publication - Within 10 days from the transmitted to the higher level
filing of the proposed tax ordinance, the Sanggunian for review. If no action is
same shall be published for 3 taken by the latter within 30 days after
consecutive days in a newspaper of submission, the same shall be deemed
local circulation or posted approved [Arts. 110 and 111, LGC
simultaneously in at least 4 IRR].
conspicuous public places within the h. Within 10 days after the approval of the
territorial jurisdiction of the LGU [Art. ordinance, certified true copies of all
276(b)(1), LGC IRR]. tax ordinances or revenue measures
b. Notices - The Sanggunian shall send shall be published in full for 3
written notices, specifying the date and consecutive days in a newspaper of
venue of public hearing, to the local circulation.
interested or affected parties operating
or doing business within the concerned Where there are no newspapers of
LGU [Art. 276(b)(2), (3), LGC IRR]. local circulation, it must be posted in at
c. Public hearing - The public hearing least 2 conspicuous and publicly
must be held not earlier than 10 days accessible places [Art. 276, LGC IRR].
from sending the notices, or the last
day of publication, or date of posting, 8. Withdrawal of Local Tax Exemption
whichever is later [Art. 276(b)(3), LGC Privileges
IRR].
d. Approval - An ordinance must be Unless otherwise provided in the LGC, tax
approved on third reading by a majority exemptions or incentives granted to, or
of the Sanggunian members present, enjoyed by all persons, whether natural or
there being a quorum [Art. 107(g), LGC juridical, including government-owned or -
IRR]. controlled corporations were withdrawn upon
e. The enacted ordinance shall be the effectivity of the LGC [Sec. 193, LGC].
presented to the local chief executive
(LCE), who may: Tax exemption privileges of the following were
1. Approve the same by affixing his not withdrawn by the LGC:
signature; or a. Local water districts;
2. Veto and return the same with his b. Cooperatives duly registered under R.A.
objections to the Sanggunian No. 6938;
within 15 days in case of a c. Non-stock and non-profit hospitals; and
province, and 10 days in case of a d. Educational institutions [Secs. 193 & 234,
city or municipality; otherwise, the LGC].
Page 321 of 384

9. Exemptions from Real Property Taxes within its territorial jurisdiction. That authority
belongs to provinces and cities only. A
Annual ad valorem tax on real property may be franchise tax levied by a municipality is, thus,
levied by a: null and void. The nullity is not cured by the
a. Province; subsequent conversion of the municipality into
b. City; or a city 9 CITY OF PASIG AND CRISPINA V.
c. Municipality within the Metropolitan Manila SALUMBRE, IN HER CAPACITY AS OIC-
Area [Sec. 232, LGC]. CITY TREASURER OF PASIG CITY,
PETITIONERS, VS. MANILA ELECTRIC
The following are exempted from COMPANY, RESPONDENT, G.R. No.
payment of the real property tax: 181710. March 07, 2018.]
1. Real property owned by the Republic of the
Philippines or any of its political 4. Closure and Opening of Roads
subdivisions EXCEPT when the beneficial [Sec. 21, LGC]
use thereof has been granted, for
consideration or otherwise, to a taxable
Local Government Code, Section 21. Closure and
person; Opening of Roads. – (a) A local government unit
2. Charitable institutions, churches, may, pursuant to an ordinance, permanently or
parsonages or convents appurtenant temporarily close or open any local road, alley, park,
thereto, mosques, nonprofit or religious or square falling within its jurisdiction: Provided,
cemeteries and all lands, buildings, and however, That in case of permanent closure, such
ordinance must be approved by at least two-thirds
improvements actually, directly, and
(2/3) of all the members of the sanggunian, and
exclusively used for religious, charitable, or when necessary, an adequate substitute for the
educational purposes; public facility that is subject to closure is provided.
3. All machineries and equipment that are
actually, directly and exclusively used by (b) No such way or place or any part thereof shall be
local water districts and government- permanently closed without making provisions for
the maintenance of public safety therein. A property
owned or controlled corporations engaged
thus permanently withdrawn from public use may be
in the supply and distribution of water used or conveyed for any purpose for which other
and/or generation and transmission of real property belonging to the local government unit
electric power; concerned may be lawfully used or conveyed:
4. All real property owned by duly registered Provided, however, That no freedom park shall be
cooperatives as provided for under R.A. closed permanently without provision for its transfer
or relocation to a new site.
No. 6938; and
5. Machinery and equipment used for (c) Any national or local road, alley, park, or square
pollution control and environmental may be temporarily closed during an actual
protection [Sec. 234, LGC]. emergency, or fiesta celebrations, public rallies,
The exemption from real property taxes agricultural or industrial fairs, or an undertaking of
given to cooperatives applies regardless of public works and highways, telecommunications,
and waterworks projects, the duration of which shall
whether or not the land owned is leased.
be specified by the local chief executive concerned
This exemption benefits the cooperative’s in a written order: Provided, however, That no
lessee as well. The characterization of national or local road, alley, park, or square shall be
machinery as real property is governed by temporarily closed for athletic, cultural, or civic
the Local Government Code and not the activities not officially sponsored, recognized, or
Civil Code [Provincial Assessor of Agusan approved by the local government unit concerned.
Del Sur v. Filipinas Palm Oil Plantation,
(d) Any city, municipality, or barangay may, by a duly
Inc., G.R. No. 183416 (2016)]. enacted ordinance, temporarily close and regulate
the use of any local street, road, thoroughfare, or any
10. Franchise Tax other public place where shopping malls, Sunday,
flea or night markets, or shopping areas may be
Under the Local Government Code (LGC) of established and where goods, merchandise,
foodstuffs, commodities, or articles of commerce
1991, a municipality is bereft of authority to levy
may be sold and dispensed to the general public.
and impose franchise tax on franchise holders
Page 322 of 384

A public street is property for public use; hence, 2. When necessary, an adequate substitute
outside the commerce of man. Being outside for the public facility that is subject to
the commerce of man, it may not be the subject closure should be provided;
of lease or other contract [Dacanay v. Asistio, 3. Such ordinance must have provisions for
Jr., G.R. No. 93654 (1992)]. the maintenance of public safety therein;
and
a. Scope of LGU’s Power to Close 4. If a freedom park is permanently closed,
Road, Alley, Park or Square there must be a provision for its transfer or
relocation to a new site [Sec. 21(a), (b),
● If national – temporary; LGC)].
● If local - temporary or permanent. 5. Such property permanently withdrawn from
b. Requisites For Temporary Closure public use may be used or conveyed for
any purpose for Which other real property
1. Via ordinance; belonging to the LGU may be lawfully used
2. May be done due to: or conveyed [Sec. 21(b), LGC].
● Actual emergency;
● Fiesta celebrations; d. Public Roads Are Outside The
● Public rallies; Commerce of Man
● Agricultural or industrial fairs; or
● Undertaking of public works and A public road may not be the subject of lease
highways, telecommunications, and or contract, as public roads are properties for
waterworks projects; public use outside the commerce of man
3. Duration of closure must be specified by [Dacanay v. Asistio, Jr., G.R. No. 93654
the local chief executive in a written order; (1992)].
and
4. If for the purpose of athletic, cultural, or civil As long as a property owner has reasonable
activities, these must be officially access to the general system of streets, he has
sponsored, recognized, or approved by the no right to compensation for the closure of a
local government [Sec. 21, LGC]. public street. The Constitution does not
undertake to guarantee to a property owner the
A City, Municipality, or Barangay may also public maintenance of the most convenient
temporarily close and regulate the use of any route to his door [Cabrera v. CA, G.R. No.
local street, road, thoroughfare or any other 78673 (1991)].
public place where shopping malls, Sunday,
flea or night markets, or shopping areas may 5. Legislative Power
be established for the general public [Sec.
21(d), LGC]. Local legislative power is the power of LGUs
through their local legislative councils to enact,
c. Requisites For Permanent Closure repeal, amend, modify ordinances and issue
resolutions.
1. Via ordinance approved by at least 2/3 of
all members of the Sanggunian;
a. Ordinance vs. Resolution

Ordinance Resolution
Mere declaration of sentiment or opinion of a

Has the force and effect of law.
lawmaking body.
On matters applying to persons or things in

On a specific matter.
general.
Possesses a general and permanent character. Temporary in nature.

Page 323 of 384
Ordinance Resolution
GR: Third reading is not necessary.

As a general rule, must undergo three readings. XPN: Unless decided otherwise by majority of
all Sanggunian members.
Only some resolutions are subject to

All ordinances are subject to veto/ review. veto/review (i.e., local development plan and
public investment program).
E.g., expropriation, tax, curfew, appropriations, E.g., congratulatory messages, authorizing local
exercise of police power. chief executive to sign an agreement.
[Garcia v. COMELEC, G.R. No. 111230 (1994)]
b. Requisites for Valid Ordinance 3. Sangguniang Bayan for the municipality;

See: Two-Pronged Test under Police Power and
4. Sangguniang Barangay for the barangay
Formal [Sec. 48, LGC].
1. Enacted within the corporate powers of the
local government unit; and Presiding Officer
2. Passed according to procedure prescribed Legislative Body Presiding Officer
by law.
Sangguniang
Substantive Vice-Governor
Panlalawigan
1. It must not contravene the Constitution or
any statute; Sangguniang
Vice-Mayor
2. It must be fair, not oppressive; Panlungsod
3. It must not be partial or discriminatory;
4. It must not prohibit but may regulate trade; Sangguniang Bayan Vice-Mayor
5. It must be general and consistent with
Sangguniang
public policy; Punong Baran
Barangay
6. it must not be unreasonable [Legaspi v.
City of Cebu, G.R. No. 159110 (2013)].
Ordinances are inferior in status and The presiding officer shall vote only to break a
subordinate to the laws of the state. An tie [Sec. 49(a), LGC].
ordinance in conflict with a state law of general
character and statewide application is In the event of the inability of the regular
universally held to be invalid. In every power to Presiding officer to preside at a Sanggunian
pass ordinances given to a municipality, there session, the members present and constituting
is an implied restriction that the ordinances a quorum shall elect from among themselves a
shall be consistent with general law [Batangas temporary presiding officer. He shall certify
CATV, Inc. v. CA, G.R. No. 138810 (2004)]. within ten (10) days from the passage of
ordinances enacted and resolutions adopted
The power to enact ordinances carries with it by the Sanggunian in the session over which
the power to repeal them, provided that vested he temporarily presided [Sec. 49(b), LGC].
rights are not thereby impaired.
Non-Membership of Acting Governor:
Local Legislative Power Shall be A Vice Governor, who is concurrently an Acting
Exercised By: Governor, is actually a quasi-Governor. He is
1. Sangguniang Panlalawigan for the deemed a nonmember of the Sanggunian for
province; the time being and so cannot preside over its
2. Sangguniang Panlungsod for the city; sessions. The procedure for the election of a
Page 324 of 384
temporary presiding officer in case of inability The presence of the presiding officer is
of the regular presiding officer shall apply in considered in determining the presence of a
such case [Gamboa, Jr. v. Aguirre, G.R. No. quorum since a presiding officer is considered
134213 (1999)]. a “member” of the Sanggunian [La Carlota City,
Negros Occidental v. Rojo, G.R. No. 181367
c. Internal Rules of Procedure (2012)].
On the first regular session following the Quorum shall be based on the total number of
election of its members and within 90 days members elected and qualified. The filing of a
thereafter, the Sanggunian shall adopt or leave of absence does not affect a member’s
update its existing rules of procedure [Sec. 50, election to, and qualification as member of, a
LGC]. local legislative body [Zamora v. Caballero,
G.R. No. 147767 (2004)].
LGC, Sec. 50 does not mandate that no other
business may be transacted on the first regular General Rule: A majority of the members
session [Malonzo v. Zamora, G.R. No. 137718 present, there being a quorum is required for
(2000)]. the valid enactment of an ordinance or
resolution [Art. 107(g), LGC IRR].
The Rules of Procedure Shall Provide Exception: When otherwise provided by the
For: LGC:
1. Organization of the Sanggunian and the ● Any ordinance or resolution authorizing or
election of its officers; directing the payment of money or creating
2. Creation of Standing Committees; a liability requires the approval of the
3. Order and calendar of business for each majority of all the Sanggunian members
session; [Rule VII, Sec. 14 (g), LGC IRR].
4. The legislative process; ● It is legally permissible for the Sanggunian
5. Parliamentary procedures; to provide for a higher voting requirement
6. Disciplinary rules for members for for the enactment or amendment of a
disorderly behavior and absences without particular ordinance [Casiño v. CA, G.R.
justifiable cause for four (4) consecutive No. 91192 (1991)].
sessions, for which they may be censured,
reprimanded, or excluded from the When There Is No Quorum
session, suspended for not more than sixty The presiding officer may declare a recess until
(60) days, or expelled: Provided, That the such time as a quorum is constituted or a
penalty of suspension or expulsion shall majority of the members present may also
require the concurrence of at least two- adjourn from day to day and may compel the
thirds (2/3) vote of all the Sanggunian attendance of any member absent without
members: Provided, further, That a justifiable cause by designating a member of
member convicted by final judgment to the Sanggunian to arrest the absent member
imprisonment of at least one (1) year for and present him at the session.
any crime involving moral turpitude shall be
automatically expelled from the The member designated shall be assisted by a
Sanggunian; and member or members of the police force in the
7. Such other rules as the Sanggunian may territorial jurisdiction of the LGU concerned.
adopt [Sec. 50, LGC].
If there is still no quorum, no business shall be
Quorum transacted. The presiding officer, upon proper
The presence of a quorum is required to motion duly approved by the members present,
transact official business. A majority of all shall then declare the session adjourned for
members of the Sanggunian who have been lack of quorum [Sec. 53, LGC].
elected and qualified shall constitute a quorum
[Sec. 53, LGC].
Page 325 of 384

d. Sangguniang Sessions o The local chief executive shall affix his
signature on each and every page of
1. Regular Sessions the ordinance [Sec. 54(a), LGC].
● During the first session following the o The signature of the local chief
election, the Sanggunian shall, by executive in the approval of an
resolution, fix the day, time, and place ordinance or resolution is not a mere
of its regular sessions. ministerial act, as it requires the
● Minimum Number of Regular Sessions: exercise of analysis and judgment.
○ Sangguniang Panlalawigan, This is part of the legislative process
Panlungsod, and Bayan → Once a [De Los Reyes v. Sandiganbayan, G.R.
week No. 121215 (1997)].
○ Sangguniang Barangay → 2x a 2. Disapproval (Veto)
month o The local chief executive may veto the
● No two sessions, regular or special, ordinance, stating his reasons in
may be held in a single day. writing. The local chief executive may
veto an ordinance or resolution only
General Rule: All sessions shall be open to the once [Sec. 55(a & c), LGC].
public.
Grounds for Disapproval
Exception: Closed-door session is ordered by Under the LGC, there are only two grounds:
majority of the members present, there being a 1. Ultra vires; or
quorum, in the public interest or for reasons of 2. Prejudicial to public welfare [Sec. 55(a),
security, decency or morality. LGC]
2. Special Sessions Periods

● May be called by the local chief The ordinance is returned with objections to the
executive or by majority of the Sanggunian within 15 days in the case of
Sanggunian. Sangguniang Panlalawigan, or within 10 days
● Written notice to the members shall be in the case of Sangguniang
served personally at their usual place Panlungsod/Bayan; otherwise, the ordinance
of residence at least 24 hours before shall be deemed approved [Sec. 54, LGC].
the special session is held.
● No other matters may be considered Override
except those stated in the notice unless The veto may be overridden by the
otherwise concurred in by 2/3 vote of Sanggunian upon a 2/3 vote of all its members
those present, there being a quorum. [Sec. 54, LGC].
No Subpoena and Contempt Powers Item Veto

● Local legislative bodies do not have the The local chief executive, except the Punong
power to subpoena witnesses and the Barangay, shall have the power to veto any
power to punish nonmembers for contempt particular item or items of an:
in the exercise of their legislative powers. 1. Appropriations ordinance; or
● They may only invite resource persons who 2. Ordinance or resolution adopting the local
are willing to supply information which may development plan or public investment
be relevant to the proposed ordinance program; or
[Negros Oriental II Electric Cooperative, 3. Ordinance directing the payment of money
Inc. v. Sangguniang Panlungsod of or creating liability.
Dumaguete, G.R. No. 72492 (1987)].
In case of an item veto, the veto shall not affect
Approval and Veto of Ordinances the items not objected to. If the veto is not
1. Approval overridden, the items in the appropriations
ordinance of the previous year corresponding
Page 326 of 384

to those vetoed shall be deemed re-enacted Barangay since he is a member of the
[Sec. 55(b), LGC]. Sangguniang Barangay. The Punong
Barangay signs the ordinances enacted by the
Note: There is no veto for barangays. The veto Sangguniang Barangay upon their approval
power cannot be exercised by the Punong [Sec. 54(c), LGC].
e. Publication and Effectivity of Ordinances

Publication Effectivity
General Rule [Sec. 59(a), LGC]
Posted:
(1) In a bulletin board at the entrance of the provincial capitol or city, 10 days after posting,
municipal, or barangay hall, as the case may be; and unless otherwise stated
(2) In at least 2 other conspicuous places. in the ordinance.
Highly Urbanized and Independent Component Cities [Sec. 59 (d), LGC]
In addition to posting, main features of the ordinance shall be published

once: 10 days after posting,
unless otherwise stated
(a) In a local newspaper of general circulation; or if none,
in the ordinance.
(b) In any newspaper of general circulation.
All Ordinances with Penal Sanctions [Secs. 511 & 59(c), LGC]
(1) Posted at prominent places in the provincial capitol or city, Unless otherwise
municipal or barangay hall for a minimum period of 3 consecutive provided therein, the
weeks; ordinance shall take
effect on the day
(2) Gist of such penal ordinance shall be published in a newspaper of following its publication,
general circulation within the province where the local legislative body or at the end of the
belongs; if none, posting shall be made in all municipalities and cities of period of posting,
the said province. whichever occurs.
Tax Ordinances and Revenue Measures [Sec. 188, LGC]
Within 10 days after their approval, certified true copies shall be 10 days after publication
published in full for 3 consecutive days. or posting, unless
(a) in a newspaper of local circulation, or, (b) if none, the same may be otherwise stated in the
posted in at least two conspicuous publicly places and accessible. ordinance.
Note: Prior Hearing Requirement for Tax and Revenue Measures: Public hearings must be
conducted prior to the enactment of a tax ordinance or revenue measure [Secs. 187 & 188, LGC].
The following rules apply to:

1. Ordinances; and
2. Resolutions approving the local government plan and public investment programs.
f. Review of Ordinances & Resolutions

(Approving local development plans and public investment programs) [Secs. 56 & 57, LGC]
Page 327 of 384
Sangguniang Panlalawigan Sangguniang Panlungsod or

Sangguniang Bayan
1. Ordinances;
What 2. Resolutions approving programs local All barangay ordinances.
development plans and public.
By Sangguniang Panlungsod or
Sangguniang Panlalawigan
Whom Sangguniang Bayan
Within 3 days from approval, forwarded by Within 10 days from approval, forwarded
When
the Secretary of the Sanggunian. by the Sangguniang Barangay.
Sangguniang Panlalawigan shall examine

the documents or transmit them first to the
The concerned Sanggunian shall examine
How Provincial Attorney (if none, to Provincial
the ordinance.
Prosecutor) for comments and
recommendations.
If beyond the power conferred upon the Whether consistent with law and the city
Grounds
Sanggunian concerned. and municipal ordinances.
Reviewing Sanggunian shall return the

Effect if
Reviewing Sanggunian shall declare such ordinance with its comments for
Grounds
ordinance or resolution invalid in whole or adjustment, amendment, or modification,
Are
in part. in which case, the effectivity of the
Present
barangay ordinance is suspended.
30 days; if no action after 30 days, 30 days; if no action after 30 days,

Period
presumed consistent with law and valid. deemed approved.
Note: Any attempt to enforce any ordinance or lapse of the 60-day period without the SOJ
resolution approving the local development taking action, the aggrieved party may file
plan or public investment program, after the action with a competent court.
disapproval thereof, shall be sufficient ground
for the suspension or dismissal of the official or Sec. 187, LGC is valid as it is merely an
employee concerned [Sec. 58, LGC]. exercise of the power of supervision [Drilon v.
Lim, G.R. No. 112497 (1994)].
g. Review of Tax Ordinances by the
Secretary of Justice [Sec. 187, LGC] h. Local Initiative and Referendum
Within 30 days from the effectivity of tax Local Initiative

ordinances or revenue measures, questions on Initiative has been described as an instrument
their constitutionality or legality may be raised of direct democracy whereby the citizens
on appeal to the Secretary of Justice. The SOJ directly propose and legislate laws as it is the
shall render a decision within 60 days from citizens themselves who legislate the laws,
receipt of appeal. direct legislation through initiative (along with
referendum) is considered as an exercise of
The appeal shall not have the effect of original legislative power, as opposed to that of
suspending the effectivity of the ordinance and derivative legislative power which has been
the accrual of the tax, fee or charge. Within 30 delegated by the sovereign people to
days from receipt of the SOJ’s decision or the legislative bodies such as the congress
Page 328 of 384

[Marmeto v. COMELEC, G.R. No. 213953 desire, apply for initiative in the manner
(2017)]. provided by law [Sec. 124, LGC].
Note: The Court dismissed an initiative petition,
Definition and Exercise which proposed the creation of a separate local
Legal process whereby the registered voters of legislative body, for being ultra vires [Marmeto
an LGU may directly propose, enact, or amend v. COMELEC, G.R. No. 213953 (2017)].
an ordinance [Sec. 120, LGC]. This is Limitations Upon Sanggunians
exercised by all registered voters of the Any proposition or ordinance approved through
provinces, cities, municipalities, and barangays the system of initiative and referendum:
[Sec. 121, LGC]. 1. Shall not be repealed, modified, or
amended by the Sanggunian concerned
Effectivity within six (6) months from the date of its
15 days after Certification by the COMELEC approval; and
that the proposition is approved by a majority 2. May be amended, modified, or repealed
of the votes cast [Sec. 123, LGC]. by the Sanggunian within three (3) years
thereafter by a vote of three-fourths (3/4)
Limitations on Power of Initiative of all its members.
1. Local initiative shall not be exercised 3. In case of barangays, the period shall be
more than once a year. eighteen (18) months [Sec. 125, LGC].
2. Initiative shall extend only to subjects or
matters which are within the legal powers Local Referendum
of the Sanggunians to enact. Legal process whereby the registered voters of
3. If at any time before the initiative is held, the local government unit may approve,
the Sanggunian adopts in toto the amend, or reject any ordinance enacted by the
proposition presented and the local chief Sanggunian. It shall be held under the direction
executive approves the same, the of COMELEC within 60 days in case of
initiative shall be cancelled. However, provinces and cities, 45 days in case of
those against such action may, if they so municipalities and 30 days in case of
barangays [Sec. 126, LGC].
Initiative Referendum
Law-making body submits matter

How
Initiated by the people directly. to the registered voters of its
Initiated
territorial jurisdiction.
To legislate, because the lawmaking body fails To approve or reject any

Objective or refuses to enact the ordinance or resolution ordinance or resolution which is
or Purpose that they desire or because they want to duly enacted or approved by such
amend or modify one already existing. lawmaking authority.
Legislative. A referendum consists

No role except for unfavorable action on the
merely of the electorate approving
petition submitted to it. Initiative is a process of
Role of or rejecting what has been drawn
lawmaking by the people themselves without
Legislature up or enacted by a legislative
the participation and against the wishes of their
body [SBMA v. COMELEC, G.R.
elected representatives.
No. 125416 (1996)].
The process and the voting in an initiative are Voters will simply write either
Effect in
more complex than in a referendum “Yes” of “No” in the ballot
Process
[Gatmaytan]. [Gatmaytan].
Page 329 of 384

Procedure [Sec. 122, LGC] 6. Effectivity of Local Propositions
If the proposition is approved by a majority of
1. File a Petition with Local Legislature the votes cast, it shall take effect 15 days after
Registered voters must file a petition with the certification by the COMELEC.
Sanggunian concerned proposing the
adoption, enactment, repeal or amendment of Initiative Covers Both Ordinances and
an ordinance: Resolutions
a. Not less than 1,000 registered voters in Sec. 124 of the LGC clearly does not limit the
provinces and cities; application of local initiatives to ordinances, but
b. Not less than 100 registered voters in to all “subjects or matters which are within the
municipalities; legal powers of the Sanggunians to enact,”
c. Not less than 50 registered voters in which undoubtedly includes resolutions. This
barangays. interpretation is supported by Sec. 125 of the
same Code [Garcia v. COMELEC, G.R. No.
2. Invoke Initiative by Giving Notice 111230 (1994)].
If no favorable action thereon is made by the
local legislative body within 30 days from its R.A. No. 6735 (The Initiative and
presentation, the proponents through their duly Referendum Act) Does Not Cover the
authorized and registered representatives may System of Initiative on Amendments to
invoke their power of initiative, giving notice to the Constitution
the local legislative body concerned. Two or Under Sec. 2 of R.A. No. 6735, the people are
more propositions may be submitted in an not accorded the power to directly propose,
initiative. COMELEC shall extend assistance in enact, approve or reject, in whole or in part, the
the formulation of the proposition. Constitution through the system of initiative.
They can only do so with respect to national
3. Collection of Signatures and local laws, ordinances or resolutions
Proponents shall have 90 days in case of [Defensor Santiago v. COMELEC, G.R. No.
provinces and cities, 60 days in case of 127325 (1997)].
municipalities, and 30 days in case of
barangays, from notice to collect the required Power of COMELEC to Review the
number of signatures. Substance of the Initiative Provisions
The petition shall be signed before the Election The COMELEC in the exercise of its quasi-
Registrar or his representative, in the presence judicial and administrative powers, may
of a representative of the proponent and a adjudicate and pass upon such proposals
representative of the local legislative body insofar as their form and language are
concerned in a public place in the LGU. concerned, and it may be added, even as to
content, where the proposals or parts thereof
4. Certification of COMELEC and Setting are patently and clearly outside the “capacity of
of Date of Vote the local legislative body to enact” [SBMA v.
The COMELEC shall certify that the required COMELEC, G.R. No. 125416 (1996)].
number of signatures has been obtained.
Failure to obtain the required number defeats Power of the Courts to Declare Null and
the proposition. Void Any Proposition
The power of the courts to nullify propositions
Otherwise, the COMELEC shall set a date for for being ultra vires extends only to those
approval of the proposition within 60 days from already approved, i.e., those which have been
the date of certification in case of provinces and approved by a majority of the votes cast in the
cities, 45 days in case of municipalities, and 30 initiative election called for the purpose. In
days in case of barangays. other words, the courts can review the terms
only of an approved ordinance [Marmeto v.
5. Voting and Results COMELEC, G.R. No. 213953 (2017)].
The results of the initiative shall be certified and
proclaimed by the COMELEC.
Page 330 of 384

6. Corporate Powers and Congress has absolute control over it; if
the property is owned in its private or
a. To Sue and Be Sued proprietary capacity, then it is patrimonial and
● Under Sec. 22 of the LGC, all local Congress has no absolute control, in which
government units may be sued. case, the municipality cannot be deprived of it
Paragraph 2 is a Congressional grant without due process and payment of just
of consent to be sued [Gatmaytan]. compensation [Province of Zamboanga del
● An LGU constitutes a political body Norte v. City of Zamboanga, G.R. No. L-24440
corporate created by a special charter (1968)].
endowed with the powers which pertain
to a municipality corporation. As such, To be considered public property: It is enough
it possesses the capacity to sue and be that the property be held and devoted for
sued [Municipal Board v. Court of Tax governmental purposes like local
Appeals, G.R. No. L-18946 (1964)]. administration, public education and public
health [Province of Zamboanga del Norte v.
Suability v. Liability City of Zamboanga, supra].
● The fact that they are suable does not
necessarily mean that they are liable. The subdivision of communal land of the State
Reference must be had to the applicable (although titled in the name of the municipal
law and established facts to determine their corporation) and conveyance of the resulting
liability [Municipality of San Fernando, La subdivision lots by sale on installment basis to
Union v. Firme, G.R. No. 52179 (1991)]. bona fide occupants by Congressional
● Consent to be sued only means that the authorization and disposition does not
State gives up its immunity from suit. This constitute infringements of the due process
does not concede liability, but merely clause or the eminent domain provisions of the
allows the plaintiff a chance to prove, if it Constitution but operates simply as a
can, that the State or its officials are liable manifestation of the legislature’s right of control
[USA v. Guinto, G.R. No. 76607 (1990)]. and power to deal with State property [Rabuco
v. Villegas, G.R. No. L-24661 (1974)].
The legal officer shall represent the LGU as
counsel in civil and special proceedings [Sec. Property Held in Trust by the LGU for the
481(3)(i), LGC]. National Government
Regardless of the source or classification of
b. To Acquire and Sell Property land in the possession of a municipality,
excepting those acquired with its own funds in
Nature and Control its private or corporate capacity, such property
The municipality owns property in two is held in trust for the State for the benefit of its
capacities: inhabitants, whether it be for governmental or
proprietary purposes. It holds such lands
1. In Its Public and Governmental subject to the paramount power of the
Capacity legislature to dispose of the same, for after all
it owes its creation to it as an agent for the
performance of a part of its public work
The property is public and Congress has
absolute control over it; [Rabuco v. Villegas, supra].
2. In Its Private or Proprietary Capacity c. To Enter into Contracts
It is patrimonial and Congress has no absolute The question of whether a sanggunian

control. authorization separate from the appropriation
ordinance is required should be resolved
If the property is owned by the municipal depending on the particular circumstances of
corporation or municipality in its public and the case. Resort to the appropriation
governmental capacity, the property is public ordinance is necessary in order to determine if
Page 331 of 384

there is a provision therein which specifically 2. When Not Required
covers the expense to be incurred or the No further authorization is required if the
contract to be entered into [Quisumbing v. appropriation ordinance already contains in
Garcia, G.R. No. 175527 (2008)]. sufficient detail the project and cost of a capital
outlay such that all the local chief executive
Requisites needs to do after undergoing the requisite
1. Entered into by the local chief executive public bidding is to execute the contract.
on behalf of the LGU;
2. Prior authorization by Sanggunian 7. Ultra Vires Acts
concerned; and
3. A legible copy of contract must be posted Every local government unit only derives its
at a conspicuous place in the provincial legislative authority from Congress. In no
capitol or city, municipal or barangay hall instance can the local government unit rise
[Sec. 22, LGC]. above its source of authority.
● As such, its ordinance cannot run against
The Authorization Need Not Be in the or contravene existing laws, precisely
Form of an Ordinance because its authority is only by virtue of the
A careful perusal of Section 444(b)(1)(vi) of the valid delegation from Congress [Mosqueda
LGC shows that the obligation which the said v. Pilipino Banana Growers & Exporters
local executive is authorized to enter into must Association, Inc., G.R. No. 189185 (2016)].
be made pursuant to a law or ordinance [Land
Bank of the Philippines v. Cacayuran, G.R. No. Types of Ultra Vires Acts [Land Bank of
191667 (2013)]. the PH v. Cacayuran, G.R. No. 191667
(2013)]
Appropriation Ordinance as Prior Examples of void ultra vires municipal
Authorization contracts:
Where the local government unit operates
under an annual as opposed to a re-enacted A public street is property for public use; hence,
budget, it should be acknowledged that the outside the commerce of man. Being outside
appropriation passed by the Sanggunian may the commerce of man, it may not be the subject
validly serve as the authorization required of lease or other contract. The city government,
under Sec. 22(c) of the LGC. After all, an contrary to law, has been leasing portions of
appropriation is an authorization made by the streets. Such lease or license is null and
ordinance, directing the payment of goods and void for being contrary to law [Dacanay v.
services from local government funds under Asistio, Jr., G.R. No. 93654 (1992)].
specified conditions or for specific purposes.
Note: The Dacanay case was decided before
Separate Sanggunian Authorization the enactment of the LGC. If the LGC would be
applied, flea markets may be allowed subject
1. When Required to compliance with Sec. 21 in that there must
When the appropriation ordinance describes be an ordinance.
the projects in generic terms there is an
obvious need for a covering contract for every Local Government Code, Section 21(d). Any city,
specific project that in turn requires approval by municipality, or barangay may, by a duly enacted
the Sanggunian. ordinance, temporarily close and regulate the use of
any local street, road, thoroughfare, or any other
Specific Sanggunian approval may also be public place where shopping malls, Sunday, flea or
night markets, or shopping areas may be
required for the purchase of goods and
established and where goods, merchandise,
services which are neither specified in the foodstuffs, commodities, or articles of commerce
appropriation ordinance nor encompassed may be sold and dispensed to the general public.
within the regular personal services and
maintenance operating expenses [Quisumbing
v. Garcia, supra]. A loan contract entered into by a municipality
for the purpose of funding the conversion of the
Page 332 of 384
Agoo Plaza into a commercial plaza, the former liable for damages, and the city or municipality shall
being a property for public use, hence part of be subsidiarily responsible therefor. xxx
the public dominion [Land Bank of the
Philippines v. Cacayuran, supra]. Civil Code, Article 2180. xxx The State is
responsible in like manner when it acts through a
special agent; but not when the damage has been
Liability of Public Officials for Ultra Vires
caused by the official to whom the task done
Acts properly pertains; in which case what is provided in
While a municipality cannot be bound by a Article 2176 shall be applicable. xxx
contract which is void for being ultra vires,
“case law states that the [officers] who Civil Code, Article 2189. Provinces, cities and
authorized the same can be held personally municipalities shall be liable for damages for the
death of, or injuries suffered by, any person of the
accountable for acts claimed to have been defective condition of roads, streets, bridges, public
performed in connection with official duties buildings, and other public works under their control
where they have acted ultra vires” [Land Bank or supervision.
of the Philippines v. Cacayuran, supra].
Liability Under Art. 2189 Based on

B. Liability of Local Government
Control or Supervision
Units
For liability to arise under Art. 2189 of the Civil
Statutory Liability Code, ownership of the roads, streets, bridges,
public buildings, and other public works, is not
Local Government Code, Section 24. Liability for a controlling factor, it being sufficient that a
Damages. – Local government units and their province, city or municipality has control or
officials are not exempt from liability for death or supervision thereof [Municipality of San Juan v.
injury to persons or damage to property. CA, G.R. No. 121920 (2005)].
Although the drainage hole which caused the

Liability Under the Civil Code
accident was located on a national road, the
City was still liable under Art. 2189 because
Civil Code, Article 34. When a member of a city or their City Engineer exercises control and
municipal police force refuses or fails to render aid supervision over said national road [Guilatco v.
or protection to any person in case of danger to life
or property, such peace officer shall be primarily
City of Dagupan, G.R. No. 61516 (1989)].
Political/Governmental Acts vs. Corporate/Proprietary Acts

Political/Governmental Acts Corporate/Proprietary Acts
LGU generally not liable unless a Can be held liable ex contractu or

Liability
statute provides otherwise. ex delicto.
Defense of due diligence in the

No valid defense for non-
Defense selection and supervision of its
performance.
officers.
Officers or agents acting within

Officers and agents are like a)
official duties are not liable unless
individuals; or b) the directors and
Personal Liability of they acted willfully and maliciously
officers of a private corporation
Officers [Mendoza v. De Leon, G.R. No.
(i.e., they are liable if they acted in
9596 (1916); but See Sec. 24,
bad faith or with gross negligence).
LGC].
Page 333 of 384

Political/Governmental Acts Corporate/Proprietary Acts
Application of Respondeat superior does not Respondent Superior applies

Respondeat Superior apply. [Mendoza v. de Leon, supra].
Note: The distinction in jurisprudence between governmental and proprietary acts may not be
applicable after the enactment of the LGC 1991. Under Sec. 24 of the LGC 1991, there is a general
withdrawal of exemption.
Contractual Liability Personal Liability of the Public Official
General Rule: The LGU is liable only for The public official is personally liable for
contracts that are validly entered in to. damages:
1. In contracts and torts, if he acts:
Exception: The Doctrine of Implied a. Beyond the scope of his powers; or
Municipal Liability provides that an LGU may b. With bad faith [Rivera v. Maclang,
become obligated upon an implied contract to G.R. No. L-15948 (1963)]; and
pay reasonable value of the benefits accepted 2. For his refusal or neglect, without
by it as to which it has the general power to justifiable cause, to perform his official
contract [Province of Cebu v. IAC, G.R. No. duty [Art. 27, Civil Code].
72841 (1987)] on the hiring of a private counsel 3. Municipal Mayor and Vice Mayor were
by the governor which was not repudiated by held liable for back wages for illegally
the provincial board. dismissing a Sanggunian Secretary
[Campol v. Balao-as, G.R. No. 197634
Torts Liability (2016)].
4. Municipal Mayor cannot be held
Under jurisprudence, liability of the LGU would personally liable for the collection of an
depend on the nature of the act. additional levy for special education as
such was done pursuant to an ordinance
a. If in the Performance of a which, at the time of the collection, was yet
Governmental Function to be invalidated [Demaala v. Commission
The LGU is not liable [Palafox v. Province of on Audit, G.R. No. 199752 (2015)].
Ilocos Norte, G.R. No. L-10659 (1958)].
Liability of Public Officials for Ultra Vires
b. If in the Performance of a Proprietary Acts:
Function While a municipality cannot be bound by a
The LGU is liable, such as in the following contract which is void for being ultra vires,
instances: “case law states that the officers who
● The improper grant of a ferry service authorized the same can be held personally
franchise [Mendoza v. de Leon, supra]; accountable for acts claimed to have been
● Deaths caused by a collapsed stage in a performed in connection with official duties
town fiesta [Torio v. Fontanilla, G.R. No. L- where they have acted ultra vires” [Land Bank
29993 (1978)]. of the Philippines v. Cacayuran, supra].
c. Liability for Back Pay of Employees Refunding of Amounts Disallowed by the

LGUs may be held liable for the back pay or COA
wages of employees or laborers illegally
separated from the service [Guillergan v. In the recent landmark ruling in Mario M.
Ganzon, G.R. No. L-20818 (1966)]. Madera v. Commission on Audit, G.R. No.
244128 (08 September 2020) (“Madera”), the
Supreme Court laid down a new set of rules
Page 334 of 384
regarding the refund of amounts disallowed by recipients, are liable to return the
the Commission on Audit (“COA”). disallowed amounts respectively
received by them, unless they are able
The rules regarding the refund of disallowed to show that the amounts they
amounts: received were genuinely given in
1. If a Notice of Disallowance is set aside consideration of services rendered.
by the court, no return shall be required d. The court may likewise excuse the
from any of the persons held liable return of recipients based on undue
therein. prejudice, social justice
2. If a Notice of Disallowance is upheld, considerations, and other bona
the rules on return are as follows: fide exceptions as it may determine on
a. Approving and certifying officers who a case to case basis.
acted in good faith, in regular
performance of official functions, and C. Settlement of Boundary
with the diligence of a good father of
the family are not civilly liable to return Disputes
consistent with Section 38 of the
Administrative Code of 1987. Amicable Settlement
b. Approving and certifying officers who
are clearly shown to have acted in bad Boundary disputes between and among local
faith, malice, or gross negligence are, government units shall, as much as possible,
pursuant to Section 43 of the be settled amicably [Sec. 118, LGC].
Administrative Code of 1987, solidarily
liable to return only the net disallowed There is a boundary dispute when a portion or
amount, which excludes amounts the whole of the territorial area of an LGU is
excused under these rules. claimed by two or more LGUs [Sec. 15, LGC
c. Recipients, whether approving or IRR].
certifying officers or mere passive
Boundary Disputes Between Parties

Boundary Dispute Between Where Amicably Settled By
Sangguniang Panlungsod or
2 or more barangays Same city or municipality
Sangguniang Bayan
2 or more municipalities Same province Sangguniang Panlalawigan
Jointly referred to respective

Municipalities or component
Different provinces Sanggunians of the
cities
provinces concerned
Component city or municipality

v. highly urbanized city
N/A Jointly referred to respective
Sanggunians of the parties
Between 2 or more highly
urbanized cities
Note: The power of provincial boards to settle boundary disputes is limited to implementing the law
creating a municipality. Thus, provincial boards do not have the authority to approve agreements which
in effect amend the boundary stated in the creating statute [Municipality of Jimenez v. Baz, Jr., G.R.
No. 105746 (1996)].
Page 335 of 384

Formal Trial for the creation of a barangay is for its territorial
jurisdiction to be properly identified by metes
a. Trial by Sanggunian and bounds or by more or less permanent
In the event the Sanggunian fails to effect an natural boundaries. Precisely because
amicable settlement within 60 days from territorial jurisdiction is an issue raised in the
referral of the dispute: pending boundary dispute, until and unless
a. It shall issue a certification to that such issue is resolved with finality, to define the
effect; and territorial jurisdiction of the proposed barangay
b. The dispute shall be formally tried by would only be an exercise in futility [City of
the Sanggunian concerned, which shall Pasig v. COMELEC, G.R. No. 125646 (1999)].
decide the issue within 60 days from
the date of the certification referred to Evidence Given More Weight
above [Sec. 118(e), LGC].
It is undisputed that the Land Management
b. Trial by RTC Bureau is the principal government agency
When the dispute between the LGUs do not fall tasked with the survey of lands, and thus, more
under those enumerated in Sec. 118, LGC, the weight should be given to the documents
RTC shall exercise original jurisdiction over the relating to its official tasks which are presumed
settlement of the boundary dispute to be done in the ordinary course of business.
[Municipality of Kananga v. Madrona, G.R. No. Between a geodetic engineer and a tax
141375 (2003), applying Sec. 19(6), B.P. Blg. assessor, it is the former’s certification as to the
129]. location of properties in dispute that is
controlling, absent any finding of abuse of
Appeal discretion. The duty of provincial and municipal
assessors is primarily the assessment of taxes
and not the survey of lands [Barangay
Appeal of the Sanggunian Decision
Sangalang v. Barangay Maguihan, G.R. No,
● When: Within the time and manner
159792 (2009)].
prescribed by the Rules of Court.
● Where: Proper RTC having jurisdiction
over the area in dispute [Sec. 119, LGC]. D. Vacancies and Succession
Maintenance of the Status Quo Permanent Vacancy

Pending final resolution of the dispute, the Occurs when an Elective Local Official:
status of the affected area prior to the dispute a. Fills a higher vacant office;
shall be maintained and continued for all b. Refuses to assume office;
purposes [Sec. 119, LGC; Art. 18, LGC IRR]. c. Fails to qualify;
d. Dies;
The conduct of a plebiscite on the creation of a e. Is removed from office;
barangay should be suspended or canceled in f. Voluntarily resigns; or
view of a pending boundary dispute between g. Is otherwise permanently incapacitated
two local governments involving an area from discharging the functions of his office
covered by the proposed barangay. A requisite [Sec. 44(d), LGC].
a. Permanent Vacancy in the Local Chief Executive [Sec. 44, LGC]

Vacant Positions Successors
Governor Vice governor
Mayor Vice mayor
Vice governor or vice mayor Highest-ranking Sanggunian member
Page 336 of 384

Vacant Positions Successors
Mayor; Second highest ranking Sanggunian

Governor and vice governor OR Mayor and vice member to become Vice governor/Vice mayor
mayor Subsequent vacancies filled according to their
rank
Highest-ranking Sangguniang Barangay

Punong Barangay
Member
Ranking in the Sanggunian

Determined on the basis of the proportion of votes obtained by each winning candidate to the total
number of registered voters in each district in the immediately preceding local election [Sec. 44, LGC].
Resolution of Ties
A tie between or among highest ranking Sanggunian members shall be resolved by the drawing of lots
[Sec. 44(c), LGC].
b. Permanent Vacancies in the Sanggunian [Fariñas v. Barba, G.R. No. 116763 (1996);
Sec. 45, LGC]
If member who If member who
caused vacancy was caused vacancy not
Position Appointing Authority
member of a political a member of any
party political party
Nomination and Recommendation of

Sangguniang
Certification of the the Sangguniang
Panlalawigan
political party of the Panlalawigan
member who caused
the vacancy issued by
the highest official of
President through the
Sangguniang the political party
Executive Secretary
Panlungsod (of highly Rationale: To maintain Recommendation of
urbanized and party representation the Sangguniang
independent as willed by the people Panlungsod
component cities) in the election
[Navarro v. CA, G.R.
No. 141307 (2001)].
Sangguniang Nomination and Recommendation of

Panlungsod (of Certification of the Sangguniang
component cities) political party of the Panlungsod
Governor member who caused
the vacancy issued by
Recommendation of
Sangguniang Bayan the highest official of
Sangguniang Bayan
the political party
N/A
City Sangguniang Recommendation of
Sangguniang
Barangay Municipal Sangguniang
Barangay There is no right to
Mayor Barangay
nominate because the
Page 337 of 384

If member who If member who

caused vacancy was caused vacancy not
Position Appointing Authority
member of a political a member of any
party political party
members of the
Sangguniang
Barangay are not
allowed to have party
affiliations
Appointment Without Nomination and Resignation by: Approved by:

Certification
Such appointment is null and void ab initio and Governors and vice
is a ground for administrative action against the governors; mayors
responsible official [Sec. 45(b), LGC]. President
and vice mayors of
HUCs and ICCs
Power of Appointment
The appointing authority is not bound to Mayors and vice
appoint anyone recommended to him by the mayors of
Governors
Sanggunian concerned. component cities
and municipalities
On the other hand, neither is the appointing
authority vested with so large a discretion that Sanggunian Sanggunian
he can disregard the recommendation of the members concerned
Sanggunian concerned. Since the
recommendation takes the place of nomination City or municipal
Barangay officials
by political party, the recommendation must mayor
likewise be considered a condition sine qua
non for the validity of the appointment [Fariñas Exceptions
v. Barba, supra]. Resignation is deemed accepted when:
a. Not acted upon: The resignation shall be
Term of Office of the Appointee deemed accepted if not acted upon by the
The appointee under Sec. 45 serves the authority concerned within 15 working days
unexpired term of the vacant office [Sec. 44(d), from the receipt thereof [Sec. 82, LGC].
LGC]. b. Irrevocable resignations by Sanggunian
members: Deemed accepted upon
Vacancy in the Barangay or Youth presentation before an open session of the
Representation in the Sanggunian Sanggunian concerned and duly entered in
The vacancy is automatically filled by the its records [Sec. 82, LGC].
official next in rank of the organization
concerned [Sec. 45(d), LGC]. However, this does not apply to
Sanggunian members who are subject to
c. Resignation of Elective Officials recall elections or to cases where existing
laws prescribe the manner of acting upon
General Rule: Deemed effective only upon such resignations [Sec. 82, LGC].
acceptance of the resignation by the following
authorities: [Sec. 82, LGC] When Law Is Silent as to Who Approves
Resignation
Under established jurisprudence, resignations,
in the absence of statutory provisions as to
Page 338 of 384
whom they should be submitted, should be perform his duties for physical or legal reasons
tendered to the appointing person or body such as, but not limited to:
[Sangguniang Bayan of San Andres v. CA, a. Leave of absence;
G.R. No. 118883 (1998)]. b. Traveling abroad; or
c. Suspension from office [Sec. 46, LGC].
Resignation Not Allowed in Recall
The elective local official sought to be recalled
Office where Who temporarily
shall not be allowed to resign while the recall
temporary vacancy succeeds in to
process is in progress [Sec. 73, LGC].
occurs office
d. Abandonment Vice governor,
Abandonment is the “voluntary relinquishment Governor
automatically
of an office by the holder, with the intention of
terminating his possession and control thereof” Vice mayor,
Mayor
[Sangguniang Bayan of San Andres v. CA, automatically
supra].
Highest-ranking
Resignation v. Abandonment Sanggunian
Punong Barangay
Although a resignation is not complete without Member,
an acceptance thereof by the proper authority, automatically
an office may still be deemed relinquished
through voluntary abandonment which needs 1. The designated
no acceptance. person in writing
by the local chief
Abandonment of office is a species of executive; OR
Local Chief
resignation. While resignation in general is a 2. Vice governor,
Executive is
formal relinquishment, abandonment is a Vice mayor, or
traveling within the
voluntary relinquishment through nonuser. highest ranking
country but is
Nonuser refers to a neglect to use a privilege Sangguniang
outside his territorial
or a right or to exercise an easement or an Barangay
jurisdiction for a
office [Sangguniang Bayan of San Andres v. Member, on the
period not exceeding
CA, supra]. 4th day of
three consecutive
absence, if local
days.
chief executive
Requisites for Essential Elements fails or refuses
Resignation of Abandonment to designate a
successor.
1. Intention to 1. Intent to
relinquish part of Abandon;
a term 2. Overt act by Extent of Duty Exercised by Temporary
relinquishment; which the Successor
2. Act of intention is to be General Rule: The successor shall
relinquishment; carried into automatically exercise the powers and perform
3. Acceptance by effect. the duties and functions of the local chief
the proper executive.
authority.
Exceptions: If the local chief executive is
traveling within the country but outside his
Temporary Vacancy territorial jurisdiction for a period not exceeding
3 consecutive days, he may designate in
Succession In Temporary Vacancies writing the officer-in-charge.
Temporary vacancy occurs when the local
chief executive is temporarily incapacitated to The power to appoint, suspend, or dismiss
employees can only be exercised if the period
Page 339 of 384
of temporary incapacity exceeds thirty working
Local Official LOA approved by
days [Sec. 46(a), LGC].
Sanggunian
Termination of Temporary Incapacity Panlalawigan,
Temporary incapacity is terminated upon The Vice governor
Panglungsod, and
submission by the local chief executive to the or Vice mayor
Bayan Members and
Sanggunian of a written declaration that he has their employees
reported back to office.
The City/Municipal
If the temporary incapacity is due to legal Punong Barangays
Mayor
causes, the local chief executive must also
submit the necessary documents showing that Sanggunian The Punong
the legal causes no longer exist [Sec. 46(b), Barangay Members Barangay
LGC].
If the application for LOA is not acted upon
Leaves of Absence [Sec. 47(a), LGC] within 5 working days after receipt, the
Local Official LOA approved by application is deemed approved [Sec. 47(b),
LGC].
Governors and The President or his
mayors of HUCs or duly authorized
ICCS representative
E. Recall
Vice-Governors, Local Government Code, Section 69. By Whom

The Local Chief
City/Municipal Vice exercised. – The power of recall for loss of
Executive confidence shall be exercised by the registered
mayors
voters of a local government unit to which the local
City/Municipal elective office subject to such belongs.
Mayors of
The Governor
component cities
and municipalities
Grounds
Ground for recall Loss of confidence [Sec. 69, LGC].
Registered voters of a LGU to which the local elective official subject to

Right given to
recall belongs [Sec. 69, LGC].
By a petition of a registered voter supported by:

● 25% of registered voters if LGU has a voting population of not more
than 20,000.
● 20% of registered voters if LGU has a voting population of 20,000 to
Initiation of recall 75,000. In no case shall petitioners be less than 5,000.
process ● 15% of registered voters if LGU has a voting population of 75,000 to
300,000. In no case shall petitioners be less than 15,000.
● 10% of registered voters if LGU has a voting population of more
than 300,000. In no case shall petitioners be less than 45,000 [Sec.
70, LGC, as amended by R.A. No. 9244].
Barangay, city, or municipal officials: not later than 30 days from

When recall election
completion.
is held
Page 340 of 384

Provincial officials: not later than 45 days from completion [Sec. 71,
LGC].
Automatically considered as candidate and is entitled to be voted upon

Effects on official [Sec. 71, LGC].
sought to be recalled
Not allowed to resign while recall process is in progress [Sec. 73, LGC].
Only upon election and proclamation of a successor or the candidate

Effectivity of recall receiving the highest number of votes cast during the election on recall
[Sec. 72, LGC].
Signature Requirement 2. Failure to obtain the required number

The law states “upon petition of at least 25% of shall result in the automatic nullification
registered voters” and not “signed by 25% of of the petition.
the registered voters.” The petition must be c. Notice, Publication, and Posting.
filed not by one person but at least by 25% of 1. Within 3 days from certification of
the total number of registered voters. While the sufficiency, COMELEC shall:
initiatory recall petition may not yet contain the i. Provide the official subject of recall
signatures of at least 25% of the total number with a copy of the petition;
of registered voters, the petition must contain ii. Cause the publication of the
the names of at least 25% of the total number petition once a week for 3
of registered voters in whose behalf only one consecutive weeks in a national
person may sign the petition in the meantime newspaper and a local newspaper
[Angobung v. COMELEC, G.R. No. 126576 of general circulation; and
(1997)]. iii. Cause its posting for 10 to 20 days
at conspicuous places.
Note: The Angobung decision is likely no d. Verification and Authentication of
longer good law as it was decided under the Signatures.
LGC’s original provisions on recall. As 1. COMELEC verifies and authenticates
amended by R.A. No. 9244, Sec. 70 of the LGC the signatures.
seems to require that the petition already e. Filing of Candidacies.
contains the required number of signatures 1. COMELEC announces the acceptance
upon the filing thereof [Gatmaytan]. of candidates for the recall election, the
● Sec. 70(b)(2)(a), LGC as amended, official subject of the recall being
requires the petition to contain the names automatically included in the list [Sec.
of petitioners and their signatures. 71, LGC].
f. Setting of Election.
Procedure [Sec. 70, LGC, as amended 1. COMELEC shall set the election within
by R.A. No. 9244] 30 days upon completion of the above
procedure in barangays, cities, and
a. Petition filed by a registered voter in the municipalities; or within 45 days in
provinces [Sec. 71, LGC].
LGU concerned to the COMELEC,
supported by the necessary number of
registered voters. Limitations
b. COMELEC’s Certification of Sufficiency.
1. Within 15 days from filing of the 1. Any local elective official may be the
petition, the COMELEC must certify the subject of recall election only once
sufficiency of the required number of during his term of office for loss of
signatures. confidence [Sec. 74(a), LGC].
2. No recall election shall take place within
one (1) year from the date of the official’s
Page 341 of 384
assumption to office or one (1) year which he or she was elected [Sec. 11 (c), R.A.
immediately preceding a regular local No. 10742].
election [Sec. 74(b), LGC]. R.A. No. 9006 (Fair Elections Act)
No “deemed resigned” rule for elective
The phrase “regular local election” refers to an officials: An elective official running for any
election where the office held by the local office other than the one which he is holding in
elective official sought to be recalled will be a permanent capacity, is no longer considered
contested and be filled by the electorate [Paras ipso facto resigned from his office upon the
v. COMELEC, G.R. No. 123169 (1996)]. filing of his certificate of candidacy because of
Sec. 14 of R.A. No. 9006.
As used in Sec. 74(b) of the LGC, “recall” refers
to the election itself by means of which voters Note: Sec. 14 of R.A. No. 9006 expressly
decide whether they should retain their local repealed Sec. 67 of B.P. Blg. 881 or the
official or elect his replacement. Hence, recall Omnibus Election Code which states that “any
proceedings may be initiated within 1 year from elective official, whether national or local,
the official’s assumption of office as long as the running for any office other than the one which
recall election is set outside such period he is holding in a permanent capacity, except
[Claudio v. COMELEC, G.R. No. 140560 for President and Vice-President, shall be
(2000)]. considered ipso facto resigned from his office
upon the filing of his certificate of candidacy.”
F. Term Limits
The “deemed resigned” rule is retained for
appointive officials. Sec. 14 of R.A. No. 9006
Length of Term
did not repeal Sec. 66 of the Omnibus Election
Code, which imposes a limitation to appointive
1987 Constitution, Article X, Section 8. The term officials and considers them ipso facto
of office of local elective officials, except barangay resigned from office upon filing of their
officials, which shall be determined by law, shall be
certificate of candidacy.
three years and no such official shall serve for more
than three consecutive terms. xxx
The classification justifying Sec. 14 of R.A. No.
9006, i.e., elected officials vis-à-vis appointive
R.A. No. 9164: Synchronized Barangay officials, is anchored upon material and
and Sangguniang Kabataan Elections significant distinctions (e.g., elective officials
(2002) occupy their office by virtue of the mandate of
the electorate, appointive officials are
Term of office of barangay and prohibited from engaging in partisan political
sangguniang kabataan officials: 3 years activity except to vote) [Fariñas v. Executive
[Sec. 2, R.A. No. 9164]. Secretary, G.R. No. 147387 (2003)].
No Barangay Elective Official Shall Serve Limitation of Consecutive Terms

for More Than 3 Consecutive Terms in the
Same Position What Constitutes a Term of Office
1. The term of office shall be reckoned from The term limit for elective officials must be
the 1994 barangay elections; taken to refer to the right to be elected as well
2. Voluntary renunciation of office for any as the right to serve in the same elective
length of time shall not be considered as an position. Consequently, it is not enough that an
interruption [Sec. 2, R.A. No. 9164]. individual has served three consecutive terms
in an elective local office, he must also have
A Sangguniang Kabataan official who, during been elected to the same position for the same
his or her term of office, shall have passed the number of times before the disqualification can
age of twenty-four (24) years shall be allowed apply [Borja, Jr. v. COMELEC, G.R. No.
to serve the remaining portion of the term for 133495 (1998)].
Page 342 of 384

The interruption of a term that would prevent No. 147927 (2002); Socrates v. COMELEC,
the operation of the three-term rule involves G.R. No. 154512 (2002)].
“no less than the involuntary loss of title to
office [or the right to hold on to an office]” or “at c. Conversion
least an effective break from holding office” The abolition of an elective local office due
[Aldovino, Jr. v. COMELEC, G.R. No. 184836 to the conversion of a municipality to a city
(2009)]. does not, by itself, work to interrupt the
incumbent official’s continuity of service
Two Conditions for the Application of the [Latasa v. COMELEC, G.R. No. 154829
Disqualification (2003)].
1. Elected for three consecutive times for
the same position; and d. Preventive Suspension
2. Fully served three consecutive terms Preventive suspension is not a term-
[Borja, Jr. v. COMELEC, supra]. interrupting event as the elective officer’s
continued stay and entitlement to the office
Prevailing Doctrines on Issues Affecting remain unaffected during the period of
Consecutiveness of Terms And/or suspension, although he is barred from
Involuntary Interruption [Abundo, Sr. v. exercising the functions of his office
COMELEC, G.R. No. 201716 (2013)] [Aldovino, Jr. v. COMELEC, supra].
a. Assumption of Office by Operation of e. Losing in an Election Protest

Law When a candidate is proclaimed a winner
When a permanent vacancy occurs in an for an elective office and assumes office,
elective position pursuant to the rules of his term is interrupted when he loses in an
succession under the LGC: election protest and is ousted from office,
thus disenabling him from serving what
For the office assumed: The successor’s would otherwise be the unexpired portion
service for the unexpired portion of the term of of his term of office had the protest been
the replaced official is not treated as one full dismissed [Lonzanida v. COMELEC, G.R.
term and is not counted in the application of No. 135150 (1999); Dizon v. COMELEC,
any term limit [Borja, Jr. v. COMELEC, supra]. G.R. No. 182088 (2009)].
For the office held before succession: The However, when an official loses in an
successor’s assumption by operation of law to election protest and said decision becomes
the higher office (e.g., vice-mayor) is final after said official had served the full
considered an involuntary severance or term for said office, then his loss in the
interruption of the office he previously held election contest does not constitute an
(e.g., councilor), i.e., it is not counted in the interruption since he managed to serve the
application of any term limit [Montebon v. term from start to finish. His full service
COMELEC, G.R. No. 180444 (2008)]. should be counted in the application of the
term limits [Ong v. Alegre, G.R. No. 163295
b. Recall Elections (2006); Rivera III v. COMELEC, G.R. No.
An elective official, who has served for three 167591 (2007)].
consecutive terms and who did not seek the
elective position for what could be his fourth f. Effect of Winning in an Election Protest
term, but later won in a recall election, had an The period during which the winner of an
interruption in the continuity of his service. For, election protest is unable to assume office
he had become in the interim (i.e., from the end as it was occupied by his opponent is
of the 3rd term up to the recall election) a considered to be an involuntary interruption
private citizen [Adormeo v. COMELEC, G.R. in the service of his term and therefore bars
the application of the three-term limit rule
[Abundo, Sr. v. COMELEC, supra].
Page 343 of 384

PUBLIC INTERNATIONAL LAW

INTERNATIONAL LAW
PUBLIC INTERNATIONAL LAW POLITICAL LAW
c. Requisites (Valid Treaty)
PUBLIC 1. Treaty Making Capacity - Refers to States
which have international legal personality
INTERNATIONAL (See Article 6 of VCLT specifically provides
that states have the capacity to enter into
LAW treaties);
2. Competence of the representative giving
I. SOURCES OF consent;
3. Consent freely given;
OBLIGATIONS 4. Object and Subject Matter;
5. Ratification.
A. Treaties
In addition to the constitutional requirement,
a. Definition of Treaty ratification is likewise necessary under
international law when:
1. The treaty provides for consent to be
A treaty, under international law is:
expressed by means of ratification;
a. An international agreement;
2. It is otherwise established that the
b. Concluded between states;
negotiating states agreed that ratification
c. In written form;
should be required;
d. Governed by international law;
3. The representative of the state has signed
e. Embodied in a single instrument or in two
the treaty subject to ratification; or
or more related instruments; and
4. The intention of the State to sign the treaty
f. Whatever its particular designation [Art.
subject to ratification appears from the full
2(1)(a), Vienna Convention on the Law of
powers of its representative, or was
Treaties (VCLT)].
expressed during the negotiation [Art.
14(1), VCLT].
However, the definition of a treaty under the
VCLT is without prejudice to the use of those
terms or to the meanings which may be given d. Treaty-Making Process
to them in the internal law of any State [Art.
2(2), VCLT]. 1. Authorization
Two modes where a person is considered as
Thus, other names of treaties include representing their state: (a) with full powers;
conventions, covenants, protocols, modus and (b) without full powers.
vivendi, pacts, charters, concordat.
With Full Powers
b. Requisites (General) A person is considered as representing a State
in the treaty-making process if he produces
1. Written Form; appropriate full powers [Art. 7(1)(a-b), VCLT].
• No specific form required, as long as it is
written [See Maritime Delimitations and Without Having to Produce Full Powers
Territorial Questions between Qatar and In virtue of their functions, the following are
Bahrain, Qatar v. Bahrain, ICJ (1994)]. considered as representing their State:
• May be embodied in a single instrument a. Heads of State, Heads of Government
or in two or more related instruments. and Ministers for Foreign Affairs, for the
2. Between States; purpose of performing all acts relating
3. Governed by international Law. to the conclusion of a treaty;
b. Heads of diplomatic missions, for the
purpose of adopting the text of a treaty
between the accrediting State and the
State to which they are accredited;
Page 345 of 384
Representatives accredited by States 2. Pacta Tertiis Nec Nocent Nec Prosunt
to an International conference or to an Treaty obligation is based on consent. No state
international organization or one of its may be bound by a treaty obligation unless it
organs, for the purpose of adopting the has so consented [Art. 34, VCLT].
text of a treaty in that conference,
organization or organ [Art. 7(2)(ac), How manifested: Signature, exchange of
VCLT]. instruments constituting a treaty, ratification,
acceptance, approval or accession, or by any
2. Negotiation other means if so agreed [Art. 11, VCLT, but
The State representatives discuss the terms see Article 12-14 of VCLT for specific rules
and provisions of the treaty. governing giving consent by exchange of
instruments, signature, or ratification].
3. Adoption
When the form and content have been settled 3. Pacta Sunt Servanda
by the negotiating states, the treaty is adopted. Every treaty in force is binding upon the parties
This is only preparatory to (1) the to it and must be performed by them in good
authentication of the text of the treaty, and (2) faith [Art. 26, VCLT].
the signing thereof [Art. 9, VCLT].
Note: This is considered as CIL and it applies
4. Authentication to all obligations contained in a treaty.
A definitive text of the treaty is established as
the correct and authentic one [Art. 10, VCLT]. 4. Generally Not Binding on Third States,
i.e. Non-Contracting Parties
5. Expression of consent General Rule: A treaty does not create either
The state parties express their consent to be obligations or rights for a third State without its
bound by the terms of the treaty. The modes of consent [Art. 34, VCLT].
such expression are by (i) signature, (ii)
exchange of instruments constituting a treaty, Exceptions:
(iii) ratification, (iv) acceptance, (v) approval or a. When the third party accepts a provision
(vi) accession, or (vii) by any other means if so establishing an obligation for that third
agreed [Art. 11, VCLT]. party [Art. 35, VCLT];
b. When the third party accepts a right
Note: See Articles 12-17 of the VCLT for in provided for and exercises such right in
detail explanations of each manner of accordance with the conditions established
expressing consent. in the treaty. Art. 36, VCLT].
6. Registration 5. Treaties are Non-Retroactive

The treaty is then registered with the General Rule: A treaty does not bind a party in
Secretariat of the United Nations [Art. 80, relation to any act or fact which took place or
VCLT]. Otherwise, the treaty may not be any situation which ceased to exist before the
invoked before any UN organ [Art. 102(2), UN date of entry into force of the treaty [Art. 28,
Charter], including the ICJ. VCLT].
e. Basic Principles of Treaties Exceptions: A different intention appears from

the treaty or is otherwise established [Art. 28,
1. Vienna Convention on the Law of VCLT].
Treaties
The primary body of law governing treaties is 6. Interpretations
the Vienna Convention on the Law of Treaties,
which is considered binding as CIL. Schools of Interpretation [Art. 31, VCLT]
a. Subjective – intention of the parties;
b. Objective – textual;
Page 346 of 384
c. Teleological – object and purpose. international law having the same character
[Draft Conclusion 1, Peremptory Norms of
General Rule: A treaty shall be interpreted in General International Law (DCJC)].
good faith in accordance with the ordinary
meaning to be given to the terms of the treaty General Nature of Jus Cogens [Draft
in their context and in the light of its object and Conclusion 3, DCJC]
purpose [Art. 31(1), VCLT]. Peremptory norms of general international law
(jus cogens) reflect and protect fundamental
Exceptions: The context for the purpose of the values of the international community. These
interpretation of a treaty shall comprise, in are hierarchically superior to other rules of
addition to the text, including its preamble and international law and are universally
annexes [Art. 31(2), VCLT]: applicable.
a. Any agreement relating to the treaty which Bases for Jus Cogens [Draft Conclusion 5,
was made between all the parties in DCJC]
connection with the conclusion of the 1. CIL is the most common basis for
treaty; peremptory norms of general international
b. b. Any instrument which was made by one law (jus cogens).
or more parties in connection with the 2. Treaty provisions and general principles of
conclusion of the treaty and accepted by law.
the other parties as an instrument related
to the treaty. Elements of Jus Cogens [Draft Conclusion
4, DCJC]
The first duty of a tribunal is to endeavor to give 1. The norm must be a norm of general
effect to the provisions of the treaty in their international law;
natural and ordinary meaning in the context in 2. The norm must be accepted and
which they occur. If the words in their natural recognized by the international community
and ordinary meaning are ambiguous or lead of States as a whole; and
to an unreasonable result, only then must the 3. The norms must be one from which no
Court, by resort to other methods of derogation is permitted and which can be
interpretation, seek to ascertain what the modified only by a subsequent norm of
parties really did mean when they used these general international law of the same
words [Competence of the General Assembly character.
(Ad Op), ICJ (1950)].
Acceptance and Recognition [Draft
An agreement as to the interpretation of a Conclusion 6, DCJC]
provision reached after the conclusion of the
“Acceptance and recognition” as a criterion for
treaty represents an authentic interpretation by identifying a peremptory norm of general
the parties. Subsequent practice constitutes
international law (jus cogens) is distinct from
objective evidence of the understanding of the acceptance and recognition as a norm of
parties as to the meaning of the treaties
general international law. To identify a norm as
[Kasikili/Sedudu Island, ICJ (1999)]. jus cogens, there must be evidence that such
a norm is accepted and recognized as one from
1. Concept of Jus Cogens which no derogation is permitted, and which
(Peremptory Norms of International can only be modified by a subsequent norm of
Law) general international law having the same
A peremptory norm of general international law character.
(jus cogens) is a norm accepted and
recognized by the international community of Evidence of Acceptance and Recognition
States as a whole as a norm from which no [Draft Conclusion 8, DCJC]
derogation is permitted and which can be Evidence of acceptance and recognition that a
modified only by a subsequent norm of general norm of general international law is a
Page 347 of 384
peremptory norm (jus cogens) may take a wide b. Brings their mutual relations into
range of forms. These include, but are not conformity with the peremptory norm of
limited to: general international law [Art. 71,
● Public statements made on behalf of VCLT].
States; 2. If a jus cogens norm arises, any existing
● Official publications; treaty to the contrary becomes void [Art.
● Government legal opinions; 64, VCLT].
● Diplomatic correspondence; a. Releases the parties from any
● Legislative and administrative acts; obligation further to perform the treaty;
● Decisions of national courts; b. Does not affect any right, obligation or
● Treaty provisions; legal situation of the parties created
● Resolutions adopted by an international through the execution of the treaty prior
organization or at an intergovernmental to its termination, provided that those
conference. rights, obligations or situations may
thereafter be maintained only to the
Subsidiary Means for the Determination extent that their maintenance is not in
of Peremptory Character of Norms of itself in conflict with the new
General International Law (Jus Cogens) peremptory norm of general
[Draft Conclusion 9, DCJC] international law [Art. 71, VCLT].
a. Decisions of international courts and
tribunals, in particular of ICJ, are a There Are Consequences for Serious
subsidiary means for determining the Breaches of Peremptory Norms of
peremptory character of norms of general General International Law (Jus Cogens)
international law (jus cogens). [Draft Conclusion 19, DCJC]
b. The works of expert bodies established A breach of an obligation arising under a
by States or international organizations peremptory norm of general international law
and the teachings of the most highly (jus cogens) is serious if it involves a gross or
qualified publicists of the various nations systematic failure by the responsible State to
may also serve as subsidiary means. fulfill that obligation.
c. There must be showing of practice of such
kind as to show a conviction that the States shall cooperate to bring to an end
developing rule was of that specific nature through lawful means any serious breach by a
(superior opinio juris). State of an obligation arising under a
1. Example: If the universal reaction of a peremptory norm of general international law
breach of treaty was to assert that no (jus cogens). No State shall recognize as lawful
derogation was permitted, this is opinio a situation created by a serious breach, nor
juris. render aid or assistance in maintaining that
2. If a State not directly affected by the situation.
breach took counter-measures against
the offending State, and that State 2. Reservations, Withdrawal,
conceded its right to do so, this is Termination, and Rebus Sic Stantibus
opinio that an obligation erga omnes
was involved. a. Reservations
A reservation is a unilateral statement,
Effects of Jus Cogens however phrased or named, made by a State,
1. Treaties to the contrary are void [Art. 53, when signing, ratifying, accepting, approving or
VCLT]. acceding to a treaty, whereby it purports to
a. Eliminates as far as possible the exclude or to modify the legal effect of certain
consequences of any act performed in provisions of the treaty in their application to
reliance on any provision which that State [Art. 2(d), VCLT].
conflicts with the peremptory norm of
general international law; and
Page 348 of 384

Exceptions: A reservation shall not operate to a. When it appears from the negotiating
modify or exclude the provisions of a treaty: States and the object and purpose of a
a. Where the treaty expressly prohibits treaty that the application of the treaty
reservations in general; in its entirety between all the parties is
b. Where the treaty expressly prohibits that an essential condition of the consent of
specific reservation being made; or each one to be bound by the treaty;
c. Where the reservation is incompatible with i. Then a reservation requires
the object and purpose of the treaty [Art. acceptance by all the parties.
19, VCLT; Reservation to the Genocide b. When a treaty is a constituent
Conventions Advisory Opinion, ICJ instrument of an international
(1951)]. organization.
ii. Then a reservation requires the
To be considered binding on the other acceptance of the competent organ
contracting State to the treaty, that State must of that organization.
accept the reservation. A reservation is
presumed to be accepted. A reservation is Exception: When the treaty provides
deemed unaccepted when another contracting otherwise.
state objects.
Acceptance of a Reservation
Interpretative Declaration Acceptance by another contracting State of a
Only specifies and clarifies the meaning or reservation constitutes the reserving State a
scope of a treaty of certain of its provisions. party to the treaty in relation to that other State
The character of a unilateral statement as a if or when the treaty is in force for those States.
reservation or an interpretative declaration is
determined by the legal effect that its author Objection to a Reservation
purports to produce. The statement should be General Rule: An objection to a reservation
interpreted in good faith in accordance with the does not preclude entry into force of the treaty
ordinary meaning to be given to its terms. between the objecting and reserving States.
1. General Principles on Reservations Exception: Unless a contrary intention is

definitely expressed by the objecting State.
Generally, reservations are allowed when
the State is signing, ratifying, accepting, An act expressing a State’s consent to be
approving or acceding to a treaty, unless bound by the treaty and containing a
they are: reservation is effective as soon as at least
a. Prohibited by the treaty; one other contracting State has accepted
b. Only specified reservations are allowed the reservation.
by the treaty; or
c. The reservation is incompatible with For the purposes of paragraphs 2
the object and purpose of the treaty (reservation expressly authorized by
[Art. 19, VCLT]. treaty) and 4 (reservation in a treaty
constituent of an international
A reservation expressly authorized by a organization), a reservation is considered
treaty does not require any subsequent to have been accepted by a State, on the
acceptance by the other contracting following date, whichever is later:
States. a. By the end of a period of twelve months
after it was notified of the reservation, if
Exception: When the treaty provides it shall have raised no objection to the
otherwise. reservation; or
b. By the date on which it expressed its
When do reservations require the consent to be bound by the treaty [Art.
consent of a party? 20, VCLT].
Page 349 of 384
Exception: The treaty provides otherwise. i. The parties intended to admit the
possibility of denunciation or
b. Withdrawal and Termination withdrawal; or
ii. A right of denunciation or withdrawal
1. Invalid Treaties may be implied from the nature of the
treaty [Art. 56, VCLT].
Invalidity of a treaty may be invoked: c. Conclusion of a subsequent inconsistent
a. If consent was given in violation of treaty [Art. 59, VCLT];
provisions of internal law regarding d. Material breach or Termination or
competence to conclude treaties, provided Suspension of a Treaty as a Consequence
that: of its Breach [Art. 60, VCLT]. This is either:
i. The violation is manifest; and i. A repudiation of the treaty not
ii. It concerned a rule of fundamental sanctioned by the present Convention;
importance [Art. 46, VCLT]. or
b. If the representative consented in violation ii. The violation of a provision essential to
of specific restrictions on authority, the accomplishment of the object or
provided the restriction was notified to the purpose of the treaty [Art. 60 (3),
other negotiating states prior to the VCLT].
representative expressing such consent e. Supervening Impossibility of Performance
[Art. 47, VCLT]; [Art. 61, VCLT].
c. Error of fact or situation, provided that:
i. Such formed an essential basis of a General Rule: The impossibility results from
state’s consent to be bound; the permanent disappearance or destruction of
ii. The State did not contribute by its own an object indispensable for the execution of the
conduct to the error; and treaty. If the impossibility is temporary, it may
iii. The circumstances were not such as to be invoked only as a ground for suspending the
put that State on notice of a possible operation of the treaty.
error [Art. 48, VCLT].
d. If consent was obtained through fraudulent Exception: If the impossibility is the result of a
conduct of another negotiating state [Art. breach by that party either of an obligation
49, VCLT]; under the treaty or of any other international
e. If the representative of a state was obligation owed to any other party to the treaty.
corrupted to consent by another
negotiating state [Art. 50, VCLT]; f. Severance of Consular or Diplomatic
f. If the representative of a State was coerced Relations if the relations were
through acts or threats directed against him indispensable for the application of the
[Art. 51, VCLT]; treaty [Art. 63, VCLT]
g. If the conclusion of a treaty is procured by g. Emergence of a new peremptory norm of
threat or use of force [Art. 52, VCLT]; general international law (Jus Cogens) [Art.
h. If it violates a jus cogens norm at the time 64, VCLT].
of its conclusion [Art. 53, VCLT].
Rebus Sic Stantibus
2. Other Grounds for Termination of Fundamental Change of Circumstances [Art.
Treaty 62, VCLT], otherwise known as rebus sic
stantibus.
a. Termination of the treaty or withdrawal of a
party in accordance with the provisions of The doctrine of rebus sic stantibus is a principle
the treaty or by consent of all the parties in customary international law providing that
[Art. 54, VCLT]; where there has been a fundamental change of
b. Denunciation or desistance by a party in circumstances since an agreement was
accordance with the provisions of the concluded, a party to that agreement may
treaty, or if the treaty does not so provide: withdraw from or terminate it. Article 62 of the
Page 350 of 384

VCLT is considered as a codification of CIL ii. Party specially affected by the
[Gabcikovo-Nagymaros Project, ICJ (1997)]. breach to invoke it as a ground for
suspending the operation of the
Requisites [Art. 62 (1), VCLT] treaty in whole or in part in the
a. The existence of those circumstances relations between itself and the
constituted an essential basis of the defaulting State;
consent of the parties to be bound by the iii. Any party other than the defaulting
treaty; State to invoke the breach as a
b. The effect of the change is radically to ground for suspending the
transform the extent of obligations still to be operation of the treaty in whole or
performed under the treaty; in part with respect to itself if the
c. The change of circumstances was not treaty is of such a character that a
foreseen. material breach of its provisions by
one party radically changes the
When Fundamental Change of position of every party with respect
Circumstances cannot be invoked (Art. 62 to the further performance of its
(2), VCLT) obligations under the treaty.
a. If the treaty establishes a boundary; or 5. Supervening impossibility of performance
b. If the fundamental change is the result of a [Art. 61, VCLT];
breach by the party invoking it either of an a. If the impossibility is temporary, it may
obligation under the treaty or of any other be invoked only as a ground for
international obligation owed to any other suspending the operation of the treaty.
party to the treaty. 6. Fundamental change of circumstance [Art.
62, VCLT];
3. Suspension of Treaties a. If a party may invoke a fundamental
change of circumstances as a ground
Grounds for Suspension: for terminating or withdrawing from a
1. Conformity with provisions of treaty [Art. treaty it may also invoke the change as
57, VCLT]; a ground for suspending the operation
2. At any time by consent of all parties [Art. of the treaty.
57, VCLT;] 7. In a multilateral treaty, by agreement of two
3. Conclusion of a later treaty [Art. 58, VCLT]; or more parties;
a. If it appears from the later treaty or it a. But only between themselves alone;
was otherwise established that b. Temporary;
suspension of the earlier treaty was c. Requires that:
intended. i. The treaty provides possibility for
4. Material breach [Art. 60, VCLT]; suspension; or
a. Material breach by one of the parties ii. The treaty does not prohibit
entitles the other to invoke the breach suspension in question, and it does
as a ground for terminating the treaty or not affect enjoyment of other
suspending its operation in whole or in parties of their rights in the treaty
part [Art. 60(1), VCLT]; and is not incompatible with the
b. Effect of material breach on multilateral object and purpose of the treaty.
treaties [Art. 60(2), VCLT]:
i. Entitles other parties by unanimous B. Customary International Law
agreement to suspend the
operation of the treaty in whole or Definition
in part or to terminate it either: It is a general practice accepted as law [Art.
1) In the relations between 38(1)(b), ICJ Statute].
themselves and the defaulting
State; or 1. Elements
2) As between all the parties; a. State Practice
Page 351 of 384
1. Duration and consistency of practice Binding Effect of CIL
2. Generality of practice General Rule: Customary International Law is
b. Opinio Juris. binding on all states.
Before a norm may become customary Exceptions:

international law binding on all States, there Persistent Objector – When a State has
must be state practice and opinio juris sive continuously objected to a new customary
necessitatis [North Sea Continental Shelf norm at the time when it is yet in the process of
Cases, ICJ (1969)]. formation, by such persistent objection, the
norm will not be applicable as against that
State Practice State [Magallona and Asylum Case, ICJ
The practice must be consistent and general. (1950)].
Consistency requires substantial uniformity
and not necessarily complete uniformity in Subsequent Objector – The method of
practice [Asylum Case, ICJ (1950)]. Generality straight lines, established in the Norwegian
does not require complete consistency system (argued by UK to be contrary to
[Brownlie]. international but which Norway persistently
objected to); that even before the dispute
This means that the practice is virtually uniform arose, this method had been consolidated by a
and extensive and established, widespread, constant and sufficiently long practice, in the
consistent and representative (good number of face of which the attitude of governments bears
states) [Thirlway]. witness to the fact that they did not consider it
to be contrary to international law [Fisheries
State practice means that it pertains to the Case, ICJ, (1951)].
actions of a State only, not of individuals.
Note: A Subsequent Objector may be held
The Following Acts May Evidence State liable for a violation of international law [Art. 2,
Practice [Harris] ARSIWA].
1. Diplomatic correspondence;
2. Policy statements; Regional / Bilateral Custom – The ICJ has
3. Press releases; recognized the possibility of a regional
4. Opinions of official legal advisers; custom in the Asylum Case [ICJ, 1950] and of
5. Official manuals on legal decisions a bilateral custom in the Right of Passage
(executive decisions and practices, and over Indian Territory Case [ICJ, 1960].
government comments on drafts by the
ILC); Duality of Norms
6. International and national judicial It is possible for a norm of international law to
decisions; exist both as a customary norm and a
7. Recitals in treaties and international conventional norm (e.g., prohibition against the
instruments; use of force). Such norms are said to be of dual
8. Practice of international organs. character.
Opinio Juris Norms of dual character come into being when:

This refers to the belief on the part of states that a. A treaty provision simply restates a
a particular practice is required by law, and not customary norm;
because of courtesy or political expediency b. A treaty provision constitutes evidence of
(i.e., the State acts in such a manner because custom; or
it believes it is obligated to do so) [North Sea c. A treaty provision crystallizes into a
Continental Shelf Cases, ICJ (1969)]. customary norm.
For a treaty provision to crystallize into custom,

the provision must be norm-creating or
Page 352 of 384

lawmaking, creating legal obligations which i. The principle that private property seized
are not dissolved by their fulfillment [North Sea and used by the enemy in times of war
Continental Shelf Cases, ICJ (1969)]. under circumstances not constituting valid
requisition does not become enemy
The customary norm retains a separate identity property and its private ownership is
even if its content is identical with that of a retained, the enemy having acquired only
treaty norm. Thus, a State that cannot hold its temporary use [Noceda v. Escobar,
another State responsible for a breach of a G.R. No. L-2939 (1950)];
treaty obligation can still hold the erring state j. The principle that a State has the right to
responsible for the breach of the identical protect itself and its revenues, a right not
customary norm [Nicaragua Case, ICJ (1986)]. limited to its own territory but extending to
the high seas [Illuh Asaali v. Commissioner
Philippine Practice of Customs, G.R. No. L-24170 (1968)].
The Supreme Court has identified the following
customary norms: 2. Obligations Erga Omnes
a. Rules and principles of land warfare and of Erga omnes obligations refer to the obligations
humanitarian law under the Hague of a State towards the international community
Convention and the Geneva Convention as a whole, which, by their very nature, are the
[Shigenori Kuroda v. Jalandoni, G.R. No. L- concern of all States [Barcelona Traction
2662 (1949)]; (Belgium v. Spain), ICJ Report (1970)].
b. Pacta sunt servanda [La Chemise Lacoste,
S.A. v. Fernandez, G.R. No. 63796-97 C. General Principles of Law
(1984)];
c. Human rights as defined under the
Definition
Universal Declaration of Human Rights
These refer to those general principles in
[Reyes v. Bagatsing, G.R. No. L-65366
municipal law (particularly those of private law)
(1983)];
that may be appropriated to apply to the
d. The principle of restrictive sovereign
relations of states [Oppenheim].
immunity [Sanders v. Veridiano II, G.R. No.
L-46930 (1988)];
Function of GPL
e. The principle in diplomatic law that the
To avoid a non liquet, i.e., when a court does
receiving state has the special duty to
not have a treaty or customary norm to decide
protect the premises of the diplomatic
on.
mission of the sending state [Reyes v.
Bagatsing, supra];
Examples of General Principles of Law
f. The right of a citizen to return to his own
1. Estoppel [Temple of Preah Vihear Case,
country [Marcos v. Manglapus, G.R. No.
(1962)];
88211 (1989)];
2. Res Judicata;
g. The principle that “a foreign army allowed
3. Res Inter Alios Acta;
to march through friendly country or to be
4. Prescription;
stationed in it, by permission of its
5. Duty to Make Reparations [Chorzow
government or sovereign, is exempt from
Factory Case, PCIJ (1927)];
criminal jurisdiction of the place” [Raquiza
6. Abuse of Rights;
v. Bradford, G.R. No. L-44 (1945)];
7. Good Faith;
h. The principle that judicial acts, not of a
8. Principle of Reciprocity;
political complexion of a de facto
9. Circumstantial Evidence.
government established by the military
occupant in an enemy territory, are valid
Circumstantial evidence is admitted as indirect
under international law [Montebon
evidence in all systems of law and its use is
v.Director of Prisons, G.R. No. L-1352
recognized by international decisions. Such
(1947)];
circumstantial evidence, however, must consist
of a series of facts or events that lead to a
Page 353 of 384
single conclusion [Corfu Channel Case, ICJ 4. Harmonization
(1949)]. International law forms part of municipal law,
but in the rare instance of conflict between the
two systems the municipal judge is bound by
D. Application of International his jurisdictional rules. International law and
Law by Domestic Courts municipal law have the same juridical
substratum for their legal value, not destroyed
1. Monism by virtue of the formal delimitation of domains
International and municipal legal systems are of application. There is a demarcation of the
fundamentally part of one legal order. This view domains of international and municipal law, but
considers international law to be superior, with there is no inherent compatibility, and both
municipal law being a mere subset of must be given effect.
international law. International norms are thus
applicable within municipal systems even
without some positive act of the state.
II. INTERNATIONAL
LEGAL PERSON
2. Dualism
International law and municipal law are A. States
separate systems. Only those issues affecting
international relations are within the scope of A State exists when it complies with the four (4)
international law. requisites listed in the Montevideo Convention,
which is considered as CIL for defining the
Before an international norm can have an requisites of statehood.
effect within a municipal legal system, that
norm must be transformed, or adopted into the 1. Elements
municipal system through a positive act by a
state organ. However, customary international
law and general principles of international law Montevideo Convention, Article 1. The state as a
person of international law should possess the
need not be transformed or adopted.
following qualifications:
a. A permanent population;
Monism vs. Dualism b. A defined territory;
Monism sees all laws, international and c. Government; and
municipal, as part of one and the same system. d. Capacity to enter into relations with the other
If there is conflict between the two, States.
international law prevails.
a. Permanent Population
Dualism sees international law and municipal
law as separate and independent of each It refers to a permanent population and
other. Neither international law nor municipal intended to be used in association with that of
law can alter or repeal each other and for territory, and connotes a stable community.
international law to be binding within a State, it
must be transformed or incorporated into b. Defined Territory
municipal law.
State territory is that defined portion of the
3. Inverted Monism surface of the globe, which is subjected to the
Municipal law has primacy over international sovereignty of the State [Oppenheim]. A State
law in both international and municipal must exercise control over a certain area. It
decisions, because the State is superior to and need not be exactly defined by metes and
antecedent to the international community, and bounds, so long as there exists a reasonable
remains the only law-making entity. certainty of identifying it. No minimum land
area is required.
Page 354 of 384

1. Modes of Acquiring Territory v. Conquest
Act of defeating an opponent and occupying all
i. Occupation or part of its territory [Shaw].
Occupation refers not to mere discovery, but to
effective exercise of sovereignty over a territory Illegal under current international law [See Art.
that is terra nullius (i.e., not subject to the 2(4) of the UN Charter prohibiting threats or
sovereignty of any other state). use of force against the territorial integrity or
political independence of any state].
Effective occupation means continued display ● Does not, by itself, transfer title to land.
of authority. It involves: There must be a formal annexation and
● The intention and will to act as sovereign or further actions of international nature (e.g.,
animus occupandi; and treaty of cession) [Shaw].
● Some actual exercise or display of such
authority [Eastern Greenland Case, PCIJ c. Government
(1933)].
Denotes a “stable political community
ii. Prescription supporting a legal order to the exclusion of
Title is acquired by continuous and undisturbed another in a given area.”
exercise of sovereignty over a period of time.
The existence of effective government, with
In contrast [to occupation], prescription is the centralized administrative and legislative
acquisition of territory that is not terra organs, is the best evidence of a stable political
nullius, obtained by means that may initially community. It is a centralized structure capable
have been of doubtful legality but is of exercising effective control over a human
uninterrupted and uncontested for a long time. community living in a given territory.
Timely protests by the ‘former’ sovereign will
usually bar the claim [Aust]. State practice suggests that the requirement of
a “stable political organization” in control of the
Conditions under which title to territory may be territory does not apply during a civil war or
acquired by prescription: where there is a collapse of law and order in a
● Possession must be à titre de souverain; state that already exists.
● Possession must be peaceful,
uninterrupted and public; Under the rules on succession of States, even
● Possession must be endured for a certain changes of entire governments do not affect
length of time [Botswana/Namibia the identity and personality of the state. Once
Judgment, ICJ (1999)]. statehood is established, neither invasion nor
disorder alone can remove its character as a
iii. Accession or Accretion state [Brownlie].
Accession or accretion is the natural process of
land formation resulting in the increase of 1. Types of Government
territory.
i. DE JURE
iv. Cession Government from law, one with a color of
Cession means the transfer of territory from legitimacy.
one state to another by treaty (derivative). It is
the only bilateral mode of acquiring territorial ii. DE FACTO
sovereignty. One that governs without a mandate of law. So
long as it is in place, it may command
The notion of cession contemplates a transfer obedience from the inhabitants of the occupied
of sovereignty by one sovereign power to area. The de facto ruler may suspend laws and
another [Christian v. The Queen, UKPC enact new ones.
(2006)].
Page 355 of 384

● De Facto Proper/Government by independence, to provide for its conservation and
Revolution: That which usurps, either by prosperity, and consequently to organize itself as it
force or the will of the majority, the legal sees fit, to legislate upon its interests, administer its
government and maintains control against services, and to define the jurisdiction and
it; competence of its courts. The exercise of these
rights has no other limitation than the exercise of the
● Government by Paramount Force/by
rights of other states according to international law.
Occupation: Results from the occupation
of a state or a part thereof by invading
forces in time of war; and b. Failed States
● Government by Secession: Government
established as an independent government States whose government has collapsed
by inhabitants of a country who rise in [Shaw]. Though retaining legal capacity, they
insurrection against the parent state [See have, for all practical purposes, lost the ability
Co Kim Cham v. Valdez Tan Keh, G.R. No. to exercise it.
L-5 (1945)].
c. Secession
d. Capacity to Enter into Relations
Secession is the effort of a group or section of
A State must be free from outside control in a state to withdraw itself from the political and
conducting foreign and internal affairs, i.e., constitutional authority of that state, with a view
sovereign and independent. to achieving statehood for a new territorial unit
on the international plane [In Re Secession of
The State is the sole executive and legislative Quebec, Can. (1998)].
authority. It must be independent of other state
legal orders, and any interference by such legal Grounds for Secession:
orders, or by an international agency, must be a. Colonization;
based on a title of international law. b. Alien subjugation, domination, or
exploitation outside the colonial context;
Independence is the decisive criterion of c. Remedial Secession: When a people is
statehood. This concept of independence is blocked from the meaningful exercise of its
represented by the requirement of capacity to right to self-determination internally, it is
enter into relations with other States. entitled, as a last resort, to exercise it by
secession [In re Secession of Quebec,
2. Recognition of States and Can. (1998)].
Governments
The Principle of Continuity and
a. Recognition Obligations Contracted by De Facto
Governments
Recognition is an act by which a state The State is bound by engagements entered
acknowledges the existence of another state, into by governments that have ceased to exist.
government or belligerent community and Hence, the restored government is generally
indicates willingness to deal with the entity as liable for the acts of the usurper.
such under international law.
A general government de facto having
As a public act of state, recognition is an completely taken the place of the regularly
optional and political act. There is no legal duty constituted authorities in the state binds the
in this regard. nation. So far as its international obligations
are concerned, it represents the state. It
Montevideo Convention, Article 3: The political
succeeds to the debts of the regular
existence of the state is independent of recognition government it has displaced and transmits its
by the other states. Even before recognition the own obligations to succeeding titular
state has the right to defend its integrity and governments. Its loans and contracts bind the
Page 356 of 384
state and the state is responsible for the Exception: United Nations which has an
governmental acts of the de facto authorities. objective international personality. The UN’s
In general its treaties are valid obligations of personality is binding on the whole
the state. It may alienate the national territory international community, including States who
and the judgments of its courts are admitted to are not UN members [Reparations for Injuries
be effective after its authority has ceased Advisory Opinion, ICJ (1949)].
[Tinoco Arbitration, 1 U.N. Rep. Int’l Arb.
Awards 369, (1923)]. D. Status of Individuals and
Corporations
B. Non-State Entities
General Rule: Individuals, whether natural or
Persons or things in respect of which rights are juridical, do not have international legal
held and obligations are assumed by the personalities.
subject. They are not directly governed by the
rules of international law. Their rights (e.g., Exception: Individuals may assume the status
human rights of individuals) may be asserted of subjects of international law only on the
and their responsibilities imposed indirectly, basis of agreement by States and in specific
through the instrumentality of an intermediate contexts, not in accordance with general or
agency (e.g., State). CIL.
This distinction between objects and subjects Examples of Instances Where Natural
of International Law has been criticized as Juridical Persons Are Granted Personality:
unhelpful, as non-state actors already have ● Art. 187(c)-(e) of the UNCLOS provides for
standing to bring suits in the fields of jurisdiction of the Sea-Bed Disputes
international criminal law and international Chamber of the ITLOS over disputes
human rights law. between parties to contracts relating to the
exploitation of marine resources. Parties to
The United Nations has an objective such contracts may be natural or juridical
international personality [Reparations for persons.
Injuries Advisory Opinion, ICJ, (1949)]. ● The London Agreement of the International
Military Tribunal at Nuremberg, relating to
C. International Organizations crimes against peace, war crimes and
crimes against humanity, imposed duties
An organization established by a treaty or other and liabilities upon individuals as well as
instrument governed by international law and upon states.
possessing its own international legal ● Art. VI of the Convention on the Prevention
personality. International organizations may and Punishment of the Crime of Genocide
include as members, in addition to States, defined “parties charged with genocide” as
other entities [Draft Articles on the including individuals [Magallona].
Responsibility of International Organizations, ● The International Criminal Court has
Art. 2(a)]. jurisdiction over individuals who commit
genocide, crimes against humanity and
General Rule: International organizations war crimes, subject to conditions of the ICC
have special personalities. The status and Statute [Art. 25(1), ICC Statute, in relation
powers of an international organization is to Art. 5].
determined by agreement and not by general
or customary international law. They are
considered subjects of international law “if their
legal personality is established by their
constituent instrument.” Thus, legal personality
in this context is a relative concept [Magallona].
Page 357 of 384

III. JURISDICTION 3. Protective Principle
Jurisdiction means the power of a state under A State may exercise jurisdiction over an
international law to govern persons and offense committed outside its territory by its
property by its municipal law. This may be national or non-national, by reason of
criminal or civil, and may be exclusive or protecting its security or vital interests.
concurrent with other States [Harris].
4. Passive Personality Principle
Types of Jurisdiction:
a. Prescriptive Jurisdiction: This refers to A State may exercise jurisdiction over crimes
the power of a State to make its law committed without respect to the nationality of
applicable to the activities, relations, or the offender, on the ground that such crimes
status of persons, or the interests of are declared as international crimes by the
persons in things, whether by legislation, international community as a whole and thus
by executive act or order, by administrative are prohibited by international law [Magallona].
rule or regulation, or by determination by a
court. 3. Universality Principle
b. Adjudicative Jurisdiction: This refers to
the State’s jurisdiction to subject persons A State may exercise jurisdiction over crimes
or things to the process of its courts or committed without respect to the nationality of
administrative tribunals, whether in civil or the offender, on the ground that such crimes
in criminal proceedings, whether or not the are declared as international crimes by the
state is a party to the proceedings. international community as a whole and thus
c. Enforcement Jurisdiction: This refers to are prohibited by international law [Magallona].
the State’s jurisdiction to enforce or compel
compliance or to punish noncompliance Example: Jurisdiction is asserted with respect
with its laws or regulations, whether to acts considered committed against the
through the courts or by use of executive, whole world [e.g., piracy, see People v. Lol-lo
administrative, police, or other nonjudicial and Saraw, G.R. No. 17958 (1922)].
action.
Conflict of Jurisdiction
A. Basis of Jurisdiction This arises when two or more States can
exercise jurisdiction based on one or more
different principles of jurisdiction (ex:
1. Territoriality Principle Universality v. Territoriality).
Jurisdiction is determined by reference to the
place where the act occurred or was B. Title to Territory
committed. A State takes jurisdiction over See: Prescription
persons or events within its territory
[Magallona]. This usually refers to criminal C. Adjacent Maritime Seas
jurisdiction.
1. Territorial Sea
2. Nationality Principle
These waters stretch up to 12 miles from the
A State may exercise jurisdiction over an baseline in the seaward direction. They are
offender by virtue of his being its national, subject to the jurisdiction of the coastal state,
without regard as to where he was at the time which jurisdiction almost approximates that
the offense was committed and without respect which is exercised over land territory.
to the nature of the offense [Magallona].
The sovereignty of a coastal State extends,
beyond its land territory and internal waters
Page 358 of 384
and, in the case of an archipelagic State, its
archipelagic waters, to an adjacent belt of sea, This is subject to two limitations:
described as the territorial sea. This i. It must involve only acts that are
sovereignty extends to the air space over the required by navigation or by distress
territorial sea as well as to its bed and subsoil [Art. 18 (2), UNCLOS]; and
[Art. 2, UNCLOS]. ii. It must not prejudice the peace,
security, or good order of the coastal
Rights that are Available to all States in State [Art. 19, UNCLOS].
Territorial Sea b. Transit Passage
a. Innocent Passage Refers to the right to exercise freedom of
Refers to navigation through the territorial navigation and overflight solely for the
sea without entering internal waters, going purpose of continuous and expeditious
to internal waters, or coming from internal transit through the straights used for
waters and making for the high seas [Art. international navigation. The right cannot
18 (1), UNCLOS]. be unilaterally suspended by the coastal
State [Art. 38, UNCLOS].
Innocent Passage v. Transit Passage

Innocent Passage Transit Passage
Includes the right of overflight (i.e., pertains to

Pertains to navigation of ships only.
navigation of aircraft).
Requires submarines and other underwater

Submarines are allowed to navigate in “normal
vehicles to navigate on the surface and show
mode” (i.e., submerged).
their flag.
Can be suspended, but under the condition that

it does not discriminate among foreign ships,
and such suspension is essential for the
Cannot be suspended.
protection of its security, and suspension is
effective only after having been duly published
[Art. 25, UNCLOS].
In the designation of sea lanes and traffic

Designation of sea lanes and traffic separation
separation schemes, the coastal State shall
schemes is subject to adoption by Competent
only take into account the recommendations of
international organization upon the proposal
the competent international organization.
and agreement of states bordering the straits.
c. Rights that are Available to Coastal ii. Crime disturbs peace & good
State order;
1. To prevent passage which is not iii. Assistance has been requested;
innocent; iv. Measures to suppress drug
2. To suspend innocent passage trafficking [Art. 27, UNCLOS].
temporarily [Art. 25, UNCLOS];
3. To apply laws and regulations relating d. Territorial Sea Entitlements
to innocent passage [Art. 21, 1. Islands generate territorial sea, EEZ,
UNCLOS]; and continental shelf [Art. 121 (2),
4. To enforce criminal law if: UNCLOS];
i. Consequences of the crime
extends to the coastal State;
Page 359 of 384
2. Rocks have a territorial sea but no EEZ b. Rights of the Coastal State in the
or continental shelf [Art. 121 (3), EEZ
UNCLOS];
3. Low-tide elevations have no territorial a. Sovereign rights for exploring and
sea if outside the territorial sea; exploiting, conserving and managing the
i. A low-tide elevation is a naturally natural resources of the waters superjacent
formed area of land which is to the seabed and of the seabed and its
surrounded by and above water at subsoil;
low tide but submerged at high tide b. Establish and use of artificial islands,
[Art. 13, UNCLOS]. installations and structures;
4. Artificial islands do not possess the c. Conduct marine scientific research;
status of islands and do not generate d. Preserve and protect its marine
maritime zones [Art. 60 (8), UNCLOS]. environment [Art. 56, UNCLOS];
e. Authorize and regulate the construction,
2. Contiguous Zone operation and use of artificial islands and
installations and structures [Art. 60,
The contiguous zone is that which is UNCLOS];
contiguous to its territorial sea. It may not f. Determine the allowable catch of living
extend beyond 24 nautical miles from the resources [Art. 61, UNCLOS];
baselines from which the breadth of the g. Give other states access to surplus of the
territorial sea is measured. allowable catch [Art. 62, UNCLOS];
h. Board and inspect a ship;
The powers of the Coastal State over the i. Arrest a ship and its crew;
Contiguous Zone include: j. Institute judicial proceedings against them.
1. Control to prevent infringement of its In arrest or detention of foreign vessels, the
customs, fiscal, immigration or sanitary coastal State has the duty to promptly
laws and regulations within its territory or notify the flag state of the action taken [Art.
territorial sea; and 73, UNCLOS].
2. Control to punish infringement of the above
laws and regulations committed within its c. Rights of the Non-Coastal State
territory or territorial sea [Art. 33,
UNCLOS]. Under Art. 58, UNCLOS, all States enjoy the
freedom of navigation, over flight, and laying of
3. Exclusive Economic Zone submarine cables and pipelines in the EEZ of
coastal states.
The exclusive economic zone (EEZ) is the
stretch of area up to 200 miles from the Coastal States have the primary responsibility
baselines. Within this zone, a State may to utilize, manage and conserve the living
regulate non-living and living resources, other resources within their EEZ (i.e., ensuring that
economic resources, artificial installations, living resources are not endangered by
scientific research, and pollution control. overexploitation), and the duty to promote
optimum utilization of living resources by
a. The Extent of the State’s Rights in determining allowable catch.
the EEZ
There is a duty to share catch if the maximum
The UNCLOS gives the coastal State allowable catch is determined to be above the
sovereign rights overall economic resources of capacity of the State to harvest.
the sea, seabed, and subsoil in an area
extending not more than 200 nautical miles The State shall give other States access to the
beyond the baseline from which the territorial surplus by means of arrangements allowable
sea is measured [Arts. 55 and 57, UNCLOS]. under the UNCLOS. The UNCLOS, however,
Page 360 of 384

does not specify the method for determining baseline of the territorial sea, or 100
“allowable catch.” nautical miles from the 2,500-meter isobath
(i.e., the point where the waters are 2,500
d. The Right of Geographically meters deep) [Art. 76 (1 and 2) in relation
Disadvantaged States or to Art. 76 (5 and 6), UNCLOS].
Landlocked States
d. Exclusive Rights of the Coastal
General Rule: These states have the right to State in the Continental Shelf
participate, on an equitable basis, in the
exploitation of the surplus of the living a. Sovereign rights with respect to the
resources in the EEZ of coastal states of the exploration and exploitation of its natural
same subregion or region. resources, including the mineral and other
non-living resources of the seabed and
Exception: A coastal state whose economy is subsoil together with living organisms
overwhelmingly dependent on the exploitation belonging to the sedentary species [Art. 77,
of its EEZ is not required to share its resources. UNCLOS].
b. The coastal state has the exclusive right to
4. Continental Shelf authorize and regulate oil-drilling on its
continental shelf [Art. 81, UNCLOS].
a. Extended Continental Shelf
Note: “Exclusive” means that if the coast does
It is the seabed and subsoil of the submarine not explore or exploit its resources, no other
areas extending beyond the territorial sea of state can without the State’s consent.
the coastal state throughout the natural
prolongation of its land territory up to: Exclusive
a. The outer edge of the continental margin; Continental Shelf
Economic Zone
or
b. A distance of 200 nautical miles from the Coastal state is No duty to manage
baselines of the territorial sea where the obliged to manage and conserve living
outer edge of the continental margin does and conserve living resources.
not extend up to that distance [Art. 76(1), resources in the
UNCLOS]. EEZ.
b. Continental Margin The extent of the The extent of the

right of the coastal right of the coastal
Submerged prolongation of the landmass of state to natural state to natural
the continental state, consisting of the resources (nonliving) resources (nonliving)
continental shelf proper, the continental slope, only extends to the covers both waters
and the continental rise [Art. 76(3), UNCLOS]. seabed and subsoil. super adjacent to the
seabed and those of
c. Continental Shelf the seabed and
subsoil.
a. The juridical or legal continental shelf
The extent of the The extent of the
covers the area until 200 nautical miles
right of the coastal right of the coastal
from baselines.
state to living state to living
b. The extended continental shelf covers the
resources only resources does not
area from the 200-mile mark to 350 nautical
extends to sedentary extend to sedentary
miles from the baselines depending on
species. species.
geomorphologic or geological data and
information.
c. The continental shelf shall not extend
beyond 350 nautical miles from the
Page 361 of 384
D. Jurisdiction Over Persons connection with any criminal investigation
directed against him in connection with any
and Economic Activity criminal investigation directed against him or
the execution of a penalty imposed on him
1. Criminal Jurisdiction under the penal or criminal law of the
requesting State or government [Section 2(a),
a. General Theory P.D. 1069].
Territoriality Principle: Jurisdiction is 2. The General Rule on Standard of

determined by reference to the place where the Treatment
act occurred or was committed. A State takes
jurisdiction over persons or events within its Flowing from its right to existence and as an
territory [Magallona]. This usually refers to attribute of sovereignty, no State is under any
criminal jurisdiction. obligation to admit aliens. The state can
determine in what cases and under what
Territorial sovereignty involves the exclusive conditions it may admit such. Once it admits
right to display the activities of a State. This aliens, under the international standard of
right has a corollary, a duty: the obligation to justice, which calls for compliance with the
protect within the territory the rights of other ordinary norms of official conduct observed in
States, in particular, their right to integrity and civilized jurisdictions, aliens should be
inviolability in peace and in war, together with protected by certain minimum standards of
the rights which each State may claim for its humane protection, however harsh the
nationals in foreign territory [Island of Las municipal laws of a state may be.
Palmas Arb., PCA (1928)].
3. Requisites For Extradition to Be
b. Extradition Exercised [Gov. of Hong Kong v.
Olalia, Jr., supra]
1. Definition
a. There must be an extradition treaty in
Extradition is the surrender by one nation to force between the HKSAR and the
another of an individual accused or convicted Philippines;
of an offense outside of its own territory, and b. The criminal charges that are pending
within the territorial jurisdiction of the other, in the HKSAR against the person to be
which, being competent to try and to punish extradited;
him, demands the surrender [Government of c. The crimes for which the person to be
Hongkong Special Administrative Region v. extradited is charged are extraditable
Muñoz, G.R. No. 207342 (2016)]. within the terms of the treaty;
d. The individual before the court is the
Extradition has thus been characterized as the same person charged in the HKSAR;
right of a foreign power, created by treaty, to e. The evidence submitted establishes
demand the surrender of one accused or probable cause to believe that the
convicted of a crime within its territorial person to be extradited committed the
jurisdiction, and the correlative duty of the other offenses charged; and
state to surrender him to the demanding State f. The offenses are criminal in both the
[Government of Hong Kong Special HKSAR and the Philippines (double
Administrative Region v. Olalia, Jr., G.R. No. criminality rule).
153675 (2007)].
It also refers to the removal of an accused from

the Philippines with the object of placing him at
the disposal of foreign authorities to enable the
requesting state or government to hold him in
Page 362 of 384

4. Fundamental Principles on b. The request is received by the State of
Extradition refuge.
c. A judicial investigation is conducted by the
The Duty to Extradite Must Be Based on a state of refuge to ascertain if the crime is
Treaty covered by the extradition treaty and if
It is not part of CIL, although the duty to there is a prima facie case against the
extradite exists only for some international fugitive according to its own laws.
crimes. Thus, a state must extradite only when d. If there is a prima facie case, a warrant of
obliged by treaty to do so [Government of surrender will be drawn and the fugitive will
Hongkong Special Administrative Region v. be delivered to the state of origin.
Muñoz, G.R. No. 207342 (2016)].
The evaluation process partakes the nature of
Principle of Specialty a criminal investigation, having consequences
A fugitive who is extradited may be tried only which will result in deprivation of liberty of the
for the crime specified in the request for prospective extraditee. A favorable action in an
extradition and included in the list of offenses extradition request exposes a person to
in the extradition treaty [US v. Rauscher, 119 eventual extradition to a foreign country, thus
US 407 (1886)]. exhibiting the penal aspect of the process.
Rule of Double Criminality The evaluation process itself is like a

The act for which extradition is sought must be preliminary investigation since both procedures
punishable in both the requesting and may have the same result: the arrest and
requested States [Government of Hongkong imprisonment of the respondent [Secretary of
Special Administrative Region v. Muñoz, Justice v. Lantion, supra].
supra].
Extradition Deportation
It Is a Sui Generis Proceeding
An extradition proceeding is sui generis. It is Effected at the
Unilateral Act of the
not a criminal proceeding which will call into request of another
State.
operation all the rights of an accused as State.
guaranteed by the Bill of Rights [Sec. of Justice
v. Lantion, G.R. No. 139465 (2000)]. Based on offenses Based on causes
committed in the arising in the local
Bail May Be Granted to the Extraditee on state of origin. state.
the Basis of Clear and Convincing
Evidence That He Is Not a Flight Risk An undesirable alien
Calls for the return may be deported to
The potential extraditee must prove by “clear
and convincing evidence” that he is not a flight of the fugitive to the a state other than
requesting state. his own or his state
risk and will abide by all the orders and
processes of the extradition court [Government of origin.
of Hong Kong Special Administrative Region v.
Olalia, Jr., supra]. The Obligation of Aut Dedere Aut
Judicare (to extradite or prosecute)
There Must Be Compliance with A conventional obligation of States found in
Procedural Due Process various treaties. A state subject to this
obligation is bound to extradite if it does not
Procedure prosecute, and to prosecute if it does not
a. A request for extradition is presented extradite.
through diplomatic channels to the state of
refuge with the necessary papers for
identification.
Page 363 of 384

The Effective Fulfillment of the Obligation Restrictive Theory
to Extradite or Prosecute Requires: The immunity of the sovereign is recognized
1. undertaking necessary national measures only with regard to public acts or acts (jure
to criminalize the relevant offenses; imperii) of state, but not regard to private acts
2. establishing jurisdiction over the offenses or acts (jure gestionis). The Philippines follows
and the person present in the territory of the restrictive theory.
the State;
3. investigating or undertaking primary 2. Suits Against the State
inquiry;
4. apprehending the suspect, and submitting A suit against the state will only prosper if the
the case to the prosecuting authorities state gives its express consent.
(which may or may not result in the When Is a Suit Considered a Suit Against
institution of proceedings); the State?
OR 1. If it produces adverse consequences to
Extraditing, if an extradition request is public treasury in terms of disbursement as
made by another State with the necessary well as loss of government property,
jurisdiction and capability to prosecute the regardless of the defense;
suspect [Final Report of the International 2. When the Republic is sued in its name;
Law Commission on the Obligation of Aut 3. When the suit is against an unincorporated
dedere aut judicare (2014)]. government agency; and
4. Even when the suit, on its face, is against
2. Civil Jurisdiction an officer but liability will belong to/fall on
the government.
The head of State represents the sovereignty
of the State and enjoys the right to special When Is a Suit Not Against the State?
protection for his physical safety and the 1. When it partakes of the nature of ordinary
preservation of his honor and reputation. business rather than functions of a
governmental or political character;
The head of State is immune from criminal and 2. When the purpose of the suit is to compel
civil jurisdiction, except when he himself is the an officer charged with the duty of making
plaintiff, and is not subject to tax or exchange payments pursuant to an appropriation
or currency restrictions. Based on the principle made by law in favor of the plaintiff to make
of extraterritoriality, his quarters, archives, such payment, since the suit is intended to
property, and means of transportation are compel performance of a ministerial duty
inviolate. [Begosa v. Philippine Veterans
Association, G.R. No. L-25916 (1970)];
3. Immunity From Jurisdiction 3. When it is clear that the respondent is a
public officer sued in a private capacity;
a. Sovereign Immunity 4. When the action is not in personam with the
government as the named defendant, but
1. Two Theories of Sovereign Immunity an action in rem that does not name the
[US v. Ruiz, G.R. No. L-35645 (1985)] government in particular.
Absolute Theory Official Capacity vs. Personal Capacity

A sovereign cannot, without its consent, be The doctrine of non-suability applies only in
made a respondent in the courts of another cases wherein the complaint is against officials
sovereign. of state for acts performed in discharge of
duties or his official capacity. When officials
This derives from the principle of sovereign abuse this authority gravely (like discriminatory
equality found in Article 2(1) of the UN Charter behavior), this is no longer an official state act
as well as generally accepted principles of and the official may now be sued in his
international law.
Page 364 of 384
personal capacity [Shauf v. CA, G.R. No 90314 Functional necessity theory
(1990)]. The privileges and immunities are necessary to
enable the diplomatic mission to perform its
Beyond Scope of Authority functions. This theory was adopted by the ILC
When officials, while discharging their official when it drafted the draft articles of the VCDR
functions, commit acts that are beyond their [Magallona].
scope of authority (i.e., police forces firing upon
civilians and killing them, mistakenly believing Personal Inviolability
they were Communists), they will be liable in General Rule: The person of a diplomatic
their personally capacity and thus will not be agent shall be inviolable. He shall not be liable
covered by state immunity [Republic v. to any form of arrest or detention [Art. 29,
Sandoval, G.R. No. 84607 (1993)]. VCDR].
Waiver of Immunity Exception: The diplomatic envoy may be

When the State expressly states their consent arrested temporarily in case of urgent danger,
to be sued through legislation (including such as when he commits an act of violence
treaties), it waives its immunity from suit. which makes it necessary to put him under
However, this waiver of immunity may be restraint for the purpose of preventing similar
limited to certain legal actions (i.e., under the acts [Diplomatic and Consular Staff in Tehran
VFA, there is a waiver of immunity by the US Case, ICJ (1980)].
under criminal jurisdiction but not to civil
actions) [Arigo v. Swift, G.R. No. 206510 The receiving State shall treat him with due
(2014)]. respect and shall take all appropriate steps to
prevent any attack on his person, freedom or
Consent To Be Sued dignity [Art. 29, VCDR].
Express Consent – effected only by the will of
the legislature through the medium of a duly Heads of State
enacted statute; may be embodied either in a The head of State represents the sovereignty
general law or a special law. of the State and enjoys the right to special
protection for his physical safety and the
General Law – Authorizes any person who preservation of his honor and reputation.
meets the conditions stated in the law to sue
the government in accordance with the The head of State is immune from criminal and
procedure in the law. civil jurisdiction, except when he himself is the
plaintiff, and is not subject to tax or exchange
b. Diplomatic and Consular Immunity or currency restrictions. Based on the principle
of extraterritoriality, his quarters, archives,
Theoretical Bases property, and means of transportation are
Diplomatic immunities and privileges have Inviolate.
been justified under the following theories:
Scope
Extraterritoriality theory 1. The private residence of a diplomatic agent
The premises of the diplomatic mission shall enjoy the same inviolability and
represent a sort of extension of the territory of protection as the premises of the mission;
the sending State. 2. His papers, correspondence and, except
as provided in paragraph 3 of Article 31;
Representational theory 3. His property shall likewise enjoy
The diplomatic mission personifies the sending inviolability [Art. 30, VCDR];
State. 4. Personal baggage is exempt from
inspection, except:
a. If there are serious grounds for
presuming that it contains articles
Page 365 of 384

which are neither for the official use of receiving state to take up his post or, if already
the mission or for the personal use of a in its territory, from the moment when his
diplomatic agent or members of his appointment is notified to the Ministry of
family forming part of his household; or Foreign Affairs.
b. If the import or export of the articles is
prohibited by the law or controlled by They come to an end when he:
the quarantine regulations of the a. Exits the country; or
receiving State. e. Upon expiration of a reasonable period in
which to leave the country [Art. 39, VCDR].
Such inspection shall be conducted only in the
presence of the diplomatic agent or of his Waiver of Immunity from Jurisdiction
authorized representative [Art. 36, VCDR]. In proceedings, whether criminal, civil or
administrative, the waiver must be:
Immunity from Local Jurisdiction b. Made by the sending State itself; and
c. Express [Art. 32, VCDR].
Persons Entitled
a. Diplomatic agent and family State practice indicates that the authority to
Diplomatic agent and the members of the exercise the waiver rests with the sovereign
family of the diplomatic agent forming part of organs, and not the diplomatic agent or official
his household who are not nationals of the himself [Magallona].
receiving state [Art. 31, VCDR];
A diplomatic agent is not obliged to give
b. Administrative and technical staff evidence as a witness [Art. 31, VCDR].
a. As to criminal jurisdiction, members of
the administrative and technical staff of 4. Areas Not Subject to Jurisdiction of
the diplomatic mission, as well as Individual States
members of their families forming part
of their respective households, who are a. High Seas
not nationals of or permanent residents The freedom to use the world’s marine waters
in the receiving State; is one of the oldest customary principles of
b. As to civil and administrative international law. The UNCLOS gives to the
jurisdiction, immunity shall not extend coastal State sovereign rights in varying
to acts performed outside the course of degrees over the different zones of the sea
their duties [Art. 37, VCDR]; which are: 1) internal waters; 2) territorial sea;
3) contiguous zone; 4) exclusive economic
c. Service staff zone; and 5) the high seas [Arigo v. Swift, G.R.
Members of the service staff of the diplomatic No. 206510 (2014)].
mission, who are not nationals of or permanent
residents in the receiving state, with respect to Ships sailing the high seas are generally under
acts performed in the course of their duties [Art. the jurisdiction of the flag state (if there is one);
37, VCDR]; however, when a ship is involved in certain
criminal acts, such as piracy, any nation can
d. Private servants exercise jurisdiction under the doctrine of
Private servants of members of the mission universal jurisdiction.
shall, if they are not nationals of or permanently
resident in the receiving State enjoys only b. Deep Seabed
privileges and immunities to the extent
admitted by the receiving State.
Who Regulates the Deep Seabed Usage
The International Seabed Authority (ISA)
Duration of Immunities and Privileges
The ISA is the organization that organizes,
Immunities and privileges begin from the
carries out, and controls the activities of the
moment the person enters the territory of the
Page 366 of 384

Area on behalf of mankind as a whole. The ISA
is composed of:
IV. INTERNATIONAL
a. The Assembly: all state parties to the RESPONSIBILITY
UNCLOS;
b. The Council: the executive organ whose 36 Relevant Text: Articles on State Responsibility
members are elected by the Assembly; (ARSIWA)
c. The Enterprise: the organ directly engaged
in the exploration and exploitation of the Every internationally wrongful act of a state
resources of the Area, including the entails the international responsibility of that
transporting, processing and marketing of State [Art. 1, ARSIWA].
minerals.
A. Concept of Imputability of
c. Outer Space
Internationally Wrongful Act or
The Outer Space Treaty Omission
“Treaty on Principles Governing the Activities
of States in the Exploration and Use of Outer Attribution
Space, including the Moon and Other Celestial Attribution or imputability is a legal construct
Bodies.” whereby an internationally unlawful conduct of
a State organ acting in that capacity is
The treaty is the foundation of international regarded as the conduct of the State itself,
space law for signatory nations (108 in 2019). making that State responsible for it as an
The treaty presents principles for space internationally wrongful act.
exploration and operation:
1. Space activities are for the benefit of all It proceeds from the theory that as an abstract
nations, and any country is free to explore entity, the State can physically act only through
orbit and beyond. individuals or groups of individuals performing
2. There is no claim for sovereignty in space; "acts of the State" on its behalf [Differences
no nation can “own” space, the Moon or Relating to Immunity from Legal Processes of
any other body. a Special Rapporteur of the Commission of
3. Weapons of mass destruction are Human Rights, 38 International Legal Materials
forbidden in orbit and beyond, and the 873 (1999)].
Moon, the planets, and other celestial
bodies can only be used for peaceful Elements of an Internationally Wrongful
purposes. Act:
4. Any astronaut from any nation is an “envoy An action or omission is an intentionally
of mankind,” and signatory states must wrongful act when it:
provide all possible help to astronauts a. Is attributable to the State under
when needed, including emergency international law; and
landing in a foreign country or at sea. b. Constitutes a breach of an international
5. Signatory states are each responsible for obligation of a State [Art. 2, ARSIWA].
their space activities, including private
commercial endeavors, and must provide The characterization of an act of a state as
authorization and continuing supervision. internationally wrongful is governed by
6. Nations are responsible for damage international law. Such characterization is not
caused by their space objects and must affected by the characterization of the same act
avoid contaminating space and celestial as lawful by internal law [Art. 3, ARSIWA].
bodies.
Theory of Objective or Strict Liability
With respect to state responsibility, the theory
provides that fault is unnecessary for State
responsibility to be incurred.
Page 367 of 384

1. Conduct of Organs of a State Such is considered an act of the State if the
[Article 4, ARSIWA] organ, person or entity acts in that capacity,
even if it exceeds its authority or contravenes
The conduct of any State organ shall be instructions.
considered an act of that State whether the
organ exercises legislative, executive, judicial 5. Conduct Directed or Controlled by a
or any other functions, whatever position it State [Article 8, ARSIWA]
holds in the organization of the State.
If the person or group of persons is in fact
An organ includes any person or entity which acting on the instructions of, or under the
has that status in accordance with the internal direction or control of, that State in carrying out
law of the State. the conduct.
2. Conduct of Persons or Entities a. Effective Control

Exercising Elements of Governmental Under the law on state responsibility, a State is
Authority [Article 5, ARSIWA] responsible only for the acts of its organs and
over non-state actors over which it exercised
The conduct of a person or entity (which is not effective control [Nicaragua case, IICJ, (1986)].
a State organ) empowered by the law of that
State to exercise elements of governmental For there to be effective control, it should have
authority shall be considered an act of the given instructions or provided the direction
State, provided the person or entity is acting in pursuant to which the perpetrators of the
that capacity. wrongful act acted. The agents or private
persons should have been told what to do on
all stages of the act.
3. Conduct of Organs Placed at the
Disposal of a State by Another State Requires a high degree of dependence.
[Article 6, ARSIWA]
b. Overall Control
If the organ is acting in the exercise of elements In the Application of the Convention on the
of the governmental authority of the State at Prevention and Punishment of the Crime of
whose disposal it is placed. Genocide Case (ICJ, 2007), the ICJ ruled that
the “over-all control test” was only relevant in
4. Excess of Authority or so far as the question of characterization of the
Contravention of Instructions [Article Yugoslav conflict as an international armed
7, ARSIWA] conflict, or whether or not the conflict has been
internationalized; it is not relevant to the task of
These are unauthorized or ultra vires acts by a determining whether a state is responsible for
State organ, person, or entity empowered to the acts of certain non-state organs involved in
exercise government authority. that same international armed conflict.
Effective Control v. Overall Control

Effective Control Overall Control
Control must have been exercised in respect to

each individual act or omission which Control must have gone “beyond the mere
constitutes the breach. financing and equipping of such forces” and
The private persons or groups must have been must have “participation in the planning and
mere agents of the state who were told what supervision of military operations.”
had to be done at all stages.
Page 368 of 384

Effective Control Overall Control
This provides a higher threshold for attribution. This presents a lower threshold for attribution.
A general situation of dependence and support There need not be a showing of actual or direct
would thus be insufficient to justify attribution. control.
This refers to the matter of individual criminal

responsibility and the application of the rules of
This refers to the matter of state responsibility.
international humanitarian law [e.g. Prosecutor
v. Tadic, ICTY Appeals Chamber (1995)].
6. Conduct Carried Out in the Absence 9. Responsibility of a State in

or Default of the Official Authorities Connection with the Acts of Another
[Article 9, ARSIWA] State
If the person or group of persons exercise A State would be internationally responsible for
elements of the governmental authority in the the following actions:
absence or default of the official authorities and 1. Aiding or assisting another State in the
in circumstances such as to call for the commission of an internationally wrongful
exercise of those elements of authority. act if: [Art.16, ARSIWA]
a. That State does so with knowledge of
7. Conduct of an Insurrectional or the circumstances of the internationally
Other Movement [Art. 10, ARSIWA] wrongful act; and
b. The act would be internationally
The conduct of an insurrectional movement wrongful if committed by that State.
which becomes the new Government of a State 2. Directing and controlling another State in
shall be considered an act of that State. the commission of an internationally
wrongful act if: [Art. 17, ARSIWA]
The conduct of a movement, insurrectional or a. That State does so with knowledge of
other, which succeeds in establishing a new the circumstances of the internationally
State in part of the territory of a pre-existing wrongful act; and
State or in a territory under its administration b. The act would be internationally
shall be considered an act of the new State. wrongful if committed by that State.
3. Coercing another State if: [Art. 18,
This is without prejudice to the attribution to a ARSIWA]
State of any conduct, however related to that of a. The act would, but for the coercion, be
the movement concerned, which is to be an internationally wrongful act of the
considered an act of that State by virtue of coerced State; and
articles 4 to 9. b. The coercing State does so with
knowledge of the circumstances of the
8. Conduct Acknowledged and act.
Adopted by a State as its Own [Art. 11,
10. Circumstances Precluding
ARSIWA]
Wrongfulness (Defenses)
Conduct not attributable under the preceding
Although a State which fails to act in conformity
articles shall nevertheless be considered an
with an international obligation will typically be
act of that State if and to the extent that the
subject to international responsibility for the
State acknowledges and adopts the conduct in
wrongful act, the State may be excused from
question as its own.
performance of an international obligation if
Page 369 of 384
circumstances precluding wrongfulness are 2. Limitations of Countermeasures: [Art.
present. 49, ARSIWA]
a. Countermeasures only undertaken to
a. Consent [Art. 20, ARSIWA] against the Responsible State to
Valid consent by a State to the commission of induce it to comply with the legal
a given act by another State precludes the consequences of its internationally
wrongfulness of that act in relation to the former wrongful act;
State to the extent that the act remains within b. Countermeasures shall, as far as
the limits of that consent. possible, be taken in way as to permit
resumption of performance of
b. Self-Defense [Art. 21, ARSIWA] obligations in question;
If the act constitutes a lawful measure of self- c. Countermeasures must be
defense taken in conformity with the UN proportional, commensurate to the
Charter. injury suffered. taking into account the
gravity of the internationally wrongful
Requisites of Collective Self-Defense: act and the rights in question [Art. 51,
a. State must have been the victim of an ASR].
armed attack;
b. The State being attacked is of the belief d. Force Majeure [Art. 23, ARSIWA]
and so declares that it was a victim of an General Rule: If the act is due to force
armed attack; majeure, that is the occurrence of an irresistible
c. The victim State must request for force or of an unforeseen event, beyond the
assistance [Nicaragua v. US, ICJ (1986)]. control of the State, making it materially
impossible in the circumstances to perform the
c. Countermeasures [Article 22, obligation.
ARSIWA]
If and to the extent that the act constitutes a Exceptions: The above rule does not apply if:
countermeasure taken against the latter State a. The situation of force majeure is due, either
in accordance with the ASR. alone or in combination with other factors,
to the conduct of the State invoking it; or
1. Conditions for Countermeasures [Art. b. The State has assumed the risk of that
52, ARSIWA] situation occurring.
a. Prior to taking countermeasures, the
injured State must: e. Distress [Art. 24, ARSIWA]
1. Call upon the responsible State to General Rule: If the author of the act in
fulfill its obligation to cease and question has no other reasonable way, in a
make reparations; situation of distress, of saving the author’s life
2. Notify the responsible State of any or the lives of other persons entrusted to the
decision to take countermeasures author’s care.
and offer to negotiate with that
State. Exceptions:
i. Exception: Notwithstanding the a. The situation of distress is due, either alone
obligation to notify, the injured or in combination with other factors, to the
State may take such urgent conduct of the State invoking it; or
countermeasures as are b. The act in question is likely to create a
necessary to preserve its comparable or greater peril.
rights.
b. Countermeasures may not be taken or f. Necessity [Art. 25, ARSIWA]
must be suspended without undue Elements
delay if: a. It is the only way for the State to safeguard
1. Internationally wrongful act has an essential interest against a grave and
ceased. imminent peril; and
Page 370 of 384
b. It does not seriously impair an essential B. Reparation
interest of the State or States towards
which the obligation exists, or of the The responsible State is under an obligation to
international community as a whole. make full reparation for the injury caused by the
internationally wrongful act.
Cannot be invoked if:
a. The international obligation in question Injury includes any damage, whether material
excludes the possibility of invoking or moral, caused by the internationally wrongful
necessity; or act of a State.
b. The State has contributed to the situation
of necessity. Full reparation – Means that the responsible
State must endeavor to wipe out all the
g. Other Principles consequences of the illegal act and reestablish
The responsible State may not rely on the the situation which would, in all probability,
provisions of its internal law as justification for have existed if that act had not been committed
failure to comply with its obligations under this [Factory at Chorzów (PCIJ, 1928)]. This may
part [Art. 32, ARSIWA]. be achieved by one form of reparation only or
by a combination of the different forms
None of the circumstances listed above [ARSIWA Draft Articles].
precludes the wrongfulness of any act of a
State which is not in conformity with an Material Damage – Refers to damage to
obligation arising under a peremptory norm of property or other interests of the State and its
general international law [Art. 26, ARSIWA]. nationals which is assessable in financial
terms.
11. Consequences Of an
Internationally Wrongful Act Moral Damage – Includes such items as
individual pain and suffering, loss of loved ones
The international responsibility of a State which or personal affront associated with an intrusion
is entailed by an internationally wrongful act on one’s home or private life [ARSIWA Draft
involves legal consequences [Art. 28, Articles].
ARSIWA].
1. Forms of Reparation
The legal consequences of an internationally
wrongful act under this part do not affect the Full reparation for the injury caused by the
continued duty of the responsible State to internationally wrongful act shall take the form
perform the obligation breached [Art. 29, of restitution, compensation and satisfaction,
ARSIWA]. either singly or in combination [Art. 34,
ARSIWA].
Cessation and Non-Repetition
The State responsible for the wrongful act is a. Restitution [Art. 35, ARSIWA]
under the obligation to:
a. Cease the act if it is still continuing; and A State responsible for an internationally
b. Offer appropriate assurances and wrongful act is under an obligation to make
guarantees of non-repetition, if restitution, that is, to re-establish the situation
circumstances so require [Art. 30, which existed before the wrongful act was
ARSIWA]. committed, provided and to the extent that
restitution:
Cessation – serves as a preventive function a. Is not materially impossible;
upon the wrongful state and is described as a b. Does not involve a burden out of all
positive reinforcement. proportion to the benefit deriving from
restitution instead of compensation.
Page 371 of 384

Restitution consists only in re-establishing material consequences for the State
the status quo ante, i.e., the situation that concerned [ARSIWA Draft Articles].
existed prior to the occurrence of the wrongful d. Other Principles
act, and does not require a hypothetical inquiry
into what the situation would have been if the Interest on any principal sum due under this
wrongful act had not been committed. chapter shall be payable when necessary, in
Restitution in this narrow sense may therefore order to ensure full reparation. The interest rate
have to be completed by compensation to and mode of calculation shall be set so as to
ensure full reparation for the damage caused achieve that result [Art. 38, ARSIWA].
[ARSIWA Draft Articles].
Contribution to the Injury
b. Compensation [Art. 36, ARSIWA] In the determination of reparation, account
shall be taken of the contribution to the injury
The State responsible is under an obligation to by willful or negligent action or omission of the
compensate for the damage caused thereby, injured State or any person or entity in relation
insofar as such damage is not made good by to whom reparation is sought [Art. 39,
restitution. ARSIWA].
Compensation corresponds to the financially C. International Protection of

assessable damage suffered by the injured
State or its nationals. It is not concerned to Human Rights (Including
punish the responsible State, nor does Refugees and Stateless
compensation have an expressive or Persons)
exemplary character [ARSIWA Draft Articles].
1. Basic Principles of International
c. Satisfaction [Art. 37, ARSIWA]
Human Rights Law
The State responsible is under an obligation to
give satisfaction for the injury caused by that Definition of Human Rights
act insofar as it cannot be made good by Human rights are those fundamental and
restitution or compensation. inalienable rights which are essential for life as
a human being. They are recognized by the
Satisfaction may consist in an international community as a whole through
acknowledgement of the breach, an their protection and promotion under
expression of regret, a formal apology or contemporary international law.
another appropriate modality.
Definition of International Human Rights
Satisfaction shall not be out of proportion to the Law
injury and may not take a form humiliating to International human rights law lays down the
the responsible State. obligations of Governments to act in certain
ways or to refrain from certain acts, in order to
Satisfaction is of exceptional character. It is promote and protect human rights and
only in cases where restitution or fundamental freedoms of individuals or groups
compensation have not provided full reparation [United Nations, Global Issue].
that satisfaction may be required [ASR Draft
Articles]. Classifications of Human Rights
a. First generation rights consist of civil and
It is the remedy for injuries not financially political rights;
assessable. These injuries are frequently of a b. Second generation rights consist of
symbolic character, arising from the very fact of economic, social and cultural rights;
the breach of the obligation, irrespective of its c. Third generation rights consist of the rights
to development, to peace, and to
environment [Vasak, Karel].
Page 372 of 384
Note: there is no hierarchy among these citing Filartiga v. Pena-Irala, 630 F.2d 876 (2d
classifications. Cir. 1980)].
In the Philippines, the UDHR is considered as
The Distinction Between First Generation customary international law. It has been
and Second Generation Human Rights interpreted by this Court as part of the generally
a. As to Obligatory Force accepted principles of international law and
1st Generation Rights are strictly or binding on the State [Poe-Llamanzares v.
objectively obligatory, whatever the COMELEC, G.R. No. 221697 (2016)].
economic condition or other conditions of
the state obliged. 2nd Generation Rights The UDHR embodies both first and second
are relatively or subjectively obligatory, generation rights.
states are required to progressively
achieve the full realization of these rights The Civil and Political Rights (1st
“to the maximum of their available Generation Rights) Enumerated in the
resources.” UDHR Include Rights Such As:
b. As to Derogation 1. The right to life, liberty, privacy and security
1st Generation rights are derogable only in of person;
times of public emergency and only as 2. Prohibition against slavery;
provided under Article 4 of ICCPR. 2nd 3. The right to not to be subjected to arbitrary
Generation Rights may be restricted for the arrest, detention or exile;
general welfare, with or without an 4. The right to recognition as a person before
“emergency that threatens the the law;
independence or security of a state party.” 5. Equal protection of the law;
6. Right to an effective remedy by the
a. The Universal Declaration of Human competent national tribunal;
Rights (UDHR) 7. The right to a fair and public hearing by an
independent and impartial tribunal;
The UDHR is the first comprehensive catalog 8. The right to fair trial and presumption of
of human rights proclaimed by an international innocence;
organization. 9. The right to a nationality;
10. The right to own property;
It is not a treaty. It has no obligatory character 11. The right to freedom of thought,
because it was adopted by the UN General conscience and religion;
Assembly as Resolution 217A (III). As a 12. The right to freedom of opinion and
resolution, it is merely recommendatory. expression;
13. The right to peaceful assembly and
Accordingly, it has been observed that the association;
Universal Declaration of Human Rights no 14. The right to take part in the government of
longer fits into the dichotomy of “binding treaty” his country.
against “non-binding pronouncement,” but is
rather an authoritative statement of the The Economic, Social and Cultural Rights
international community. Thus, a Declaration Enumerated in the UDHR Include Rights
creates an expectation of adherence, and Such As:
insofar as the expectation is gradually justified 1. The right to social security;
by State practice, a declaration may by custom 2. The right to work and protection against
become recognized as laying down rules unemployment;
binding upon the States. Indeed, several 3. The right to equal pay for equal work;
commentators have concluded that the 4. The right to form and join trade unions;
Universal Declaration has become, in toto, a 5. The right to rest and leisure.
part of binding, customary international law
[Razon, Jr. v. Tagitis, G.R. No. 182498 (2009) Note: See Articles 3-28 of the UDHR for a
complete enumeration of the rights.
Page 373 of 384
b. The International Covenant on Civil opinion, national or social origin, birth or
and Political Rights (ICCPR) other status.
2. State parties are required to take the
It embodies the first generation of human necessary steps to adopt legislative or
rights, although it lists more rights than the other measures that are necessary to give
UDHR, namely: effect to the rights recognized in the
1. The right to self-determination [Art. 1]; ICCPR.
2. The right of members of ethnic, religious or 3. State parties must ensure that any person
linguistic groups not to be denied to enjoy whose rights or freedoms are violated have
their own culture, to profess and practice an effective remedy, notwithstanding that
their own religion, or to use their own the violation has been committed by
language [Art. 27]; persons action in an official capacity.
3. The right to compensation in case of 4. State parties must ensure that any person
unlawful arrest [Art. 9]; claiming such remedy shall have his right
4. The right to legal assistance in criminal thereto determined by competent judicial,
prosecution [Art. 14]; administrative or legislative authority, and
5. The right against self-incrimination; that they shall enforce the remedy when
6. Protection against double jeopardy; granted.
7. The right to review by higher tribunal in 5. To ensure that the competent authorities
case of criminal conviction [Art. 14]; shall enforce such remedies when granted
8. The right of every child to nationality [Art. [Art. 2].
24];
9. The right to protection of a child as required c. The International Covenant on
by his status as a minor [Art. 24]; Economic, Social and Cultural
10. The right of persons below 18 years old not Rights (ICESCR)
to be sentenced to death for crimes [Art. 6];
11. The right against carrying out the death It embodies the second generation of human
sentence on the part of a pregnant woman rights, although it lists more rights than the
[Art. 6 ]. UDHR, namely:
a. The right to work [Art. 6];
Non-Derogable Rights [Art. 4, ICCPR]: b. The right to the enjoyment of just and
1. Right to life [Art. 6]; favourable conditions of work [Art. 7];
2. Freedom from torture, or from cruel, c. The right to health [Art. 7];
inhuman, or degrading treatment or d. The right to strike and form/join trade
punishment [Art. 7]; unions [Art. 8];
3. Freedom from slavery or servitude [Art. 8]; e. The right to social security [Art. 9];
4. To not be imprisoned for debt [Art. 11]; f. The right to an adequate standard of living
5. Freedom from retroactive/ex post facto [Art. 11];
laws [Art. 15]; g. The right to education [Art. 13];
6. To be recognized everywhere as a person h. The right to enjoy the benefits of scientific
before the law [Art. 16]; progress [Art. 15];
7. Freedom of thought, conscience and i. Freedom for scientific research and
religion [Art. 18]. creativity [Art. 15].
The Following Are Obligations of State Note: See Arts. 6-15 of the ICESCR for a
Parties Under the ICCPR: complete enumeration of the rights.
1. State parties undertake to respect and to
ensure to all individuals within their territory The obligation of a state party to the ICESCR
the rights enumerated therein, without is to undertake the necessary steps to the
distinction of any kind, such as race, color, maximum of its available resources, with a
sex, language, religion, political or other view to achieving progressively the full
Page 374 of 384

realization of the rights enumerated in the 2. Refugees
covenant by all appropriate means.
a. General Principles
Common Provisions in the ICCPR and
ICESCR Reference Treaties: The 1951 Convention
Relating to the Status of Refugees (1951
The common provisions of the two covenants Convention) and the 1967 Protocol Relating to
deal with collective rights, namely: the Status of Refugees (1967 Protocol).
a. The right of self-determination of peoples;
b. The right of peoples to freely dispose of b. Definition
their natural wealth and resources; and
c. The right of peoples not to be deprived of A person outside the country of his nationality
their own means of subsistence. owing to a well-founded fear of being
persecuted for reasons of race, religion,
These rights were not covered by the UDHR. nationality, membership of a particular social
group or political opinion, is and is unable or,
Philippine Jurisprudence on Human owing to such fear, is unwilling to avail himself
Rights of the protection of that country; or who, not
having a nationality and being outside the
On enforced disappearances [Razon, Jr. country of his former habitual residence as a
v. Tagitis, G.R. No. 182498 (2009)]: result of such events, is unable or, owing to
Any act of enforced disappearance is an such fear, is unwilling to return to it [Art. 1A (1),
offense to dignity. It is condemned as a denial 1951 Convention].
of the purposes of the Charter of the United
Nations and as a grave and flagrant violation of The term “the country of his nationality” shall
human rights and fundamental freedoms mean each of the countries of which he is a
proclaimed in the Universal Declaration of national, and a person shall not be deemed to
Human Rights and reaffirmed and developed in be lacking the protection of the country of his
international instruments in this field. nationality if, without any valid reason based on
well-founded fear, he has not availed himself of
On the Principle of Non-Discrimination the protection of one of the countries of which
vis-à-vis the Right to Electoral he is a national.
Participation [Ang Ladlad LGBT Party vs.
Commission on Elections, G.R. No. Refugees vs. Internally Displaced
190582 (2010)]: Persons
The principle of non-discrimination requires Refugees are people as defined above while
that laws of general application relating to internally displaced persons are those who
elections be applied equally to all persons, have been forced to flee their homes, suddenly
regardless of sexual orientation. Although or unexpectedly in large numbers as a result of
sexual orientation is not specifically armed conflict, internal strife, systematic
enumerated as a status or ratio for violation of human rights, or natural or man-
discrimination in Article 26 of the ICCPR, the made disaster, and who are within their
ICCPR Human Rights Committee has opined territory of their country [Analytical Report of
that the reference to “sex” in Article 26 should the United Nations’ Secretary-General on
be construed to include “sexual orientation.” Internally Displaced Persons (1992)].
On the right to nationality [Poe- c. The Following are Refugees Not

Llamanzares v. COMELEC, supra]: Covered by the Convention:
The common thread of the UDHR, UNCRC and
ICCPR is to obligate the Philippines to grant 1. He has voluntarily re-availed himself of
nationality from birth and ensure that no child the protection of the country of his
is stateless. nationality;
Page 375 of 384
2. Having lost his nationality, he has regulations as well as to measures taken for
voluntarily re-acquired it; the maintenance of public order [Art. 2, 1951
3. He has acquired a new nationality, and Convention].
enjoys the protection of the country of
his new nationality; f. Non-Discrimination
4. He has voluntarily re-established
himself in the country which he left or States shall apply the provisions of this
outside which he remained owing to Convention to refugees without discrimination
fear of persecution; or as to race, religion or country of origin [Art. 3,
5. He can no longer continue to refuse to 1951 Convention].
avail himself of the protection of the
country of his nationality because the g. Personal Status
circumstances in connection with
which he has been recognized as a The personal status of a refugee shall be
refugee have ceased to exist; governed by the law of the country of his
6. Being a person who has no nationality domicile or, if he has no domicile, by the law of
he is able to return to the country of his the country of his residence [Art. 12, 1951
former habitual residence [Art. 1(C), Convention].
1951 Convention].
Rights previously acquired by a refugee and
d. The Convention shall NOT Apply to: dependent on personal status, more
[1951 Convention] particularly rights attaching to marriage, shall
be respected by a Contracting State, subject to
1. A person receiving from organs or compliance, if this be necessary, with the
agencies of the United Nations other formalities required by the law of that State,
than the United Nations High provided that the right in question is one which
Commissioner for Refugees protection would have been recognized by the law of that
or assistance [Art. 1(D)]; State had he not become a refugee [Art. 12,
2. A person recognized by the competent 1951 Convention].
authorities of the country in which he
has taken residence as having the h. Rights of a Refugee
rights and obligations which are
attached to the possession of the Among those enumerated in the 1951
nationality of that country [Art.1(E)]; Convention are:
a. He/she has committed a crime 1. Non-discrimination of application (for
against peace, war crime, or a refugee status) based on race, religion, or
crime against humanity; country of origin [Art. 3];
b. He/she has committed a serious 2. To be treated similar to nationals with
non-political crime outside the respect to the following:
country of refuge prior to his a. Right to Religion [Art. 4];
admission to that country as a b. Rationing system (when supplies are
refugee; short) [Art. 20];
c. He/she has been guilty of acts c. Elementary education [Art. 22(1)];
contrary to the purposes and d. Public Relief [Art. 23];
principles of the United Nations e. Labor Legislation and Social Security
[Art. 1(F)]. [Art. 24(1)];
f. Fiscal Charges [Art. 29].
e. General Obligations of Refugees 3. To be accorded the same treatment as an
alien or foreign national with respect to the
Every refugee has duties to the country in following:
which he finds himself, which require in a. To have his personal status respected
particular that he conform to its laws and [Art. 12];
Page 376 of 384
b. To acquire movable and immovable constitutes a danger to the community of
property [Art. 13]; that country [Art. 33, 1951 Convention].
c. Protection of industrial property and
rights in literacy, artistic, and scientific 3. Statelessness
works [Art. 14];
d. Right of Association [Art. 15]; Definition
e. Access to Courts [Art. 16]; Statelessness is the condition or status of an
f. Wage-earning employment [Art. 17]; individual who is born without any nationality or
g. Self-employment [Art. 18]; who loses his nationality without retaining or
h. To practice liberal professions [Art. 19]; acquiring another [Cruz].
i. Housing [Art. 21];
j. Education other than elementary [Art. “Stateless person” means a person who is not
22(2)]. considered as a national by any State under
4. Administrative Assistance [Art. 25]; the operation of its law [Art. 1, Convention
5. Freedom of movement [Art. 26]; Relating to the Status of Stateless Persons
6. To be issued travel documents [Art. 28(1)]; (1960)].
7. Be permitted to transfer their assets [Art.
30(1)]; Examples:
8. Sympathetic considerations as regards the 1. A child born in a state where only the jus
following: sanguinis principle is recognized to parents
a. Extension of benefits similar to death whose state observes only jus soli.
benefits or social security [Art. 24(4)]; 2. An individual who, after renouncing his
b. Issuance of travel documents to original nationality in order to be
refugees who are unable to obtain a naturalized in another state, is
travel document from the country of subsequently denaturalized and is
their lawful residence [Art. 28(1)]; thereafter denied repatriation by his former
c. Permission to transfer assets country.
necessary for their resettlement in
another country [Art. 30(2)]. Rights of a Stateless Person
9. To not be expelled [Arts. 32 and 33]; a. The right to religion and religious
10. To not be penalized for illegal entry until instruction;
their status in the country is regularized or b. Access to courts;
they obtain admission into another country c. Elementary education;
[Art. 31]. d. Public relief and assistance and rationing
of products in short supply;
i. Principle of Non-Refoulment e. Treatment no less favorable than that
accorded to aliens Right of Association.
General Rule: No State shall expel or return
(“refouler”) a refugee in any manner Note: That the rights under the Convention
whatsoever to the frontiers of territories where Relating to the Status of Stateless is not an
his life or freedom would be threatened on exclusive list.
account of his race, religion, nationality,
membership of a particular social group or Right to Nationality under the Universal
political opinion [Art. 33, 1951 Convention]. Declaration on Human Rights (UDHR)
a. Everyone has the right to a nationality.
Exceptions: The benefit may not be claimed b. No one shall be arbitrarily deprived of his
by: nationality nor denied the right to change
a. A refugee whom there are reasonable his nationality [Art. 15].
grounds for regarding as a danger to the
security of the country in which he is; or Right to Nationality under the
b. Who, having been convicted by a final International Convention on Civil and
judgment of a particularly serious crime, Political Rights (ICCPR)
Page 377 of 384
a. Every child shall have, without any 1. Complaints Procedure
discrimination as to race, color, sex, The HRC's Complaints Procedure allows
language, religion, national or social origin, individuals and groups to submit
property or birth, the right to such complaints of human rights violations
measures of protection as are required by directly to the HRC. The complaints are
his status as a minor, on the part of his examined by a Working Group on
family, society, and the State. Communications, which can make
b. Every child shall be registered immediately recommendations to the state party to take
after birth and shall have a name. remedial action [Resolution 5/1, HRC].
c. Every child has the right to acquire a
nationality [Art. 24]. 2. Individual Communications
Under the Optional Protocol to the
4. Remedies Under Treaty-Based International Covenant on Civil and
Mechanisms Political Rights (ICCPR), individuals or
Under the International Covenant on Civil and groups can submit communications to the
Political Rights, States Parties are obligated to HRC alleging violations of their human
provide effective domestic remedies for rights. However, individuals cannot utilize
persons whose ICCPR rights are violated, to the individual complaints mechanism until
be determined by a competent government they have exhausted domestic remedies.
body, and such remedies must be enforced
[Article 2(3), ICCPR]. 3. Reports by Special Procedures
The HRC's special procedures can submit
The remedies and domestic protection reports on human rights issues or country
afforded to ICCPR rights depend primarily on situations to the HRC, which can be used
the legal and political system of the relevant to inform discussions, resolutions, and
State Party. decisions.
If a remedy is not already provided for by HRC views are not legally binding, as the HRC
existing legislative or other measures, each is not a judicial body. However, the HRC is the
State Party to the present Covenant pre-eminent interpreter of the ICCPR which is
undertakes to take the necessary steps, in itself legally binding. The HRC’s decisions are
accordance with its constitutional processes therefore strong indicators of legal obligations,
and with the provisions of the present so rejection of those decisions is good
Covenant, to adopt such laws or other evidence of a State’s bad faith attitude towards
measures as may be necessary to give effect its ICCPR obligations [Joseph].
to the rights recognized in the present
Covenant. [Article 2(3), ICCPR]. D. International Minimum
Standard and National
The Human Rights Committee
The Human Rights Committee (HRC) is the Treatment (Including
treaty-monitoring body for the ICCPR and Expropriation of Foreign-Owned
designed to be a secondary source of ICCPR Properties)
rights protection.
Definition
There are several communication mechanisms The "international minimum standard" is a
available under the HRC that allow individuals, set of principles derived from customary
groups, and non-governmental organizations international law that require states to provide
to bring human rights violations to the attention certain protections to aliens, foreign investors,
of the HRC and its special procedures. Some and their assets as stationed in the host state.
of these communication mechanisms include: It is a baseline of protection that applies to all
foreign investors, regardless of whether they
Page 378 of 384

are covered by specific investment treaties or 2. Protection Against the Denial of
agreements. Justice
“National treatment” is a component of the The “denial of justice” in the context of the
international minimum standard, which international minimum standards covers the
requires host states to treat foreign investors deficiencies on the part of the host state
no less favorably than their own nationals in concerning the administration of justice. A
similar circumstances. However, certain forms denial of justice does not arise merely upon the
of inequality are admissible i.e., aliens are not incorrect application of local law in the local
entitled to political rights in the host state, courts. The focus of denial of justice is rather
aliens must accept local law in regard to on the process by which justice is administered
regulation of the economy, including in the host state.
restrictions on employment of aliens in
particular types of employment, etc. A denial of justice could be pleaded if the
[Crawford]. relevant courts refuse to entertain a suit, if they
subject it to undue delay, or if they administer
Standards of Treatment justice in a seriously inadequate way ... There
In addition to the international minimum is a fourth type of denial of justice, namely the
standard, a number of primary rules govern the clear and malicious misapplication of the law.
standards with which states must treat those This type of wrong doubtless overlaps with the
aliens under international law: notion of ‘pretense of form’ to mask a violation
of international law. In the present case ... the
1. Fair and Equitable Treatment evidence [is] sufficient to dispel any shadow
over the bona fides of the Mexican judgments.
The fair and equitable treatment standard Their findings cannot possibly be said to have
(FET) is an autonomous standard of been arbitrary, let alone malicious [Azinian v.
investment protection set out in the great United Mexican States, ICSID Case No.
majority of bilateral investment treaties, though ARB(AF)/97/2].
in varying formulations. The substantive
protectors afforded by the FET include the 3. Expropriation of Foreign Property
protection of investors’ legitimate expectations,
non-abusive treatment, non-arbitrary and non- A state may place conditions on the entry of an
discriminatory exercise of public powers, and alien on its territory and may restrict acquisition
the host state’s adherence to due process of certain kinds of property by aliens. Apart
requirements. from such restrictions, an alien individual, or a
corporation controlled by aliens, may acquire
The minimum standard of fair and equitable title to property within a state under its law.
treatment is infringed by conduct attributable to
the State and harmful to the claimant if the Generally, foreign assets and their use may be
conduct is arbitrary, grossly unfair, unjust or subjected to taxation, trade restrictions,
idiosyncratic, is discriminatory and exposes the revocation of licenses for breach of regulations,
claimant to sectional or racial prejudice, or or measures of devaluation, but not
involves a lack of due process leading to an expropriation. However, if expropriation does
outcome which offends judicial propriety — as take place, this standard requires that any
might be the case with a manifest failure of expropriation of foreign property by a host state
natural justice in judicial proceedings or a must be for a public purpose, carried out with
complete lack of transparency and candor in an due process, done in accordance with
administrative process. [Waste Management II international law, and must be accompanied by
v. Mexico, ICSID Case No. ARB(AF)/00/3]. prompt, adequate, and effective
compensation. This standard is also
sometimes referred to as the "right to
compensation" [Crawford].
Page 379 of 384
E. Environmental Harm financial resources they command [Principle 7,
Rio Declaration].
Definition
It is the branch of public international law 4. Sustainable Development
comprising those substantive, procedural, and
institutional rules which have as their primary It is development that meets the needs of the
objective the protection of the environment present without compromising the ability of
[Sands]. future generations to meet their own needs
[Gabcikovo-Nagymaros Project, ICJ (1997)].
The protection of the environment is a vital part
of contemporary human rights doctrine, for it is No State has the right to use or permit the use
a sine qua non for numerous human rights of its territory in such a manner as to cause
such as the right to health, and the right to life injury by fumes in or to the territory of another
itself [Danube Dam Case, ICJ (1997)]. or the properties or persons therein, when the
case is of serious consequence and the injury
1. Precautionary Principle is established by clear and convincing
evidence [Trail Smelter Arbitration Case
Where there are threats of serious or (1938)].
irreversible damage, lack of full scientific
certainty shall not be used as a reason for Two fundamental principles of liability for
postponing cost-effective measures to prevent transboundary pollution:
environmental degradation. a. A State must show material damage and
causation to be entitled to legal relief; and
When it is uncertain as to the consequence of b. A State has a duty to prevent and it may be
the proposed activity to the environment, held responsible for pollution by private
doubts should be resolved on the side of parties within its jurisdiction if such
caution by taking measures to prevent or avoid pollution results in demonstrable injury to
environmental degradation [Principle 15, Rio another state [Trail Smelter Case, US v.
Declaration]. Canada (1941)].
2. Polluter-Pays Principle
5. Sic Utere Tuo Ut Alienum Non
Refers to the responsibility of the polluter to Laedas or the No-Harm Principle
bear the cost of pollution, with due regard to the
public interest and without distorting States have, in accordance with the Charter of
investment in the energy cycle or international the United Nations and the principles of
trade [Principle 16, Rio Declaration]. international law, the sovereign right to exploit
their own resources pursuant to their own
3. Common but Differentiated environmental policies, and the responsibility
to ensure that activities within their jurisdiction
Responsibilities
or control do not cause damage to the
environment of other States or of areas beyond
States shall cooperate in a spirit of global
the limits of national jurisdiction [Principle 21,
partnership to conserve, protect and restore
Stockholm Declaration].
the health and integrity of the earth’s
ecosystem. In view of the different
Principle 21 as Custom:
contributions to global environmental
“The Court recognizes that the environment is
degradation, States have common but
daily under threat and that the use of nuclear
differentiated responsibilities. The developed
weapons could constitute a catastrophe for the
countries acknowledge the responsibility that
environment. The existence of the general
they bear in the international pursuit to
obligation of States to ensure that activities
sustainable development in view of the
within their jurisdiction and control respect the
pressures their societies place on the global
environment of other States or of areas beyond
environment and of the technologies and
Page 380 of 384
national control is now part of the corpus of Individuals can only pursue claims if they have
international law relating to the environment” exhausted all domestic remedies within the
[ICJ Advisory Opinion on the Legality of the State. Thus, in principle, there is no
Threat or Use of Nuclear Weapons (1996)]. independent ability for individuals to bring
claims before international human rights
Protection of the Environment During bodies [Art. 14, ADP].
Armed Conflict
Each State Party undertakes not to engage in 2. International Economic Law
military or other hostile use of environmental
modification techniques having widespread, The ability of individuals to bring international
long-lasting or severe effects as the means of claims in International Economic Law is now
destruction, damage or injury to any other considerable. The main participants in a
Party State [Art. 1, Convention on the number of areas in international economic law
Prohibition of Military or other Hostile Use of are primarily States and corporations acting on
Environmental Modification Techniques or the equal terms [Evans].
Environmental Modification Convention
(ENMOD)]. 3. Immunities
F. International Claims There is an increasing recognition of

immunities enjoyed by individuals under
Although individuals are given rights and international law, which even States cannot
responsibilities under the international legal easily revoke. Diplomats, heads of state,
system, they do not automatically have the representatives of international organizations,
ability to bring claims under international law. and others may have personal immunities
arising from their relationship with the State or
Individuals are seen as extremely handicapped State-based bodies even when acting outside
in international law, from a procedural point of their official roles [Evans].
view [Higgins].
V. DISPUTE RESOLUTION
When Individuals can Bring
International Claims: A. Legality of the Use of Force
1. International Human Rights Law Self-Defense
If the act constitutes a lawful measure of self-
Claims may be brought by individuals against defense taken in conformity with the UN
the State of which they are a national and Charter.
against a State in whose jurisdiction they
happen to be, irrespective if they are a national Requisites of Collective Self-Defense:
of that state. 1. State must have been the victim of an
armed attack;
In most instances, the individual is a direct 2. The State being attacked is of the belief
party to the proceedings before the and so declares that it was a victim of an
international body; decisions can be rendered armed attack;
and remedies can be granted by the Court, 3. The victim State must request for
usually in the form of monetary compensation assistance [Nicaragua v. US, ICJ (1986)].
or ordering investigations into the violations.
However, the State can only be sued if it has

ratified the treaty or accepted the relevant
article in the treaty that allows individuals to
bring claims against the State [Evans].
Page 381 of 384

B. Concept of International and Armed conflict does not include internal
disturbances or tensions such as:
Non-International Armed a. Riots;
Conflicts b. Isolated and sporadic acts of violence; and
c. Other acts of a similar nature.
International Armed Conflict 1. The Role of the International
Definition: An IAC occurs when one or more Criminal Court
states have recourse to armed force against
another state, regardless of the reasons or the Adoption of the Rome Statute in 1998: The
intensity of the confrontation [Prosecutor v. international community finally created a
Tadic, ICTY Appeals Chamber (1995)]. permanent International Criminal Court with
jurisdiction over international crimes committed
General Rule: All Members shall refrain in by nationals, or on the territory, of a State party
their international relations from the threat or to the Statute, or referred to it by the UN
use of force against the territorial integrity or Security Council.
political independence of any state, or in any
other manner inconsistent with the Purposes of
the United Nations [Art. 2(4), UN Charter].
C. Judicial and Arbitral
Settlement
Exception: Inherent right of individual or
collective self-defense if an armed attack 1. International Court of Justice
occurs [Art. 51, UN Charter].
The International Court of Justice shall be the
Non-International Armed Conflict principal judicial organ of the United Nations. It
Definition: This refers to conflicts between shall function in accordance with the annexed
governmental forces and non-governmental Statute, which is based upon the Statute of the
armed groups, or between such groups only. Permanent Court of International Justice and
forms an integral part of the present Charter
Basis: The Common Article 3, Geneva [Art. 92, UN Charter].
Conventions and Article 1, Additional Protocol
II. Who Are the Parties to the Statute of the
International Court Justice?
Common Article 3 applies to “armed conflicts • All members of the United Nations – ipso
not of an international character occurring in facto parties to the Statute of the
the territory of one of the High Contracting International Court of Justice.
Parties.” These include armed conflicts in • Non-Member States of the United
which one or more non-governmental armed Nations – may become a party to the
groups are involved. Statute of the International Court of Justice
on conditions to be determined in each
Art. 1 Develops Common Article 3. It case by the General Assembly upon the
Applies To: recommendation of the Security Council
a. All armed conflicts which take place in the [Art. 93, UN Charter].
territory of a state party;
b. Between its armed forces and dissident Obligation of Member States
armed forces or other organized groups; General Rule: Each Member of the United
c. Which, under responsible command, Nations undertakes to comply with the decision
exercise such control over a part of its of the International Court of Justice in any case
territory; to which it is a party.
d. As to enable it to carry out sustained and
concerted military operations and to If there is a failure to perform obligation
implement the Protocol. under a judgment by the ICJ → the other
party may have recourse to the Security
Page 382 of 384

Council, which may, if it deems necessary, c. the existence of any fact which, if
make recommendations or decide upon established, would constitute a breach of
measures to be taken to give effect to the an international obligation;
judgment [Art. 94, UN Charter]. d. the nature or extent of the reparation to be
made for the breach of an international
Who can Participate in ICJ Proceedings? obligation.
a. Only STATES may be parties in cases The declarations may be made unconditionally
before the Court. or on condition of reciprocity on the part of
b. The Court, subject to and in conformity with several or certain states, or for a certain time.
its Rules, may request of public
international organizations information Such declarations shall be deposited with the
relevant to cases before it, and shall Secretary-General of the United Nations, who
receive such information presented by shall transmit copies thereof to the parties to
such organizations on their own initiative. the Statute and to the Registrar of the Court.
c. The Registrar shall notify the public
international organization concerned and Declarations made under Article 36 of the
shall communicate to it copies of all the Statute of the Permanent Court of International
written proceedings [Article 34, ICJ Justice and which are still in force shall be
Statute]. deemed, as between the parties to the present
Statute, to be acceptances of the compulsory
Organization of the ICJ jurisdiction of the International Court of Justice
1. The full Court shall sit except when it is for the period which they still have to run and in
expressly provided otherwise in the accordance with their terms.
present Statute.
2. Subject to the condition that the number of Power of the ICJ to Indicate any
judges available to constitute the Court is Provisional Measure
not thereby reduced below eleven, the 1. The Court shall have the power to indicate,
Rules of the Court may provide for allowing if it considers that circumstances so
one or more judges, according to require, any provisional measures which
circumstances and in rotation, to be ought to be taken to preserve the
dispensed from sitting. respective rights of either party.
3. A quorum of nine judges shall suffice to 2. Pending the final decision, notice of the
constitute the Court [Article 25, ICJ measures suggested shall forthwith be
Statute]. given to the parties and to the Security
Council [Art. 41, ICJ Statute].
The Jurisdiction of the Court Comprises:
1. All cases which the parties refer to it; and Power to Give Advisory Opinions
2. All matters specially provided for in the 1. The Court may give an advisory opinion on
Charter of the United Nations or in treaties any legal question at the request of
and conventions in force [Art. 36, ICJ whatever body may be authorized by or in
Statute]. accordance with the Charter of the United
Nations to make such a request.
Article 36 ICJ Statute. The states parties to 2. Questions upon which the advisory opinion
the present Statute may at any time declare of the Court is asked shall be laid before
that they recognize as compulsory ipso facto the Court by means of a written request
and without special agreement, in relation to containing an exact statement of the
any other state accepting the same obligation, question upon which an opinion is required,
the jurisdiction of the Court in all legal disputes and accompanied by all documents likely
concerning: to throw light upon the question [Art. 65,
a. the interpretation of a treaty; ICJ Statute].
b. any question of international law;
Page 383 of 384

The following can request the ICJ to give
advisory opinions:
1. The General Assembly or the Security
Council may request the International
Court of Justice to give an advisory opinion
on any legal question.
2. Other organs of the United Nations and
specialized agencies, which may at any
time be so authorized by the General
Assembly, may also request advisory
opinions of the Court on legal questions
arising within the scope of their activities
[Art. 96, ICJ Statute].
Permanent Court of Arbitration

A non-UN intergovernmental organization
located in The Hague, Netherlands. Unlike a
judicial court in the traditional sense, the PCA
provides services of arbitral tribunal to resolve
disputes that arise out of international
agreements between member states,
international organizations or private parties.
The cases span a range of legal issues
involving territorial and maritime boundaries,
sovereignty, human rights, international
investment, and international and regional
trade.
Page 384 of 384

Table of Contents D. Unlawful Acts .................................................. 252

E. Powers of the President to Suspend or Prohibit
PARTNERSHIPS .........................................1 Transaction or Investment .................................. 253
A. General Provisions .............................................. 1 F. Investments by an Entity Controlled by or
B. Rights and Obligations of Partnership and Acting on Behalf of the Foreign Government, or
Partners ....................................................................... 8 Foreign State-owned Enterprises ....................... 253
C. DISSOLUTION AND WINDING UP ....... 15 G. Reciprocity Clause .......................................... 253
D. LIMITED PARTNERSHIP ........................... 22
INTELLECTUAL PROPERTY CODE . 255
CORPORATIONS ......................................31 I. Intellectual Property Code ................... 256
A. Definition of Corporation ................................ 32 A. In General ......................................................... 256
B. Classes of Corporations .................................... 33 B. Patents ............................................................... 257
C. Nationality of Corporations ............................. 35 C. Trademarks ....................................................... 265
D. Corporate Juridical Entity ................................ 38 D. Copyrights ........................................................ 277
E. Capital Structure ................................................. 42
F. Incorporation and Organization ...................... 50 ELECTRONIC COMMERCE ACT ....... 294
G. Corporate Powers .............................................. 65 I. Policy of the Law ........................................... 295
H. Stockholders and Members.............................. 79 II. Definition of terms ...................................... 295
I. Board of Directors and Trustees ...................... 99 III. Legal Recognition of Electronic Data
J. Capital Affairs .................................................... 109
Messages, Documents, and Signatures .......... 296
K. Dissolution and Liquidation .......................... 120
L. Other corporations........................................... 130 IV. Presumption Relating to Electronic
M. Merger and Consolidation ............................. 149 Signatures............................................................ 297
V. Admissibility and Evidential Weight of
BANKING LAWS .....................................154 Electronic Data Message or Electronic
A. NEW CENTRAL BANK ACT .................... 155 Document ........................................................... 298
B. GENERAL BANKING LAW OF 2000..... 162 VI. Obligation of Confidentiality .................... 298
C. SECRECY OF BANK DEPOSITS (R.A. No.
VII. Punishable Acts & Penalties.................... 298
1405, as amended, and R.A. No. 6426, as amended)
.................................................................................. 169 FOREIGN INVESTMENTS ACT .......... 300
D. ANTI-MONEY LAUNDERING ACT ..... 172 I. Declaration of Policy [Sec. 2]....................... 301
INSURANCE ............................................183 II. Definitions [Sec. 3] ...................................... 301
III. Inter-Agency Investment Promotion
I. Basic Concepts ..................................... 184 Coordination Committee (IIPCC) [Sec. 4] .... 303
A. Elements of an Insurance Contract .............. 186 IV. Registration of Investments of Non-
B. Characteristics/Nature of Insurance Contracts Philippine Nationals [Sec. 5] ............................ 304
.................................................................................. 187
C. Classes of Insurance ........................................ 189
V. Foreign Investments in Export Enterprises
D. When insurable interest should exist ............ 202 [Sec. 6] ................................................................. 305
E. Double Insurance and Over- insurance ....... 207 VI. Foreign Investments in Domestic
F. No Fault, Suicide, and Incontestability Clauses Enterprises [Sec. 7]............................................ 305
.................................................................................. 208 VII. Foreign Investment Negative List [Sec. 8]
.............................................................................. 305
II. Perfection of the Insurance Contract . 210
III. Rights and Obligations of Parties ..... 214
TAXATION 1 ........................................... 310
A. Insurer................................................................ 214 I. GENERAL PRINCIPLES OF
B. Insured ............................................................... 215 TAXATION ......................................... - 311 -
C. Beneficiary ......................................................... 216 A. POWER OF TAXATION AS
IV. Rescission of Insurance Contracts .... 216 DISTINGUISHED FROM POLICE POWER
AND EMINENT DOMAI ........................... - 311 -
TRANSPORTATION LAW .................... 225 B. INHERENT AND CONSTITUTIONAL
A. Common Carriers ............................................ 225 LIMITATIONS OF TAXATION .................... 312
B. Obligations and Liabilities .............................. 229 C. KINDS OF TAXES ....................................... 325
C. The Montreal Convention of 1999 ............... 243 D. DOCTRINES IN TAXATION................... 327
PUBLIC SERVICE ACT .......................... 248 II. NATIONAL TAXATION.................. 338

A. Critical Infrastructure ...................................... 249 A. TAXING AUTHORITY ............................... 338
B. Foreign State-Owned Enterprise ................... 249 a. Powers and Duties of the Bureau of Internal
C. Public Service as Public Utility....................... 249 Revenue [Sec. 2, NIRC] ....................................... 338
b. Interpreting Tax Laws and Deciding Tax Cases II. LOCAL TAXATION .......................... 454
.................................................................................. 338 A. Local Government Taxation.......................... 454
c. Non-retroactivity of rulings (Sec. 246, NIRC) B. Taxing Powers of Provinces........................... 457
.................................................................................. 338 C. Taxing Powers of Municipalities ................... 460
B. Income Tax ....................................................... 340 D. Taxing Powers of Cities ................................. 465
E. Taxing Powers of Barangays .......................... 465
TAXATION 2 ...........................................412
III. REAL PROPERTY TAXATION ..... 473
I. NATIONAL TAXATION .................... 413
A. Value – Added Tax (VAT) ............................. 413 IV. JUDICIAL REMEDIES.................... 488
B. Tax Remedies Under The NIRC ................... 439 A. Jurisdiction of The Court Of Tax Appeals .. 488
B. Procedures......................................................... 490
PARTNERSHIPS
COMMERCIAL LAW
PARTNERSHIPS COMMERCIAL LAW
Common Fund
The Civil Code requires the parties “bind
PARTNERSHIPS themselves to contribute” to a common fund.
The partnership may therefore exist even
before the common fund is created. The
A. General Provisions common fund may not even come from the
partners themselves but may be borrowed from
1. Definition, Elements, and third persons. The form of the common fund
may not even be cash or property; it can be in
Characteristics
the form of credit or industry [Lim Tong Lim v.
Philippine Fishing Gear, G.R. No. 136448
a. Definition (1999)].
By the contract of partnership: 2. Intention of dividing the profits among
1. Two or more persons bind themselves to themselves
contribute to a common fund:
a. Money, Intention to Divide Profits
b. property, or If the common fund’s work is “indispensable,
c. industry. beneficial and economically useful to the
2. With the intention of dividing the profits business” of the partners and the profit motive
among themselves. is the primordial reason to establish the
partnership, even if there are no actual profits,
Two or more persons may also form a then there is partnership [AFISCO v. CA, G.R.
partnership for the exercise of a profession No. 112675 (1999)].
[Art. 1767, Civil Code].
Note: There must be a valid contract.
b. Elements Additionally, a partnership contract must
comply with the necessary elements of a
1. Two or more persons bind themselves to contract under the Civil Code (cause, object,
contribute money, property, or industry to a and consideration).
common fund [Art. 1767, Civil Code].
c. Parties & Object
Money
Must be in legal tender. Checks, drafts,
1. Parties
promissory notes, and other mercantile
General Rule: Any person capacitated to
documents are not money. There is no
contract may enter into a contract of
contribution of money until they have been
partnership.
cashed [Art. 1249, Civil Code].
Exceptions: The capacity of the following
Property
persons to enter into a contract of partnership,
May be real, personal, corporeal, or
though capacitated to contract generally, are
incorporeal property. Hence, credit or even
limited.
goodwill may be contributed as property [De
Leon, supra].
The following persons cannot enter into a
contract of partnership:
Industry
1. Those suffering from civil interdiction;
Means the active cooperation, the work of the
2. Minors;
party associated, which may be either personal
3. Insane or demented persons;
manual efforts or intellectual, and for which he
4. Deaf-mutes who do not know how to write;
receives a share in the profits (not salary) of the
5. Incompetents who are under guardianship.
business [De Leon, supra].
6. Those who are prohibited from giving each
other any donation or advantage cannot
Page 1 of 494
enter into a universal partnership [Art. time of the constitution of the
1782, Civil Code]. partnership.
c. A stipulation for the common
Void donations: enjoyment of any other profits may also
1. Those made between persons who were be made. However, the property which
guilty of adultery or concubinage at the the partners may acquire subsequently
time of the donation [Art. 739, Civil Code] by inheritance, legacy or donation
2. Those made between persons found guilty cannot be included in such stipulation,
of the same criminal offense, in except the fruits thereof [Art. 1779, Civil
consideration thereof [Art. 739, Civil Code] Code].
3. Those made to a public officer or his wife, 2. All the profits
descendants and ascendants, by reason of a. It comprises all that the partners may
his office [Article 739, Civil Code] acquire by their industry or work during
4. Every donation or grant of gratuitous the existence of the partnership.
advantage, direct or indirect, between the b. Only the usufruct over the property of
spouses during the marriage shall be void, the partners passes to the partnership
except moderate gifts, which the spouses [Art. 1780, Civil Code].
may give to each other on the occasion of
any family rejoicing. The prohibition shall When the articles of universal partnership do
also apply to persons living together as not specify its nature (all present property or all
husband and wife without a valid marriage the profits), the partnership will be considered
[Art. 87, Family Code]. as one only of all the profits [Art. 1781, Civil
5. A corporation cannot enter into a Code].
partnership in the absence of express
authorization by statute or charter Rule on After-Acquired Properties
[Mendiola v. CA, G.R. No. 159333 (2006)]. Aside from the contributed properties, only the
profits of the contributed common property (no
Under Sec. 35 of the Revised Corporation other profits) are included. Thus, should a
Code (RCC), every corporation incorporated partner subsequently acquire a property as
under the RCC has the power and capacity to remuneration for his work, such property and
enter into a partnership, joint venture, merger, its fruits are not to be enjoyed by the universal
consolidation, or any other commercial partnership of all present property [Paras, Civil
agreement with natural and juridical persons. Code of the Philippines Annotated, Vol. V
(2008)].
There is no prohibition against a partnership
being a partner in another partnership [De Properties subsequently acquired by
Leon, supra]. inheritance, legacy, or donation, cannot be
included in the stipulation but the fruits thereof
2. Object can be included in the stipulation.
A. In a Universal Partnership B. In a Particular Partnership
A universal partnership may refer to: A particular partnership has for its object:
1. All present property 1. Determinate things,
a. The partners contribute all the property 2. Their use or fruits, or
which belongs to them to a common 3. A specific undertaking, or
fund, with the intention of dividing the 4. The exercise of a profession or vocation
same among themselves, as well as [Art. 1783, Civil Code].
the profits they may acquire therewith
[Art. 1778, Civil Code]. C. Effect when the object is unlawful
b. The property contributed includes all
those belonging to the partners at the If the partnership has an unlawful object or
purpose:
Page 2 of 494
1. The contract is void ab initio [Art. 1409 (1), 4. Consensual – perfected by mere consent
Civil Code]; 5. Bilateral – entered by two or more persons
2. Once dissolved by judicial decree: 6. Onerous – contributions have to be made
a. The profits shall be confiscated by 7. Nominate – has a special designation in
favor of the State; law.
b. The instruments or tools and proceeds
of the crime shall also be forfeited in 2. Essential Attributes
favor of the State [Art. 1770, Civil
Code]; 1. Informal/Consensual and Weak Juridical
3. The contributions of partners shall not be Personality [Arts. 1771, 1785, 1830, Civil
confiscated unless they are instruments or Code]
tools of the crime [Art. 1411, Civil Code]. a. Generally, a partnership may be
constituted in any form;
d. Form b. The juridical personality of a
partnership is deemed weak since a
General Rule partnership may be dissolved without
No required form is necessary. need of going through a formal
dissolution process.
Exceptions: The contract is subject to the 2. Mutual Agency [Arts. 1803, 1818, Civil
provisions of Arts. 1771, 1772 and 1773, Civil Code]
Code and to the Statute of Frauds. a. All partners shall be considered agents
1. Where immovable property or real rights and whatever any one of them may do
are contributed to the partnership, a public alone shall bind the partnership;
instrument shall be necessary [Art. 1771, b. Every partner is an agent of the
Civil Code]. partnership for the purpose of its
a. An inventory of said property, signed business, and the act of every partner
by the parties, must be attached to the binds the partnership.
public instrument.
b. Otherwise, the contract of partnership 3. Delectus Personae (Selection of
is void [Art. 1773, Civil Code]. Persons)
2. Every contract of partnership having a
capital of Php 3,000 or more, in money or One selects his partners on the basis of their
property, shall appear in a public personal qualifications and qualities (e.g.
instrument solvency, ability, honesty, trustworthiness). It is
a. The instrument must be recorded in the for this reason that there is mutual
Office of the Securities and Exchange representation among the partners so that the
Commission. act of one is considered the act and
b. Failure to comply with these responsibility of the others as well [Bautista,
requirements shall not affect the Treatise on Philippine Partnership Law (2005)].
liability of the partnership and the
members thereof to third persons [Art. 4. Partners Burdened with Unlimited
1772, Civil Code]. Liability [Arts. 1816, 1817, Civil Code]
e. Characteristics All partners, including industrial ones, shall be

liable pro rata with all their property and after
1. Generally [De Leon, supra] all the partnership assets have been
exhausted, for the contracts which may be
1. Principal – does not depend on other entered into in the name and for the account of
contracts the partnership, under its signature and by a
2. Preparatory – entered as a means to an person authorized to act for the
end partnership [Art. 1816, Civil Code].
3. Commutative – undertaking of each one is
considered equal with others
Page 3 of 494
A stipulation among the partners against the 5. As the consideration for the sale of a
unlimited liability under Art. 1816 is void, goodwill of a business or other property by
except as among the partners [Art. 1817, Civil installments or otherwise.
Code].
3. Partnership Term
2. Rules to Determine Existence
Article 1784, Civil Code. A partnership begins from
When the intent of the parties is clear, such the moment of the execution of the contract, unless
intent shall govern. it is otherwise stipulated.
When the intent of parties does not clearly

As to period, a partnership may either be:
appear, the following rules apply [Art. 1769,
1. For a fixed term or particular
Civil Code]:
undertaking; or
1. Persons who are not partners to each other
2. At will, the formation and dissolution of
are not partners as to third persons, subject
which depend on the mutual desire and
to the provisions on partnership by
consent of the parties. Any one of the
estoppel.
partners may, at his sole pleasure, dictate
2. Co-ownership or co-possession does not
the dissolution of the partnership, even in
of itself establish a partnership, even when
bad faith, subject to liability for damages
there is sharing of profits in the use of the
[Ortega v. CA, G.R. No. 109248 (1995)].
property.
A partnership term may be extended by:
Exception: The co-ownership of inherited
1. Express renewal; or
properties is automatically converted into
2. Implied renewal, when these requisites
an unregistered partnership the moment
concur:
said common properties and/or the income
a. The partnership is for a fixed term or
derived therefrom are used as a common
particular undertaking;
fund with intent to produce profits for the
b. It is continued after the termination of
heirs in proportion to their respective
the fixed term or particular undertaking
shares in the inheritance as determined in
without any express agreement [Art.
a project partition [Oña v. CIR, G.R. L-
1785, Civil Code].
19342 (1972)].
Note: A continuation of the business by the
3. Sharing of gross returns does not of itself
partners or such of them as habitually acted
establish a partnership, even when the
therein during the term, without any settlement
parties have joint or common interest in any
or liquidation of the partnership affairs, is prima
property from which the returns are
facie evidence of a continuation of the
derived.
partnership [Art. 1785 (2), Civil Code].
4. The receipt by a person of a share in the
profits of a business is prima facie evidence
that he is a partner. 4. Partnership by Estoppel
Exception: No such inference is drawn if the a. Definition

profits are received in payment:
1. As a debt by installments or otherwise; Estoppel is a bar which precludes a person
2. As wages of an employee or rent to a from denying or asserting anything contrary to
landlord; that which has been established as the truth by
3. As an annuity to a widow or representative his own deed or representation, either express
of a deceased partner; or implied [De Leon, supra].
4. As interest on a loan, though the amount of
payment vary with the profits of the
business;
Page 4 of 494
b. Partner by Estoppel Representation Effect
A partner by estoppel is a person who, by or (2) with one or 1. To bind them to
words spoken or written or by conduct: (1) more persons not the same extent
represents himself as a partner or (2) consents actual partners and in the same
to another representing him to anyone as a manner, as
partner though he were a
1. In an existing partnership; or partner in fact
2. With one or more persons not actual 2. With respect to
partners [Art. 1825, Civil Code]. persons who rely
upon the
Liability of a Partner by Estoppel representation.
1. Personal Representation When all the A partnership act or

members of the obligation results
A partner by estoppel is liable to any such existing partnership
persons: consent to the
1. To whom such representation has been representation
made; and
2. Who has, on the faith of such In all other cases The representation is
representation, given credit to the actual or the joint obligation of
apparent partnership [Art. 1825 (1), Civil the person acting
Code]. and the persons
consenting to the
2. Public Representation representation
If he has made such representation or

Nature of Liability
consented to its being made in a public
A partner by estoppel is liable in the following
manner, whether the representation has or has
manner [Art. 1825, Civil Code]:
not been (personally) made or communicated
1. He is liable as though he were a partner
to such persons so giving credit by or with his
when:
knowledge:
1. When partnership liability results, he is a. There is an existing partnership;
b. All the partners consented to the
liable as though he were an actual member
of the partnership. representation; and
c. A partnership liability results.
2. When no partnership liability results, he is
liable pro rata with the other persons, if any, 2. He is liable jointly and pro rata (as though
he were a partner in fact) with those who
so consenting to the contract or
representation. consented to the representation when:
a. There is an existing partnership but not
3. When there are no such other persons, he
is separately liable [Art. 1825 (1), Civil all the partners consented; or
b. There is no existing partnership and all
Code].
those represented as partners
consented to the representation.
Effect on Existing Partnership or Other
Persons not Actual Partners [Art. 1825 (2), 3. He is liable separately when:
a. There is an existing partnership but
Civil Code]
none of the partners consented; or
Representation Effect b. There is no existing partnership and
not all of those represented as partners
When a person has He is an agent of the consented to the representation.
been represented to persons consenting
be a partner (1) in an to such Note: Art. 1825, Civil Code does not create a
existing partnership, representation: partnership as between the alleged partners.
The law only considers them as partners and
Page 5 of 494
the association as a partnership insofar as it is in their individual capacity computed on
favorable to third persons, pursuant to the their distributive shares of partnership
equitable principle of estoppel. Thus, profits [Tan v. Del Rosario, G.R. Nos.
partnership liability is created only in favor of 109289 and 109446 (1994)].
persons who have, on the faith of such
representation, given credit to the partnership 7. Management
[MacDonald vs. National City Bank of New
York, G.R. No. L-7991 (1956)]. a. In General
5. Partnership as Distinguished from The property rights of a partner are:

Joint Venture 1. His rights in specific partnership property;
2. His interest in the partnership; and
3. His right to participate in the management
Partnership Joint venture
Operates with firm Operates without firm
name and legal name and legal Management of the partnership is primarily
personality personality governed by the agreement of the partners in
the articles of partnership.
Generally relates to a Usually limited to a
continuing business single transaction It may be stipulated that the partnership will
of various be managed by:
transactions of a 1. All the partners; or
certain kind 2. A number of partners appointed as
managers which may be appointed
a. In the articles of partnership; or
A joint venture is an agreement between two b. After the constitution of the partnership.
parties to enter into a commercial undertaking.
It may fall under a partnership with a limited b. Scope of Powers of a Managing
purpose.
Partner
General Rule: The partner designated as
Under Philippine law, a joint venture is a form
manager in the articles may execute all acts of
of partnership and should thus be governed by
administration, despite opposition by the other
the laws of partnership [Aurbach v. Sanitary
partners.
Wares Manufacturing Corp., G.R. Nos. 75951,
75875, 75975-76 (1989)].
Exception: He cannot do so when he acts in
bad faith [Art. 1800, Civil Code].
6. Professional Partnership
c. Managing Partner’s Power to Revoke
Definition
Those formed by persons for the sole purpose
General Rule: Power is irrevocable without
of exercising their common profession, no part
just or lawful cause.
of the income of which is derived from
engaging in any trade or business [Sec. 22 (B),
The powers of the managing partner may be
National Internal Revenue Code].
revoked:
1. If appointed in the articles of partnership,
Distinguished from an Ordinary Partnership
when:
The distinction between a Partnership and a
General Professional Partnership (GPP) is
a. There is just or lawful cause for
revocation; and
material in taxation.
1. A GPP is not taxable as an entity. b. The partners representing the
2. The income tax is imposed not on the controlling interest revoke such power.
professional partnership, which is tax 2. If appointed after the constitution of the
exempt, but on the partners themselves partnership, at any time and for any cause
Page 6 of 494
Rationale: Such appointment is a mere 1. The concurrence of all is necessary for the
delegation of power, not founded on a change validity of the acts, and
of will on the part of the partners, the 2. The absence or disability of one cannot be
appointment not being a condition of the alleged.
contract.
Exception: Unless there is imminent danger of
It is merely a simple contract of agency, which grave or irreparable injury to the partnership
may be revoked at any time. The vote of [Art. 1802, Civil Code].
revocation, however, should also be done by
the partners having the controlling interest [De f. When Manner of Management was not
Leon, supra]. Agreed Upon
d. In case of Two or More Managing When there is no agreement as to the manner
Partners of management, the following rules apply:
1. All the partners are considered agents
When there are two or more managing (mutual agency). Whatever any one does
partners appointed: alone binds the partnership, unless there is
1. Each one may separately execute all acts a timely opposition to the act, under Art.
of administration. 1801, Civil Code.
2. If any of them opposes the acts of the 2. Any important alteration in the immovable
others, the decision of the majority prevails. property of the partnership, even if useful
3. In case of a tie, the partners owning the to the partnership, requires unanimity.
controlling interest will decide [Art. 1801,
Civil Code]. If the alteration is necessary for the
preservation of the property, however,
Requisites for Applicability of Art. 1801: consent of the others is not required. If the
1. Two or more partners have been appointed refusal is manifestly prejudicial to the
as managers; partnership, court intervention may be
2. There is no specification of their respective sought [Art. 1803, Civil Code].
duties; and
3. There is no stipulation that one of them The consent need not be express. It may be
shall not act without the consent of all the presumed from the fact of knowledge of the
others. alteration without interposing any objection [De
Leon, supra].
The right to oppose is not given to non-
managers because in appointing their other g. Mutual Agency
partners as managers, they have stripped
themselves of all participation in the In addition to the Art. 1801, Civil Code there is
administration [Paras, supra]. effectively a mutual agency in the following
cases:
The other managers, however, should make 1. Partners can dispose of partnership
the opposition before the acts produce legal property even when in partnership name
effects insofar as third persons are concerned. [Art. 1819, Civil Code].
2. An admission or representation made by
Note: Those who vote against the contract any partner concerning partnership affairs
shall prevail, the same having been entered is evidence against the partnership [Art.
into without authority [De Leon, supra]. 1820, Civil Code].
3. Notice to any partner of any matter relating
e. Stipulation of Unanimity to partnership affairs is notice to the
partnership [Art. 1821, Civil Code].
General Rule: In case there is a stipulation that 4. Wrongful act or omission of any partner
none of the managing partners shall act without acting for partnership affairs makes the
the consent of others, partnership liable [Art. 1822, Civil Code].
Page 7 of 494
5. Partnership is bound to make good the a. To warrant against eviction in the same
losses for wrongful acts or misapplications manner as a vendor; and
of partners [Art. 1823, Civil Code]. b. To deliver to the partnership the fruits
of the property promised to be
B. Rights and Obligations of contributed, from the time they should
have been delivered, without need of
Partnership and Partners demand [Art. 1786, Civil Code];
3. In case a sum of money is to be
1. Rights and Obligations of the contributed, or in case he took any amount
Partnership/Obligations of the from the partnership coffers: To indemnify
Partners to the Partnership the partnership for
a. Interest; and
a. Obligation to Contribute and to b. Damages from the time he should have
Warrant complied with his obligation, or from
the time he converted the amount to his
Art. 1786, Civil Code. Every partner is a debtor of own use, respectively [Art. 1788, Civil
the partnership for whatever he may have promised
Code].
to contribute.
4. To preserve the property with diligence of
He shall also be bound for warranty in case of a good father of a family pending delivery
eviction with regard to specific and determinate to the partnership [Art. 1163, Civil Code].
things which he may have contributed to the 5. To indemnify for any interest and damages
partnership, in the same cases and in the same caused by the retention of the property or
manner as the vendor is bound with respect to the
by delay in its obligation to contribute a sum
vendee. He shall also be liable for the fruits thereof
from the time they should have been delivered, of money [Arts. 1788 and 1170, Civil
without the need of any demand. Code].
2. Amount of Contribution
1. Contribution of Money or Property
With respect to contribution of money or General Rule: Partners are to contribute equal
property, a partner is obliged: shares to the capital of the partnership.
1. To contribute, at the beginning of the
partnership or at the stipulated time, the Exceptions:
money, property or industry which he 1. When there is an agreement to the
undertook to contribute; contrary, the contribution shall follow such
agreement [Art. 1790, Civil Code].
Effect of failure to contribute: Makes the 2. Industrial partners, unless he has
partner ipso jure a debtor of the partnership contributed capital pursuant to an
even in the absence of demand. The agreement to that effect.
remedy is not rescission but an action for
specific performance with damages and 3. Additional Capital Contribution
interest [Sancho v. Lizarraga, G.R. L-
33580 (1931)]. Any partner who refuses to contribute an
additional share to the capital, except an
Note: When contribution is in goods, the industrial partner, to save the venture shall be
amount thereof must be determined by obliged to sell his interest to the other partners,
proper appraisal of the value as prescribed unless there is an agreement to the contrary
in the contract of partnership, or in the [Art. 1791, Civil Code].
absence thereof, the current prices, at the
time of contribution [Art. 1787, Civil Code]. Requisites:
1. There is an imminent loss of the business
2. In case a specific and determinate thing is of the partnership;
to be contributed: 2. The majority of the capitalist partners are of
the opinion that an additional contribution
Page 8 of 494
to the common fund would save the c. Obligation to Compensate for
business; Damages
3. The capitalist partner refuses deliberately
(not because of financial inability) to Every partner is responsible to the partnership
contribute an additional share to the for damages suffered by it through his fault [Art.
capital; and 1794, Civil Code].
4. There is no agreement that even in case of
imminent loss of the business, the partners 1. Set-Off of Liability
are not obliged to contribute.
General Rule: The liability for damages cannot
4. Contribution of Industry be set-off or compensated by profits or benefits
which the partner may have earned for the
An industrial partner is obliged to contribute his partnership by his industry.
industry at the stipulated time.
Rationale: The partner has the obligation to
b. Obligation to Apply Sums Collected secure the benefits for the partnership. As
Pro Rata such, the requirement for compensation that
the partner be both a creditor and a debtor of
General Rule: A partner (a) authorized to the partnership at the same time, is not
manage, (b) who collects a demandable sum complied with [Art. 1278, Civil Code].
owed to him in his own name from a person
who also owes the partnership a demandable Exception: The court may equitably lessen the
sum, is obliged to apply the sum collected to liability if, through his extraordinary efforts in
both credits pro rata, even if he issued a receipt other activities of the partnership, unusual
for his own credit only [Art. 1792, Civil Code]. profits were realized [Art. 1794, Civil Code].
Note, however, that there is still no
Exceptions compensation in this case.
1. In case the receipt was issued for the
account of the partnership credit only, d. Obligation to Account and Act as
however, the sum shall be applied to the Trustee
partnership credit alone.
2. When the debtor declares, pursuant to Art. Every partner must
1252, Civil Code at the time of making the 1. Account to the partnership for any benefit;
payment, to which debt the sum must be and
applied, and if the personal credit of the 2. Hold as trustee for it any profits derived by
partner is more onerous to him, it shall be him without the consent of the other
so applied [Art. 1792, Civil Code]. partners:
a. From any transaction connected with
1. Requisites for Applicability of Art. 1792, the formation, conduct, or liquidation of
Civil Code the partnership; or
b. From any use by him of its property
1. There exist at least two (2) debts, one [Art. 1807, Civil Code].
where the collecting partner is creditor, and
the other, where the partnership is the General Rule: The partner cannot use or apply
creditor; exclusively to his own benefit partnership
2. Both debts are demandable; and assets or results of the knowledge or
3. The partner who collects is authorized to information gained by him as a partner to the
manage and actually manages the detriment of the partnership [Pang Lim &
partnership. Galvez vs. Lo Seng, G.R. No. 16318 (1921)].
Exception: If the taking by the partner is with

the consent of all other partners [Lim Tanhu v.
Ramolete, G.R. L-40098 (1975)].
Page 9 of 494
The duty to account continues until the b. Obligation not to Engage in Another
partnership relation is terminated [Art. 1829, Business
Civil Code].
1. Industrial Partners
This obligation exists even when he issued a
receipt for his share only [Art. 1793, Civil General Rule: An industrial partner cannot
Code]. engage in business for himself.
Rationale: In this case, the debt becomes a Should he do so, the capitalist partners, as well
bad debt. It would be unfair for the partner who as industrial partners may either:
already collected not to share in the loss of the 1. Exclude him from the firm; or
other partners. 2. Avail themselves of the benefit which he
may have obtained with a right to damages
Credit collected after dissolution: The [Art. 1789, Civil Code].
collecting partner need not bring the same to
the partnership capital. Art. 1793 presupposes Exception: He may engage in business for
that there exists partnership capital. Upon himself when the partnership expressly permits
dissolution of the partnership and the return to him to do so [Art. 1789, Civil Code].
each principal of what he contributed, the
community of interest between them Remedy of the other partners
disappears altogether [De Leon, supra; Espiritu The other partners have the remedy of either
and Sibal, op. cit., citing 11 Manresa 352-353]. excluding the erring partner from the firm or of
availing themselves of the benefits which he
2. Obligations of the Partners Among may have obtained.
Themselves
An action for specific performance to compel
a. Obligation to Render True and Full the partner to perform the promised work is not
Information available as a remedy because this will amount
to involuntary servitude [De Leon, supra].
Partners shall render on demand true and full
information of all things affecting the Rationale:
partnership to: 1. To prevent the industrial partner from
1. Any partner; exploiting his services for his own personal
2. The legal representative of any deceased benefit without the permission of the firm.
partner; or 2. To prevent conflict of interest and to ensure
3. The legal representative of any partner compliance by said partner with his
under legal disability [Art. 1806, Civil prestation.
Code].
2. Capitalist Partners
Even without demand, honesty demands the
giving of vital information, the refraining from all General Rule: For a capitalist partner, the
kinds of concealment [Paras, supra]. prohibition on engaging in another business
extends only to any operation which is of the
By “information”, it is meant that which can be same or similar kind of business in which the
used for partnership purposes, it is in the sense partnership is engaged
of a property which the partnership has a
valuable right [De Leon, supra]. Exception: Unless there is a stipulation to the
contrary.
If the capitalist partner violates this prohibition,

he shall:
1. Bring to the common funds any profits
accruing to him from his transactions; and
Page 10 of 494
2. Personally bear all the losses [Art. 1808, Note: But this does not exempt the industrial
Civil Code]. partner from liability insofar as third persons
are concerned. He may however, recover what
The test is the possibility of unfair he has given to third persons from the other
competition partners, for he is exempted by law from losses
A partner occupies a fiduciary position with [La Compania Maritima v. Muñoz, G.R. No. L-
respect to his co-partners imposing duties of 3704 (1907)].
utmost good faith and he may not carry on any
other business in rivalry with the business of 3. Obligations of the Partners to Third
the partnership, whether in his own name or for Persons
the account of another at the expense of the
partnership [De Leon, supra]. a. Liability for Partnership Debts
c. Obligation to Share in the The partnership is primarily liable for contracts

Profits/Losses entered into:
1. In its name and for its account;
1. Rules for Distribution of Profits and 2. Under its signature; and
Losses 3. By a person authorized to act for it.
1. They shall be distributed in conformity with Upon exhaustion of its assets, all partners are
the agreement. liable pro rata with all their property. Any
2. If only the share in profits has been partner may enter into a separate obligation to
stipulated, the share in the losses shall be perform a partnership contract [Art. 1816, Civil
in the same proportion. Code].
3. In the absence of any stipulation:
a. The share in the profits of the capitalist 1. Nature of Individual Subsidiary
partners shall be in proportion to their Liability
contributions.
b. The losses shall be borne by the General Rule: The partners are liable
capitalist partners, also in proportion to subsidiarily. It only arises upon exhaustion of
the contributions. partnership assets [La Compania Maritima v.
c. The share of the industrial partners in Muñoz, supra].
the profits is that share as may be just
and equitable. If he also contributed Exceptions:
capital, he will receive a share of the 1. A third person who transacted with the
profits in proportion to his contribution; partnership can hold the partners solidarily
and (rather than subsidiarily) liable for the
d. The industrial partner, who did not whole obligation if the case falls under Art.
contribute capital, is not liable for 1822 or 1823, Civil Code [Muñasque v. CA,
losses [Art. 1797, Civil Code]. G.R. L-39780 (1985)]. The provisions refer
to wrongful acts or omission and
2. Exclusion of Partner From Share misapplication of money or property by a
General Rule: A stipulation excluding one or partner in the ordinary course of business.
more partners from any share in the profits or 2. A person admitted as a partner into an
losses is void [Art. 1799, Civil Code]. existing partnership is liable for all the
obligations of the partnership arising before
Exception: A stipulation exempting an his admission, except that his liability shall
industrial partner from losses is valid, since, if be satisfied only out of partnership
the partnership fails to realize profits, he can no property, unless there is a stipulation to the
longer withdraw his work or labor [De Leon, contrary [Art. 1826, Civil Code]. In other
supra; 11 Manresa 377]. words, he is not personally liable.
Page 11 of 494
2. Pro Rata b. Liability of Partners for Partnership
Contracts
The partners are liable pro rata. This liability is
not increased even when a partner: 1. Acts apparently for the carrying on of
1. Has left the country and the payment of his usual business
share of the liability cannot be enforced
[Co-Pitco v. Yulo, G.R. No. L-3146 (1907)]; General Rule: The partnership is liable for any
or act of a partner which is apparently for the
2. His liability is condoned by the creditor carrying on of the usual business of the
[Island Sales v. United Pioneers, G.R. No. partnership, including the execution of any
L-22493 (1975)]. instrument in the partnership name.
Basis for Pro-rating Exception: The partnership is not bound when

Pro rata must be understood to mean equally the following concur:
or jointly and not its literal meaning. After all 1. The partner has in fact no authority to act;
partnership assets have been exhausted, pro- and
rating is based on the number of partners and 2. The person with whom he deals has
not on the amount of their contributions to the knowledge of such fact [Art. 1818 (1), Civil
common fund, subject to adjustment among Code].
the partners [De Leon, supra].
2. Acts not apparently for carrying on of
3. Liability of an Industrial Partner the usual business
An industrial partner, who is not liable for General Rule: Acts of a partner which is not
losses, is not exempt from this liability (for apparently for carrying on of the usual business
partnership debts). However, he can recover does not bind the partnership.
the amount he has paid from the capitalist
partners, unless there is a stipulation to the Exception: The partnership is bound if the
contrary [La Compania Maritima v. Muñoz, other partners authorized him to do the act [Art.
supra]. 1818 (2), Civil Code].
4. Stipulation against Individual Liability 3. Acts of strict dominion

Any stipulation against pro rata liability is void General Rule: One or some of the partners
against third persons but valid among the have no authority to do the following acts of
partners [Art. 1817, Civil Code]. strict dominion:
1. Assign the partnership property in trust for
A stipulation which excludes one or more creditors or on the assignee’s promise to
partners from any share in the profits or losses pay the debts of the partnership;
is void [Art. 1799, Civil Code]. 2. Dispose of the goodwill of the business;
3. Do any other act which makes it impossible
Note: The exemption of the industrial partner to to carry on the ordinary business of the
pay losses relates exclusively to the settlement partnership;
of the partnership affairs among the partners 4. Confess a judgment;
themselves, and has nothing to do with the 5. Enter into a compromise concerning a
liabilities of the parties to third persons. partnership claim or liability;
6. Submit a partnership claim or liability to
Art. 1816 refers to “liabilities” while Art. 1797 arbitration;
speaks of “losses.”. 7. Renounce a claim of the partnership.
There is therefore no conflict between the two
articles [Nachura]. Exceptions:
They may do so if:
1. Authorized by all the partners; or
Page 12 of 494
2. The other partners have abandoned the Where the title is in the name of one or more or
business [Art. 1818 (3), Civil Code]. all the partners, or in a third person in trust for
the partnership, a partner authorized to carry
4. Acts in contravention of a restriction on the usual business may convey equitable
Any act of a partner in contravention of a title in the partnership name or in his own name
restriction on authority does not bind the [Art. 1819 (4), Civil Code].
partnership to persons having knowledge of
the restriction [Art. 1818 (4), Civil Code]. Where the title is in the names of all the
partners, a conveyance executed by all of them
The partnership is not liable to third persons passes all the rights to the property [Art. 1819
having actual or presumptive knowledge of the (5), Civil Code].
restrictions, whether or not the acts are for
apparently carrying on in the usual business of c. Liability for Admission by a Partner
the partnership [De Leon, supra].
An admission or representation by any partner
Conveyance of Partnership Real Property may be used as evidence against the
partnership when:
1. Title in Partnership Name 1. It concerns partnership affairs; and
2. Such affairs are within the scope of his
Any partner may convey the real property in the authority [Art. 1820, Civil Code].
name of the partnership. The partnership can
recover it, except when: Instances Where Knowledge of a Partner is
1. The act of the partner binds the Considered Knowledge of the Partnership
partnership, when he has authority to carry 1. Knowledge of the partner acting in the
out the usual business of the partnership, particular matter
under Art. 1818 (1), Civil Code; or a. Acquired while a partner, or
2. If not so authorized, the property has been b. Then present to his mind;
conveyed by the grantee, or a person 2. Knowledge of any other partner who
claiming under him, to a holder for value reasonably could and should have
and without knowledge that the partner communicated it to the acting partner [Art.
exceeded his authority [Art. 1819 (1), Civil 1821, Civil Code].
Code].
d. Liability for Wrongful Acts of a
A partner authorized to carry out the usual Partner
business may convey, in his own name, the
equitable interest of the partnership [Art. 1819 The partnership is solidarily liable with the
(2), Civil Code]. partner who causes loss or injury to any person
not a partner, or incurs any penalty through any
2. Title in the Name of Other Persons wrongful act or omission:
1. In the ordinary course of the business of
Where the title is in the name of one or more the partnership, or
but not all the partners, and the record does not 2. Not in the ordinary course of business, but
disclose the right of the partnership: with the authority of his co-partners [Art.
1. The partners having title may convey title. 1822, Civil Code].
2. The partnership may recover it when the
partners conveying title have no authority e. Liability for Misapplication of Money
to carry on the usual business of the or Property
partnership, unless the purchaser or his
assignee is: The partnership is liable for losses suffered by
a. A holder for value; and a third person whose money or property was:
b. Without knowledge that the act 1. Received by a partner
exceeded authority [Art. 1819 (3), Civil a. Acting within the scope of his apparent
Code]. authority, and
Page 13 of 494
b. Misapplied it f. Liability in case of Partnership by
2. Received by the partnership Estoppel
a. In the course of its business, and
b. Misapplied by any partner while it is in Note: Refer to the discussion above on
the custody of the partnership [Art. Partnership by Estoppel.
1823, Civil Code].
g. Liability of an Incoming Partner
Solidary liability
All partners are solidarily liable with the A person admitted as a partner is liable for
partnership for its liabilities under Arts. 1822 obligations incurred subsequent to his
and 1823 [Art. 1824, Civil Code]. admission as the other partners are liable. This
is because he is already part of the partnership.
This is without prejudice to the guilty partner
being liable to the other partners. However, as The partner is liable for obligations incurred
far as third persons are concerned, the before his admission, but will be satisfied only
partnership is answerable [De Leon, supra]. out of the partnership property, unless
otherwise stipulated that he fully assumes such
Applicability of the Rule of Respondeat obligations [Art. 1826, Civil Code].
Superior
The rule of respondeat superior (also called the Rationale:
rule of vicarious liability) applies to the law of 1. The new partner partakes of the benefits of
partnership in the same manner as other rules the partnership property and an already
governing the agency relationship [De Leon, established business.
supra; Teller, op. cit., p. 61]. 2. He has every means of obtaining full
knowledge of the debts of the partnership
It is not only the partners who are liable in and remedies that amply protect his
solidum; it is also the partnership [Art. 1824, interest [De Leon, supra].
Civil Code].
Notice to or Knowledge of the Partnership
The injured party may proceed against the The following operate as notice to or
partnership or any partner [Paras, supra]. knowledge of the partnership:
1. Notice to any partner of any matter relating
The reason for the law’s imposition of wider to partnership affairs;
liability on the partnership with respect to torts 2. Knowledge of the partner acting in the
and breach of trust is based on public policy particular matter acquired while a partner;
[De Leon, supra]. 3. Knowledge of the partner acting in the
particular matter then present to his mind;
Criminal Liability for Criminal Acts or
A non-acting partner in a partnership engaged 4. Knowledge of any other partner who
in a lawful business is not criminally liable for reasonably could and should have
the criminal acts of another partner but he is communicated it to the acting partner.
criminally liable if the partnership is involved in
an unlawful enterprise with his knowledge or These do not apply in case of fraud on the
consent. partnership committed by or with the consent
of the partner [Art. 1821, Civil Code].
Partnership Liability
1. Does Not Extend to criminal liability Preference of Partnership Creditors in
where the wrongdoing is regarded as Partnership Property
individual in character (e.g. embezzlement) With respect to partnership assets, the
2. Extends to criminal liability where the partnership creditors are entitled to priority of
crime is statutory, especially where it payment. However, the private creditors of
involves fine or imprisonment [De Leon, each partner may ask for the attachment and
supra]. public sale of the share of the latter in the
Page 14 of 494
partnership assets as provided in Art. 1814, C. DISSOLUTION AND WINDING
Civil Code [Art. 1827, Civil Code].
UP
Property Preference:
1. Partnership Property – Partnership 1. Concepts
creditors are preferred
2. Partner’s Individual Property – Partner’s Dissolution is the change in the relation of the
individual creditors are preferred [Art. 1839 partners caused by any partner ceasing to be
(8), Civil Code]. associated in the carrying on of the business.
1. It is different from the winding-up of the
Remedy in Case of Insufficiency of Assets: business [Art. 1828, Civil Code].
1. Partnership Creditor – After exhaustion of 2. It does not terminate the partnership, which
partnership assets, the creditor may come continues until the winding up of
after the private property of the partners. partnership affairs is completed [Art. 1829,
2. Partner’s Individual Creditor – Ask for Civil Code].
attachment and public sale of the share of
the partner in the partnership assets [Arts. Note:
1827 and 1814, Civil Code]. 1. The dissolution of a partnership must not
be understood in the absolute and strict
h. Liability with Regard to Personal sense so that at the termination of the
Creditors of Partners object for which it was created, the
partnership is extinguished [Testate Estate
of Mota v. Serra, G.R. No. L-22825 (1925)].
Interest by Personal Creditors
2. The partnership, although dissolved,
General Rule: Partnership creditors are
continues to exist until its termination, at
preferred over the personal creditors of the
which time the winding up of its affairs
partners as regards partnership property.
should have been completed and the net
partnership assets are partitioned and
Exception: On due application by any
distributed to the partners [Emnace v. CA,
judgment creditor of a partner, a competent
G.R. No. 126334 (2001)].
court may:
1. Charge the interest of the partner for the
Winding up means the administration of the
satisfaction of the judgment debt;
assets of the partnership for the purpose of
2. Appoint a receiver of the share of the
terminating the business and discharging the
profits and of any other money due or to fall
obligations of the partnership [De Leon, supra].
due to the partner; and
3. Make all other orders, directions, accounts
Termination is the point in time when all
and inquiries, which the debtor partner
partnership affairs are completely wound up
might have made, or which the
and finally settled. It signifies the end of the
circumstances may require [Art. 1814 (1),
partnership life [De Leon, supra].
Civil Code].
The interest charged may be redeemed before 2. Causes of Dissolution

foreclosure or, in case of sale directed by the
court, may be purchased without causing a. Without Violation of the Agreement
dissolution: Between the Partners
1. With separate property, by one or more of
the partners; or 1. By the termination of the definite term or
2. With partnership property, by one or more particular undertaking specified in the
of the partners, with consent of all, except agreement;
the debtor partner [Art. 1814 (2), Civil 2. By the express will of any partner, who
Code]. must act in good faith, when no definite
term or particular is specified;
Page 15 of 494
3. By the express will of all the partners who 2. When a specific thing which a partner had
have not assigned their interests or promised to contribute, perishes before
suffered them to be charged for their delivery, or by the loss of the thing, only the
separate debts, either before or after the use or enjoyment of which has been
termination of any specified term or contributed; the loss of a specific thing,
particular undertaking; however, does not dissolve the corporation
4. By the expulsion of any partner from the after its ownership has already been
business bona fide in accordance with transferred to the partnership;
such a power conferred by the agreement 3. By the death of any partner;
between the partners [Art. 1830 (1), Civil 4. By the insolvency of any partner or of the
Code]. partnership;
5. If, after the expiration of the definite term or
particular undertaking, the partners Note: The insolvency of the partner or of
continue the partnership without making a the partnership must be adjudged by the
new agreement, the firm becomes a court [Sec. 32, The Insolvency Law (RA
partnership at will [Art. 1785, Civil Code]. 10142)].
6. Any one of the partners may, at his sole
pleasure, dictate the dissolution of the 5. By the civil interdiction of any partner;
partnership at will. He must, however, act
in good faith, not that the attendance of bad Civil interdiction deprives the offender
faith can prevent the dissolution of the during the time of his sentence of the right
partnership, but that it can result in a to manage his property and dispose of
liability for damages [Ortega v. CA, supra]. such property by any act or any
conveyance inter vivos [Art. 34, Revised
b. In Contravention of the Agreement Penal Code].
Between the Partners
Rationale: One who is without capacity to
Where circumstances do not permit dissolution manage his own property should not be
under any other provision of Art. 1830, Civil allowed to manage partnership property
Code, it may also be dissolved by the express [Arts. 1327 and 38, Civil Code].
will of any partner at any time.
d. By Decree of Court
Thus, even if there is a specified term, one
partner can cause its dissolution by expressly A partner may apply for dissolution in court
withdrawing even before the expiration of the when:
period, with or without justifiable cause. If the 1. A partner has been declared insane in any
cause is not justified or no cause was given, judicial proceeding or is shown to be of
the withdrawing partner is liable for damages, unsound mind;
but in no case can he be compelled to remain
in the firm [Rojas v. Maglana, G.R. No. 30616
Note: The partner may have been
(1990)].
previously declared insane in a judicial
proceeding; otherwise, his insanity must be
c. By Operation of Law duly proved. It must materially affect the
capacity of the partner to perform his
1. By any event which makes it unlawful for contractual duties as such [De Leon,
the business of the partnership to be supra].
carried on or for the members to carry it on
in partnership; 2. A partner becomes in any other way
incapable of performing his part of the
Note: If the business or object had been partnership contract;
unlawful from the very beginning, the firm
never had juridical personality [Paras,
supra].
Page 16 of 494
Note: The incapacity must be lasting, from 2. When any partner retires;
which the prospect of recovery is remote 3. When the other partners assign their rights
[De Leon, supra]. to the sole remaining partner;
4. When all the partners assign their rights in
3. A partner has been guilty of such conduct the partnership property to third persons
as tends to affect prejudicially the carrying [Art. 1840, Civil Code]
on of the business;
4. A partner willfully or persistently commits a 3. Effects of Dissolution
breach of the partnership agreement, or
otherwise so conducts himself in matters a. On Authority of the Partners
relating to the partnership business that it In general
is not reasonably practicable to carry on
the business in partnership with him; Upon dissolution, the authority of the partners
to represent the partnership is confined only to
Rationale: They defeat and materially acts necessary to:
affect and obstruct the purpose of the 1. Wind up partnership affairs; or
partnership [De Leon, supra]. 2. Complete transactions began but not then
finished [Art. 1832 (1), Civil Code].
5. The business of the partnership can only
be carried on at a loss; With respect to partners
The authority of partners to act for the
Note: A court is authorized to decree partnership is terminated, with respect to
dissolution, notwithstanding the partners:
partnership has been making profits, where 1. When the dissolution is not by the act,
it appears at the time of the application that insolvency or death of a partner, or
the business can only be carried on at a 2. When the dissolution is by such act,
loss [De Leon, supra]. insolvency or death, when the partner
acting for the partnership has knowledge or
6. Other circumstances render a dissolution notice of the cause [Art. 1832, Civil Code].
equitable.
In other cases, each partner is still liable for his
Reason for necessity of court decree: In share in the liability created by the partner
the instances mentioned in Art. 1831, the acting for the partnership [Art. 1833, Civil
facts may be so far open to dispute as to Code].
make necessary judicial determination as
to dissolution, rather than allow them to be With respect to third persons who are not
the occasion for automatic dissolution by partners
operation of law [De Leon, supra]. 1. After dissolution, a partner can bind the
partnership by any act appropriate for:
A person who acquires the interest of a a. Winding up partnership affairs; or
partner may likewise apply: b. Completing transactions unfinished at
1. After the termination of the specified term dissolution.
or particular undertaking; 2. He can also bind it by any transaction
2. At any time if the partnership was a which would bind the partnership as if
partnership at will when the interest was dissolution had not taken place, provided
assigned or when the charging order was the other party to the transaction:
issued. a. Had extended credit to the partnership
prior to dissolution and had no
e. Other Causes knowledge or notice thereof; or
b. Had not so extended credit but had
1. When a new partner is admitted into an known of the partnership prior to
existing partnership; dissolution, and having no knowledge
or notice of dissolution, the fact had not
Page 17 of 494
been advertised in a newspaper of b. Had not extended credit to the
general circulation in the place (or in partnership prior to dissolution and,
each place if more than one) at which having no knowledge or notice of his
the partnership business was regularly want of authority, the fact of his want of
carried on [Art. 1834, Civil Code]. authority has not been advertised [Art.
1834, Civil Code].
Note the character of the notice required:
1. As to persons who extended credit to the Art. 1834 does not affect the liability under Art.
partnership prior to dissolution, notice must 1825 of any person who, after dissolution,
be actual. represents himself or consents to another
2. As to persons who merely knew of the representing him as a partner in a partnership
existence of the partnership, publication in engaged in carrying on business [Art. 1834,
a newspaper of general circulation in the Civil Code].
place of business of the partnership is
sufficient. c. On Liability for Contracts after
Dissolution by Specific Causes [Art.
b. On Liability for Transactions after 1833, Civil Code]
Dissolution
Trigger: A contract
The liability of a partner, in general, is the same 1. Entered into by a partner acting for the
as in ordinary contracts (pro rata and partnership
subsidiary). 2. After dissolution by a partner’s:
a. act,
In the following cases, however, the liability b. death, or
shall be satisfied out of the partnership c. insolvency
assets alone (i.e., there is no subsidiary
liability): General Rule: Binds the other partners.
1. When the partner had been, prior to the
dissolution, unknown as a partner to the Exceptions:
person with whom the contract is made; 1. The dissolution being by act of any partner,
2. When the partner had been, prior to the the partner acting for the partnership had
dissolution, so far unknown or inactive in knowledge of the dissolution; or
partnership affairs that the business 2. The dissolution being by death or
reputation of the partnership could not be insolvency of a partner, the partner acting
said to have been in any degree due to his for the partnership had knowledge or notice
connection with it [Art. 1834, Civil Code]. of the death or insolvency.
Any act of a partner after dissolution in no d. On Existing Liability of Partners [Art.

case binds the partnership in the following
1835, Civil Code]
cases:
1. Where the partnership is dissolved General Rule: Dissolution does not of itself
because it is unlawful to carry on the
discharge the existing liability of any partner.
business, unless the act is appropriate for
winding up partnership affairs; Exception: A partner may be relieved when
2. Where the partner has become insolvent; there is an agreement to that effect between:
or 1. Himself;
3. Where the partner has no authority to wind 2. The partnership creditor; and
up partnership affairs, except by a
3. The person or partnership continuing the
transaction with one who:
business.
a. Had extended credit to the partnership
prior to dissolution and had no
Such agreement may be inferred from the
knowledge or notice of his want of course of dealing between:
authority; or
Page 18 of 494
1. The creditor having knowledge of the 2. The surplus applied in cash to the net
dissolution; and amount owing to the respective partners.
2. The person or partnership continuing the
business. This is a right as against his co-partners and all
partners claiming through them in respect of
In case of dissolution by death, the individual their interests in the partnership. It cannot be
property of a deceased partner is liable for availed if there is an agreement to the contrary
obligations of the partnership incurred while he [Art. 1837, Civil Code].
was a partner, after payment of his separate
debts. Note: When dissolution is caused by expulsion,
the expelled partner may be discharged from
4. Winding Up all partnership liability in the same manner as
above, but he shall receive in cash only the net
a. Who May Wind Up amount due him from the partnership [Art.
1835, Civil Code].
The following partners have the right to wind
up the partnership affairs: b. Dissolution in Contravention of the
1. Those designated in an agreement; Agreement
2. Those who have not wrongfully dissolved
the partnership; or 1. Partner who did not cause the
3. The legal representative of the last dissolution
surviving partner, who was not insolvent.
The partners who did not cause the dissolution
Any partner or his legal representative or wrongfully has the following rights:
assignee may obtain winding up by the court, 1. To demand the right under Art. 1837 (1),
upon cause shown [Art. 1836, Civil Code]. Civil Code
2. To be indemnified for damages for breach
b. Manner of Winding Up of the agreement against the partner who
caused the dissolution wrongfully [Art.
1. Extrajudicial, by the partners themselves; 1837 (1), Civil Code];
or 3. To continue the business:
2. Judicial, under the control and direction of a. In the same name,
the proper court. b. By themselves or jointly with others,
c. During the agreed term for the
The action for liquidation of the partnership is partnership.
personal. The fact that sale of assets, including
real property, is involved does not change its For the purpose of continuing the business, the
character, such sale being merely a necessary said partners may possess the partnership
incident of the liquidation of the partnership, property, provided:
which should precede and/or is part of its 1. They secure the payment by bond
process of dissolution [Claridades v. Mercader, approved by the court; or
G.R. No. L-20341 (1966)]. 2. They pay any partner, who has caused the
dissolution wrongfully, the value of his
5. Rights of Partners in Case of interest in the partnership, less any
Dissolution damages recoverable, and indemnity
against all present or future partnership
liabilities [Art. 1837, Civil Code].
a. Dissolution Without Violation of the
Agreement
2. Partner who caused the dissolution
Each partner may have:
The partner who caused the dissolution
1. The partnership property applied to
wrongfully has the following rights:
discharge the partnership liabilities; and
Page 19 of 494
1. If the business is not continued: All the of the prospects of enterprises or of value of
rights in Art. 1837 (1), Civil Code, subject the property which he has put into the firm as
to liability for damages; capital is not ground for dissolution [Pineda,
3. If the business is continued: The right, as Partnership, Agency and Trusts (2006)].
against his co-partners and all claiming
through them, to: 7. Settling of Accounts between
a. Ascertainment, without considering the Partners
value of the goodwill of the business,
and payment to him in cash the value Subject to any agreement to the contrary, the
of his partnership interest, less any following rules shall be observed in settling
damage, or have the payment secured accounts between partners after dissolution:
by a bond approved by the court; and
b. Be released from all existing liabilities a. Composition of Partnership Assets
of the partnership [Art. 1837 (3), Civil
Code]. 1. The partnership property; and
2. The contributions of the partners
The goodwill of a business may be defined to necessary for the payment of all the
be the advantage which it has from its liabilities [Art. 1839 (1), Civil Code].
establishment or from the patronage of its
customers, over and above the mere value of In accordance with the subsidiary liability of the
its property and capital. The goodwill (which partners, the partnership property shall be
includes the firm name) is part of the applied first to satisfy any liability of the
partnership assets and may be subject of a partnership [Art. 1839 (3), Civil Code].
sale [De Leon, supra].
b. Amount of Contribution for Liabilities
6. Rights of Partners in Case of
Rescission The rules for distribution of losses shall
determine the contributions of the partners [Art.
Rights 1839 (4), Civil Code]. As such:
A partner, who is induced by fraud or 1. The contribution shall be in conformity with
misrepresentation to become a partner, may the agreement.
rescind the contract. Without prejudice to any 2. If only the share in profits has been
other right, he is entitled: stipulated, the contribution shall be in the
1. To a lien on, or right of retention of, the same proportion.
surplus of the partnership property after 3. In the absence of any stipulation, the
satisfying the partnership liabilities to third contribution shall be in proportion to the
persons for any sum of money paid by him capital contribution [Art. 1797, Civil Code].
for the purchase of an interest in the
partnership and for any capital or advances c. Enforcement of Contribution
contributed by him;
2. To stand, after all liabilities to third persons The following persons have the right to enforce
have been satisfied, in the place of the the contributions:
creditors of the partnership for any 1. An assignee for the benefit of creditors;
payments made by him in respect of the 2. Any person appointed by the court; or
partnership liabilities; and 3. To the extent of the amount which he has
3. To be indemnified by the person guilty of paid in excess of his share of the
the fraud or making the representation partnership liability, any partner or his legal
against all debts and liabilities of the representative [Art. 1839 (5) & (6), Civil
partnership [Art. 1838, Civil Code]. Code].
Nature of Fraud or Deceit The individual property of a deceased partner

The fraud or deceit must be material or shall be liable for the contributions [Art. 1839
substantial. Mere exaggerations of one partner (7), Civil Code].
Page 20 of 494
d. Order of Application of Assets a. Admission of a new partner into the
existing partnership;
The partnership liabilities shall rank, in order of b. Retirement or death of any partner, and
payment, as follows: his rights to partnership property are
1. Those owing to creditors other than assigned to: [1] two or more of the
partners; partners, or [2] one or more of the
2. Those owing to partners other than for partners and one or more third
capital and profits; persons;
3. Those owing to partners in respect of c. Retirement of all but one (1) partner,
capital; and their rights to partnership property
4. Those owing to partners in respect of are assigned to the remaining partner,
profits [Art. 1839 (2), Civil Code]. who continues the business, either
alone or with others;
e. Doctrine of Marshaling of Assets d. Wrongful dissolution by any partner,
and the remaining partners continue
When partnership property and the individual the business, either alone or with
properties of the partners are in possession of others; or
a court for distribution: e. Expulsion of a partner, and the
1. Partnership creditors have priority on remaining partners continue the
partnership property; business, either alone or with others.
2. Separate creditors have priority on 2. When the cause of dissolution is the
individual property, saving the rights of lien retirement or death of any partner, and
of secured creditors; business is continued with the consent of
3. Anything left from either shall be applied to the retired partner or the representative of
the deceased partner, without assignment
satisfy the other [Art. 1839 (8), Civil Code].
of their rights to partnership property.
3. When the cause of dissolution is the
f. Distribution of Property of Insolvent
assignment by all the partners or their
Partner representatives of their rights in
partnership property to one or more
Trigger: Where
third persons who promise to pay the
1. A partner has become insolvent; or debts and who continue the business of the
2. His estate is insolvent,
partnership [Art. 1840 (1), Civil Code].
Rule: The claims against his separate property
b. Liability of A New Partner
shall rank in the following order:
1. Those owing to separate creditors;
The liability to the creditors of the dissolved
2. Those owing to partnership creditors;
partnership of a new partner in the partnership
3. Those owing to partners by way of
continuing the business shall be satisfied out of
contribution [Art. 1839 (9), Civil Code].
the partnership property alone. However, he
may, through agreement, assume individual
8. Rights of the Creditors of the liability [Art. 1840 (2), Civil Code].
Dissolved Partnership
c. Priority of Creditors of Dissolved
a. As Creditors of the New Partnership Partnership
In the following cases, creditors of the Creditors of the dissolved partnership have
dissolved partnership are also creditors of the prior right to any claim of the retired partner or
person or partnership continuing the business: the representative of the deceased partner
1. When the business is continued without against the person or partnership continuing
liquidation, and the cause of dissolution the business [Art. 1840 (3), Civil Code].
is:
Page 21 of 494
This is without prejudice to the right of creditors Exception: There is an agreement to the
to set aside any assignment on the ground of contrary [Art. 1842, Civil Code].
fraud [Art. 1840 (4), Civil Code].
D. LIMITED PARTNERSHIP
Rationale: Business will be hampered if
outside creditors are not given superior rights.
It will be risky for them to deal with 1. Definition
partnerships. Moreover, if partners enjoy
priority right, in the natural order of things, they 1. A partnership;
will prefer their own interests to that of the 2. Formed by two or more persons;
outside creditors. Such a state will make it easy 3. Having as members:
to defraud non-partner creditors [Pineda, a. One or more general partners; and
supra]. b. One or more limited partners [Art.
1843, Civil Code].
d. Rights of a Retired Partner or a
The limited partners as such shall not be bound
Representative of Deceased Partner
by the obligations of the partnership [Art. 1843,
Civil Code], except to the extent of their capital
Trigger:
contributions.
1. When any partner retires or dies, and
2. The business is continued without any
2. Characteristics
settlement of accounts as between him or
his estate and the person or partnership
1. A limited partnership is formed by
continuing the business
compliance with the statutory
requirements [Art. 1844, Civil Code].
General Rule: He or his legal representative,
2. The business is controlled or managed by
as against such person or partnership, subject
one or more general partners, who are
to the prior rights of creditors of the dissolved
personally liable to creditors [Arts. 1848 &
partnership:
1850, Civil Code].
1. May have the value of his interest at the
3. One or more limited partners contribute to
date of dissolution ascertained; and
the capital and share in the profits but do
2. Shall receive as an ordinary creditor: not manage the business and are not
a. An amount equal to the value of his personally liable for partnership obligations
interest in the dissolved partnership beyond their capital contributions [Arts.
with interest; or 1845, 1848, 1856, Civil Code].
b. At his option or at the option of his legal 4. Obligations or debts are paid out of the
representative, in lieu of interest, the partnership assets and the individual
profits attributable to the use of his right property of the general partners [Art. 1843,
in the property of the dissolved Civil Code].
partnership. 5. The limited partners may have their
contributions back subject to conditions
Exception: Unless otherwise agreed upon prescribed by law [Arts. 1844 and 1857,
[Art. 1841, Civil Code]. Civil Code].
6. A limited partnership has the following
9. Right to an account advantages:
a. For general partners, to secure
General Rule: The right to an account of his capital from others while retaining
interest shall accrue to any partner, or his control and supervision for the
legal representative at the date of dissolution, business (Sec. 17, Commissioners’
as against: Note, 8 Uniform Laws Annotated, pp.
1. The winding up partners; 2-5.);
2. The surviving partners; or b. For limited partners, to have a share
3. The person or partnership continuing the in the profits without risk of personal
business. liability (40 Am. Jur. 474.).
Page 22 of 494
3. General and Limited Partners General partner Limited partner
Distinguished
Firm name
General partner Limited partner Name may appear in Name must not
the firm name [Art. appear in the firm
Extent of liability
1815, Civil Code]. name (subject to
exceptions) [Art.
Personally, but Liable only to the
subsidiarily liable for extent of his capital 1846, Civil Code].
obligations of the contributions
Prohibition to engage in other business
partnership [Art. (subject to
1816, Civil Code]. exceptions) [Arts. Prohibited in any kind Not prohibited,
1845, 1848, 1856, of business if he is an unless he is also a
Civil Code]. industrial partner [Art. general partner [Art.
1789, Civil Code], or 1853, Civil Code].
Right to participate in management
in the same kind of
business in which the
Unless otherwise No right to
agreed upon, all participate in partnership is
engaged, if he is a
general partners have management [Art.
an equal right to 1848, Civil Code]. capitalist partner [Art.
1808, Civil Code].
manage the
partnership [Arts.
Effect of retirement, death, insanity or
1803 and 1810 (3),
insolvency
Civil Code].
Dissolves Does not dissolve
Nature of contribution
partnership [Art. partnership; rights
Cash, property or Cash or property 1860, 1830, 1831, transferred to
Civil Code]. executor or
industry [Art. 1767, only, not industry
Civil Code]. [Art. 1845, Civil administrator for
selling his estate
Code].
[Art. 1861, Civil
Proper party in proceedings by or Code].
against partnership
Assignability of interest
Proper party Not a proper party,
Not assignable Freely assignable
unless: (1) he is also
without the consent of [Art. 1859, Civil
a general partner
the other partners Code].
[Art. 1853, Civil
[Art. 1813, Civil
Code]; or (2) where
Code].
the object of the
proceedings is to
enforce his right
against or liability to
the partnership [Art.
1866, Civil Code].
Note: The limited

partner is a
necessary but not
an indispensable
party.
Page 23 of 494
4. General and Limited Partnership 5. Formation
Distinguished
a. General Requirements
General Limited Two or more persons desiring to form a limited
partnership partnership partnership shall:
1. Sign and swear to a certificate stating the
Creation
items in Art. 1844, Civil Code; and
May be constituted in Partners must: [1] 2. File, for record, the certificate in the SEC
any form, subject to sign and swear to a [Art. 1844, Civil Code].
exceptions certificate in
A limited partnership is formed if there is
compliance with Art.
substantial compliance in good faith with the
1844, Civil Code;
requirements [Art. 1844, Civil Code].
and [2] file the
certificate for record
in the SEC [Art. When there is failure to substantially comply
with the requirements:
1844, Civil Code].
1. In relation to third persons, the partnership
Composition is general, unless they recognize that the
firm is a limited partnership [Jo Chung
Only general One or more Cang v. Pacific com. Co., G.R. No. 19892
partners general, and one or (1923)]; and
more limited partners 2. As between the partners, the partnership
[Art. 1843, Civil remains limited, since they are bound by
Code]. their agreement [68 C.J.S. 1016; Hoefer
vs. Hall, 411 P.d. 230].
Firm name
b. Purpose of Filing
Must contain the Must include the
word “Company” word “Limited” [SEC 1. To give actual or constructive notice to
[SEC Memo. Circ. Memo. Circ. No. 14- potential creditors or persons dealing with
No. 14-00], except 00] the partnership; and
for professional 2. To acquaint them with its essential
partnerships. Must not include features, including the limited liability of
name of limited limited partners, so that they will not be
May or may not partners, unless: [1] misled or defrauded [De Leon, supra].
include the name of it is also the surname
one or more of the of a general partner, c. Firm Name
partners. or [2] prior to the time General Rule: The surname of a limited
when the limited partner shall not appear in the partnership
partner became name.
such, the business
has been carried on Exceptions:
under a name in 1. It is also the surname of a general partner;
which his surname or
appeared [Art. 1846, 2. Prior to the time when the limited partner
Civil Code] became such, the business had been
carried on under a name in which his
Rules governing dissolution
surname appeared.
Arts. 1828-1842, Arts. 1860-1863,
Civil Code Civil Code A limited partner whose surname appears in a
partnership name contrary to this prohibition
is liable as a general partner to partnership
Page 24 of 494
creditors who extend credit without actual A general partner shall have the rights and
knowledge that he is not a general partner [Art. powers and be subject to all restrictions and
1846, Civil Code]. liabilities of a partner in a partnership without
limited partners [Art. 1850, Civil Code]. Thus,
d. False Statement in the Certificate he has general authority over the business.
If the certificate contains a false statement, one Exception: If a limited partner takes part in the
who suffers loss by reliance thereon may hold control of the business, he becomes liable as a
liable any party to the certificate who knew the general partner [Art. 1848, Civil Code].
statement to be false.
However, written consent or ratification by
Requisites: all limited partners is necessary to
1. The partner knew the statement to be false: authorize the general partners to:
a. At the time he signed the certificate; or 1. Do any act in contravention of the
b. Subsequently, but having sufficient certificate;
time to cancel or amend it, or file a 2. Do any act which would make it impossible
petition for its cancellation or to carry on the ordinary business of the
amendment, and he failed to do so [Art. partnership;
1847, Civil Code]. 3. Confess a judgment against the
2. The person seeking to enforce liability has partnership;
relied upon the false statement in 4. Possess partnership property, or assign
transacting business with the partnership; their rights in specific property, for other
and than a partnership purpose;
3. The person suffered loss as a result of 5. Admit a person as a general partner;
reliance upon such false statement [Art. 6. Admit a person as a limited partner, unless
1847, Civil Code]. the right to do so is given in the certificate;
7. Continue the business with partnership
e. General and Limited Partner at the property on the:
Same Time a. Death;
b. Retirement;
c. Insanity;
A person may be a (1) general; and (2) limited
partner in the same partnership at the same d. Civil interdiction; or
e. Insolvency of a general partner, unless
time.
the right to do so is given in the
certificate [Art. 1850, Civil Code].
This fact must be stated in the certificate
provided for in Art. 1844.
7. Obligations of a Limited Partner
Such person shall have:
1. All the rights and powers of a general a. Obligations Related to Contribution
partner; and
2. Be subject to all the restrictions of a general The contributions of a limited partner may be
partner [Art. 1853, Civil Code]. cash or other property, but not services [Art.
1845, Civil Code].
Except that, in respect to his contribution
as a limited partner, he shall have the rights A limited partner is liable for partnership
against the other members which he would obligations when he contributes services
have had if he were not also a general partner instead of only money or property to the
[Art. 1855-1858, Civil Code]. partnership [De Leon, supra].
6. Management
General Rule: Only general partners have the

right to manage the partnership.
Page 25 of 494
A limited partner is liable to the 3. Whose name appears in the certificate as
partnership: a general partner, or who is not designated
1. For the difference between his actual as a limited partner,
contribution and that stated in the
certificate as having been made; and Rule: Is not personally liable as a general
2. For any unpaid contribution which he partner by reason of his exercise of the rights
agreed in the certificate to make in the of a limited partner, provided:
future, at the time and on the conditions 1. On ascertaining the mistake, he promptly
stated in the certificate [Art. 1858 (1), Civil renounces his interest in the profits of the
Code]. business or other compensation by way of
income [Art. 1852, Civil Code];
He holds as trustee for the partnership: 2. He does not participate in the management
1. Specific property stated in the certificate as of the business [Art. 1848, Civil Code]; and
contributed by him, but which was not 3. His surname does not appear in the
contributed or which has been wrongfully partnership name [Art. 1846, Civil Code].
returned; and
2. Money or other property wrongfully paid or b. Liability to Partnership Creditors
conveyed to him on account of his
contribution [Art. 1858 (2), Civil Code]. General Rule: A limited partner is not liable as
a general partner. His liability is limited to the
These liabilities can be waived or extent of his contributions [Art. 1843, Civil
compromised only by the consent of all Code].
members. Such waiver or compromise,
however, shall not affect the right to enforce Exceptions: The limited partner is liable as a
said liabilities of a creditor: general partner when:
1. Who extended credit; or 1. His surname appears in the partnership
2. Whose claim arose, after the filing or before name, with certain exceptions [Art. 1846
a cancellation or amendment of the (2), Civil Code].
certificate, to enforce such liabilities [Art. 2. He takes part in the control of the business
1858 (3), Civil Code]. [Art. 1848, Civil Code].
3. The certificate contains a false statement
Even after a limited partner has of which he knows and which was relied
rightfully received the return in whole or upon, resulting in loss [Art. 1847, Civil
Code].
in part of his capital contribution, he is
still liable to the partnership for any sum, not in
In cases (a) and (b), the limited partner is
excess of such return with interest, necessary
entitled to reimbursement by the general
to discharge its liabilities to all creditors:
partner/s [Art. 1863, Civil Code].
1. Who extended credit; or
2. Whose claims arose before such return
Rationale: The general partner/s may not have
[Art. 1858 (4), Civil Code].
been aware of the false statement in the
certificate.
A person designated as general partner
but who exercised the rights of a limited c. Liability to Separate Creditors
partner
Trigger: A person: On due application to a court of competent
1. Who has contributed capital to a jurisdiction by any separate creditor of a limited
partnership; partner, the court may:
2. Who erroneously believed that he has 1. Charge his interest with payment of the
become a limited partner [Art. 1852, Civil unsatisfied amount of such claim;
Code]; and 2. Appoint a receiver; and
Page 26 of 494
3. Make all other orders, directions and 1. Receive or hold as collateral security any
inquiries which the circumstances of the partnership property; or
case may require. 2. Receive any payment, conveyance, or
release from liability if it will prejudice the
The interest so charged may be redeemed with right of third persons [Art. 1854, Civil
the separate property of any general partner, Code].
but may not be redeemed with partnership
property [Art. 1862, Civil Code]. Violation of the prohibition is considered a
fraud on the creditors of the partnership [Art.
Note: In a general partnership, the interest may 1854 (2), Civil Code].
be redeemed with partnership property with the
consent of all the partners whose interests are c. Right to Share in Profits
not charged [Art. 1814, Civil Code].
A limited partner may receive from the
8. Rights of a Limited Partner partnership the share of the profits or the
compensation by way of income stipulated for
a. In General in the certificate.
A limited partner shall have the same rights This right is subject to the condition that
as a general partner to: partnership assets will still be in excess of
1. Require that the partnership books be kept partnership liabilities after such payment [Art.
at the principal place of business of the 1856, Civil Code]. The partnership liabilities
partnership; being referred to exclude the liabilities to the
2. To inspect and copy any of them at a limited and general partners.
reasonable hour;
3. To demand true and full information of all Rationale: Otherwise, he will receive a share
things affecting the partnership; to the prejudice of third-party creditors [Art.
4. To demand a formal account of partnership 1827, Civil Code].
affairs whenever circumstances render it
just and reasonable; d. Right to Return of Contribution
5. To ask for dissolution and winding up by
decree of court; A limited partner may have his
6. To receive a share of the profits or other contributions withdrawn or reduced when:
compensation by way of income; and 1. All the liabilities of the partnership, except
7. To receive the return of his contribution liabilities to general partners and to limited
provided the partnership assets are in partners on account of their contributions,
excess of all its liabilities [Art. 1851, Civil have been paid or there remains property
Code]. of the partnership sufficient to pay them;
2. The consent of all members is had, unless
b. Right to Transact Business with the the return may be demanded as a matter of
Partnership right; and
3. The certificate is cancelled or so amended
A limited partner may: as to set forth the withdrawal or reduction
1. Loan money to the partnership; [Art. 1857 (1), Civil Code].
2. Transact other business with the
partnership; and Note: Once withdrawal has been approved by
3. Receive a pro rata share of the partnership the SEC and registered, the partnership may
assets with general creditors if he is not no longer recover the limited partner’s
also a general partner [Art. 1854 (1), Civil contributions.
Code].
The return of his contributions may be
Limitations: A limited partner, with respect to demanded, as a matter of right (i.e., even
his transactions with the partnership, cannot: when not all the other partners consent):
Page 27 of 494
1. On the dissolution of the partnership; 2. He has all the rights and powers, and is
2. Upon the arrival of the date specified in the subject to all the restrictions and liabilities
certificate for the return; or of his assignor, except those liabilities
3. After the expiration of a 6-month notice in which:
writing given by him to the other partners, if a. The assignee was ignorant of; and
no time is fixed in the certificate for: b. Cannot be ascertained from the
a. The return of the contribution; or certificate [Art. 1859 (2) and (6), Civil
b. The dissolution of the partnership [Art. Code].
1857 (2), Civil Code].
Assignee
Return of Contribution in the Form of 1. An assignee is only entitled to receive the
Cash share of the profits or other compensation
General Rule: A limited partner, irrespective of by way of income, or the return of
the nature of his contribution, has only the right contribution, to which the assignor would
to demand and receive cash in return for his otherwise be entitled. He has no right:
contribution. a. To require any information or account of
the partnership transactions;
Exceptions: He may receive his contribution in b. To inspect the partnership books [Art. 1859
a form other than cash when: (3), Civil Code].
1. There is a statement in the certificate to the 2. An assignee has the right to become a
contrary; or substituted limited partner if:
2. All the members of the partnership consent a. All the partners consent thereto; or
[Art. 1857 (3), Civil Code]. b. The assignor, being empowered to do so
by the certificate, gives him that right [Art.
e. Preference of Limited Partners 1859 (4), Civil Code].
3. An assignee becomes a substituted limited
General Rule: The limited partners stand on partner when the certificate is appropriately
amended [Art. 1859 (5), Civil Code].
equal footing.
Exception: By an agreement of all the partners g. Right to Ask for Dissolution

(general and limited) stated in the certificate, A limited partner may have the partnership
priority or preference may be given to some dissolved and its affairs wound up when:
limited partners over others with respect to: 1. He rightfully but unsuccessfully demands
1. The return of contributions; the return of his contribution; or
2. Their compensation by way of income; or 2. He has a right to contribution but his
3. Any other matter [Art. 1855, Civil Code]. contribution is not paid because the
partnership property is insufficient to pay its
Note: Such an agreement shall be stated in the liabilities [Art. 1857, Civil Code].
certificate.
9. Dissolution
f. Right to Assign Interest
A limited partnership is dissolved in much the
The interest of a limited partner is assignable. same way and causes as an ordinary
partnership [68 C.J.S. 1042.; Arts. 1860, 1864,
The assignee may become: 1844, Civil Code]
1. A substituted limited partner; or
2. A mere assignee. General Rule: The retirement, death,
insolvency, insanity or civil interdiction of a
Substituted limited partner general partner dissolves the partnership.
1. He is a person admitted to all the rights of
a limited partner who has died or has Exception: It is not so dissolved when the
assigned his interest in a partnership. business is continued by the remaining general
partners:
Page 28 of 494
1. Under a right to do so stated in the proportion of their contribution [Art. 1863, Civil
certificate; or Code].
2. With the consent of all members [Art. 1860,
Civil Code]. Exceptions: Unless
1. There is a statement in the certificate as to
Upon the death of a limited partner, his their share in the profits; or
executor or administrator shall have: 2. There is a subsequent agreement fixing
1. All the rights of a limited partner for the their share [Art. 1863, Civil Code].
purpose of settling his estate; and
2. The power to constitute an assignee as a 11. Amendment or Cancellation of
substituted limited partner, if the deceased Certificate
was so empowered in the certificate.
a. Cancellation of Certificate
The estate of a deceased limited partner shall
be liable for all his liabilities as a limited partner The certificate shall be canceled when:
[Art. 1861, Civil Code]. 1. The partnership is dissolved; or
2. All limited partners cease to be such limited
10. Settlement of Accounts partners [Art. 1864, Civil Code].
a. Order of Payment b. Amendment of Certificate

In settling accounts after dissolution, the A certificate shall be amended when:
liabilities of the partnership shall be entitled to 1. There is a change in the name of the
payment in the following order: partnership or in the amount or character
1. Those to creditors, including limited of the contribution of any limited partner;
partners except those on account of their 2. A person is substituted as a limited
contributions, and excluding general partner;
partners, in the order of priority as provided 3. An additional limited partner is admitted;
by law; 4. A person is admitted as a general
2. Those to limited partners in respect to their partner;
share of the profits and other 5. A general partner retires, dies, becomes
compensation by way of income in their insolvent or insane, or is sentenced to
contributions; civil interdiction and the business is
3. Those to limited partners in respect to the continued;
capital of their contributions; 6. There is a change in the character of the
4. Those to general partners other than for business of the partnership;
capital and profits; 7. There is a false or erroneous statement
5. Those to general partners in respect to in the certificate;
profits; 8. There is a change in the time as stated in
6. Those to general partners in respect to the certificate for the dissolution of the
capital [Art. 1863 (1), Civil Code]. partnership or for the return of a
contribution;
Note: In settling accounts of a general 9. A time is fixed for the dissolution of the
partnership, those owing to partners in respect partnership, or the return of a contribution,
to capital enjoy preference over those in no time having been specified in the
respect to profits [Art. 1863 (3) and (4), Civil certificate; or
Code]. 10. The members desire to make a change in
any other statement in the certificate in
b. Share in the Partnership Assets order that it shall accurately represent the
General Rule: The share of limited partners in agreement among them [Art. 1864, Civil
respect to their claims for capital, profits, or for Code].
compensation by way of income, is in
Page 29 of 494
c. Requirements for Amendment or partners’ contributions [Art. 1867, Civil
Cancellation Code]
To amend or cancel a certificate:
1. The amendment or cancellation must be in
writing;
2. It must be signed and sworn to by all the
members including the new members, and
the assigning limited partner in case of
substitution or addition of a limited or
general partner; and
3. The writing to amend (with the certificate,
as amended) or to cancel must be filed, for
record, in the SEC [Art. 1865, Civil Code].
(1) In case of refusal to execute the

writing [Art. 1865, Civil Code].
Trigger: If any person, who is designated in

Art. 1865 as a person who must execute the
writing, refuses to do so
Rule: A person desiring the cancellation or

amendment of a certificate may petition the
court to order a cancellation or amendment
thereof.
Action of the court: The court shall order the

SEC to record the cancellation or amendment
if it finds that the petitioner has a right to have
the writing executed. From the moment the
amended certificate/writing or a certified copy
of a court order granting the petition for
amendment has been filed, such amended
certificate shall thereafter be the certificate of
partnership [Art. 1865, Civil Code].
12. Limited Partnerships Formed Prior

to the Effectivity of the Civil Code
Limited partnerships formed under the law

prior to the Civil Code may:
1. Continue to be governed by the provisions
of the old law; or
2. Become a limited partnership under the
Civil Code by compliance with Art. 1844,
provided that the certificate states:
a. The amount of the original contribution
of each limited partner and the time it
was made; and
b. That the partnership assets exceed its
liabilities to third persons by an amount
greater than the sum of all limited
Page 30 of 494
CORPORATIONS
COMMERCIAL LAW
CORPORATIONS COMMERCIAL LAW
A corporation comes into existence upon the
issuance of the certificate of incorporation.
CORPORATIONS Then, and only then, will it acquire juridical
personality to sue and be sued, enter
contracts, hold or convey property or perform
A. Definition of Corporation any legal act in its own name.
Revised Corporation Code (RA 11232) c. Has the Right of Succession

Section 2. A corporation is an artificial being
created by operation of law, having the right of Since one of the attributes of a corporation is
succession and the powers, attributes, and that it is an artificial being with a distinct
properties expressly authorized by law or incident to personality, the corporation’s existence is
its existence unaffected by a change in the composition of
stockholders. Its existence is limited only by the
Articles of Incorporation (AOI), may be subject
1. Attributes of a Corporation
to Quo Warranto proceedings (Rule 66 of the
Rules of Court), and may be shortened by
a. An Artificial Being dissolution (Title XIV))
A corporation is a juridical entity that exists d. Has the Powers, Attributes, and
apart from its stockholders. It has its own set of
Properties Expressly Authorized by
rights and obligations as provided for by law.
Law or Incident to Its Existence
Technically, it has no physical existence
although it occupies a principal place of
A corporation has no power except those
business.
expressly conferred on it by the Revised
Corporation Code and by its articles of
Being only a juridical entity, the physical acts of
incorporation, those which may be incidental to
the corporation, like the signing of documents,
such conferred powers, those that are implied
can be performed only by natural persons duly
from its existence, and those reasonably
authorized for such purpose by corporate by-
necessary to accomplish its purposes. In turn,
laws or by a special act of the Board of
a corporation exercises said powers through its
Directors (BOD) [Swedish Match Philippines,
BOD and/or its duly authorized officers and
Inc. v. Treasurer of the City of Manila, G.R. No.
agents [Monfort Hermanos Agricultural Dev.
181277 (2013)].
Corp. v. Monfort III, G.R. No. 152542 (2004)].
A corporation, upon coming into existence, is
Being a creature of the law, its powers are
invested by law with a personality separate and
limited by:
distinct from those persons composing it as
1. The law (see Sec. 35 for general powers
well as from any other legal entity to which it
and Secs. 36 to 43 for specific powers);
may be related [Yutivo Sons Hardware v. CTA,
G.R. No. L-13203 (1961)]
2. By the express terms of its AOI as well
those essential or necessary to carry out its
b. Created by Operation of Law purpose or purposes under such Articles (see
Sec. 35, last par.); and
Mere consent of the parties to form a
corporation is not sufficient. The State must 3. By those necessary or incidental to its
give its consent either through a special law (in powers so conferred (see Sec. 44)
case of government corporations) or a general
law (i.e., Revised Corporation Code in case of
private corporations).
Page 32 of 494
B. Classes of Corporations Stock Non-Stock
1. Stock Corporations Have capital No part of its

stock divided income is
into shares distributable
Stock corporations – corporations which have
[Sec. 3] as dividends
capital stock divided into shares AND are
to its
authorized to distribute to the holders of such members,
shares, dividends, or allotments of the surplus trustees, or
profits based on shares held [Sec. 3]. It is officers [Sec.
organized for profit. 86]
The governing body of a stock corporation is

usually the BOD (except in certain instances,
e.g. one person corporations, close
Distribution Are Any profit
corporations).
of Profits authorized may obtain
to distribute as an incident
Note: A corporation is considered a stock
to the to its
corporation if they have the power to declare
holders of operations
dividends. So long as the corporation has
such shares, shall, when
capital stock and unrestricted retained
dividends or necessary or
earnings and there is no prohibition in its
allotments of proper, be
Articles of Incorporation or in its by-laws for it
surplus used for the
to declare dividends, such corporation is a
profits on furtherance
stock corporation [Sec. 42].
the basis of of its purpose
the shares or purposes
2. Non-stock Corporations held [Sec. 3] [Sec. 86]
All other corporations are non-stock Composition Composed Composed of
corporations [Sec. 3]. of members
stockholders
Non-stock corporations – One where no part of
the income is distributable as dividends to its Profit It is for profit It is not for
members, trustees, or officers, subject to the profit [Sec.
provisions of the Code on dissolution [Sec. 86]. 87]
It is not organized for profit.
Its governing body is usually the Board of Other distinctions

Trustees (BoT). However, non-stock
corporations may, through their articles of Stock Non-Stock
incorporation or their by-laws, designate their
governing boards by any name other than as Cumulative Cumulative Cumulative
board of trustees [Sec. 174]. Voting voting in voting in
election of election of
directors is trustees is
provided by only
law [Sec. 23] available if
provided in
AOI or BL
[Sec. 23]
Page 33 of 494
Stock Non-Stock Stock Non-Stock
Number of Maximum of May be more the right to

Board 15 directors than 15 vote.
Members except in [Secs. 13(f) &
merger or 91] Transfer of There is free Transfer of
consolidation Membership transfer of membership
of banks shares. cannot be
[Sec. 13(f)] Membership made without
is not consent of
Term Term of Maximum personal to the
director is 1 term of a the corporation
year [Sec. 22] trustee is 3 stockholder. [Sec. 89]
years [Sec. Note: Subject Membership
91] to provisions is personal.
on close
Place of Stockholders’ May be corporations
Meetings meetings anywhere
must be in the within Proxy Vote May always Vote by
principal Philippine vote by proxy proxy can be
office as set territory as [Sec. 57] denied in the
forth in the provided by AOI or BL
AOI or, if not BL [Sec. 92] [Sec. 88]
practicable,
in the city or Termination Upon transfer Membership
municipality of share, may be
where the seller is no terminated
principal longer part of according to
office is corporation. causes
located [Sec. Transfer may provided in
50] only be the AOI or BL
subject to [Sec. 90].
Election of BOe D elects BOT elects restrictions
Officers officers [Sec. officers, but noted down
24 they may in AOI, BL,
also be and stock
directly certificate,
elected by and must not
members be more
[Sec. 91] onerous than
the right of
Voting One class of Right to vote first refusal
Rights shares must of members [Sec. 97].
always have of any class Note:
complete may be Transfer
voting rights denied in the restrictions
[Sec. 6]. AOI or BL imposed in a
There are [Sec. 88] Shareholders
specific Agreement
instances may be
where even binding upon
non-voting the
shares have stockholders
Page 34 of 494
Under the “liberal” Control Test, there is no
Stock Non-Stock
need to further trace the ownership of the 60%
who are (or more) Filipino stockholdings of the Investing
parties Corporation since a corporation which is at
thereto, since least 60% Filipino-owned is considered as
they are Filipino [Narra Nickel Mining & Development
chargeable Corp. v. Redmont Consolidated Mines Corp.,
with notice, G.R. No. 195580 (2014)].
unless
palpably Absent any doubt, the Control Test shall be
unreasonable used in determining the nationality of a
under the corporation specially in cases where foreign
circumstance ownership restrictions apply [SEC OGC
s (SEC Opinion No. 16-19].
Opinion,
[June 8, Control Test is applied in the following:
1995]) 1. Exploitation of natural resources - Only
Filipino citizens or corporations whose capital
Distribution Residual Generally, stock is at least 60% owned by Filipinos can
of Assets assets are to members are qualify to exploit natural resources [Sec. 2, Art.
be distributed not allowed XII, Const.]
to the to participate
stockholders in distribution 2. Public Utilities - No franchise,
upon of assets. certificate or any other form of authorization for
dissolution, Assets are to the operation of a public utility shall be granted,
after payment be distributed except to citizens of the Philippines or to
of creditors. to such corporations or associations organized under
Dissolution is persons, the laws of the Philippines at least 60% of
effected societies, whose capital is owned by such citizens [Sec.
through the organization 11, Art. XII, Const.].
methods s , or
provided in corporations 3. Mass Media [Note: Control test DOES NOT
the Code as may be apply to Mass Media. Grandfather Rule
[Sec. 139]. specified in a applies]
plan of
distribution 4. Advertising industry (70%) – “Only Filipino
[Sec. 93]. citizens or corporations or associations at least
seventy per centum of the capital of which is
owned by such citizens shall be allowed to
C. Nationality of Corporations engage in the advertising industry” [Sec. 11,
Art. XVI, Const.]
The nationality of a corporation serves as a
legal basis for subjecting an enterprise or its 5. Any industry or activity where foreign
activities to the laws, the economic and fiscal ownership is prohibited or restricted under the
powers, and the various social and financial Foreign Investment Negative List.
policies of the State to which it is supposed to
belong [SEC OGC Opinion No. 22-07]. The "control test" is still the prevailing mode of
determining whether or not a corporation is a
1. Control Test Filipino corporation, within the ambit of Sec. 2,
The nationality of the private corporation is Art. XII of the 1987 Constitution, entitled to
determined by the citizenship of the controlling undertake the exploration, development and
stockholders. utilization of the natural resources of the
Philippines. When in the mind of the Court,
Page 35 of 494
there is doubt, based on the attendant facts 2017 Gamboa Ruling (Roy III v.
and circumstances of the case, in the 60-40 Herbosa)
Filipino equity ownership in the corporation,
then it may apply the "grandfather rule" [Narra However, in 2017, the Supreme Court
Nickel Mining & Development Corp. v. explained its ruling in the 2012 Gamboa
Redmont Consolidated Mines Corp., G.R. No. decision. It stated that the resolution of the
195580 (2014)]. 2012 Gamboa resolution, specifically its
dispositive portion, did not modify the 2011
The Gamboa Rulings Gamboa decision.
2011 Gamboa Ruling The Supreme Court clarified that the Gamboa
Decision already held, in no uncertain terms,
The term "capital" in Sec. 11, Article XII of the that what the Constitution requires is full and
1987 Constitution refers only to shares of stock legal beneficial ownership of 60% of the
entitled to vote in the election of directors, and outstanding capital stock, coupled with 60% of
thus in the present case only to common the voting rights must rest in the hands of
shares, and not to the total outstanding capital Filipino nationals. Thus, for purposes of
stock [common and non-voting preferred determining compliance with the constitutional
shares]. or statutory ownership, the required
percentage of Filipino ownership shall be
For stocks to be deemed owned and held by applied to both the (a) total number of
Philippine citizens or Philippine nationals, mere outstanding shares of stock entitled to vote in
legal title is not enough to meet the required the election of directors; and (b) the total
Filipino equity. Full beneficial ownership of the number of outstanding shares of stock,
stocks, coupled with appropriate voting rights whether entitled to vote or not [Jose M. Roy III
is essential. Thus, stocks, the voting rights of v. Chairperson Teresita Herbosa, G.R. No.
which have been assigned or transferred to 207246 (2017)].
aliens, cannot be considered held by Philippine
citizens or Philippine nationals [Gamboa v. The Supreme Court further said that the
Teves, G.R. No. 176579 (2011)]. statement in Gamboa that the 60% ownership
percentage must be computed on to BOTH
classes of common and preferred shares is
2012 Gamboa Ruling
OBITER.
In 2012, the Supreme Court modified its ruling,
SEC Memorandum Circular No. 8 dated
stating now that:
The term “capital” is not limited to voting shares 20 May 2013
since the constitutional requirement of at least
60% Filipino ownership applies not only to All corporations engaged in identified areas of
voting control of the corporation, but also to the activities or enterprises specifically reserved,
beneficial ownership of the corporation. It is wholly or partly, to Philippine Nationals by the
therefore imperative that such requirement Constitution, the FIA, and other existing laws,
apply uniformly and across the board to all shall, at all times, observe the constitutional or
classes of shares, regardless of nomenclature statutory ownership requirement. For purposes
and category, comprising the capital of a of determining compliance therewith, the
corporation. required percentage of Filipino ownership shall
be applied to both:
Preferred shares, denied the right to vote in the
election of directors, are still entitled to vote on 1. The total number of outstanding shares of
the eight specific corporate matters under Sec. stock entitled to vote in the election of
6. of the Corporation Code [Note: Still Sec. 6 directors; AND
under the RCC] [Gamboa v. Teves, G.R. No. 2. The total number of outstanding shares of
176579 (2012)]. stock, whether or not entitled to vote in the
Page 36 of 494
election of directors [Sec. 1-2, SEC MC No. 1. That the foreign investors provide
8]. practically all the funds for the joint
investment undertaken by these Filipino
Note: This was the SEC Memorandum that businessmen and their foreign partner;
was put in question in the Roy III v. Herbosa
case, and subsequently upheld by the Court as 2. That the foreign investors undertake to
constitutional. Thus, the 60% Filipino provide practically all the technological
ownership requirement is NOT needed for support for the joint venture;
EACH AND EVERY CLASS (i.e., common and
preferred) of shares. 3. That the foreign investors, while being
minority stockholders, manage the
2. Grandfather Rule company and prepare all economic viability
studies [Narra Nickel Mining and Dev. Corp
The Grandfather Rule is a method of v. Redmont Consolidated Mines Corp., G.R.
determining the nationality of a corporation, No. 195580 (2014)].
which is owned in part by another corporation,
by breaking down the equity structure of the The Grandfather Rule applies: (i) in enterprises
shareholder corporation [De Leon]. where the Filipino ownership requirement is
100% (mass media) or (ii) in other instances,
The Grandfather Rule is applied if doubt exists when the 60-40 Filipino foreign equity
as to the locus of the “beneficial ownership” ownership is in doubt (i.e. in cases where the
and “control” of a corporation, even if the 60-40 joint venture corporation with Filipino and
Filipino to foreign equity ratio is apparently met foreign stockholders with less than 60%
by the subject or investee corporation [Narra Filipino stockholdings [or 59%] invests in
Nickel Mining & Development Corp. v. another joint venture corporation, which is
Redmont Consolidated Mines Corp., G.R. No. either 60-40% Filipino-alien or the 59% less
195580 (2014)]. Filipino) [Narra Nickel Mining and Dev. Corp v.
It involves the computation of Filipino 195580 (2014)].
ownership of a corporation in which another
corporation, of partly Filipino and partly-foreign Successive Application of the Tests
equity, owns capital stock. The percentage of
shares held by the second corporation in the The Control Test can be applied jointly with the
first is multiplied by the latter’s own Filipino Grandfather Rule to determine the observance
equity, and the product of these percentages is of foreign ownership restriction in nationalized
determined to be the ultimate Filipino economic activities. They are not incompatible
ownership of the subsidiary corporation. ownership-determinant methods that can only
be applied alternatively to each other.
The Grandfather Rule must be applied to
accurately determine the actual participation, The Grandfather Rule, standing alone, should
both direct and indirect, of foreigners in a NOT be used to determine Filipino ownership
corporation engaged in a nationalized activity and control in a corporation, as it could result
or business [SEC Opinion re: Silahis Int’l Hotel in an otherwise foreign corporation rendered
(1987)]. qualified to perform nationalized or partly
nationalized activities.
“Doubt”
"Doubt" refers to various indicia that the Hence, it is only when there is doubt, based on
"beneficial ownership" and "control" of the the Control Test, that the Grandfather Rule is
corporation do not in fact reside in Filipino applied.
shareholders, but in foreign stakeholders. The
following are indicators of doubt: If the subject corporation’s Filipino equity falls
below the threshold 60%, the corporation is
immediately considered foreign-owned, in
Page 37 of 494
which case, the need to resort to the General Rule: Due to the corporation’s
Grandfather Rule disappears. separate juridical personality, a stockholder
may not be made to answer for acts or liabilities
If a corporation that complies with the 60-40 of said corporation, and vice-versa [Land Bank
Filipino to foreign equity requirement, it can be of the Philippines v. CA, G.R. No. 127181
considered a Filipino corporation, and if there (2001)].
is no doubt as to who has the “beneficial
ownership” and “control” of the corporation, Exceptions: The corporation’s separate
there is no need for the application of the juridical personality cannot be invoked to
Grandfather Rule. escape liability when:
However, if there is doubt as to who has the 1. This legal fiction is used for ends
“beneficial ownership” and “control” of the subversive to the policy and purpose
corporation (e.g. the Filipino-Owned behind its creation or which could not
corporation subscribed to 60% of the capital have been intended by law to which it
and the foreign corporation subscribed to 40%, owes its being (i.e. to defeat public
but the subscription of the former is only convenience, justify wrong, protect
nominally paid-up and such corporation fraud, defend crime, confuse legitimate
entered into a financial assistance agreement legal or judicial issues, used as a
with the foreign- owned corporation), the vehicle for the evasion of an existing
application of the grandfather rule is necessary obligation, perpetrate deception or
[Narra Nickel Mining and Dev. Corp v. otherwise circumvent the law).
195580 (2015)]. 2. The corporate entity is a mere alter
ego, adjunct, or business conduit for
D. Corporate Juridical Entity the sole benefit of the stockholders or
of another corporate entity [Land Bank
A private corporation organized under the RCC of the Philippines v. CA, G.R. No.
commences its corporate existence and 127181 (2001)]. The corporation is
juridical personality from the date the SEC merely a farce, as it is so organized and
issues the certificate of incorporation under its controlled, and its affairs are so
official seal [Sec. 18]. conducted, as to make it merely an
instrumentality, agency, conduit or
Persons desiring to incorporate must submit to adjunct of another corporation [Lanuza
the SEC: et al v. BF Corporation, et al, G.R. No.
a. The intended corporate name for 174938 (2014)].
verification, and
b. The articles of incorporation and Property
bylaws [Sec. 18].
Corporate property is owned by the corporation
Note: One-person corporations are not as a juridical person, and the stockholders
required to submit and file bylaws [Sec. 119]. have no claim on corporate property as
owners. The latter only have a mere
1. Doctrine of Separate Juridical expectancy or inchoate right to the same upon
Personality dissolution of the corporation and after all
corporate creditors have been paid. Such right
is limited only to their equity interest.
Concept
Although a stockholder’s interest in the
A corporation has a personality separate and corporation may be attached by his personal
distinct from that of its stockholders and creditor, corporate property cannot be used to
members and is not affected by the personal satisfy his claim [Wise and Co. v. Man
rights, obligations, and transactions of the SunLung, G.R. No. 46997 (1940)].
latter.
Page 38 of 494
A stockholder cannot bring an action for b. Recovery of Moral Damages
replevin to recover property of the corporation.
The corporation, as an artificial person, must General Rule: A corporation, being an artificial
purchase, hold, grant, sell, and convey the person, has no feelings, emotions nor senses;
corporate property, and do business, sue and therefore, it cannot experience physical
be sued, plead and be impleaded, for corporate suffering and mental anguish, which are bases
purposes, in its corporate name [Button v. for moral damages under Art. 2217 of Civil
Hoffman, 61 Wis. 20 (1884)]. Code [Manila Electric Co. v. Nordec
Philippines, 861 SCRA 515 (2018)].
Corporations are entitled to due process and
equal protection, but subject to the police Exception: The only exception to this rule is
power of the state. insofar as their properties when the corporation has a reputation that is
are concerned [Smith, Bell & Co. v. Natividad, debased, resulting in its humiliation in the
40 Phil. 144 (1920)]. They are also entitled to business realm. But in such a case, it is
protection against unreasonable searches and imperative for the claimant to present proof to
seizures [Bache & Co. v. Ruiz, 37 SCRA 823 justify the award. It is essential to prove the
(1971)]. They are not, however, entitled to the existence of the factual basis of the damage
privilege against self-incrimination [Bataan and its causal relation to the petitioner's acts
Shipyard & Engineering v. PCGG, 150 SCRA [Manila Electric Company v. T.E.A.M
181 (1987)]. Electronics Corporation, G.R. No. 131723
(2007), as quoted in Manila Electric Co. v.
a. Liability of Tort and Crime Nordec Philippines].
Being an entity with a separate juridical 2. Doctrine of Piercing the Corporate

personality, a corporation can be held liable for Veil
torts committed by its officers under express
direction from the stockholders or directors, A corporation will be looked upon as a legal
acting as a body [PNB v. CA G.R. No. L-27155 entity as a general rule, and until sufficient
(1978)]. reason to the contrary appears but when the
notion of legal entity is used to defeat public
The corporation itself cannot be arrested and convenience, justify wrong, protect fraud or
imprisoned; thus, it cannot be penalized for a defend crime, the law will regard the
crime punishable by imprisonment. However, a corporation as an association of persons.
corporation may be charged and prosecuted
for a crime if the imposable penalty is a fine Piercing the veil of corporate entity is an
[Ching v. Secretary of Justice, G ̧ .R. No. equitable remedy developed to address
164317 (2006)]. situations where the separate corporate
personality of a corporation is abused or used
Note: Sec. 170 of the RCC provides that for for wrongful purposes [PNB v. Ritratto Group,
violations of the Code, if it is committed by a G.R. No. 142616 (2001)].
corporation, the same may, after notice and
hearing, be dissolved in appropriate Note: Doctrine of Limited Liability and Piercing
proceedings before the Commission. the Corporate Veil also applies to a One
Person Corporation. Single stockholder must
Since a corporation as a person is a mere legal prove that the property of the One Person
fiction, it cannot be proceeded against Corporation is independent of the stockholder's
criminally because it cannot commit a crime in personal property, otherwise the stockholder
which personal violence or malicious intent is shall be jointly and severally liable for the debts
required. Criminal action is limited to the and other liabilities of the One Person
corporate agents guilty of an act amounting to Corporation [Sec. 130].
a crime and never against the corporation itself
[Time Inc. v. Reyes, G.R. No. L-28882 (1971)].
Page 39 of 494
Effect of Piercing the Corporate Veil a. Grounds for Application of Doctrine
The corporation will be considered as a mere The veil of separate corporate personality may
association of persons. Thus, the liability will be lifted/pierced:
directly attach to the stockholders or to the 1. When such personality is used to
other corporation [China Banking v. Dyne- defeat public convenience, to justify
Sem, G.R. No. 149237 (2006)]. wrong, to protect fraud or defend crime,
or as a shield to confuse the legitimate
For the juridical personality of a corporation to issues;
be disregarded, the wrongdoing must be 2. When the corporation is merely an
clearly and convincingly established, and adjunct, a business conduit or an alter
cannot be presumed [Del Rosario v. NLRC, ego of another corporation; or
G.R. No. 85416 (1990)]. 3. Where the corporation is so organized
and controlled and its affairs are so
Procedural Considerations conducted as to make it merely an
instrumentality, agency, conduit or
One cannot pierce the veil to acquire adjunct of another corporation; or
jurisdiction over a party [Pacific Rehouse Corp. 4. When the corporation is used as a
v. CA, G.R. No. 199687 (2014)]. cloak or cover for fraud or illegality, or
to work injustice, or
General Rule 5. Where necessary to achieve equity or
1. Both the individual sought to be held for the protection of the creditors
liable and the corporation must be [China Banking v. Dyne-Sem, G.R. No.
impleaded at the first instance; 149237 (2006)].
2. The court must first acquire jurisdiction
over the corporation or corporations Note: Aside from this general guideline, no
involved before its or their separate hard and fast rule can be laid down to cover all
personalities are disregarded; and cases where the corporate entity theory cannot
3. The doctrine of piercing the veil of be availed of, and each case will have to be
corporate entity can only be raised considered on its merits [Campos].
during a full-blown trial over a cause of
action duly commenced involving The Court has pierced the veil of corporate
parties duly brought under the authority fiction when it was used:
of the court by way of service of
summons or what passes as such 1. To defraud the government of taxes
service [Kukan v. Reyes, G.R. No. due it;
182729 (2010)]. 2. To evade payment of civil liability;
3. By a corporation which is merely a
Exception: When an aggrieved laborer is conduit or alter ego of another
unable to attach the properties of the Corporation;
corporation, the Labor Arbiter may thereafter 4. To evade compliance with contractual
“amend” its decision by ordering that the obligations;
individuals responsible be impleaded and their 5. To evade financial obligation to its
properties levied. Provided that such employees;
individuals were impleaded and had the 6. To ward off a judgment credit;
opportunity to be heard [Guillermo v. Uson, 7. To avoid inclusion of corporate assets
G.R. No. 198967 (2016)]. as part of the estate of the decedent;
and
A sheriff may not pierce the corporate veil, 8. To cover up an otherwise blatant
because such power only belongs to the court violation of the prohibition against
[Cruz v. Dalisay, A.M. No. R-181-P (1987)]. forum shopping.
Page 40 of 494
Only in these and similar instances may the veil transaction attacked so that the
be pierced and disregarded [PNB v. Andrada corporate entity as to this transaction
Electric and Engineering Co., G.R. No. 142936 had at the time no separate mind, will
(2002)]. or existence of its own;
2. Such control must have been used by
b. Test in Determining Applicability the defendant to commit fraud or
wrong, to perpetuate the violation of a
The doctrine has been applied in the following statutory or other positive legal duty, or
contexts: dishonest and unjust act in
contravention of plaintiffs’ legal rights;
a. When the liability belongs to the and
corporations, but the plaintiff seeks to 3. The aforesaid control and breach of
hold the individual liable. duty must proximately cause the injury
or unjust loss complained of [WPM
Mere controlling interest is not enough. There International v. Labayen, G.R. No.
must be a clear showing that the corporate 182770 (2014)].
fiction is used to defeat public convenience,
justify wrong, protect fraud, or defend crime Circumstances rendering a subsidiary an
[Koppel Phil v. Yatco, G.R. No. L-47673 instrumentality:
(1946)]. 1. The parent corporation owns all or
most of the subsidiary’s capital stock;
Note the following badges of fraud: 2. The parent and subsidiary corporations
1. Used as a shield to further an end have common directors or officers;
subversive of justice; or 3. The parent corporation finances the
2. For purposes that could not have been subsidiary
intended by the law that created it; or 4. The parent corporation subscribes to
3. To defeat public convenience; all the capital stock of the subsidiary or
4. Justify wrong; otherwise causes its incorporation;
5. Protect fraud; or 5. The subsidiary has grossly inadequate
6. Defend crime; or capital;
7. To perpetuate fraud or confuse 6. The parent corporation pays the
legitimate issues; or salaries and other expenses or losses
8. To circumvent the law or perpetuate of the subsidiary;
deception 7. The subsidiary has substantially no
business except with the parent
corporation or no assets except those
b. Where the liability is personal to the
conveyed to or by the parent
individual and he seeks to evade it by
corporation;
hiding behind a corporate vehicle. 8. In the papers of the parent corporation
or in the statements of its officers, the
The veil of corporate fiction must be pierced subsidiary is described as a
where the main purpose in forming the department or division of the parent
corporation was to evade the incorporator’s corporation or its business or financial
subsidiary civil liability resulting from the responsibility is referred to as the
conviction of one of his employees [Palacio v. parent corporation’s own;
Fely Transportation, G.R. No. L-15121 (1962)]. 9. The parent corporation uses the
property of the subsidiary as its own;
c. The instrumentality or alter ego rule. 10. The directors or executives of the
subsidiary do not act independently in
The elements of this modality are the interest of the subsidiary but take
1. Control, not mere majority or complete their orders from the parent corporation
stock control, but complete domination, in the latter’s interest; and
not only of finances but of policy and
business practice in respect to the
Page 41 of 494
11. The formal ledger requirements of the In stock sales, which takes place at the
subsidiary are not observed [PNB v. shareholder level, the rule is that –
Ritratto Group, G.R. No. 142616 1. A shift in the composition of its
(2001)] shareholders will not affect its
existence and continuity because the
d. Successor corporation rule corporation possesses a personality
separate and distinct from that of its
Where a corporation feigns dissolution or shareholders
cessation but really continues in existence 2. The corporation continues to be the
organized under another name. employer of its people and continues to
be liable for the payment of their just
The application of the rule figures prominently claims.
in labor cases where the prior entity seeks to 3. The corporation or its new majority
evade its obligations to its laborers. Some shareholders are not entitled to lawfully
telltale signs exhibited in Claparols v. CIR [G.R. dismiss corporate employees absent a
No. L-30822 (1975)] include: just or authorized cause
Consecutive date of cessation and Note: This overturns the ruling in Manlimos v.
commencement of subsequent entity; NLRC (1995) allowing for the defense of good
1. Ownership and control by former faith in stock sales.
controlling stockholder;
2. Turnover of assets. Note: Existence of interlocking directors,
corporate officers and shareholders is also not
On the other hand, in Livesey v. Binswanger enough justification to pierce the veil of
[G.R. No. 177493 (2014)], the court pointed to corporate fiction in the absence of fraud or
the following: other public policy considerations [PNB v.
1. Same officers; Hydro Resources Contractors Corp., G.R. No.
2. Same office; and 16570 (2013)].
3. Continuation of the business.
E. Capital Structure
Note: SME v. De Guzman, G.R. No. 184517
(2013) allows for the defense of good faith in
1. Number and Qualifications of
case of assets sales between a predecessor
and successor corporation: Incorporators
In asset sales or when the assets of the Number: Not more than fifteen [Sec. 10]
selling corporation are transferred to another a. The Revised Corporation Code
removed the prescribed minimum
entity, the rule is that –
number of incorporators. Previously,
the incorporators must be no less than
1. The seller in good faith is authorized
five except for special corporations.
to dismiss the affected employees, [Herbosa, 2019]
but is liable for the payment of b. A corporation with a single stockholder
separation pay under the law is considered a One Person
Corporation
2. The buyer in good faith is not obliged
to absorb the employees affected by Qualifications
the sale, nor is it liable for the 1. Any person, natural or juridical, may
payment of their claims. The most organize a corporation [Sec. 10]
that it may do, for reasons of public a. Juridical entities (partnership,
policy and social justice, is to give association or corporation, singly or
preference to the qualified separated jointly with others) are now permitted
personnel of the selling firm. to be incorporators, and not merely
Page 42 of 494
initial subscribers under the Old shares which correspond to the amount not
Code. paid.
b. The following are NOT allowed to
organize as a corporation, except as Nevertheless, holders of subscribed shares not
provided under special laws: fully paid, which are not delinquent, shall have
1. Natural persons who are all the rights of a stockholder. [Sec. 71]
licensed to practice a
profession SEC has opined that the entire subscription,
2. Partnerships or associations although not yet fully paid, may be transferred
organized for the purpose of to a single transferee, who as a result of the
practicing a profession transfer must assume the unpaid balance.
2. Natural persons must be of legal age [SEC Opinion, 9 Oct. 1995]
3. Each incorporator must subscribe to at
least one share of the capital stock It is necessary, however, to secure the consent
of the corporation because such transfer
Note: The RCC removed the Philippine contemplates a novation which under Art. 1293
residency requirement for the majority of the (NCC) cannot be made without consent of the
incorporators. creditor.
2. Subscription Requirements Characteristics
No minimum capital requirement There can be a subscription only with reference

to unissued shares of the Authorized Capital
Under the Old Corporation Code (CC), at least Stock (ACS), in the following cases:
25% of the authorized capital stock as stated in 1. The original issuance of the ACS at the
the AOI must be subscribed at the time of time of incorporation.
incorporation, and at least 25% of the total 2. The opening, during the life of the
subscription must be paid upon subscription corporation, of the portion of the
[Sec 13, CC]. original ACS previously unissued; or
3. The increase in ACS achieved through
Section 13 has been removed in the Revised a formal amendment of the Articles and
Corporation Code, thus removing such registration thereof with the SEC
minimum capital requirements [Sec 12]. [Villanueva]
However, the increase in capital remains
subject to the 25% subscription and 25% Status as Shareholder
payment of subscription rule [Sec. 37].
One may become a stockholder in a
Subscription Agreements corporation in either of two ways:
1. By SUBSCRIPTION to shares before
Any contract for the acquisition of unissued or after incorporation
stock in an existing corporation or a corporation a. becomes a stockholder upon
still to be formed shall be deemed a acceptance of the corporation
subscription contract. This is notwithstanding of his offer to subscribe
the fact that the parties may refer to it as a whether the consideration is
purchase or some other contract. [Sec. 59] fully paid or not
2. By acquisition of already issued shares
Nature of Subscription Contracts a. from an existing stockholder
b. purchase of TREASURY
A subscription contract is indivisible. SHARES from the corporation
Consequently, where stocks were subscribed
and part of the subscription contract price was
not paid, the whole subscription shall be
considered delinquent, and not only the
Page 43 of 494
Types of Subscription Contracts A corporation already existing upon effectivity
of the RCC may opt out of the rule on perpetual
1. Pre-incorporation subscription - It is a existence by:
subscription for shares of stock of a a. Obtaining the vote of its stockholders
corporation still to be formed. representing majority of the
2. Post-incorporation subscription - Outstanding Capital Stock, without
Entered into after incorporation. prejudice to the appraisal right of
[Sundiang Sr. & Aquino, 2009] dissenting stockholders
b. Notifying the Commission that it elects
Rules on Pre-Incorporation Subscription to retain its specific corporate term, as
provided in its AOI. [Herbosa, 2019]
General Rule: A pre-incorporation
subscription is IRREVOCABLE: It is presumed that shareholders, when they
incorporated, assented to the perpetual
A. For a period of at least 6 months from character of their contract. Their corporate
the date of subscription; relations will only end upon agreement
between or among the prescribed number of
Exceptions: shareholders or involuntarily upon the court’s
1. All of the other subscribers or the SEC’s determination.
consent to the revocation, or
2. The incorporation fails to Extending or shortening the corporate
materialize within 6 months or term
within a longer period as may
be stipulated in the contract of
General Rule: If a corporation wishes to
subscription extend its corporate term, it may amend its AOI
at least 3 years prior to the expiration of its
B. After the submission of the Articles of term. Previously, such change should be made
Incorporation to the SEC. [Sec. 60]
at least 5 years prior to the expiration. [Sec. 11]
Interest on Unpaid Subscription
Exception: When there exists justifiable
reasons for an earlier extension, to be
General Rule: A stockholder is NOT liable to determined by the SEC.
pay interest on his unpaid subscription. He is
not considered a corporate debtor for the Requisites: A private corporation may extend
unpaid amount of his subscription. [Herbosa,
or shorten its term as stated in the articles of
2019] incorporation when –
Exception: If expressly stipulated in the
1. Approved by a majority vote of the
subscription contract. [Sec 65] board of directors or trustees, and
2. Ratified at a meeting by the
3. Corporate Term stockholders or members representing
at least two-thirds (2/3) of the
Perpetual existence outstanding capital stock or of its
members
General Rule: The Revised Corporation Code
provides that a corporation shall have Note: In case of extension of corporate term, a
perpetual existence. The AOIs of existing dissenting stockholder may exercise the right
corporations shall be deemed amended to of appraisal [Sec. 36]
reflect their perpetual term
Revival of Corporate Existence
Exception: The AOIs of corporations created
under the effectivity of this Code provide for a Corporations with an expired term upon the
specific period. [Sec 11] effectivity of the RCC, may apply with the SEC
for revival of its corporate existence.
Page 44 of 494
Upon approval by the SEC, it will then issue a
XPN: There are justifiable
certificate of revival giving it perpetual
reasons for an earlier
existence, with all its rights and privileges, and
extension
subject to all its duties, debts and liabilities prior
to revival, unless it requests for a limited term.
[Sec. 11] 4. Classification of Shares
This benefit does not extend to corporations Nature of Shares of Stock

whose dissolution was decreed by the SEC or
the courts. Shares of stock are units into which the capital
stock is divided. A share of stock represents
Should the controlling stockholders or interest of the holder thereof to participate in
members wish to file the application, they must the management of the corporation, to share
represent the prescribed number of proportionally in the profits of the business and,
stockholders or members the application for upon liquidation, to obtain an aliquot part of
voluntary dissolution (i.e. at least 2/3 of corporate assets after all corporate debts have
OCS/membership). Dissenting stockholders been paid [Campos].
may not exercise their appraisal right.
[Herbosa, 2019] Classes of Shares of Stock
Summary of changes [Herbosa, 2019] The shares in stock corporations may be

divided into classes or series of shares, or both.
For newly GR: Automatic perpetual The rights, privileges, or restrictions, and the
established term stated par value of the class or series of shares
corporations must be indicated in the Articles of
XPN: AOI provides a Incorporation [Sec. 6]
specific corporate term
General Rule: No share may be deprived of
For existing GR: AOI shall be deemed voting rights [Sec. 6].
corporations amended to reflect a
perpetual term Exceptions:
1. Preferred non-voting shares
XPN: The corporation 2. Redeemable shares,
opts out and elects to 3. Provided by the Code (e.g. Treasury shares)
retain their existing term;
Requires majority vote of There shall always be a class/series of shares
shareholders/members which have COMPLETE VOTING RIGHTS
[Sec. 6].
For GR: May apply with the
corporations SEC for the revival of the Doctrine of Equality Shares
with expired corporation. Upon Each share shall be EQUAL in ALL respects to
terms approval, they will have a every other share, except as otherwise
perpetual term provided in the Articles of Incorporation and
stated in the certificate of stock [Sec. 6].
XPN: Their application
indicates a fixed term Classes of shares of stock
For GR: May file an

Classification of shares:
corporations application for extension
1. Preferred Shares vs. Common Shares
with a limited of such term 3 years prior
2. Scope of Voting Rights Subject to
term to the expiration of the
Classification
term
3. Founders’ Shares
4. Redeemable Shares
Page 45 of 494
5. Treasury Shares Cumulative vs. Non-cumulative
6. Par value shares vs. No-par value a. Cumulative - regardless of lack of
shares profits in any given year, and lack of
declaration of dividends, the arrears for
1. Preferred Shares vs. Common such year must be paid to the preferred
Shares stocks in a subsequent year (once
profits are made) before any dividends
Preferred Shares can be paid to the common stocks.
Stocks which are given, by the issuing b. Non-Cumulative – entitlement to
corporation: receipt of dividends essentially
a. Preference in dividends depends on declaration of such; types:
b. Preference in the distribution of assets 1. Discretionary – right to dividends in
of the corporation in case of liquidation, a particular year depends on the
or discretion of the board, even if the
c. Preference in both dividends and corporation has profits.
distribution, or 2. Mandatory – a positive duty is
d. Such other preferences as may be imposed to declare preferred
stated in the Articles of Incorporation dividends every year that
which do not violate the Corporation unrestricted retained earnings are
Code. available.
3. Earned cumulative or dividend
Note: Preferred shares may be issued only with credit – board has discretion not to
a stated par value [Sec. 6]. declare dividends, however, once
the board decides that dividends
Unless the right to vote is clearly withheld, a will be declared, the preferred
preferred stockholder would have such right as stockholders have a right to arrears
it is an incident to stock ownership. The Board in dividends for the years when
of Directors may fix the terms and conditions there were unrestricted retained
only when so authorized by the Articles of earnings are available but no
Incorporation and such terms and conditions dividend was declared.
shall be effective upon filing a certificate
thereof with the SEC [Sec. 6]. Participating and Non-participating
Unless otherwise provided, preferred stocks
Kinds of Preferred Shares are non-participating.
a. Preferred Shares as to Assets vs. a. Participating - those which, after
Preferred Shares as to Dividends getting their fixed dividend preference,
b. Cumulative vs. Non-Cumulative share with common stocks the rest of
c. Participating vs. Non-participating the dividends
b. Non-participating – those which, after
Preferred Shares as to Assets vs. Preferred getting their fixed dividend preference,
Shares as to Dividends have no more right to share in the
a. Preferred shares as to assets –gives remaining dividends with the common
the holder preference in the distribution stocks.
of the assets of the corporation in case
of liquidation. Common shares
b. Preferred shares as to dividends -
entitled to receive dividends on said A common stock represents the residual
share to the extent agreed upon before ownership interest in the corporation. It is a
any dividends at all are paid to the basic class of stock ordinarily and usually
holders of common stock. issued without extraordinary rights or privileges
and entitles the shareholder to a pro rata
division of profits” [CIR v. CA, 301 SCRA 152
(1999)].
Page 46 of 494
The owners thereof are entitled to otherwise provided in the Revised Corporation
management (via exclusive right to vote) of the Code.
corporation and to equal pro-rata division of
profits. General Rule: Non-Voting Shares are not
entitled to vote. The law only authorizes the
Comparison denial of voting rights in the case of
redeemable shares or preferred shares,
provided that there shall always be a class or
Common Preferred
series of shares which have complete voting
Definition Stock which Stock which rights [Sec. 6].
entitles the entitles the
owner to an holder to Exception: Shares whose voting rights are
equal pro some denied, shall nevertheless be entitled to vote
rata division preference, on the following fundamental matters:
of profits either in the a. Amendment of the Articles of
dividends, or Incorporation;
in the b. Adoption and amendment of by-laws;
distribution c. Sale, lease, exchange, other
of assets, or disposition of all or substantially all of
both the corporate property;
d. Incurring, creating or increasing
Value Depends if it Stated par bonded indebtedness;
is a par or value [Sec. e. Increase or decrease of capital stock;
no-par value 6] f. Merger and consolidation;
share g. Investment of corporate funds in
another corporation or business;
Voting Usually May be h. Dissolution of the corporation
Rights vested with deprived of
the exclusive voting rights 3. Founders’ Shares
right to vote except for
the instances Founders’ Shares are shares classified as
provided in such in the AOI, which are given certain rights
Section 6 and privileges not enjoyed by the owners of
[Sec. 6] other stocks. These may be given special
preference in voting rights and dividend
Preference No May have payments.
upon advantage, first crack at
Liquidation priority or dividends/pr Where exclusive right to vote and be voted for
preference ofits/ in the election of directors is granted, such right
over any distribution must be for a limited period not to exceed 5
other of assets years, subject to approval by SEC The 5-year
stockholder depending period shall commence from date of approval
in the same on the by SEC.
class features of
the shares Founder’s shares given the exclusive right to
vote and be voted for are not allowed to
exercise that right in violation of the
2. Scope of Voting Rights Subject to AntiDummy Law and the Foreign Investment
Classification Act [Sec. 7].
Only preferred and redeemable shares may be

deprived of the right to vote [Sec. 6], except as
Page 47 of 494
4. Redeemable Shares b. Optional - the corporation is not
mandated to redeem the shares.
Redeemable Shares are shares which may be
purchased by the corporation from the holders 5. Treasury Shares
of such shares upon the expiration of a fixed
period, regardless of the existence of Treasury Shares are shares which have been
unrestricted retained earnings in the books of issued and fully paid for, but subsequently
the corporation. reacquired by the issuing corporation by
purchase, redemption, donation or through
The RCC made the redemption subject to the some other lawful means. Such shares may
rules and regulations that may be issued by again be disposed of for a reasonable price
SEC, in addition to what may be stipulated in fixed by the BOD [Sec. 9].
the AOI and Certificate of Stock [Sec. 8].
Shares may be reacquired without impairing
Limitations the corporate trust fund. Reacquisition of
a. Redeemable shares may be issued shares is allowed, provided the corporation will
only when expressly provided for in the use assets up to the extent of its unrestricted
AOI [Sec. 8]. retained earnings [SEC Rules Governing
b. The terms and conditions affecting said Redeemable and Treasury Shares, Sec 3, par
shares must be stated both in the AOI (1)(a)].
and in the certificate of stock [Sec. 8].
c. Redeemable or preferred shares may It should be recalled that corporate earnings
be deprived of voting rights in the AOI are not part of the corporate trust fund
[Sec. 6]. [Herbosa, 2019]. They are excluded from the
d. The corporation is required to maintain definition of outstanding capital stock.
a sinking fund to answer for redemption
price if the corporation is required to Pre-emptive right of stockholders in close
redeem [SEC-OGC Opinion No. 07- corporations shall extend to reissuance of
03]. treasury shares, unless otherwise provided in
e. The redeemable shares are deemed the AOI [Sec. 101].
retired upon redemption, unless
otherwise provided in the AOI (i.e., if Delinquent stocks, which are stocks that have
the AOI allows for reissuance of such not been fully paid, may become treasury
shares) [SEC Rules Governing stocks upon bid of the corporation in absence
Redeemable and Treasury Shares, 26 of other bidders [Sec. 67].
April 1982].
f. Unrestricted retained earnings are Limitations on treasury shares
NOT necessary before shares can be a. They may be re-issued or sold again as
redeemed, but there must be sufficient long as it is for a reasonable price fixed
assets to pay the creditors and to by the BOD.
answer for operations [Republic b. Cannot participate in dividends.
Planters Banks v. Agana, G.R. No. c. It has no voting right as long as such
51765 (1997)] See also Sec. 8. shares remain in the Treasury [Sec.
g. Redemption cannot be made if such 56].
redemption will result in insolvency or d. It cannot be represented during
inability of the corporation to meet its stockholder’s meetings.
obligations [SEC Opinion, 24 Aug e. The amount of URE equivalent to the
1987] cost of treasury shares being held shall
be restricted from being declared and
Kinds of redeemable shares issued as dividends.
a. Compulsory - the corporation is
required to redeem the shares. Note: When treasury shares are sold below its
par or issued value, there can be no watering
Page 48 of 494
of stock because such watering of stock 6. Par Value Shares vs. No-Par Value
contemplates an original issuance of shares. Shares
For both stock corporations and close Par value shares
corporations, the pre-emptive right of
stockholders extends to the re-issuance or sale These are shares with a stated or fixed value
treasury shares, unless the articles of set out in the Articles of Incorporation, which
incorporation provide otherwise [Sec. 38 and remains the same regardless of the profitability
101; SEC Opinion, 14 January 1993]. of the corporation. This gives rise to financial
stability, and is the reason why banks, trust
Treasury Shares are not Retired Shares corporations, insurance companies and
building and loan associations must always be
Treasury shares do not revert to the unissued organized with par value shares.
shares of the corporation, but are regarded as
property acquired by the corporation, which Par value is minimum issue price of such share
may be reissued or resold at a price to be fixed in the Articles of Incorporation which must be
by the Board of Directors [SEC Rules stated in the certificate [Sec 61].
Governing Redeemable and Treasury Shares,
CCP No. 1-1982]. No par value shares
Note: Under the SEC Rules, the redemption of These are shares without a stated value in the
redeemable shares does not necessarily make AOI. They are without nominal value. They
them as treasury shares. Instead, it leads to may be issued for the amount stipulated in the
their automatic retirement or cancellation, AOI or fixed by the Board [Sec 61].
unless the contrary is specifically stipulated.
The articles thus provide advance notice to Limitations on no par value shares [Sec. 6]
ordinary shareholders that the board may, at its a. Cannot have an issue price of less than
own discretion, reissue redeemable shares P5.00 per share;
with the same features. b. Once issued, they shall be deemed
fully paid and non-assessable, and the
Treasury shares distributed by way of holders of such shares shall not be
dividends liable to the corporation or to its
creditors in respect thereto;
Treasury shares may also be distributed as c. Entire consideration received by the
property dividends. In order for treasury shares corporation shall be treated as capital
to be distributed as property dividends, the and shall not be available for
amount of the retained earnings previously distribution as dividends;
used to support their acquisition must not have d. The AOI must state the fact that the
been impaired by losses. Further, such corporation issues no-par shares and
retained earnings must not be used to justify the number of shares;
the distribution of treasury shares as property e. Cannot be issued as preferred stock;
dividends. They may only be distributed out of f. Cannot be issued by banks, insurance
the other earnings of the corporation [SEC- companies, public utilities and building
OGC Opinion No. 12-06, dated April 20, 2012]. and loan associations;
g. Cannot be issued by all corporations
Note: Treasury shares are treated as assets of authorized to obtain or access funds
the corporation [Herbosa, 2019]. Since a from the “public”.
treasury share is a fully paid share re-acquired
by the corporation, it is not outstanding and Note: A new addition in the Revised
may be re-issued and resold. It cannot receive Corporation Code is the prohibition on the
dividends before the resale because the issuance of no-par shares being imposed on all
corporation cannot grant dividends to itself corporations authorized to obtain or access
[CIR v. Manning]. funds from the “public.” This prohibition is not
Page 49 of 494
anymore limited to banks, insurance bind it. [Cagayan Fishing Development Co.,
companies, public utilities and building and Inc. v. Sandiko, G.R. No. L-43350 (1937)]
loan associations.
Exceptions: A corporation may be bound by
the contract if it makes the contract its own by:
F. Incorporation and a. Adoption or ratification of the ENTIRE
Organization contract after incorporation.
b. Novation or the intent to novate the
1. Promoter original contract is required to adopt or
ratify the pre-incorporation contract.
Promoters – persons who, acting alone or with [Campos]
others, take initiative in founding and c. The Court’s ruling in Cagayan Fishing
organizing the business or enterprise of the v. Teodoro Sandiko, that “a corporation
issuer and receives consideration therefor. should have a full and complete
[Sec. 3.10, RA 8799, The Securities Regulation organization and existence as an entity
Code] before it can enter into any kind of a
contract or transact any business”, is
Promoter’s Contracts not absolute. One of the exceptions
recognized by American courts is that
Promoter’s contracts are those types of “a contract made by the promoters
contracts entered into in behalf of a corporation of a corporation on its behalf may be
which is in the process of organization and adopted, accepted or ratified by the
incorporation, and such fact is acknowledged corporation when organized”. [Rizal
as an essential ingredient in the process of Light v. PSC and Morong Electric
perfection. [Villanueva] (1968)]
d. Acceptance of benefits under the
a. Liability of Promoter contract with knowledge of the terms
thereof.
General rule: The promoter binds himself e. Performance of its obligation under the
personally and assumes the responsibility of contract.
looking to the proposed corporation for
reimbursement. The contract must of course be one which is
● The promoter binds himself to ensure within the powers of the corporation to enter.
that the corporation, once formed, will [Builders’ Duntile Co. v. Dunn Mfg. Co. (1929)]
ratify the contract entered into in its The corporation adopts the entire contract, not
name. only parts which are beneficial. [Campos]
● Otherwise, he becomes personally
liable for such contract in the event that 2. Subscription Contract
corporation does not ratify.
A subscription contract is any contract for the
Exceptions: acquisition of unissued stock in an existing
1. Express or implied agreement to the corporation, or corporation still to be formed.
contrary
2. Novation, not merely adoption or Notwithstanding the fact that the parties refer
ratification, of the contract to the contract as a purchase or some other
contract, it shall be deemed a subscription as
b. Liability of Corporation for long as it involves the acquisition of unissued
Promoter’s Contracts stock in an existing corporation or a corporation
still to be formed. [Sec. 59]
General rule: A corporation is NOT bound by
the contract. A corporation, until organized, has
no life and no legal existence. It could not have
had an agent [the promoter] who could legally
Page 50 of 494
3.Pre-Incorporation Subscription b. b. Necessary or convenient for its
Agreements use and lawful purposes
c. At a fair valuation equal to the par
A pre-incorporation subscription or issued value of the stock issued;
agreement is a type of promoter’s contract for 3. Labor performed for or services
the acquisition of unissued stock in a actually rendered to the corporation
corporation still to be formed. 4. Previously incurred indebtedness of
the corporation;
Subscription for shares of stock of a 5. Amounts transferred from unrestricted
corporation still to be formed shall be retained earnings to stated capital;
irrevocable for a period of at least six (6) 6. Outstanding shares exchanged for
months from the date of subscription, stocks in the event of reclassification or
UNLESS: conversion;
1. All of the other subscribers consent to 7. Shares of stock in another corporation;
the revocation; or and/or
2. The corporation fails to incorporate 8. Other generally accepted form of
within the same period or within a consideration [Sec. 61].
longer period stipulated in the contract
of subscription. Invalid Consideration
No pre-incorporation subscription may be The following cannot be exchanged for the

revoked after the articles of incorporation is issuance of shares of stock [Sec. 61]:
submitted to the Commission. [Sec. 60] 1. Promissory notes
2. Future service
The rule on irrevocability of a pre-incorporation
subscription agreement embodied in the RCC In case a subscription contract contemplates
is a combination of the features of two theories: unlawful consideration exchanged for shares of
● Contract Theory: Subscription stock:
agreement among several persons to 1. The subscription contract would be
take shares in a proposed corporation valid and binding on both the
becomes a binding contract and is corporation and subscriber
irrevocable from the time of 2. But the provision on such unlawful
subscription unless cancelled by all consideration is deemed void, such
parties before acceptance of that the subscription agreement would
corporation. be construed to be for cash, and the
● Offer Theory: Subscription agreement unpaid amount treated as part of
is only a continuing offer to a proposed subscription receivables.
corporation, offer does not ripen into a
contract until accepted by the It would not be in consonance with the trust
corporation when organized. fund doctrine to consider the subscription
[Villanueva] contract void [Villanueva].
4. Consideration for Stocks Valuation of Consideration
Where the consideration is other than actual

Stocks shall not be issued for a consideration
cash, or consists of intangible property, the
less than the par or issued price thereof.
valuation thereof shall initially be determined
Consideration for the issuance of stock may
by the stockholders or the board of directors,
be:
subject to the approval of the Commission
1. Actual cash paid to the corporation;
[Sec. 61].
2. Property, tangible or intangible, which
must be:
a. Actually received by the
corporation; and
Page 51 of 494
5. Articles of Incorporation Corporate Name
The AOI is a basic contract document, defining See 6. Corporate Name; Limitations on Use
the charter of the corporation, and serves as of Corporate Name
the basis by which to judge whether it exists for
legal purposes. Purpose Clause
The charter of the corporation is a contract A corporation only has such powers as are
between 3 parties: expressly granted by law and the AOI. The
a. between the State and the corporation; purpose clause confers and limits the powers
b. between the stockholders and the that a corporation may exercise.
State;
c. between the corporation and its Must indicate the specific PRIMARY and
stockholders. [Villanueva] SECONDARY purposes if there are more than
d. among the stockholders [Campos] one purpose; a non-stock corporation may not
include a purpose which would contradict or
The AOI must be filed with the SEC for the change its nature as such. [Sec. 13 (b)]
issuance of the Certificate of Incorporation.
The AOI and its amendments can be filed Must not be patently unconstitutional, illegal,
electronically. [Sec. 13] immoral, and contrary to government rules and
regulations. [Sec. 16 (b)]
a. Contents
Must not be for the purpose of practicing a
profession. [Sec. 10]
The Articles of Incorporation must contain:
1. Corporate Name;
Prohibited Purposes and Activities
2. Purpose Clause;
3. Principal Office;
A corporation may not be formed for the
4. Corporate Term if the corporation has
purpose of practicing a profession like law,
not elected perpetual existence;
medicine or accountancy. [Sec. 10]
5. Incorporators;
6. Trustees/Directors;
Under the present state of our law and
7. For stock corporations:
jurisprudence, a corporation cannot be
a. The authorized capital stock,
organized for or engage in the practice of law
b. Number of shares into which it is
in this country.
divided,
c. The par value of each share,
This cannot be subverted by employing some
d. Names, nationalities, and
so-called paralegals supposedly rendering the
residence addresses of the
alleged support services.
original subscribers,
e. Amount subscribed and paid by
The remedy for the apparent breach of this
each on the subscription, and
prohibition is the concern and province of the
f. A statement that some or all of the
Solicitor General who can institute the
shares are without par value, if
corresponding quo warranto action. [Ulep v.
applicable
The Legal Clinic, B.M. No. 553 (1993)]
8. For nonstock corporations:
a. Amount of its capital,
The RCC prohibits to foreign corporations from
b. The names, nationalities, and
giving donations in aid of any political party or
c. Residence addresses of the
candidate or for purposes of partisan political
contributors, and activity”. [Sec. 35(i)]
d. Amount contributed by each
9. Other matters (including arbitration Reasons for requiring purpose clause: (a)
agreement pursuant to Sec. 181). [Sec.
investor will know what line of business he will
13]
Page 52 of 494
be risking his money on; (b) Ultra vires Thus, the proper venue is not the actual
doctrine; (c) third persons dealing with principal office but that stated in its Articles of
corporation can determine if the corporation Incorporation.
can enter into a transaction. [Campos]
A corporation has no residence in the same
Principal Office sense in which the term is applied to a natural
person. [Hyatt Elevators v. Goldstar Elevators,
The principal office establishes the residence G.R. No. 161026 (2005)].
of a corporation, which is important in
determining the venue in an action by or Corporate Term
against the corporation or the province where
a chattel mortgage of shares should be See 3. Corporate Term under E. Capital
registered. [Chua Guan vs. Samahang Structure
Magsasaka, G.R. No. L-42091 (1935)]
Number, Names, Citizenship and
1. Must be within the Philippines [Sec. 13 Residences of the Incorporators
(c)];
2. Articles of Incorporation must specify See 1. Number and Qualification of
both province or city or town where it is Incorporators under E. Capital Structure
located;
3. All corporations and partnerships Number, Names, Citizenship and
applying for registration with the SEC Residences of the Directors/Trustees
should state in their Articles of
Incorporation or Articles of Partnership The minimum number of directors/trustees has
the following: been repealed. [Sec. 13]
a. Specific address of their
principal office, which shall Note: Ordinary corporations can have a
include, if feasible, the street minimum of two (2) directors, since only OPCs
number, street name, can have one (1) director.
barangay, city or municipality,
and if applicable, the name of Stock corporations: directors, not more than
the building, number of the 15
building, and name or number
of the room or unit; and Non-stock corporations: trustees
b. Specific residence address of 1. Non-stock corporations whose articles
each incorporator, stockholder, or by-laws may provide for more than
director, trustee or partner. 15 trustees. [Sec. 91]
[SEC Memorandum Circular 2. Banks may have up to 21 directors for
No. 6, s. 2016, Sec. 1] cases of mergers and consolidation.
4. For foreign corporations, the principal [Sec. 17, General Banking Act]
office address in the country of
incorporation, the specific address of For educational non-stock corporations:
the resident agent, the present 1. Trustees may not be less than 5 nor
directors and officers, and the exceed 15;
specific location where it will hold office 2. Number of trustees shall be in multiples
in the Philippines, shall be indicated. of 5. [Sec. 106]
[SEC Memorandum Circular No. 6, s.
2016, Sec. 2] Nationalized or Partially-Nationalized
Industries:
The residence of a corporation is the place Aliens may be directors but only in such
where its principal office is located, as stated in number as may be proportional to their
its Articles of Incorporation. allowable ownership of shares.
Page 53 of 494
Capital/Capital Stock what the law disqualifies is the corporation from
owning land [J.G. Summit Holdings, Inc. v. CA,
“Outstanding capital stock” is the total shares G.R. No. 124293 (2005)
of stock issued under binding subscription
contracts to subscribers or stockholders, Contents Comments
whether fully or partially paid, except treasury of AOI
shares. [Sec. 173]
Corporate Under the RCC, incorporators
If STOCK corporation: name undertake to change the name of
Authorized capital stock (ACS) in lawful money the corporation immediately upon
of the Philippines receipt of notice from SEC that
a. The number of shares into which the another corporation, partnership or
ACS is divided person has acquired a prior right
b. If with par value shares, the par value to its use, that the name has been
of each share [Sec. 13[h], Sec. 14[7]] declared not distinguishable from
c. Names, citizenship, residences of a name already registered or
original subscribers reserved for the use of another
d. Amount subscribed and paid on each corporation, or that it is contrary to
subscription law, public morals, good customs
e. Fact that some or all shares are without or public policy. [Sec. 14(11)] See
par value also SEC Memorandum Circular
No. 13, s. 2019
If NON-STOCK:
a. Amount of capital Purpose A corporation can only have one
b. Names, nationalities and residences of clause (1) primary purpose. However, it
contributors can have several secondary
c. Amount contributed by each purposes.
Other Matters Included in the AOI A corporation has only such

powers as are expressly granted
1. Classes of shares, as well as to it by law & by its articles of
preferences or restrictions on any such incorporation, those which may be
class [Sec. 6]. incidental to such conferred
2. Denial or restriction of pre-emptive powers, those reasonably
right [Sec. 38] necessary to accomplish its
3. Prohibition against transfer of stock purposes & those which may be
which would reduce stock ownership to incident to its existence.
less than the required minimum in the
case of a nationalized business or Corporation may not be formed for
activity [Sec. 14(11)] the purpose of practicing a
4. Arbitration agreement [Sec. 13; 181] profession like law, medicine or
accountancy.
No transfer clause Principal ● Must be within the
office Philippines
If the foreign shareholdings of a landholding ● Must contain specific
corporation exceed 40%, it is not the foreign address of their principal
stockholders’ ownership of the shares which is office, which shall include,
adversely affected but the capacity of the if feasible, the street
corporation to own land – that is, the number, street name,
corporation becomes disqualified to own land. barangay, city or
No law disqualifies a person from purchasing municipality, and if
shares in a landholding corporation even if the applicable, the name of
latter will exceed the allowed foreign equity, the building, number of
Page 54 of 494
Contents Comments Contents Comments

of AOI of AOI
the building, and name or Capital ● Amount of its authorized

number of the room or stock capital stock in lawful
unit money of the Philippines
● Important in determining ● Number of shares into
venue in an action by or which it is divided
against the corp., or on ● In case the shares are par
determining the province value shares, the par
where a chattel mortgage value of each,
of shares should be ● Names, nationalities and
registered residences of the original
subscribers, and the
Term of ● A corporation shall now amount subscribed and
existence have perpetual existence paid by each on his
unless its AOI provides subscription, and if some
otherwise. [Sec. 11] or all of the shares are
without par value, such
Incorporat ● Names, nationalities & fact must be stated
ors and residences of the ● For a non-stock
Directors/T incorporators; corporation, the amount of
rustees ● Names, nationalities & its capital, the names,
residences of the nationalities and
directors or trustees who residences of the
will act as such until the contributors and the
first regular directors or amount contributed by
trustees are elected; each
● Treasurer who has been ● The provision on
chosen by the pre- minimum subscribed and
incorporation paid up capital has been
subscribers/members to repealed.
receive on behalf of the
corporation, all Other ● Classes of shares into
subscriptions matters which the shares of stock
/contributions paid by have been divided;
them See SEC preferences of &
Memorandum Circular restrictions on any such
No. 26, s. 2019 class; and any denial or
restriction of the pre-
emptive right of
stockholders should also
be expressly stated in
said articles.
● If the corporation is
engaged in a wholly or
partially nationalized
business or activity, the
AOI must contain a
prohibition against a
transfer of stock which
would reduce the Filipino
ownership of its stock to
Page 55 of 494
Contents Comments provisions required by law to be set out

of AOI in the articles
5. If the corporation is governed by a
less than the required special law, the amended articles must
minimum. be accompanied by a favorable
● Transfer restrictions recommendation of the appropriate
● Arbitration agreement government agency to the effect that
such amendment is in accordance with
law. [Lopez]
b. Non-amenable Items
6. Will take effect only:
a. Upon their approval by the SEC by
The following items are amendable under Sec.
the issuance of a certificate of
15:
filing of amended articles; OR
1. Change of name of the Corporation;
b. From the date of filing with the
adding business name
SEC if not acted upon within 6
2. Adding to or changing the purpose/s
months from the date of filing for a
3. Change of principal office
cause not attributable to the
4. Change in the number of directors or
corporation
trustees
5. Increase or decrease in authorized
Procedure
capital stock [subject to Sec. 37]; re-
a. The original and amended articles
classifying shares in the authorized
together shall contain all provisions
capital stock;
required by law to be set out in the
6. Adding or revising transfer restrictions
articles of incorporation
b. The articles, as amended shall be
Requirements for Making Amendments to
indicated by underscoring the change
AOI
or changes made
1. By a majority vote of the BOD or
c. A copy shall be submitted to the SEC
trustees; and
1. Duly certified under oath by the
2. The vote or written assent of
corporate secretary and a
a. 2/3 of the outstanding capital
majority of the directors or
stock, without prejudice to the
trustees
appraisal right of dissenting
2. Stating the fact that the
stockholders in accordance
amendment or amendments
with the provisions of this
have been duly approved by
Code,
the required vote of the
b. 2/3 of the members if it be a
directors or trustees and
non-stock corporation. [Sec.
stockholders or members
15]
3. unless the AOI provides for higher
Non-Amendable Items
voting requirements
The following items state accomplished facts
(fait accompli), therefore, cannot be
Limitations
amended:
1. The names, nationalities and residences of
Requirements imposed by the Code or by
the incorporators.
special laws
1. Must be for a legitimate purpose
To allow an amendment would mean going
2. Must be approved by the
against the definition of “incorporators” in
directors/trustees and the
Sec. 5
stockholders/members through the
vote requirement
2. Treasurer-in-trust
3. Appraisal Right (in specified cases)
3. First set of directors or trustees
4. Both the original and the amended
articles together must contain all the
Page 56 of 494
4. Original stock subscriptions and paid-in a. Not distinguishable from that already
capital reserved or registered for the use of
5. Place and date of execution another corporation, or
6. Witnesses [De Leon] b. Already protected by law, or
c. Used contrary to existing law, rules and
6. Corporate Name and Limitations regulations. [Sec. 17]
on its Use
A name is not distinguishable even if it
contains one or more of the following:
The name of a corporation is essential not only
for its existence as a juridical person, but also a. The word “corporation”, “company”,
“incorporated”, “limited”, “limited
in the manner of dealing with it, and it cannot
be changed except in the manner provided for liability”, or an abbreviation of one of
such words; and
by law. [Villanueva]
b. Punctuations, articles, conjunctions,
SEC Memorandum Circular No. 13 s. 2019 contractions, prepositions,
abbreviations, different tenses,
1. The corporate name shall contain the
word "Corporation" or "Incorporated," spacing, or number of the same word
or phrase. [Sec. 17]
or the abbreviations "Corp." or "Inc."
respectively;
Note: Instead of being distinguishable, the old
2. In the case of a One Person
Corporation, the corporate name shall criteria under the Sec. 18 of the OLD
Corporation Code to determine whether or not
contain the word "OPC" either below or
at the end of its corporate name; a corporate name should be allowed is whether
it is “identical or deceptively or confusingly
3. The partnership name shall bear the
word "Company" or "Co." and if it is a similar” to that of any existing corporation or
which is “patently deceptive or patently
limited partnership, the word "Limited"
or "Ltd.". confusing”.
4. A professional partnership name
may bear the word "Company," If the SEC determines that a corporation’s
name is not allowed, it may:
"Associates," or "Partners," or other
a. Summarily order the corporation to
similar descriptions;
5. The corporate name of a foundation immediately cease and desist from
using a non-distinguishable name and
shall use the word "Foundation";
6. The corporate name of all non-stock, require it to register a new one,
b. Cause the removal of all visible
non-profit corporations, including
non-governmental organizations and signages, marks, advertisements,
labels, prints and other effects bearing
foundations, engaging in micro finance
activities shall use the word such corporate name. [Sec. 17]
"Microfinance" or "Microfinancing"
a. Provided that said corporations Business or trade name which is different from
the corporate or partnership name shall be
shall state in the purpose
clause of their AOI that they indicated in the articles of incorporation or
partnership. A company may have more than
shall conduct microfinance
operations pursuant to one business or trade name. [SEC
Memorandum Circular No. 13 s. 2019]
Republic Act No. 8425 or the
Social Reform and Poverty
Change of Corporate Name
Alleviation Act.
Criteria for Allowable Corporate Names A change of corporate name requires the
amendment of the Articles of Incorporation
Under present law, no corporate name shall be which must be approved by:
a. Majority vote of the board; and
allowed by the Commission if it is:
Page 57 of 494
b. The vote or written assent of AOIs do not become binding as the charter of
stockholders holding 2/3 of the the corporation unless they have been filed and
outstanding capital stock. [Sec. 16] registered with, and certified by the SEC.
Unless the Articles of Incorporation provides DOCUMENTS TO BE FILED WITH SEC:

for a higher voting requirement. a. Articles of Incorporation, and By-Laws
(if crafted prior to incorporation)
Amendment of a corporation’s Articles of b. Certification concerning the amount of
Incorporation to change its corporate name capital stock subscribed and/or paid
does not extinguish the personality of the
original corporation. It is the same corporation Note: Sec. 15 of the OLD Corporation
with a different name, and its character is not Code requiring that at least 25% of amount
changed. Consequently, the “new” corporation subscribed be paid, and a minimum paid-
is still liable for the debts and obligations of the up capital upon incorporation, was
“old” corporation. [Republic Planters Bank v. removed under the RCC.
CA, G.R. No. 93073 (1992)]
Note: SEC Resolution No. 0331 dated July
Use of Corporate Names of Dissolved 20, 2012 no longer requires a bank
Corporations certificate of deposit covering the paid-up
capital if payment for shares is made in
The name of a corporation or partnership that cash; where the capital stock is paid by a
has been dissolved or whose registration has combination of cash and property, only the
been revoked shall not be used by another portion paid by way of property will require
corporation or partnership: the submission of supporting documents.
a. Within five years from the approval of
the dissolution; or c. Undertaking to change the corporate
b. Within five (5) years from the date of name in case there is another person
revocation, unless its use has been or entity with same or similar name that
allowed at the time of the dissolution or was previously registered (unless
revocation by the stockholders, already incorporated in the Articles of
members or partners who represent a Incorporation)
majority of the outstanding capital
stock or membership of the dissolved d. Favorable recommendation from the
corporation or partnership, as the case appropriate government agency that
may be. [SEC Memo Circ. No. 13, s. the AOI or amendments thereto of
2019] banks, banking and quasi-banking
institutions, preneed, insurance and
7. Registration, Incorporation, and trust companies, NSSLAS,
Commencement of Corporate pawnshops, and other financial
Existence intermediaries, is in accordance with
law. [Sundiang and Aquino; Sec. 16]
A private corporation organized under the RCC
Issuance of Certificate of Incorporation By
commences its corporate existence and
Sec
juridical personality from the date the SEC
Effect: Commencement of corporate existence
issues the certificate of incorporation under its
and juridical personality. [Sec. 18]
official seal. [Sec. 18]
Ground for revocation of certificate of
Thereupon, the incorporators, stockholders or
incorporation: If, after due notice and hearing,
members, and their successors constitute a
the Commission finds that any provision of this
body politic and corporate under the name
Code, rules or regulations, or any of the
stated in the AOI, for the period of time
Commission’s orders has been violated
mentioned therein. [Sec. 18]
Page 58 of 494
Depending on the extent of participation, Steps Comments
nature, effects, frequency and seriousness of
the violation. [Sec. 158]
Drafting [See e. Articles of
GROUNDS FOR DISAPPROVING THE Articles of Incorporation under 6.
ARTICLES OF INCORPORATION: Incorporation Incorporation and
(see Sec. 13) Organization]
a. Does not substantially comply with ● Arbitration agreements
form prescribed may now be provided in
b. Purpose is patently unconstitutional, the AOI (see Sec. 181).
illegal, immoral, contrary to ● The AOI and
government rules and regulations applications for
c. The certification concerning the amendments may be
amount of capital stock subscribed filed in an electronic
and/or paid is false document
d. Required percentage of ownership of
Filing of ● AOI must be filed w/ the
Filipino citizens has not been complied
Articles; SEC & the
with when required by existing laws or
Payment of corresponding fees
the Constitution. [Sec. 16]
Fees paid
● Failure to file the AOI
SEC shall give the incorporators reasonable
will prevent due
time to correct or modify objectionable portions
incorporation of the
of the articles or amendment. [Sec. 16]
proposed corporation
and will not give rise to
Steps in Incorporation
its juridical personality.
It will not even be a de
Steps Comments facto corporation.
● Under present SEC
Promotional Promoter: rules, the AOI once
Stage ● Brings together filed, will be published
persons who become in the SEC Weekly
interested in the Bulletin at the expense
enterprise of the corporation [SEC
● Aids in procuring Circular # 4, 1982].
subscriptions and sets For corporations governed by
in motion the special laws (banks, insurance
machinery which leads companies, public utilities and
to the formation of the educational institutions) the AOI
corporation itself must be accompanied by a
● Formulates the favorable recommendation from
necessary initial the appropriate government
business and financial agency.
plan and, if necessary,
buys the rights and
property which the
business may need,
with the understanding
that the corporation,
when formed, shall
take over the same
Page 59 of 494
Steps Comments Steps Comments
Examination Process: Issuance of Certificate of Incorporation

of Articles; a. SEC shall examine Certificate of will be issued if:
Approval or them in order to Incorporation a. SEC is satisfied that all
Rejection by determine whether they legal requirements
SEC are in conformity with have been complied
law with; AND
b. If it is not, the SEC b. There are no reasons
must give the for rejecting or
incorporators a disapproving the AOI.
reasonable time within
which to correct or It is only upon such issuance
modify the that the corporation acquires
objectionable portions. juridical personality. [Sec. 18]
Grounds for rejection or Should it be subsequently found

disapproval of AOI: [Sec. 16] that the incorporators were
a. AOI/amendment not guilty of fraud in procuring the
substantially in certificate of incorporation, the
accordance with the same may be revoked by the
form prescribed SEC, after proper notice and
b. Purpose/s are patently hearing.
unconstitutional, illegal,
immoral, or contrary to 8. Election of Directors or Trustees
government rules and
regulations
When Elections are Held
c. The certification
concerning the amount
The time for holding the annual election of
of capital stock
directors of trustees and the mode or manner
subscribed and/or paid
of giving notice thereof are provided in the by-
is false
laws. [Sec. 49]
d. Required percentage
of ownership has not
Nomination
been complied with
General Rule: Each stockholder or member
Favorable recommendation
shall have the right to nominate any director or
from the appropriate
trustee who possesses all of the qualifications
government agency did not
and none of the disqualifications set forth in this
accompany the AOI or
Code.
amendments thereto of banks,
banking and quasi-banking
Exception: When the exclusive right to
institutions, preneed, insurance
nominate directors or trustees is reserved for
and trust companies, NSSLAS,
holders of founders’ shares under Section 7 of
pawnshops, and other financial
the RCC. [Sec. 23]
intermediaries, is in
accordance with law.
Required Participation
At all elections of directors or trustees, there
must be present, either in person or through a
representative authorized to act by written
proxy:
Page 60 of 494
Stock Corporations: The owners of majority of c. distribute them on the same principle
the outstanding capital stock among as many candidates as may be
seen fit: Provided, That –
Non-Stock Corporations: A majority of the a. The total number of votes cast
members entitled to vote. [Sec. 23] shall not exceed the number of
shares owned by the
Voting via Remote Communication/In stockholders as shown in the
Absentia books of the corporation
multiplied by the whole number
The stockholders or members may also vote of directors to be elected
through remote communication or in absentia: b. No delinquent stock shall be
a. By a resolution of the majority of the voted. [Sec. 23]
board of directors; Provided, That the
resolution shall only be applicable for a Nominees for directors receiving the highest
particular meeting. number of votes shall be declared elected.
b. Notwithstanding the absence of a They shall perform their duties as prescribed
provision in the bylaws of the by law, rules of good corporate governance,
corporation [SEC Memorandum and bylaws of the corporation. [Sec. 23]
Circular No. 6, s. 20]
Voting in Non-Stock Corporations
The right to vote through such modes may be
exercised in corporations vested with public General Rule: Members of nonstock
interest, notwithstanding the absence of a corporations may cast as many votes as there
provision in the bylaws of such corporations. are trustees to be elected but may not cast
[Sec. 23] more than one (1) vote for one (1) candidate.
A stockholder or member who participates Exception: Unless otherwise provided in the

through remote communication or in absentia, articles of incorporation or in the bylaws. [Sec.
shall be deemed present for purposes of 23]
quorum.
Nominees for trustees receiving the highest
The election must be by ballot if requested by number of votes shall be declared elected.
any voting stockholder or member. They shall perform their duties as prescribed
by law, rules of good corporate governance,
Voting in Stock Corporations and bylaws of the corporation. [Sec. 23]
Stockholders entitled to vote shall have the Report to SEC

right to vote the number of shares of stock
standing in their own names in the stock books Within thirty (30) days after the election of the
of the corporation at the time fixed in the directors, trustees and officers of the
bylaws, or where the bylaws are silent, at the corporation, the secretary, or any other officer
time of the election. of the corporation, shall submit to the
Commission, the elected trustees’ and
The said stockholder may: officers’:
a. vote such number of shares for as i. Names
many persons as there are directors to ii. Nationalities
be elected; iii. Shareholdings, and
b. cumulate said shares and give one (1) iv. Residence addresses [Sec. 25]
candidate as many votes as the
number of directors to be elected All corporations shall file with the Commission
multiplied by the number of the shares their GIS within 30 calendar days from the date
owned; or of actual annual stockholders'/members'
meeting. [SEC MC No. 09 s. of 2022]
Page 61 of 494
When No Election is Held Election of Officers
The meeting may be adjourned if: Immediately after the election of directors, the
a. If no election is held; or directors must formally organize by electing the
b. The owners of majority of the corporate officers. They are tasked to carry out
outstanding capital stock or majority of the policies laid down by the Board, the AOI
the members entitled to vote are not and the by- laws. [Sec. 24]
present in person, by proxy, or through
remote communication or not voting in Who are the Corporate Officers
absentia at the meeting. 1. President – must be a director;
2. Treasurer – may or may not be a
Report to SEC director; must be a resident
3. Secretary – need not be a director
After such adjournment, the non-holding of unless required by the by-laws; must
elections and the reasons therefor shall be be a citizen and resident of the
reported to the Commission within thirty (30) Philippines; and
days from the date of the scheduled election. 4. Other officers as may be provided in
[Sec. 25] the by-laws.
5. Compliance officer – only for
The report shall specify a new date for the corporations vested with public
election, which shall not be later than sixty (60) interest. [Sec. 24]
days from the scheduled date.
Note: Any 2 or more positions may be held
SEC Order to Hold Election concurrently by the same person, EXCEPT
that no one shall act as president and secretary
If no new date has been designated, or if the or as president and treasurer at the same time,
rescheduled election is likewise not held: unless otherwise allowed in the Code. [Sec 24]
1. The Commission may summarily order
that an election be held. The number of officers is not limited to those
a. Upon the application of a three enumerated in Sec. 24. A corporation
stockholder, member, director may have such other officers as may be
or trustee; and provided for by its by-laws. [Garcia v. Eastern
b. After verification of the Telecommunications Philippines, Inc., G.R.
unjustified non-holding of the No. 173115 (2009)].
election
2. The Commission shall have the power Qualifications of Corporate Officers
to issue such orders as may be
appropriate, including orders directing President Secretary Treasurer
the issuance of a notice stating the:
a. Time and place of the election,
b. Designated presiding officer, Director YES NO NO
and
c. The record date or dates for the Filipino NO YES NO
determination of stockholders Citizen*
or members entitled to vote.
[Sec. 25] Residency NO YES YES
The shares of stock or membership
represented at such meeting and entitled to Prohibited Secretary President President
vote shall constitute a quorum for purposes of concurrent or
conducting an election under this section. positions Treasurer
Notwithstanding any provision of the articles of

*Subject to rule if corporation is engaged in a
incorporation or bylaws to the contrary.
nationalized or partially-nationalized industry.
Page 62 of 494
Additional qualifications of officers may be REQUISITES OF VALID BY-LAWS
provided for in the by-laws. [Sec. 46(f)]
Approval requirement: Must be approved by
9. Adoption of By-Laws the affirmative vote of the stockholders
representing at least a MAJORITY of the
By-laws are regulations, ordinances, rules or outstanding capital stock, or majority of
laws adopted by an association or corporation members. [Sec. 45]
for its internal governance, including rules for
routine matters such as calling meetings. [SMC If filed pre-incorporation: Must be approved
v. Mandaue, G.R. No. 152356 (2005)] and signed by all incorporators.
May be done either: Record-Keeping: Must be kept in the principal

1. Prior to incorporation - approved and office of the corporation, subject to inspection
signed by all the incorporators and by any director, trustee, stockholder or member
submitted to SEC together with Articles of the corporation in person or by a
of Incorporation; or representative at reasonable hours on
2. After incorporation - The requirement business days. [Sec. 45]
of adoption of by-laws one (1) month
after receipt of the notice of issuance of Filing with SEC: A copy of the by-laws duly
certificate of incorporation has been certified by a majority of the directors or
deleted in the RCC. [Sec. 45] trustees and countersigned by the secretary of
the corporation, shall be filed with the
Nature: It is a product of agreement of the Commission and attached to the original
stockholders or members. [Campos] articles of incorporation. [Sec. 45]
Function: It establishes the rules for internal No provision of the by-laws can be adopted if it
government of the corporation [Campos]. It is contrary to law. Since the provision in
also regulates the affairs and relationship question is contrary to law, the fact that for
between and among stockholders, BOD and fifteen years it has not been questioned or
corporation. [Lopez] challenged but, on the contrary, appears to
have been implemented by the members of the
Note: OPCs are not required to have by-laws. association cannot forestall a later challenge to
its validity. [Grace Christian High School v. CA,
EFFECT OF FAILURE TO FILE THE BY- G.R. No. 108905 (1997)]
LAWS
a. Contents of By-Laws
Does not imply the "demise" of the
corporation. By-laws may be required by law Matters Usually Found in By-Laws
for an orderly governance and management of a. The time, place and manner of calling
corporations but they are not essential to and conducting regular or special
corporate birth. Nonetheless, failure to file meetings of the directors or trustees;
them within the period required by law by no b. The time and manner of calling and
means tolls the automatic dissolution of a conducting regular or special meetings
corporation. [Loyola Grand Villas Homeowners and mode of notifying the stockholders
Association v. CA G.R. No. 117188 (1997)] or members thereof;
c. The required quorum in meetings of
Note: Sec. 21 on the effect of failure to formally stockholders or members and the
organize within 5 years from incorporation, the manner of voting therein;
corporation’s corporate powers cease and the d. The modes by which a stockholder,
corporation is deemed dissolved. Organization member, director, or trustee may
includes: the filing and approval of by-laws with attend meetings and cast their votes;
the SEC and the election of directors and
officers. [Campos]
Page 63 of 494
e. The form for proxies of stockholders 7. Corporate Name
and members and the manner of voting 8. Denial of pre-emptive rights
them; [Villanueva]
f. The directors’ or trustees’
qualifications, duties and b. Binding Effects
responsibilities, the guidelines for
setting the compensation of directors When Binding: ONLY from date of issuance
or trustees and officers, and the of SEC of a certification that the by-laws are not
maximum number of other board inconsistent with the Code [Sec. 45] Pending
representations that an independent such approval, they cannot bind stockholders
director or trustee may have which or corporation.
shall, in no case, be more than the
number prescribed by the Commission; Effect on third parties: Mere internal rules
g. The time for holding the annual election among stockholders cannot affect or prejudice
of directors or trustees and the mode or 3rd persons who deal with the corporation
manner of giving notice thereof; unless they have knowledge of the same
h. The manner of election or appointment [China Banking Corp v CA G.R. No. 117604
and the term of office of all officers (1997)].
other than directors or trustees;
i. The penalties for violation of the c. Amendments
bylaws;
j. In the case of stock corporations, the Effected by: majority vote of the members of
manner of issuing stock certificates; the board and majority vote of owners of the
and Outstanding Capital Stock or members, in a
k. Such other matters as may be meeting duly called for the purpose. [Sec. 47]
necessary for the proper or convenient Unless a higher requirement is provided in the
transaction of its corporate affairs for by-laws
the promotion of good governance and
anti-graft and corruption measures. Delegation to BOD of power to amend
l. An arbitration agreement may be
provided in the bylaws pursuant to By vote of stockholders representing 2/3 of the
Section 181 of RCC. [Sec. 46] Outstanding Capital Stock or 2/3 of the
members. [Sec. 47]
Note: In close corporations - restrictions on
the right to transfer shares must appear in both Delegation to BOD may be revoked
the articles of incorporation and in the by-laws
as well as in the certificate of stock; otherwise, Any power delegated to the BOD or trustees to
restriction shall not be binding on any amend or repeal any by-laws or adopt new by-
purchases of good faith. [Sec. 97] laws shall be considered as revoked whenever
stockholders owning or representing a majority
Matters That Cannot Be Provided for in the of the outstanding capital stock or a majority of
By-laws (must be in the AOI) the members in non-stock corporations, shall
1. Classification of shares of stock so vote at a regular or special meeting. [Sec.
and preferences granted to 47]
preferred shares
2. Provisions on founder’s shares Filing with SEC
3. Providing for redeemable shares
4. Provisions on the purposes of the Whenever the bylaws are amended or new
corporation bylaws are adopted, the corporation shall file
5. Providing for the corporate term of with the Commission:
existence a. Such amended or new bylaws; and,
6. Capitalization of stock b. If applicable, the stockholders’ or
corporations members’ resolution authorizing the
Page 64 of 494
delegation of the power to amend G. Corporate Powers
and/or adopt new bylaws, duly certified
under oath by the corporate secretary
and a majority of the directors or Powers Exercised By the
trustees. [Sec. 47] Shareholders or Members
Effectivity of Amended By-Laws Corporate Acts Requiring All (Voting and
The amended or new bylaws shall only be Non-Voting) Shareholders’ Approval
effective upon the issuance by the Commission
of a certification that the same is in accordance General Rule: Vote necessary to approve a
with this Code and other relevant laws. [Sec. particular corporate act as provided in this
47] Code shall be deemed to refer only to stocks
with voting rights [Sec. 6].
10. Effects of Non-Use of Corporate
Charter Exceptions [Sec. 6]:
Voting and non-voting shares shall be entitled
Failure to Organize to vote in the following cases:
1. Amendment of Articles of Incorporation
If a corporation does not formally organize and [Sec. 15]
commence its business within five (5) years 2. Adoption, Amendment and Repeal of
from the date of its incorporation, its certificate By-Laws [Sec. 47]
of incorporation shall be deemed revoked as 3. Sale, Lease, Mortgage or Other
of the day following the end of the five (5) year Disposition of Substantially all
period. [Sec. 21] corporate assets [Sec. 39]
4. Incurring, Creating or Increasing
Continuous Inoperation Bonded Indebtedness [Sec. 37]
If a corporation has commenced its business 5. Increase or Decrease of Capital Stock
but subsequently becomes inoperative for a [Sec. 37]
period of at least five (5) consecutive years, the 6. Merger and Consolidation [Sec. 76-79]
Commission may, after due notice and hearing, 7. Investment of funds in another
place the corporation under delinquent corporation or business or for any
status. [Sec. 21] purpose other than the primary
purpose for which it was organized
A delinquent corporation shall have a period of [Sec. 41]
two (2) years to resume operations and comply 8. Dissolution of the Corporation [Secs.
with all requirements that the Commission shall 133-138]
prescribe.
Some Corporate Acts Requiring Voting
Upon compliance by the corporation, the Shareholders’ Approval
Commission shall issue an order lifting the 1. Declaration of Stock Dividends [Sec.
delinquent status. 42]
2. Management Contracts [Sec. 43]
Failure to comply with the requirements and 3. Fixing the Consideration of No-Par
resume operations within the period given by shares [Sec. 61]
the Commission shall cause the revocation of 4. Fixing the Compensation of Directors
the corporation’s certificate of incorporation. [Sec. 29]
[Sec. 21] 5. Under certain conditions, instances
involving contracts with Directors, or
Officers or contracts between
corporations with interlocking directors
[Secs 31 & 32]
Page 65 of 494
6. Under certain conditions, material 5. To adopt bylaws, and to amend or
contracts entered by corporations repeal the same in accordance with
vested with public interest [Sec. 31]. this Code;
a. Must not contrary to law,
Powers Exercised by the Board of Directors morals or public policy
6. In case of stock corporations: To issue
Unless otherwise provided in this Code, the or sell stocks to subscribers and to
board of directors or trustees shall exercise the sell treasury stocks in accordance with
corporate powers, conduct all business, and the provisions of this Code; and In case
control all properties of the corporation [Sec. of non-stock corporations: To admit
22]. members to the corporation;
7. To purchase, receive, take or grant,
Majority vote of the Board is needed in the hold, convey, sell, lease, pledge,
exercise of the ff. powers: mortgage, and otherwise deal with
1. Filling of vacancies in the board, except such real and personal property,
when it is due to removal by the including securities and bonds of other
stockholders/members or by expiration corporations;
of term a. As the transaction of the lawful
2. Extension or shortening of the business of the corporation
corporate term may reasonably and
3. Increase or decrease of capital stock or necessarily require
the creation of bonded indebtedness b. Subject to the limitations
4. Sale or other disposition of all or prescribed by law and the
substantially all assets Constitution
5. Acquisition of its own shares 8. To enter, with natural and juridical
6. Investment of corporate funds in any persons, into a:
corporation or business or for any a. Partnership, (Note: New in the
purpose other than its primary purpose RCC)
7. Declaration of cash, property, and b. Joint venture, (Note: New in
stock dividends the RCC)
8. Entering into management contracts c. Merger,
9. Amendment of AOI d. Consolidation, or
10. Amendment of the by-laws e. Any other commercial
11. Approval of the plan of merger or agreement
consolidation 9. To make reasonable donations,
12. Dissolution of the corporation including those for the public welfare or
for hospital, charitable, cultural,
scientific, civic, or similar purposes:
1. General Powers; Theory of General
a. Provided, That no foreign
Capacity corporation shall give
donations in aid of any political
General Powers party or candidate or for
Every corporation has the power and capacity: purposes of partisan political
1. To sue and be sued in its corporate activity;
name; b. Note: Under OLD Corporation
2. To have perpetual existence; Code, both domestic and
a. Unless the certificate of foreign corporations were
incorporation provides prohibited from giving
otherwise donations in aid of any political
3. To adopt and use a corporate seal; party or candidate or for
4. To amend its articles of purposes of partisan political
incorporation in accordance with the activity.
provisions of this Code;
Page 66 of 494
10. To establish pension, retirement, increase bonded indebtedness [Sec.
and other plans for the benefit of its 37]
directors, trustees, officers, and c. Power to deny pre-emptive rights
employees; and [Sec. 38]
11. To exercise such other powers as d. Power to sell or dispose corporate
may be essential or necessary to assets [Sec. 39]
carry out its purpose or purposes as e. Power to acquire own shares [Sec.
stated in the articles of incorporation. 40]
[Sec. 35] f. Power to invest corporate funds in
another corporation or business, or for
A corporation has: any other purpose [Sec. 41]
a. Express Powers – such powers as are g. Power to declare dividends [Sec. 42]
expressly granted by law and its h. Power to enter into management
articles of incorporation; contract [Sec. 43]
b. Implied Powers – those reasonably i. Power to amend AOI [Sec. 15]
necessary to accomplish its purposes,
as stated in its articles of incorporation; 3. Power to Extend or Shorten
and Corporate Term
Note: Such implied powers are deemed to exist A private corporation may extend or shorten its
because of the following provisions – term as stated in the articles of incorporation.
● “Except such as are necessary or [Sec. 36]
incidental to the exercise of the powers
so conferred” [Sec. 44] Perpetual existence under the RCC applies to
● “Such powers as are essential or existing corporations. AOIs shall be deemed
necessary to carry out its purpose or amended to reflect its perpetual term, unless
purposes as stated in the Articles of the corporation elects to retain its limited term
Incorporation” – catch-all phrase. [Herbosa, 2019].
[Sec. 35(k)]
When Exercised
c. Incidental Powers – those which may Period to extend the corporate term has been
be incident to its existence as a juridical reduced by the RCC to three years before
entity [Pilipinas Loan v. SEC, 356 expiration.
SCRA 193 (2001)]
When the term expires, it is not ipso facto
The Theory of General Capacity states that a dissolved but may apply for a revival of its
corporation is said to hold such powers as are corporate existence. [Divina, 2020]
not prohibited or withheld from it by general
law. Requirements
1. Approval by majority vote of the
2. Specific Powers; Theory of Specific board of directors or trustees, and
Capacity 2. Ratification at a meeting by the
stockholders or members representing
The Theory of Specific Capacity states that at least two-thirds (2/3) of the
the corporation cannot exercise powers except outstanding capital stock or of its
those expressly/impliedly given. members.
Under the Theory of Specific Capacity, the 3. Notice Requirement – Written notice
specific powers of a corporation are as of the proposed action and the time and
follows: place of the meeting shall be:
a. Power to extend or shorten a. Sent to stockholders or
corporate term [Sec. 36] members at their respective
b. Power to increase or decrease place of residence as shown in
capital stock, or incur, create,
Page 67 of 494
the books of the corporation, articles of incorporation must also be complied
and with. [Villanueva]
b. Either:
1. Deposited to the Power to Incur, Create, or Increase Bonded
addressee in the post Indebtedness
office with postage
prepaid, served “Bonded indebtedness” are long term debts of
personally, OR the corporation, secured by mortgage on real
2. Sent electronically in or personal property of the corporation, which
accordance with the are:
rules and regulations of 1. Structured in denominated units of
the Commission on the indebtedness
use of electronic data 2. Intended to eventually circulate within
messages, when the investing public as securities,
allowed in the by-laws representing units of investment
or done with the Thus, the power to incur, create, or increase
consent of the bonded indebtedness is a form of distributing
stockholder. [Sec. 36] liability securities to the public, and constitutes
an aspect of the inherent power of every
Exercise of Appraisal Right corporation to borrow or to incur loan
obligations. [Villanueva]
In case of extension of corporate term, a
dissenting stockholder may exercise the right Requirements [Sec. 37]
of appraisal under the conditions provided in 1. Approval by a majority vote of the
this Code. [Sec. 36] board of directors or trustees
2. Approval by two-thirds (2/3) of the
An extension of corporate term actually outstanding capital stock or at least
novates the corporate contract with each two-thirds (2/3) of the members at a
shareholder by extending the corporate stockholders’ meeting duly called for
relationship beyond the original term. the purpose
Shortening the corporate term DOES NOT 3. Notice Requirement – Written notice
trigger the right of appraisal because there of the time and place of the
would be no violation of the original stockholders’ meeting and the purpose
contractual intent, since shortening would for said meeting must be:
mean the early realization of the value of the a. Sent to the stockholders at
shares of a dissenting stockholder with the their places of residence as
dissolution of the corporation. [Villanueva] shown in the books of the
corporation and
4. Power to Increase or Decrease b. Served on the stockholders
Capital Stock or Incur, Create, personally, OR through
Increase Bonded Indebtedness electronic means recognized in
the corporation’s bylaws and/or
the Commission’s rules as a
Power to Increase or Decrease Capital
valid mode for service of
Stock
notices.
4. Certification Requirement – A
An increase or decrease of the capital stock
certificate must be signed by a majority
amends the underlying contractual
of the directors of the corporation and
relationships between and among members of
countersigned by the chairperson and
the corporation.
secretary of the stockholders’ meeting,
setting forth:
Aside from the requisites in Sec. 37, when the
capital stock is increased or decreased, the
provisions of Sec. 15 on the amendment of the
Page 68 of 494
a. That the requirements of this within six (6) months from the date of
section have been complied approval of the board of directors and
with; stockholders, which period may be
b. The amount of the increase or extended for justifiable reasons.
decrease of the capital stock; 13. Prior PCC Approval – Where
c. In case of an increase of the appropriate, prior approval of the
capital stock: Philippine Competition Commission is
d. The amount of capital stock or required for any increase or decrease
number of shares of no-par in the capital stock or the incurring,
stock thereof actually creating or increasing of any bonded
subscribed, indebtedness
e. The names, nationalities and 14. SEC Registration – Applicable only to
addresses of the persons bonds issued by a corporation.
subscribing,
f. The amount of capital stock or After approval and the issuance by the
number of no-par stock Commission of its certificate of filing:
subscribed by each, and 1. The capital stock shall be deemed
g. The amount paid by each on increased or decreased; and
the subscription in cash or 2. The incurring, creating or increasing of
property, or the amount of any bonded indebtedness authorized,
capital stock or number of as the certificate of filing may declare
shares of no-par stock allotted
to each stockholder, if such Provided, That:
increase is for the purpose of 1. The Commission shall not accept for
making effective stock dividend filing any certificate of increase of
therefor authorized; capital stock unless accompanied by a
5. Any bonded indebtedness to be sworn statement of the treasurer (with
incurred, created or increased; the abovementioned contents)
6. The amount of stock represented at the 2. No decrease in capital stock shall be
meeting; and approved by the Commission if its
7. The vote authorizing the increase or effect shall prejudice the rights of
decrease of the capital stock, or the corporate creditors. [Sec. 37]
incurring, creating or increasing of any
bonded indebtedness. Copies of the certificate of the
8. Sworn Statement of the Treasurer – increase/decrease in capital shall:
A sworn statement of the corporation’s 1. Be kept on file in the office of the
treasurer must accompany the filing of corporation and
the certificate, and it must show that: 2. Filed with the Commission and
9. At least twenty-five percent (25%) of 3. Attached to the original articles of
the increase in capital stock has been incorporation. [Sec. 37]
subscribed; and
10. At least twenty-five percent (25%) of Exercise of Appraisal Right
the amount subscribed has been paid
in actual cash to the corporation or In Cases of Increase or Decrease of Capital
that property, the valuation of which is Sock
equal to twenty-five percent (25%) of The right of appraisal can be exercised in
the subscription, has been cases of increase of capital stock because it
transferred to the corporation has the potential effect of diluting the
11. Note: A treasurer’s affidavit is required proportionate interest of a stockholder in the
in an increase of capital stock, not in a corporation.
decrease in capital stock.
12. Prior SEC Approval – The application Even with the existence of the pre-emptive
with the Commission shall be made right, there is no guaranty that the stockholder
Page 69 of 494
can preserve his proportional interest since he For close corporations, the pre-emptive rights
might not have the financial resources to extend to all stock to be issued, including
exercise his pre-emptive right on the increase. reissuance of treasury shares, whether for
money, property or personal services, or in
The right of appraisal CANNOT be exercised in payment of corporate debts, unless the AOI
cases of decrease in capital stock since the provides otherwise. [Sec. 101]
decrease would result in returning part of the
investments of the stockholders, including Pre-emptive right can only be exercised to the
dissenting stockholders. [Villanueva] same class of shares issued or disposed with
that owned by the stockholder (Share-a-like
In Cases of Incurring, Creating or Increasing basis).
Bonded Indebtedness
The appraisal right CANNOT be exercised by Requirements
dissenting stockholders when the corporation 1. Approval by majority vote of the
validly incurs, creates, or increases bonded board of directors, and
indebtedness. 2. Ratification at a meeting by the
To allow them to do so would drain the financial at least two-thirds (2/3) of the
resources of the corporation, which is contrary outstanding capital stock.
to the purpose for which the power is 3. Notice Requirement – Written notice
exercised, which is to raise funds for corporate of the proposed action and the time and
affairs. [Villanueva] place of the meeting shall be:
a. Sent to stockholders at their
5. Power to Deny Pre-Emptive Rights respective place of residence
as shown in the books of the
Preemptive right corporation, and
4. Either:
The preferential right of shareholders to a. Deposited to the addressee in
subscribe to all issues or disposition of shares the post office with postage
of any class in proportion to their present prepaid, served personally, OR
shareholdings. [Sec 38] The purpose of pre- b. Sent electronically in
emptive right is to enable the shareholder to accordance with the rules and
retain his proportionate control in the regulations of the Commission
corporation and to retain his equity in the on the use of electronic data
surplus. messages, when allowed in the
by-laws or done with the
General Rule: All shareholders of a stock consent of the stockholder.
corporation have the preemptive right to
subscribe to all issues or disposition of shares Denial of preemptive right
of any class, in proportion to their respective The AOI may deny pre-emptive right. It may
shareholdings. also be denied when circumstances call for its
Exception: If such right is denied by the AOI denial, specifically when:
or an amendment thereto. [Sec. 38] 1. Shares to be issued are to comply with
“All issues” of shares extends to BOTH laws requiring stock offerings or
issuances of: minimum stock ownership by the
1. New shares resulting in an increase in public; [Sec. 38]
capital stock, and 2. Shares to be issued are in good faith
2. Previously unsubscribed shares which with the approval of the stockholders
formed part of the existing capital representing 2/3 of the OCS in
stock. [Herbosa, 2019; SEC Opinion exchange for property needed for
No. 5-03] corporate purposes; [Sec. 38]
Page 70 of 494
3. Shares to be issued are issued in Sale of all or substantially all of corporate
payment of previously contracted assets
debts; [Sec. 38]
4. In case the right is denied in the AOI; A corporation may sell all or substantially all of
5. Waiver of the right by the stockholder. the its properties and assets, including its
goodwill. [Sec. 39]
Note: The validity of issuance of additional
shares may be questioned if done in breach of To determine whether a sale or other
trust by the controlling stockholders disposition shall be deemed to cover all or
notwithstanding the non-existence of the pre- substantially all the corporate property and
emptive right, (i.e. when controlling assets:
stockholders’ primary purpose is to perpetuate 1. Make a computation based on the
or shift control of the corporation or to “freeze corporation’s net asset value, as
out” the minority interest). shown in its latest financial statements.
2. Assess whether the corporation would
Amendment of the Articles of Incorporation be rendered incapable of continuing
to deny pre-emptive right the business or accomplishing the
purpose for which it was incorporated.
Such amendment to the AOI to deny pre- [Sec. 39]
emptive right may trigger the exercise of a
dissenting stockholder of his appraisal right. The exercise of this power does not render the
This is because such amendment prevents the corporation empty, since it is still left with
dissenting stockholder from maintaining his assets received in exchange. It always
equity interest in the corporation. The test is receives something of equal value to what has
whether the company controllers initiated the been disposed. [Villanueva]
questioned amendment. [Herbosa, 2019]
Requirements
6. Power to Sell or Dispose Corporate 1. Vote of the stockholders
Assets representing at least two- thirds
(2/3) of the outstanding capital
stock, or at least two-thirds (2/3) of
A corporation may sell, lease, exchange,
the members, in a stockholders’ or
mortgage, pledge, or otherwise dispose of its
members’ meeting duly called for the
property and assets:
purpose; OR
1. For such consideration as its board of
2. Vote of at least a majority of the
directors or trustees may deem
trustees in office in nonstock
expedient, which may be:
corporations, where there are no
a. Money
members with voting rights
b. Stocks
3. Notice Requirement – Written notice
c. Bonds, or
of the proposed action and of the time
2. Other instruments for the payment of
and place for the meeting shall be:
money or
a. Addressed to stockholders or
3. Other property or consideration
members at their places of
4. Subject to the provisions of Republic
residence as shown in the
Act No. 10667, otherwise known as
books of the corporation; and
“Philippine Competition Act”, and other
b. Deposited to the addressee in
related laws.
the post office with postage
prepaid, served personally, OR
Requisite: A majority vote of its board of
sent electronically, when
directors or trustees [Sec. 39]
allowed by the by-laws or done
with the consent of the
stockholder. [Sec. 39]
Page 71 of 494
Abandonment of Sale/Lease/Mortgage De facto Merger – Continuity-of-business
enterprise requirement
After obtaining the authorization or approval
by the stockholders or members, the board of There is a de facto merger when a corporation
directors or trustees may abandon such sale, (transferring corporation) exchanges all or
lease, exchange, mortgage, pledge, or other substantially all of its assets for the shares of
disposition of property and assets. another (transferee corporation). The
transferring corporation may later on be
However, this is subject to the rights of third dissolved, where the shares of the transferee
parties under any contract relating thereto, corporation will be distributed by way of
without further action or approval by the liquidating dividends to the shareholders of the
stockholders or members. [Sec. 39] transferring corporation.
Where only the approval of a quorum of the The continuity-of-business enterprise

BOD/T is required requirement is what differentiates a de facto
Corporation is not restricted in its power to sell merger from a voluntary dissolution of a
or dispose of its assets without the corporation. [Herbosa, 2019]
authorization of shareholders or members:
1. If the same is necessary in the usual 7. Power to Acquire Own Shares
and regular course of business of
the corporation or The power of a corporation to acquire its
2. If the proceeds of the sale will be
own shares
appropriated for the conduct of its
remaining business
A stock corporation shall have the power to
3. If the transaction does not cover all or purchase or acquire its own shares for a
substantially all of the assets. [Sec. 39]
legitimate corporate purpose or purposes.
Exercise of Appraisal Right
This corporate power does not need
shareholder’s approval. Discretion solely rests
Any stockholder who disagrees from the sale,
on the board, subject to the existence of
lease, exchange, mortgage, pledge and any
unrestricted retained earnings (“URE”) and
other disposition may exercise his appraisal for a legitimate corporate purpose/s. [Sec.
right. [Sec. 39]
40]
The transfer should not prejudice the
Unrestricted Retained Earnings
creditors of the assignor This is defined as the amount which is:
The accumulated profits and gains realized out
The only way the transfer can proceed without of the normal and continuous operations of the
prejudice to the creditors is to hold the
company AFTER deducting therefrom:
assignee liable for the obligations of the 1. Distributions to stockholders and
assignor. The acquisition by the assignee of all
2. Transfers to capital stock or other
or substantially all of the assets of the assignor accounts, and
necessarily includes the assumption of the
3. NOT appropriated by its Board of
assignor’s liabilities, unless the creditors who Directors for corporate expansion
did not consent to the transfer choose to
projects or programs:
rescind the transfer on the ground of fraud. 4. NOT covered by a restriction for
[Caltex (Phils.) Inc. v. PNOC Shipping and
dividend declaration under a loan
Transport Corp, G.R. No. 150711 (2006)]
agreement; and
5. NOT required to be retained under
special circumstances obtaining in the
corporation such as when there is a
need for a special reserve for probable
contingencies. [SEC Memorandum
Page 72 of 494
Circular No. 11-08, (December 5, 8. Power to Invest Corporate Funds in
2008)] Another Corporation or Business
General Rule: The corporation may only General Rule: The corporation is not allowed
acquire its own stocks in the presence of URE.
to engage in a business different from those
[Sec. 40] enumerated in its AOI.
Rationale: Existence of URE is required before Exception: The purpose will be amended to
a corporation acquires its own shares because:
include the desired business activity among its
1. The repurchase of shares is a method secondary purpose.
of distribution or withdrawal of assets,
and is subject to abuse, as creditors Rules in case a corporation wants to invest
have a right to assume that so long as
in an undertaking
there are debts and liabilities, the
1. Investment of a corporation in a
Board will not use corporate assets to business which is in line with its
purchase its own stock; and
primary purpose requires only the
2. Treasury shares may be availed of to approval of the board.
perpetrate control of the enterprise
2. Investment of assets for any of its
without the expensive requisite of a secondary purposes requires the prior
majority voting stock. [Villanueva]
approval of its shareholders/members
3. If the investment is outside the
Exceptions:
purpose/s for which the corporation
1. Redeemable shares may be acquired was organized, Articles of
even without surplus profit for as long
Incorporation must be amended first,
as it will not result to the insolvency of otherwise it will be an Ultra Vires act.
the Corporation;
Requirements
2. In cases that the corporation conveys 1. Approval by majority vote of the
its stocks in payment of a Debt;
board of directors or trustees, and
3. In a Close corporation, a stockholder 2. Ratification at a meeting by the
may demand the payment of the fair
value of shares regardless of existence
at least two-thirds (2/3) of the
of retained earnings for as long as it will outstanding capital stock or of its
not result to the insolvency of the
members.
corporation. 3. Notice Requirement – Written notice
of the proposed action and the time and
Legitimate Corporate Purposes [Sec. 40] place of the meeting shall be:
Legitimate corporate purposes include, but is
a. Sent to stockholders or
not limited to the following: members at their respective
1. To eliminate fractional shares arising
place of residence as shown in
out of stock dividends the books of the corporation,
2. To collect or compromise an
and
indebtedness to the corporation, 4. Either:
arising out of unpaid subscription, in a
a. Deposited to the addressee in
delinquency sale, and to purchase the post office with postage
delinquent shares sold during said
prepaid, served personally, OR
sale; and b. Sent electronically in
3. To pay dissenting or withdrawing accordance with the rules and
stockholders. regulations of the Commission
on the use of electronic data
messages, when allowed in the
by-laws or done with the
consent of the stockholder
Page 73 of 494
Exercise of Appraisal Right and such consent has not yet been
secured;
Any stockholder who disagrees from the 3. When it can be clearly shown that such
investment of corporate funds in another retention is necessary under special
corporation or business may exercise his circumstances obtaining in the
appraisal right. corporation.
9. Power to Declare Dividends Note: In case a corporation unjustifiably retains

surplus profits in excess of one hundred
Requirements (100%) percent of the paid-in accumulated
1. Must be distributed out of URE capital, it will be liable for Improperly
2. Payable in cash, in property, or in stock Accumulated Earnings Tax (IAET) equal to
to all shareholders on the basis of 10% of the improperly accumulated taxable
outstanding stock held by them income. [Sec. 29 (A), NIRC] Moreover, it will
3. Resolution by the Board also be liable to pay a penalty imposed by the
SEC. [SEC Memo. Circ. No. 6, s. 2005]
Additional requirement for stock dividend
Forms of dividends
Approved by 2/3 of shareholders representing 1. Cash - Any cash dividend due on
the outstanding capital stock at a delinquent stock shall first be applied to
regular/special meeting called for that purpose the unpaid balance on the subscription
plus cost and expenses. [Sec. 42]
Note: The approval requirement for the 2. Stock - Stock dividends shall be
declaration of stock dividends underscores that withheld from the delinquent
the payment of dividends to a stockholder is not stockholder until his unpaid
a matter of right but a matter of consensus. subscription is fully paid; Stock
[Republic Planters Bank v. Agana, 269 SCRA dividends cannot be issued to a person
1 (1997)] who is not a stockholder in payment of
services rendered.
A corporation must have also a sufficient 3. Property - Stockholders are entitled
number of authorized unissued shares for to dividends pro-rata based on the
distribution to stockholders (if ACS is total number of shares and not on the
insufficient, corporation must apply for increase amount paid on shares.
in capital stock).
Cash Dividends vs. Stock Dividends
Source of dividends
Cash Stock
Dividends may only be declared out of actual Dividends Dividends
and bona fide unrestricted retained earnings.
Voting Board of Board of
Prohibition imposed by law on UREs of a requirements Directors Directors + 2/3 of
stock corporation for issuance stockholders
Stock corporations are prohibited from Effect on Shall be Shall be withheld

retaining surplus profits in excess of 100% of delinquent applied to from the
their paid-in capital stock, except: stock the unpaid delinquent
1. When justified by definite corporate balance on stockholder until
expansion projects or programs the his unpaid
approved by the BOD; subscription subscription is
2. When the corporation is prohibited plus cost paid
under any loan agreement with any and
financial institution or creditor from expenses
declaring dividends without its consent,
Page 74 of 494
Cash Stock 10. Power to Enter into Management

Dividends Dividends Contract
Can this be No [Sec. 34] No, since this General Rule: No management contract shall
issued by requires be entered into for a period longer than 5 years
Executive stockholders’ for any one term.
Committee? approval [Sec.
34] Exception: Service contracts or operating
agreements which relate to exploration,
Rule on shares of stock issued to pay for development, exploitation or utilization of
services natural resources may be entered into for such
periods as may be provided in the pertinent
A corporation may legally issue shares of stock laws and regulations.
in consideration of services rendered to it by a
person not a stockholder, or in payment of its Requirements
indebtedness. But a share of stock thus issued 1. Approval by majority vote of the BOD
should be part of: of both the managing and the managed
1. The original capital stock of the corporation
corporation upon its organization; or 2. Approval by shareholders owning at
2. The stocks issued when the least the majority of the outstanding
increase of the capitalization of a capital stock or at least a majority of
corporation is properly authorized. the members of both the managing and
the managed corporation
In other words, it is the shares of stock that
are ORIGINALLY ISSUED by the However, the contract must be approved by 2/3
corporation and FORMING PART OF THE of stockholders owning outstanding capital
CAPITAL that can be exchanged for cash or stock/members of the managed corporation
services rendered, or property; that is, if the when:
corporation has original shares of stock unsold 1. Stockholders representing the same
or unsubscribed, either coming from the interest of both the managing and
original capitalization or from the increased managed corporations own more than
capitalization. STOCK DIVIDENDS are issued 1/3 of the total outstanding capital
only to stockholders because only stockholders stock entitled to vote of the managing
are entitled to dividends. [Nielson and Co. v. corporation (Interlocking stockholders);
Lepanto Consolidated Mining, G.R. No. L- or
21601., (1968)]. 2. A majority of the members of the BOD
of the managing corporation also
Rule on the receipt of dividends in case of constitute a majority of the BOD of the
mortgaged or pledged shares managed corporation (Interlocking
directors).
General Rule: The mortgagor or the pledgor
has the right to receive the dividends. For the managed corporation: There is a
need for such ratification as such contract is a
Exception: When the mortgagor or pledgor deviation from the principle that corporate
defaults and the mortgagee or pledgee affairs shall be managed by the BOD.
acquires the pledged stocks and the transfer is
recorded in the books of the corporation, the For the managing corporation: There is a
mortgagee or pledgee is entitled to receive the need for such ratification as such contract is a
dividends. deviation from the principle that the BOD would
devote their time and resources for the affairs
of the corporation. [Villanueva]
Page 75 of 494
11. Doctrine of Individuality of 13. Ultra Vires Doctrine
Subscription
Ultra Vires Acts
The Doctrine of Individuality of Subscription
states that a subscription is one entire and Those acts which a corporation is not
indivisible whole contract. It cannot be empowered to do or perform because they are
divided into portions. outside or beyond the express and implied
powers conferred by its Articles of
Consequently, where stocks were subscribed Incorporation or by the Revised Corporation
and part of the subscription contract price was Code, or not necessary or incidental to the
not paid, the whole subscription shall be exercise of the powers so conferred [Sec. 44].
considered delinquent, and not only the
shares which correspond to the amount not Types of Ultra Vires Acts
paid. 1. Acts done beyond the powers of the
corporation as provided in the law or its
Nevertheless, holders of subscribed shares not articles of incorporation;
fully paid, which are not delinquent, shall have 2. Ultra Vires acts of officers and not of
all the rights of a stockholder. [Sec. 71] the corporation
1. SEC has opined that the entire 3. Acts or contracts, which are per se
subscription, although not yet fully illegal as being contrary to law
paid, may be transferred to a single [Villanueva].
transferee, who as a result of the
transfer must assume the unpaid Kinds of Ultra Vires acts by reason
balance. [SEC Opinion, 9 Oct. 1995] 1. By reason of Lack of Authority (ultra
2. It is necessary, however, to secure the vires acts)
consent of the corporation because 2. By reason of Illegality (illegal acts)
such transfer contemplates a novation
which under Art. 1293 (NCC) cannot be Basis Ultra Vires Illegal Acts
made without consent of the creditor. Acts
12. Doctrine of Equality of Shares Lawfulness Lack of Illegality;

authority; Unlawful;
The doctrine of equality of shares states that all Not against law,
stocks issued by the corporation are presumed necessarily morals,
equal with the same privileges and liabilities, unlawful, public policy,
provided that the Articles of Incorporation is but outside and public
silent on such differences [Sec. 6]. the powers order
of the
There is a presumption of equality of the rights corporation
and features of shares when nothing is
expressly provided to the contrary.
Ratification Can be Cannot be
1. Although a corporation has the power ratified ratified
to classify its shares of stock, provide
for preferences and other conditions,
no presumption should exist to
distinguish one share from another. Binding power Can bind Cannot bind
2. Sec. 6 of the RCC now requires that the the parties the parties
distinguishing features be stated also if wholly or Void and
in the Certificate of Stock. partially cannot be
executed validated
Page 76 of 494
of the corporation’s business, incident to the
Basis Ultra Vires Illegal Acts
express powers and reasonably necessary to
Acts
their exercise. If so, the corporation has the
Enforceability Voidable, Void and power to do it; otherwise, not [Montelibano v.
and may be cannot be Bacolod-Murcia Milling Co., Inc., G.R. No. L-
enforced validated 15092 (1962)].
by Acts or
performanc contracts, Consequences of Ultra Vires Acts
e, which are per
ratification, se illegal as Ultra vires acts, which are per se illegal are
or estoppel being generally void.
contrary to
law. While ultra vires acts which are not illegal but
are within the scope of the articles of
Examples 1.Acts \\Acts or incorporation, are merely voidable and may
done contracts, become binding and enforceable when ratified
beyond the which are per by stockholders [Montelibano v. Bacolod-
powers of se illegal as Murcia Milling Co., Inc., G.R. No. L-15092
the being (1962)].
corporation contrary to
as provided law. Consequences of Ultra Vires Acts with
in the law respect to contracts:
or its 1. Executed contract – courts will not set
articles aside or interfere with such contracts;
incorporati 2. Executory contracts – no enforcement
on; even at the suit of either party (void and
2. Ultra unenforceable);
Vires acts 3. Partly executed and partly executory –
of officers principle of “no unjust enrichment at
and not of expense of another” shall apply;
the 4. Executory contracts apparently
corporation authorized but Ultra Vires – the
principle of estoppel shall apply.
Applicability of the Ultra Vires Doctrine Remedies in case of Ultra Vires Acts
1. State
The application of the Ultra Vires Doctrine is a a. Dissolution of the corporation
question, in each case, of the logical relation of thru a quo warranto proceeding
the act to the corporate purpose expressed in b. Injunction
the charter. c. Suspension or revocation of
the certificate of registration by
It may fairly be considered within the charter the SEC
powers if: 2. Stockholders
1. The act is one which is lawful in itself, a. Injunction
and not otherwise prohibited; b. Derivative suit
2. The act is done for the purpose of c. Ratification (except when a 3rd
serving corporate ends; AND party is prejudiced or the act is
3. The act reasonably tributary to the illegal)
promotion of those ends, in a 3. Creditors - Nullification of contract in
substantial, and not in a remote and a. fraud of creditors
fanciful sense.
The test to be applied is whether the act in

question is in direct and immediate furtherance
Page 77 of 494
14. Trust Fund Doctrine Note: Rescission of a subscription agreement
is not one of the instances when distribution of
The Trust Fund Doctrine states that the capital capital assets and property of the corporation
stock, properties, and other assets of a is allowed (Ibid).
corporation are regarded as equity in trust for
the payment of corporate creditors. Exceptions to the Trust Fund Doctrine ---
When Distribution of Corporate Capital is
All funds received by the corporation in Allowed
payment of the shares of stock shall be held in
trust for the corporate creditors and other The Trust Fund Doctrine, first enunciated by
stockholders of the corporation. this Court in the 1923 case of Philippine Trust
Co. v. Rivera is the underlying principle in the
No fund shall be used to buy back the issued procedure for the distribution of capital assets,
shares of stock except only in instances embodied in Corporation Code, which allows
specifically allowed by the Corporation Code the distribution of corporate capital only in three
[Boman Environmental Development instances:
Corporation v. CA, G.R. No. 77860 (1988)]. 1. Amendment of the AOI to reduce the
authorized capital stock,
Effects of the trust fund doctrine 2. Purchase of redeemable shares by the
corporation, regardless of the
Dividends must never impair the subscribed existence of unrestricted retained
capital stock and must only be declared out of earnings, and
unrestricted retained earnings (URE) 3. Dissolution and eventual liquidation of
[Philippine Trust Co. v. Rivera, G.R. No. L- the corporation.
19761 (1923)].
The creditors of a corporation have the right to
Subscription commitments cannot be assume that so long as there are debts and
condoned or remitted. liabilities, the BOD will not use corporate
assets to purchase its own shares of stock or
General Rule: The corporation cannot buy its to declare dividends to its stockholders when
own shares using the subscribed capital as the the corporation is insolvent [Steinberg v.
consideration therefore [NTC v. CA. G.R. No. Velasco, G.R. No. L-30460 (1929)].
127937 (1999)].
Scope of the Trust Fund Doctrine
Exceptions:
1. Redeemable shares may be acquired The trust fund doctrine is NOT limited to
even without surplus profit for as long reaching the stockholder’s unpaid
as it will not result to the insolvency of subscriptions.
the Corporation;
2. In cases that the corporation conveys A corporation has no legal capacity to release
its stocks in payment of a Debt; or an original subscriber to its capital stock from
3. In a Close corporation, a stockholder the obligation of paying for his shares, in whole
4. may demand the payment of the fair or in part, without a valuable consideration, or
value of shares regardless of existence fraudulently, to the prejudice of creditors.
of retained earnings for as long as it will
not result to the insolvency of the The creditor is allowed to maintain an action
corporation upon any unpaid subscriptions and thereby
5. Rescission of a subscription steps into the shoes of the corporation for the
agreement is not allowed since it will satisfaction of its debt.
effectively result in the unauthorized
distribution of the capital assets and The scope of the doctrine when the corporation
property of the corporation [Ong Yong is insolvent also encompasses other property
v. Tiu, G.R. No. 144476 (2003)].
Page 78 of 494
and assets generally regarded in equity as a Nature of the Rights of Members
trust fund for the payment of corporate debts.
The eleemosynary nature (i.e. charitable) of
All assets and property belonging to the every non-stock corporation defines the
corporation held in trust for the benefit of characteristic of membership therein as being
creditors that were distributed or in the essentially personal in character and therefore
possession of the stockholders, regardless of essentially non-transferable in nature.
full payment of their subscriptions, may be [Villanueva]
reached by the creditor in satisfaction of its
claim. Sec. 88 of the Revised Corporation Code
specifically provides that in a non-stock
To make out a prima facie case in a suit against corporation, the right of members of any class
stockholders of an insolvent corporation to or classes to vote “may be limited, broadened
compel them to contribute to the payment of its or denied to the extent specified in the articles
debts by making good unpaid balances upon of incorporation or the by-laws.”
their subscriptions, it is only necessary to
establish that the stockholders have not in Political Rights
good faith paid the issue price of the stocks of
the corporation [Donnina Halley v. Printwell, Shareholders have a right to:
Inc., G.R. No. 157549 (2011)]. 1. Requisitions and/or attend meetings
2. Elect and be elected as directors
H. Stockholders and Members 3. Approve the exercise of special
corporate powers
4. Access basic corporate information
1. Fundamental Rights of a
Stockholder Economic Rights
1. Direct or indirect participation in
management [Sec. 6] Shareholders individually have a right to:
2. Voting rights [Sec. 6] 1. Dividends
3. Right to remove directors [Sec. 27] 2. Transfer shares
4. Proprietary rights 3. Right to receive residual assets,
(a) Right to dividends [Sec. 42 and following the corporation's partial or full
70] liquidation
(b) Appraisal rights [Sec. 80]
(c) Right to issuance of stock Affiliation Rights
certificate for fully paid shares
[Sec. 63] As a rule, a corporation issues shares to
(d) Proportionate participation in the investors without regard to their personal
distribution of assets in liquidation circumstances. Similarly, shareholders may
[Sec. 139] transfer shares to investors without consent or
(e) Right to transfer of stocks in over the objection of the other shareholders.
corporate books [Sec. 62]
(f) Pre-emptive right [Sec. 38] Right to Institute Court Action
5. Right to inspect books and records
[Sec. 73] Shareholders or members may institute a court
6. Right to be furnished with the most action to protect, and seek redress for violation
recent financial statements/reports of their rights. (See Remedial Rights)
[Sec. 73]
7. Right to recover stocks unlawfully sold
for delinquent payment of subscription
[Sec. 68]
8. Right to file individual suit,
representative suit and derivative suits
Page 79 of 494
2. Participation in Management concerns the validation of such
secured and submitted proxies;
a. Proxy 2. The SEC’s power to pass upon the
validity of proxies in relation to election
controversies has effectively been
Stockholders and members may vote in person
withdrawn, tied as it is to its abrogated
or by proxy in all meetings [Sec. 57].
quasi-judicial powers, and has been
transferred to the RTC Special
The word “proxy” may be understood in two
Commercial Courts pursuant to the
ways:
terms of Sec. 5.2 of the Securities
Regulation Code;
1. First, it may refer to the person duly
authorized by a stockholder to vote in
Note: The SEC has the power to impose or
his behalf in a stockholder’s meeting
recommend new modes by which a
2. Secondly, it may refer to the document
stockholder, member, director, or trustee may
which evidences this authority
attend meetings or cast their votes, as
[Campos].
technology may allow, taking into account the
company’s scale, number of shareholders or
Right to Issue a Proxy
members, structure, and other factors
consistent with the basic right of corporate
The right to issue a proxy is vested with public
suffrage [Sec. 179].
interest when it comes to stock corporations.
The fact that the jurisdiction of the RTC Special
1. Although it may be regulated under the
Commercial Courts is confined to the voting on
by-laws, it cannot be denied, since it is
election of officers, and not all matters which
an aspect of ownership interest of
may be voted upon by stockholders, elucidates
stockholders.
that the power of the SEC to regulate proxies
2. However, the right of members to vote
remains extant and could very well be
by proxy may be denied under the
exercised when stockholders vote on matters
articles of incorporation or bylaws of a
other than the election of directors [GSIS v.
non-stock corporation [Sec. 88;
C.A., G.R. No. 183905 (2009)].
Campos].
Requisites for a Valid and Enforceable b. Voting Trust

Proxy:
1. It must be in writing; Voting Trust
2. Signed by the stockholder or member
of record; and An arrangement created by one or more
3. Filed with the corporation before th stockholders:
scheduled meeting with the Corporate 1. For the purpose of conferring upon a
Secretary [Sec. 57]. trustee or trustees the right to vote and
other rights pertaining to the shares;
Period of Effectivity 2. For a period not exceeding 5 years at
any time [Sec. 58].
Unless otherwise provided in the proxy, it shall
be valid only for the meeting for which it is Under a voting trust agreement, a stockholder
intended. No proxy shall be valid and effective of a stock corporation parts with the naked or
for a period longer than five (5) years at any legal title, including the power to vote, of the
one time [Sec. 57]. shares and only retains the beneficial
ownership of the stock.
Procedural Matters Relating to Proxies:
1. Proxy solicitation” involves the
securing and submission of
proxies,while “proxy validation”
Page 80 of 494
Voting trustee 3. Anti-competitive mergers and
acquisitions;
A share owner vested with colorable and naked 4. Violations of nationality and capital
title of the shares covered for the primary requirements; or
purpose of voting upon stocks that he does not 5. Fraud [Sec. 58].
own.
c. Cases When Stockholders’ Actions is
A voting trust agreement shall be ineffective Required
and unenforceable unless:
1. It is in writing and notarized; Right to Vote in Stock Corporations
2. It specifies the terms and conditions General Rule: Each share of stock is entitled
thereof; and to vote [Sec. 6].
3. A certified copy of such agreement is
filed with the corporation and with the 1. The stockholder of record has the right
SEC [Sec. 58]. to participate and to vote [Villanueva].
Period of Effectivity 2. Executors, administrators, receivers,
and other legal representatives duly
General Rule: Voting trust agreements shall appointed by the court may attend or
not exceed five (5) years at any one time. vote in behalf of stockholders without
need of any written proxy [Sec. 54].
Exception: Voting trust agreements may be for
a period exceeding five (5) years if it is Exception: Unless otherwise provided in the
specifically required as a condition in a loan articles of incorporation or declared delinquent
agreement. under Sec. 66 [Sec. 6].
This envisions a situation where a corporation Note: “Outstanding capital stock” means stocks
obtains a loan from a bank, but as a condition entitled to VOTE.
of the loan, the majority stockholders would be
required to execute voting trust agreements to Nevertheless, ALL stockholders, regardless of
ensure that the lending institution would have a classification as voting or non-voting, are
controlling interest in the corporate votes to be entitled to vote in the following matters:
taken that may affect the ability of the
borrowing corporation to pay. The voting trust 1. Amendment of the articles of
agreement therefore constitutes further incorporation;
security to the lending institution [Villanueva]. 2. Adoption and amendment of by-laws;
3. Sale, lease, exchange,
Such voting trust agreement conditioned upon mortgage,pledge, or other disposition
a loan agreement, however, shall automatically of all or substantially all of the corporate
expire upon full payment of the loan [Sec. 58]. property;
4. Incurring, creating, or increasing
Unless the agreement is expressly renewed, all bonded indebtedness;
rights granted in the agreement shall 5. Increase or decrease of capital stock;
automatically expire at the end of the agreed 6. Merger or consolidation;
period [Sec. 58]. 7. Investment of corporate funds in
another corporation or business; and
Limitation of a Voting Trust Agreement Dissolution of the corporation [Sec. 6].
No voting trust agreement shall be entered into
for the purposes of circumventing the laws Right to Vote in Non-Stock Corporations
against:
In non-stock corporations, the voting rights
1. Anti-competitive agreements; attach to membership. Members vote as
2. Abuse of dominant position; persons, in accordance with the law and the by-
laws of the corporation.
Page 81 of 494
General Rule: Each member shall be entitled 1. Majority of the BOD/BOT ; and
to one vote [Sec. 88]. 2. Stockholders owning at least the
majority of the outstanding capital
Executors, administrators, receivers, and other stock/majority of members. Includes all
legal representatives duly appointed by the stockholders with or without voting
court may attend or vote in behalf of rights.
stockholders without need of any written proxy
[Sec. 54]. c. Revocation of delegation to the BOD of
the power to amend or repeal or adopt by-
Exception: Unless the right to vote is limited, laws [Sec. 47]
broadened, or denied in the articles of Requires approval by stockholders owning at
incorporation or by-laws. least the majority of the outstanding capital
stock/majority of members.
When the principle for determining the quorum
for stock corporations is applied by analogy to d. Granting compensation other than per
non-stock corporations, only those who are diems to directors [Sec. 29]
actual members with voting rights should be Compensation other than per diems may be
counted [Sec. 88]. granted to directors by the vote of the
stockholders representing at least a majority of
d. Manner of Voting the outstanding capital stock.
1. By a majority vote e. Fixing the consideration for no-par

shares [Sec. 61]
a. Power to enter into management When the Articles of Incorporation or the BOD
contracts [Sec. 43] does not provide for the value of no-par shares,
the value of such shares shall be determined
General Rule: Requires approval by — by the stockholders representing at least
1. Majority of the BOD/BOT ; and majority of the outstanding capital stock.
2. Stockholders owning at least the
majority of the outstanding capital f. Voluntary dissolution of a corporation
stock/majority of members of both the where no creditors are affected [Sec. 134]
managing and the managed If dissolution of a corporation DOES NOT
corporation. prejudice the rights of any creditor having a
claim against it, the dissolution may be effected
Exceptions: In the ff. cases, at least 2/3 votes by:
of the outstanding capital stock/membership of 1. Majority vote of the BOD/BOT ; and
the managed corporation are required. BUT 2. A resolution adopted by the affirmative
only majority vote is required for the managing vote of the stockholders owning at least
corporation: majority of the outstanding capital
stock/membership.
1. Where a stockholder/s representing
the same interest of both the managing g. Revocation of Delegation to the Board
and the managed corporations own or of the Power to Amend/Repeal/Adopt By-
control more than one-third (1/3) of the laws [Sec. 47]
total outstanding capital stock entitled Any power delegated to the board of directors
to vote of the managing corporation; or or trustees to amend or repeal the by-laws or
2. Where a majority of the members of the to adopt new by-laws shall be considered
managing corporation’s BOD also revoked when stockholders representing a
constitute a majority of the managed majority of the outstanding capital stock, or a
corporation’s BOD. majority of the members shall so vote at a
regular or special meeting.
b. Amendments to by-laws [Sec. 47]
Requires approval by:
Page 82 of 494
h. Calling a Meeting to Remove Directors Amendment of Articles of Incorporation of
or Trustees [Sec. 27] close corporations [Sec. 102]
A special meeting for the purpose of removing An affirmative vote of at least two-thirds (2/3) of
any director or trustee must be called: the outstanding capital stock, whether with or
1. By the secretary on order of the without voting rights, at a meeting duly called
president; or for the purpose is required to make any
2. Upon written demand of stockholders amendment to the AOI which seeks to:
representing or holding at least a 1. Delete or remove any provision; or
majority of the outstanding capital 2. Reduce a quorum of the voting
stock, or a majority of the members requirement stated in the articles shall
entitled to vote [Sec. 27]. require.
2. By a two-thirds vote c. Delegating the power to amend or

repeal by-laws or adopt new by-laws [Sec.
a. Removal of directors or trustees [Sec. 47]
27]
Delegation to the BOD/BOT of the power to
Any director or trustee of a corporation may be amend or repeal by-laws or adopt new by-laws
removed from office by a vote of — requires approval by at least 2/3 of the
1. The stockholders holding or outstanding capital stock/membership.
representing at least two-thirds (2/3) of
the outstanding capital stock; or Note: Revocation of the delegation requires
2. At least two-thirds (2/3) of the only majority vote of the outstanding capital
members entitled to vote in a non- stock/membership.
stock corporation.
d. Extending/shortening corporate term
Note: Such removal shall take place — [Sec. 36]
1. Either at a regular meeting of the
corporation or at a special meeting 1. Requires approval by a majority vote of
called for the purpose; and the BOD/BOT and approval by at least
2. In either case, after previous notice to 2/3 of the outstanding capital
stockholders or members of the stock/membership.
corporation of the intention to propose 2. Includes all stockholders with or
such removal at the meeting. without voting rights.
b. Amendment of AOI [Sec. 15] e. Increasing/decreasing capital stock

[Sec. 37]
Amendment of the AOI may be made by:
1. 1. A majority vote of the BOD/BOT; and Requires approval by:
2. The vote or written assent of the 1. A majority vote of the BOD; and
stockholders representing at least two- 2. At least 2/3 of the outstanding capital
thirds (2/3) of the outstanding capital stock.
stock, or by the vote or written assent Includes all stockholders with or without voting
of at least two-thirds (2/3) of the rights.
members.
f. Incurring, creating, increasing bonded
Note: Includes all stockholders with or without indebtedness [Sec. 37]
voting rights.
1. Requires approval by a majority vote of
the BOD and approval by at least 2/3 of
the outstanding capital stock.
Page 83 of 494
2. Includes all stockholders with or k. Power to enter into management
without voting rights. contracts [Sec. 43]
g. Issuance of shares not subject to pre- General Rule: Requires approval by —

emptive right [Sec. 38] 1. Majority of the BOD/BOT ; and
2. Stockholders owning at least the
Shares in good faith in exchange for property majority of the outstanding capital
or previously incurred indebtedness with the stock/majority of members of both the
approval of the stockholders representing 2/3 managing and the managed
of the outstanding capital stock are not subject corporation.
to pre-emptive rights.
Exceptions: In the ff. cases, at least 2/3 votes
h. Sale/disposition of all or substantially of the outstanding capital stock/membership of
all corporate assets [Sec. 39] the managed corporation are required. BUT
only majority vote is required for the managing
A sale of all or substantially all the corporation’s corporation:
properties and assets, including its goodwill 1. Where a stockholder/s representing
must be authorized by the vote of: the same interest of both the managing
1. The stockholders representing at least and the managed corporations own or
2/3 of the outstanding capital stock; or control more than one-third (1/3) of the
2. At least 2/3 of the members, in a total outstanding capital stock entitled
stockholders’ or members’ meeting to vote of the managing corporation; or
duly called for the purpose. 2. Where a majority of the members of the
managing corporation’s BOD also
Note: In non-stock corporations where there constitute a majority of the managed
are no members with voting rights, the vote of corporation’s BOD.
at least a majority of the trustees in office will
be sufficient authorization. l. Ratifying contracts with respect to
dealings with directors/trustees [Sec. 31]
i. Investment of funds in another A contract of the corporation with one or more
business [Sec. 41] of its directors is voidable, at the option of such
Requires approval by: corporation, unless all of the following
1. A majority vote of the BOD/BOT; and 2. conditions are present:
At least 2/3 of the outstanding capital 1. The presence of such director/trustee
stock/membership. in the board meeting in which the
contract was approved was not
Includes all stockholders with or without voting necessary to constitute a quorum for
rights. such meeting;
2. The vote of such director or trustee was
However, where the investment by the not necessary for the approval of the
corporation is reasonably necessary to contract;
accomplish its primary purpose as stated in the 3. The contract is fair and reasonable
articles of incorporation, the approval of the under the circumstances;
stockholders or members shall not be
necessary. In case of corporations vested with public
interest, material contracts are approved by at
j. Stock Dividend declaration [Sec. 42] least two-thirds (2/3) of the entire membership
Requires approval by: of the board, with at least majority of the
1. A majority vote of the BOD; and independent directors voting to approve the
2. At least 2/3 of the outstanding capital material contract; and
stock. In case of an officer, the contract has been
Note: Declaration of cash and property previously authorized by the BOD.
dividends only requires BOD/BOT approval.
Page 84 of 494
Note: Where any of the first 3 conditions in the p. Incorporation of a religious society
preceding paragraph is absent, in the case of a [Sec. 114]
contract with a director/trustee, the contract
may be ratified by the vote of the stockholders General Rule: Any religious society or
representing 2/3 of the outstanding capital religious order, or any diocese, synod, or
stock or at least 2/3 of the members in a district organization of any religious
meeting called for that purpose. denomination, sect, or church, may incorporate
Full disclosure of the adverse interest of the Upon written consent and/or by an affirmative
directors/trustees involved is made at such vote at a meeting called for the purpose of at
meeting and the contract is fair and reasonable least 2/3 of its membership;
under the circumstances [Sec 31]. For the administration of its temporalities or for
the management of its affairs, properties, and
m. Ratifying acts of disloyalty of a estate
director [Sec. 33]
General Rule: Where a director, by virtue of Exception: Unless forbidden by the
such office, acquires a business opportunity, Constitution, rules, regulations or discipline of
which should belong to the corporation, the religious denomination, sect, or church of
thereby obtaining profits to the prejudice of which it is a part, or by competent authority.
such corporation, the director must account for
and refund to the latter all such profits. q. Voluntary dissolution of a corporation
where creditors are affected [Sec. 135]
Exception: His act may be ratified by a vote of
the stockholders owning or representing at If dissolution of a corporation may prejudice the
least 2/3 of the outstanding capital stock. rights of any creditor having a claim against it,
the dissolution may be effected by:
n. Plan of merger or consolidation [Sec. 1. Majority vote of the BOD/BOT ; and
76] 2. A resolution adopted by the affirmative
Requires approval by: vote of the stockholders representing
1. Majority of each of the BOD/BOT of the at least 2/3 of the outstanding capital
constituent corporations of the plan of stock/membership.
merger or consolidation; and
2. At least 2/3 of the outstanding capital 3. By cumulative voting
stock/membership of each corporation
at separate corporate meetings duly Election of Directors or Trustees [Sec. 23]
called. Stockholders entitled to vote may:
a. Vote such number of shares for as
Amendments to the plan of the merger or many persons as there are directors to
consolidation also requires approval by be elected [Straight Voting];
majority vote of each of the BOD and 2/3 vote b. Cumulate said shares and give 1
of the outstanding capital stock/membership of candidate as many votes as the
each corporation voting separately. number of directors to be elected
Includes all stockholders with or without voting multiplied by the number of the shares
rights. owned [Cumulative Voting for 1
Candidate]; or
o. Plan of distribution of assets in non- c. Distribute them on the same principle
stock corporations [Sec. 94] among as many candidates as may be
seen fit [Cumulative Voting by
The BOT shall, by majority vote, adopt a Distribution].
resolution recommending a plan of distribution
which shall be approved by at least 2/3 of the Note: No delinquent stock shall be voted [Sec.
members with voting rights. 23].
Page 85 of 494
Members of a non-stock corporation may cast 3. Such declaration is essentially within
as many votes as there are trustees to be the business judgment of the board
elected but may not cast more than 1 vote for of directors.
1 candidate. 4. The fact that profits have accrued in the
prosecution of the corporate business
Nominees for directors or trustees receiving does not necessarily impose upon the
the highest number of votes shall be declared directors the duty to declare them as
elected dividends [Villanueva].
Upon written consent and/or by an affirmative Exception: Stock corporations are prohibited
vote at a meeting called for the purpose of at from retaining surplus profits in excess of 100%
least 2/3 of its membership; of their paid-in capital stock.
For the administration of its temporalities or for
the management of its affairs, properties, and Exception to the exception: Stock
estate corporations may retain surplus profits in
excess of 100% of their paid-in capital stock:
3. Proprietary rights 1. When justified by definite corporate
expansion projects or programs
a. Rights to Dividends approved by the board of directors; or
2. When the corporation is prohibited
Concept of Dividends under any loan agreement with
A dividend is — financial institutions or creditors,
1. That portion of the profits of the whether local or foreign, from declaring
corporation set aside, declared and dividends without their consent, and
ordered by the directors to be paid such consent has not yet been
ratably to the stockholders on demand secured; or
or at a fixed time. 3. When it can be clearly shown that such
2. Payment to the stockholders as a retention is necessary under special
return upon their investment circumstances obtaining in the
[Villanueva] corporation, such as when there is
need for special reserve for probable
Discretion of Board to Declare Dividends contingencies [Sec. 42].
General Rule: The board of directors of a stock Note: Right to dividends vests upon declaration
corporation may declare dividends out of the so whoever owns the stock at the record date
unrestricted retained earnings to all fixed by the board owns the dividends.
stockholders on the basis of outstanding stock Subsequent transfer of stock would not carry
held by them [Sec. 42]. with it the right to dividends UNLESS agreed
upon by the parties
Upon lawful declaration of dividends by the
BOD, dividends become a debt owing to the Unrestricted Retained Earnings
shareholders. No revocation can be made. The board of directors of a stock corporation
may declare dividends out of the unrestricted
Exceptions: retained earnings [Sec. 42]
1. Dividends are revocable if NOT yet
announced or communicated to the Retained Earnings
stockholders.
2. Stock dividends, even if already
declared, may be revoked prior to Represents the accumulation of net profits
actual issuance since these are not of the corporation over the years and
distributions but merely likewise losses sustained, as well as
representations of changes in the deductions made upon previous dividends
capital structure. declared.
Page 86 of 494
2. Extension of the term of corporate
Restricted Unrestricted
existence [Sec. 80], including
Retained Earnings Retained Earnings
Voluntary Dissolution (by Petition or by
Represents the That portion which is shortening corporate term); [Secs. 134-
accumulation of net free and can be 136]
profits of the declared as 3. Extension and shortening of corporate
corporation over the dividends to term, which is an error carried over
years and likewise stockholders. from the old Corporation Code.
losses sustained, as 4. Sale, lease, exchange, transfer,
well as deductions mortgage, pledge or other disposition
made upon previous of all or substantially all of the corporate
dividends declared. property and assets [Sec. 80];
5. Merger or consolidation [Sec. 80];
6. Investment of corporate funds for any
In case of no-par value shares, the entire purpose other than the primary
consideration received by the corporation for purpose of the corporation [Sec. 80];
its no-par value shares shall be treated as 7. Increasing or decreasing capital stock.
capital and shall not be available for distribution Note: Can be exercised only if the
as dividends [Sec. 6]. increase of capital stock results in or
has the effect of changing or restricting
b. Appraisal Right the rights of any stockholder or class of
shares, or of authorizing preferences in
Appraisal Right — The right to withdraw from any respect superior to those of
the corporation and demand payment of the outstanding shares of any class [Sec.
fair value of the shares after dissenting from 80(a)].
certain corporate acts involving fundamental
changes in corporate structure [Sec. 80]. Manner of Exercise of Right
Who is Entitled to Exercise Requirements for Exercise of Appraisal

A prejudiced stockholder who dissented in the Right [Secs. 81 & 85]
meeting where the proposal was approved. 1. Stockholder must have voted against
the corporate act.
Mere silence or abstention does not suffice. 2. Stockholder must make a written
The stockholder must have voted against the demand on the corporation within 30
corporate action [Villanueva]. days after the vote was taken for
payment of the fair value of his shares.
Amount Paid to Dissenting Stockholder a. Failure to make demand within
Provided that the corporation has sufficient such period shall be deemed
unrestricted retained earnings, the amount waiver of the appraisal right.
paid to the stockholder is the fair value of his 3. Stockholder must submit his certificate
shares as of the day prior to the date on which of stock to the corporation for notation
the vote was taken, excluding any appreciation within 10 days after demand for
or depreciation in anticipation of the corporate payment.
action [Sec. 81] a. Otherwise, right to appraisal
may be terminated at the
When Available [Sec. 80] option of corporation.
1. If amendment of AOI results in:
a. Changing or restricting the Effect of Demand for Payment [Sec. 82]
rights of any stockholder or 1. ALL rights accruing to such shares,
class of shares; or including voting and dividend rights,
b. Authorizing preferences in any shall be suspended, EXCEPT the right
respect superior to those of of such stockholder to receive payment
outstanding share of any class of the fair value thereof.
[Sec. 80];
Page 87 of 494
2. There is RESTORATION of voting and 4. Where SEC determines that such
dividend rights if the dissenting stockholder is not entitled to appraisal
stockholder is not paid the value of his right
shares within 30 days after the award 5. Failure to submit the certificates of
stock representing his shares to the
Note: The award shall be — corporation for notation as dissenting
1. Agreed upon by the dissenting shares within 10 days after demand for
stockholder and corporation; or payment, at the option of the
2. Determined and appraised by 3 corporation [Sec. 85].
disinterested persons, if they fail to
agree within 60 days from the date Effect of Extinguishment of Right
when the corporate action was 1. Right of dissenting stockholder to be
approved, these 3 persons shall be; paid for the fair value of his shares shall
a. One named by the cease;
shareholder; 2. His status as a stockholder shall
b. One named by the corporation; thereupon by restores; and
c. One chosen by a & b. 3. All dividend distributions which would
d. The findings of the majority of have accrued on his shares shall be
the appraisers shall be final paid to him [Sec. 83]
[Sec. 81].
3. If shares represented by the c. Right to Inspect
certificates bearing a notation that such
shares are dissenting shares are Basis of Right
transferred, and the certificates As the beneficial owners of the business, the
consequently cancelled: stockholders have the right to know the
a. The rights of the transferor as a financial condition and management of
dissenting stockholder under corporate affairs.
this Title [Appraisal Right] shall
cease; and A stockholder’s right of inspection is based on
b. The transferee shall have all his ownership of the assets and property of the
the rights of a regular corporation. Therefore, it is an incident of
stockholder; and all dividend ownership of the corporate property, whether
distributions which would have this ownership or interest is termed an
accrued on such shares shall equitable ownership, a beneficial ownership, or
be paid to the transferee [Sec. quasi-ownership. Such right is predicated upon
85]. the necessity of self-protection [Gokongwei Jr.
v. SEC, G.R. No. L-45911 (1979)].
When Right to Payment Ceases [Sec. 83,
generally] Records Subject to Inspection [Sec. 73]
Every corporation shall keep and carefully
General Rule: No demand for payment may preserve at its principal office all information
be withdrawn. relating to the corporation including, but
not limited to:
Exceptions: The right may be extinguished in a. The AOI and by-laws of the corporation
the following instances — and all their amendments;
1. Withdrawal of demand by the b. The current ownership structure and
stockholders WITH CONSENT of the voting rights of the corporation,
corporation including lists of stockholders or
2. Abandonment of the proposed members, group structures, intra-group
corporate action relations, ownership data, and
3. Disapproval by SEC of the proposed beneficial ownership;
corporate action where such approval
is necessary
Page 88 of 494
c. The names and addresses of all the d. The inspecting or reproducing party
members of the BOD or BOT and the shall remain bound by confidentiality
executive officers; rules under prevailing laws such as
d. A record of all business transactions; 1. Intellectual Property Code
e. A record of the resolutions of the BOD 2. Data Privacy Act
or BOT and of the stockholders or 3. Securities Regulation Code
members; 4. Rules of Court
f. Copies of the latest reportorial
requirements submitted to the Test to Determine Whether the Purpose of
Commission; and Inspection is Legitimate
g. The minutes of all meetings of
stockholders or members, or of the A legitimate purpose is one which is genuine to
BOD/BOT, which shall set forth – the interests of the stockholders as such and
1. Time and place of the meeting not contrary to the interests of the corporation
held; [Gokongwei Jr. v. SEC, G.R. No. L-45911
2. How meeting was authorized; (1979)].
3. Notice given;
4. Agenda; Legitimacy of purpose is always assumed, and
5. Whether meeting was regular it is up to the corporation or officer to claim and
or special (its object, if special) prove otherwise
6. Those present and absent
7. Every act done or ordered Valid defenses of the officer or agent of the
done at the meeting corporation who refuses to allow
h. Upon demand of the inspection and/or reproduction of records:
BOD/BOT/stockholder or member – a. The person demanding to examine and
1. Time when any director, copy excerpts from the corporation’s
trustee, stockholder or member records and minutes has improperly
entered or left the meeting used any information secured through
must be noted in the minutes; any prior examination of the records or
2. The yeas and nays must be minutes of such corporation or of any
taken on any motion or other corporation;
proposition, and a record b. The person was not acting in good
thereof carefully made; faith;
3. The protest of a director, c. The person was not acting for a
trustee, stockholder or member legitimate purpose in making the
on any action or proposed demand to examine or reproduce
action corporate records;
d. The person is a competitor, director,
Requirements for the exercise of the right officer, controlling stockholder or
of inspection [Sec. 73] otherwise represents the interests of a
a. The records are open to inspection competitor [Sec. 73].
only by any director, trustee,
stockholder, or member of the Remedies when inspection is refused
corporation in person or by a a. Mandamus
representative. Under the Rules of Court, the writ of
b. Must be done at reasonable hours on mandamus should be granted only if
business days. the court is satisfied that justice so
c. A demand in writing may be made by requires [Sec. 8, Rule 65].
the director, trustee, or stockholder at b. Injunction
their expense, for such records or c. Action for damages [Sec. 73]
excerpts from the records. d. File an action under Sec. 161 to impose
a penal offense by fine
Page 89 of 494
The unjustified failure or refusal by the
Preemptive Right Right of First
corporation, or by those responsible for
Refusal
keeping and maintaining corporate
records, to comply with the pertinent shall enjoy the stipulations, by
rules and provisions of the RCC on preemptive right to which the right is
inspection and reproduction of records subscribe to all strictly construed
shall be punished with a fine ranging issues or disposition against the right of
from P10,000.00 to P200,000.00, at of shares of any person to dispose or
the discretion of the Court. class, in proportion deal with their
to their respective property.
When the violation of this provision is shareholdings [Sec.
injurious or detrimental to the public, 38].
the penalty is a fine ranging from
P20,000.00 to P400,000.00 [Sec. 161] A right claimed A right exercisable
e. Summary investigation by SEC [Sec. against the against another
73] corporation on stockholder on his
unissued shares of shares of stock
d. Preemptive Right its capital stock, and [Villanueva].
likewise on treasury
Definition shares held by the
corporation
Pre-emptive right — An option or privilege of [Villanueva].
an existing stockholder to subscribe to a
proportionate part of shares subsequently
issued by the corporation before the same can Purpose of Pre-emptive Right
be disposed of in favor of others.
● This right includes all issues and The purpose is to enable the shareholder to
disposition of such shares any class. retain his proportionate control in the
● It is a common law right and may be corporation and to retain his equity in the
exercised by stockholders even without surplus.
legal provision.
Scope of Pre-emptive Right
Basis of Preemptive Right: Preservation of
the existing proportional rights of the The broad phrase “all issues or disposition of
stockholders [Campos]. shares of any class” is construed to include:
1. New shares issued in pursuance of
Distinguished from Right of First Refusal increase in capital stock or from the
unissued shares which form part of the
ACS; and also
Preemptive Right Right of First 2. Treasury shares
Refusal a. Treasury shares would come
under the term “disposition”
Grants stockholders Grants the existing b. Likewise considering that it is
the option to stockholders or the not included among the
subscribe to all new corporation the exceptions enumerated
issues or disposition option to purchase therein, where pre-emptive
of shares of any the issued and right shall not extend, the
class, in proportion outstanding shares intention is to include it in its
to their respective of the transferring application [SEC Opinion, 14
shareholdings [Sec. stockholder [Sec. January 1993].
38]. 97]
All stockholders of a Arises only by virtue

stock corporation of contract
Page 90 of 494
Limitations to Exercise of Pre-emptive right Waiver/Denial of Preemptive Right
[Sec. 38] Allowed by the Code provided that it is made in
1. Such pre-emptive right shall NOT the AOI
extend to shares to be issued in 1. Denial made through AOI would bind
compliance with laws requiring stock present and subsequent shareholders;
offerings or minimum stock ownership 2. 2/3 vote of all voting and non-voting
by the public; shares is necessary before waiver is
2. It shall also NOT extend to shares to be binding;
issued in good faith with the approval 3. Result of non-placement of waiver
of the stockholders representing 2/3 of clause in AOI: Waiver shall not bind
the outstanding capital stock, in future stockholders but only those who
exchange for property needed for agreed to it.
corporate purposes or in payment of a
previously contracted debt; The shareholders must be given reasonable
3. It shall not take effect if denied in the time within which to exercise their preemptive
AOI or an amendment thereto; rights.
4. If one shareholder does not want to 1. Upon expiration of such period, any
exercise his pre-emptive right, the shareholders who did not exercise
other shareholders are not entitled to such will be deemed to have waived it.
purchase the corresponding shares of 2. This is necessary so as to not hinder
the shareholder who declined. But if future financing plans of the
nobody purchased the same and later corporation. Some new investors may
on the board re-issued the shares, the be willing to invest only if all the new
pre-emptive right applies [Sundiang shares will be issued to them
and Aquino]. [Campos].
Exceptions to the Pre-emptive Right e. Right to Vote

1. When such right is denied by the
articles of incorporation or an Nature of the Right to Vote
amendment thereto; and
2. Shares to be issued: The right to vote is inherent and incidental to
a. In compliance with laws requiring the ownership of corporate stocks [Tan v.
stock offerings or minimum stock Sycip, 499 SCRA 216 (2016)].
ownership by the public; or
b. To shares to be issued in good faith It represents the right of a stockholder to
with the approval of the participate in the control and management of
stockholders representing ⅔ of the the corporation. However, it is subject to the
outstanding capital stock in rule of the majority [Villanueva].
exchange for:
1. Property needed for General Rule: No share may be deprived of
corporate purposes; or voting rights.
2. In payment of a previously
contracted debt [Sec. 38]. Exception: Shares classified and issued as
“preferred” or “redeemable” may be deprived of
Remedies in case of unwarranted denial voting rights: Provided, that there shall always
1. Injunction be a class or series of shares with complete
2. Mandamus voting rights [Sec. 6].
3. The suit should be individual and not
derivative because the wrong done is Non-Voting Shares Non-voting shares are not
to the stockholders individually entitled to vote, except as provided for in par. 3
4. SEC can cancel shares if the 3rd party of Sec. 6. Holders of nonvoting shares shall
is not innocent nevertheless be entitled to vote on the
following matters:
Page 91 of 494
a. Amendment of the articles of upon by the registered stockholder of
incorporation; record [Cojuangco, Jr. v. Roxas, 195
b. Adoption and amendment of bylaws; SCRA 797 (1991)].
c. Sale, lease, exchange, mortgage,
pledge, or other disposition of all or Exception: The PCGG may exercise
substantially all of the corporate the voting right on sequestered shares
property; whenever it is able to comply with the
d. Incurring, creating, or increasing “two-tiered” or “public character” tests:
bonded indebtedness; 1. The two-tiered test is satisfied
e. Increase or decrease of authorized when:
capital stock; a. Prima facie evidence
f. Merger or consolidation of the show that the wealth
corporation with another corporation or and/or the shares are
other corporations; indeed illgotten; and
g. Investment of corporate funds in b. There is demonstrated
another corporation or business in imminent danger of
accordance with this Code; and dissipation of the
h. Dissolution of the corporation. assets.
2. The two-tiered test does not
Except in the above cases, the vote necessary apply when the funds are prima
to approve a particular corporate act shall be facie public in character or, at
deemed to refer only to stocks with right to vote least, affected with public
[Sec. 6]. interest [Republic v.
COCOFED, 372 SCRA 462
Rules Applicable to Certain Kinds of Shares (2001)].
a. Preferred or redeemable shares may
be deprived of the right to vote [Sec. 6]. h. When shares are jointly owned by
b. Fractional shares of stock cannot be two or more persons, the consent of all
voted. the co-owners shall be necessary.
c. Treasury shares have no voting rights
as long as they remain in the treasury. Exception: There is a written proxy,
d. No delinquent stock shall be voted signed by all the co-owners,
[Sec. 70]. authorizing one or some of them or any
e. A transferee of stock cannot vote if other person to vote such share or
his transfer is not registered in the shares: Provided, That when the
stock and transfer book of the shares are owned in an “and/or”
corporation. capacity, any one of the joint owners
f. In case a stockholder grants security can vote said shares or appoint a proxy
interest in his or her shares in stock therefor [Sec. 55].
corporations, the stockholder-grantor
shall have the right to attend and vote 4. Remedial Rights
at meetings of stockholders.
a. Individual Suit
Exception: The secured creditor is
expressly given by the A suit brought by the shareholder in his own
stockholdergrantor such right in writing name against the corporation when a wrong is
which is recorded in the appropriate directly inflicted against him.
corporate books [Sec. 54]
Where a stockholder or member is denied the
g. The sequestration of shares does not right of inspection, his suit would be individual
entitle the government to exercise acts because the wrong is done to him personally
of ownership over the shares. Even and not to the other stockholders or the
sequestered shares may be voted corporation [Ago Realty & Development
Page 92 of 494
Corporation v. Dr. Angelita F. Ago, G.R. No. An individual stockholder is permitted to
211203 (2019)] institute a derivative suit on behalf of the
corporation wherein he holds stock in order to
b. Representative Suit protect or vindicate corporate rights, whenever
officials of the corporation refuse to sue or are
A suit brought by the stockholder in behalf of the ones to be sued or hold the control of the
himself and all other stockholders similarly corporation. In such actions, the suing
situated when a suit brought by the stockholder is regarded as the nominal party,
shareholder in his own name against the with the corporation as the party in interest
corporation when a wrong is directly inflicted [Ago Realty & Development Corporation v. Dr.
against him or a wrong is committed against a Angelita F. Ago, G.R. No. 211203 (2019)].
group of stockholders.
Derivative Suit as Defined in
Where the wrong is done to a group of Jurisprudence
stockholders, as where preferred stockholders'
rights are violated, a class or representative It is a suit by a shareholder to enforce a
suit will be proper for the protection of all corporate cause of action.
stockholders belonging to the same group [Ago
Realty & Development Corporation v. Dr. It is a condition sine qua non that the
Angelita F. Ago, G.R. No. 211203 (2019)] corporation be impleaded as a party because
not only is the corporation an indispensable
c. Derivative Suit party, but it is also the present rule that it must
be served with process.
The right of stockholders to bring derivative
suits is not based on any provision of the The judgment must be made binding upon the
Corporation Code or the Securities Regulation corporation in order that the corporation may
Code but is a right that is implied by the get the benefit of the suit and may not bring
fiduciary duties that directors owe corporations subsequent suit against the same defendants
and stockholders. Derivative suits are, for the same cause of action [Chua v. C.A.,
therefore, grounded not on law, but on equity G.R. No. 150793 (2004)].
[Ago Realty & Development Corporation v. Dr.
Angelita F. Ago, G.R. No. 211203 (2019)]. It is a suit brought by one or more
stockholders/members in the name and on
Definition behalf of the corporation to redress wrongs
committed against it or protect/vindicate
A suit brought by a stockholder for and on corporate rights whenever the officials of the
behalf of the corporation for its protection from corporation refuse to sue, or the ones to be
the wrongful acts committed by the sued, or has control of the corporation
directors/trustees of the corporation, when the [Sundiang and Aquino].
stockholder finds that he has no redress
because the directors/trustees, are the ones The institution of a derivative suit need not be
vested by law to decide whether or not to sue. preceded by a board resolution.
It is an action brought by minority shareholders Since the board is guilty of breaching the trust
in the name of the corporation to redress reposed in it by the stockholders, it is but logical
wrongs committed against the corporation, for to dispense with the requirement of obtaining
which the directors refuse to sue. from it authority to institute the case and to sign
the certification against forum shopping [Ago
It is a remedy designed by equity and has been Realty & Development Corporation v. Dr.
the defense of minority shareholders against Angelita F. Ago, G.R. No. 211203 (2019)].
abuses by the majority [Villanueva].
Page 93 of 494
Business Judgment Rule action occurred and the time the action
was filed;
As a general rule, when a wrong is committed 2. That the stockholder or member
against a corporation, whether to bring the suit exerted all reasonable efforts, and
or not primarily lies within the discretion and alleges the same with particularity in
exercise of business judgment of the BOD. the complaint, to exhaust all remedies
available under the AOI, by-laws, laws
But where corporate directors are guilty of a or rules governing the corporation or
breach of trust, not of mere error of judgment partnership to obtain the relief he
or abuse of discretion, and intra-corporate desires;
remedy is futile or useless, a shareholder may 3. That there is no appraisal right
institute a derivative suit in behalf of himself available for the act(s) complained of;
and other stockholders and for the benefit of 4. That the suit is not a nuisance or
the corporation. harassment suit; [Rule 8, Interim Rules
of Procedure for Intra-Corporate
The purpose of the suit is to bring about a Controversies]
redress of the wrong inflicted directly upon the 5. The action brought by the
corporation and indirectly upon the stockholder/member must be “in the
stockholders [Bitong v. C.A., G.R. No. 123553 name of the corporation or association”
(1998)]. [implied from 1st par. of Rule 8, Sec. 1
of the Interim Rules; see also Florete v.
Parties to a Derivative Suit Florete, G.R. No. 174909 (2016)].
In a derivative suit, the suing stockholder is
merely a nominal party, while the corporation is The action brought by the shareholder
the real party in interest. Thus, the action must or member must be in the name of the
be brought for the benefit and in the name of corporation or association [Villamor v.
the corporation [Villanueva]. Umale, G.R. No. 172843 (2014)].
The corporation is an unwilling co-plaintiff [Rule 6. Exhaustion of intra-corporate

3 Section 10, Rules of Court]. remedies, i.e., has made a demand on
● The corporation should be made a the BOD for the appropriate relief but
party to the suit, either as plaintiff or the latter has failed or refused to heed
defendant, for res judicata to apply. his plea; and
● BUT the personal injury suffered by the
stockholder cannot disqualify him from 7. The cause of action devolves on the
filing a derivative suit in behalf of the corporation, the wrongdoing or harm
corporation. It merely gives rise to an having been, or being caused to the
additional cause of action for damages corporation and not to the particular
against the erring corporate officers stockholder bringing the suit [Lisam
[Gochan v. Young, G.R. No. 131889 Enterprises, Inc., represented by Lolita
(2001)]. A. Soriano and Lolita A. Soriano v.
Banco de Oro Unibank, Inc. et al., G.R.
Proper Forum for Derivative Suits No. 143264 (2012)].
The Regional Trial Courts exercise jurisdiction Note: The “wrong” contemplated in a derivative
over derivative suits [Sec. 5.2., Securities suit is one in which the injury alleged be indirect
Regulation Code]. as far as the stockholders are concerned and
direct only insofar as the corporation is
Requisites of Derivative Actions concerned [de Leon]. The reliefs sought pertain
1. That the person instituting the action be to the corporation [Symaco Trading Corp. v.
a stockholder or member at the time Santos, G.R. No. 142474 (2005)].
the acts or transactions subject of the
Page 94 of 494
Stockholder may commence a derivative suit A subscription contract is unconditional (i.e.,
“for mismanagement, waste or dissipation of obligation to pay is not subject to any
corporate asset because of a special injury to contingency) and indivisible (as to the amount
him for which he is otherwise without redress and transferability). [Fua Cun v. Summers
[Yu v. Yukayguan, G.R. No. 177549 (2009)]. (1923)] Hence, if the subscriber paid 20% of his
subscription, he is not entitled to the issuance
Exhaustion of Administrative Remedies of certificates corresponding to 20% of the
shares.
General Rule: A derivative suit can only be
filed when there has been a showing of Unpaid claim refers to any unpaid subscription,
exhaustion of intra-corporate remedies. and not to any indebtedness which a
subscriber may owe the corporation rising from
Exception: But where corporate directors are any other transaction. [China Banking Corp. v.
the ones guilty of a breach of trust, and intra- C.A., G.R. No. 117604 (1997)]
corporate remedy is futile or useless,
shareholders may institute a derivative suit for Liability to the Corporation for Interest on
the benefit of the corporation without having to Unpaid Subscription if so Required by the
exhaust intra-corporate remedies in order to By-Laws [Sec. 65]
bring about a redress of the wrong inflicted
directly upon the corporation and indirectly General Rule: Subscribers for stock are NOT
upon the stockholders [Villanueva]. liable to pay interest on his unpaid subscription.
Requisites of a Derivative Suit according to Exception: If so required in the by-laws at the

Jurisprudence [SMC v. Kahn, G.R. No. 85339 rate fixed in the by-laws. If no rate is fixed in the
(1989)] subscription contract, the prevailing legal rate
a. The party bringing the suit should be a shall apply. [Sec. 65]
shareholder as of the time of the act or
transaction complained of the number Notes: Transfer for consideration of treasury
of his shares not being material; shares is a sale (or disposition) by the
b. He has tried to exhaust intra-corporate corporation (not subscription). A transfer of
institute the relevant suit against the previously issued shares by a stockholder to a
erring parties. third person in a sale (or disposition). Transfer
of unissued shares is subscription.
5. Obligations of a Stockholder
Shareholders are not creditors of the
Liability to the Corporation for Unpaid corporation with respect to their shareholdings
Subscription [Sec. 66] thereto and the principle of compensation or
Payment of unpaid subscription or any set-off has no application.
percentage thereof, together with any interest
accrued shall be made: Subscription contract is NOT required to be in
1. On the date specified in the writing.
subscription contract; or
2. On the date stated in the call made by Liability for Watered Stocks [Sec. 64]
the board.
Definition
Failure to pay on such date shall:
1. Render the entire balance due and Watered Stocks — Shares issued as fully paid
payable; and when in truth no consideration is paid, or the
2. Make the stockholder liable for interest consideration received is known to be less than
at the legal rate on such balance, the par value or issued value of the shares.
unless a different interest rate is [Sec. 64]
provided in the subscription contract.
Page 95 of 494
See b. Watered stocks under 10. Capital
Affairs The sanction can be found in Sec. 158 which
can be:
Liability of directors or officers [Sec. 64] 1. A fine from P5,000 and not more than
P1,000 for each day of continuing
Any director or officer of a corporation who: violation but in no case to exceed
1. Consents to the issuance of stocks for P2,000,000;
a consideration less than its par or 2. An issuance of a permanent cease-
issued value; and-desist order, suspension or
2. Consents to the issuance of stocks for revocation of the certificate of
a consideration other than cash, valued incorporation, or dissolution and
in excess of its fair value; or forfeiture of corporate assets.
3. Having knowledge of the insufficient
consideration, does not file a written Liability for Assuming to Act as a
objection with the corporate secretary. Corporation Knowing it to be Without
Authority
The director or officer shall be liable to the
corporation or its creditors, SOLIDARILY with All persons who assume to act as a
the stockholder concerned to the corporation corporation, knowing it to be without authority
and its creditors for the difference in value. to do so, shall be liable as general partners for
[Sec. 64] all debts, liabilities and damages incurred or
arising as a result thereof.
Value received at Php XXX
When any such ostensible corporation is sued
time of issuance of
on any transaction entered or on any tort
the stock
committed by it as a corporation, it shall not be
Par or issued value (XXX) allowed to use as a defense its lack of
corporate personality.
Liability for watered Php XXX
stock Anyone who assumes an obligation to an
ostensible corporation cannot resist
performance thereof on the ground that there
Personal liability of corporate directors, was in fact no corporation. [Sec. 20]
trustees or officers attaches when they consent
to the issuance of watered down stocks or
6. Meetings
when, having knowledge of such issuance, do
not file with the corporate secretary their written
objection. [SPI Technologies Inc. V. Mapua, Kinds of Meetings
G.R. No. 191154 (2014)] Meetings of directors, trustees, stockholders,
or members may be regular or special [Sec.
Liability for Dividends Unlawfully Paid 48].
The director, trustee or officer shall be liable as When [Sec. 52]

a trustee for the corporation and must account
for the profits, which would otherwise have Regular meetings of directors or trustees shall
accrued to the corporation when: be held monthly unless the by-laws provide
1. A director, trustee willfully attempts to otherwise.
acquire, or acquires any interest
adverse to the corporation Special meetings of the BOD or trustees may
2. In respect of any matter which has be held at any time upon the call of the
been reposed in them in confidence, president or as provided in the by-laws.
and upon which, equity imposes a
disability upon themselves to deal in
their own behalf. [Sec. 30]
Page 96 of 494
Where [Sec. 53] address administrative, technical, and logistical
issues [SEC Memo. Circ. No. 6, s. 2020].
Meetings of directors or trustees of
corporations may be held anywhere in or Attendance and Voting by Proxy
outside of the Philippines unless the by-laws
provide otherwise. Directors or trustees cannot attend or vote by
proxy at board meetings [Sec. 52].
Notice
In the Philippines, teleconferencing and
Notice of regular or special meetings stating videoconferencing of members of BOD of
the date, time and place of the meeting must private corporations is a reality, in light of
be sent to every director or trustee at least two Republic Act No. 8792. The Securities and
(2) days* prior to the scheduled meeting, Exchange Commission issued SEC
unless a longer time is provided by the by-laws. Memorandum Circular No. 15, series of 2001,
on November 30, 2001, providing the
Note: This was previously just one day, under guidelines to be complied with in relation to
the old corporation code. such conferences [Expertravel and Tours, Inc.
v. CA, G.R. No. 152392 (2005)].
A director or trustee may waive this
requirement, either expressly or impliedly [Sec. Mandatory Recusal
52].
A director or trustee who has a potential
Attendance in Meetings interest in any related party transaction must
recuse from voting on the approval of the
In the old corporation code, directors or related party transaction without prejudice to
compliance with the requirements of Section
trustees cannot be represented or voted by
proxies at board meetings [Sec. 25, CC]. 31 of this Code [Sec. 52].
Allowable Alternative Modes of Attendance Who Presides
The chairman, or in his absence, the president

Directors or trustees who cannot physically
attend or vote at board meetings can shall preside at all meetings of the directors or
trustees as well as of the stockholders or
participate and vote through:
1. Remote communication such as members, unless the bylaws provide otherwise
[Sec. 53].
videoconferencing, teleconferencing;
or
2. Other alternative modes of Quorum
communication that allow them
reasonable opportunities to participate Quorum to Transact Corporate Business
[Sec. 52]. General Rule: Majority of the directors or
trustees as stated in the articles of
If a director or trustee intends to participate in incorporation, shall constitute a quorum to
a meeting through remote communication, transact corporate business [Sec. 52].
he/she shall notify in advance the Presiding
Officer and the Corporate Secretary of his/her Exception: Unless the articles of incorporation
intention. The Corporate Secretary shall note or the by-laws provide for a GREATER
such fact in the Minutes of the meeting. majority.
Corporations may issue their own internal
procedures for the conduct of board meetings
through remote communication or other
alternative modes of communication to
Page 97 of 494
Decisions Reached by Majority of Summary of Board Meetings
Quorum Regular Special
Meeting Meeting
General Rule: Every decision reached by at
least a majority of the directors or trustees Description Meetings Meetings
constituting a quorum shall be valid as a that are fixed that are
corporate act. by law or as called for a
provided by special
Exception: A vote of a majority of all the the by-laws purpose
members of the board is required in case of
election of officers [Sec. 52] and in other Date and Held Held anytime
instances provided for in the Revised time monthly, upon call
Corporation Code, such as, amendment to the unless
articles of incorporation and by-laws, and other otherwise
instances set forth in Secs. 36, 37, 39, and 41. provided by
the by-laws
In Case of Death of Board Members
Venue Anywhere in and outside the
In stock corporations: Shareholders may Philippines, unless
generally transfer their shares. Thus, on the otherwise provided by by-
death of a shareholder, the executor or laws
administrator duly appointed by the Court is
Notice Date, time, and place of the
vested with the legal title to the stock and
meeting must be sent to
entitled to vote it. Until a settlement and division
every member at least two
of the estate is effected, the stocks of the
(2) days prior to the
decedent are held by the administrator or
scheduled meeting, unless a
executor.
longer time is provided in
the by-laws
In non-stock corporations: Membership in
and all rights arising from a non-stock
This requirement may be
corporation are personal and non-transferable,
waived
unless the articles of incorporation or the
bylaws of the corporation provide otherwise. In Attendance Proxy not allowed
other words, the determination of whether or
not “dead members” are entitled to exercise Voting through remote
their voting rights (through their executor or communication is allowed
administrator), depends on the Articles of (videoconferencing,
Incorporation or by-laws [Tan v. Sycip, G.R. teleconferencing, etc.)
No. 153468 (2006)].
Who The chairman and in his
Rule on Abstention Presides absence, the president
No inference can be drawn in a vote of Quorum General Rule: Majority of

abstention. When a director or trustee the directors or trustees, as
abstains, it cannot be said that he intended to stated in the AOI
acquiesce in the action taken by those who
voted affirmatively. Neither, for that matter, can Exception: Unless the AOI
such inference be drawn from the abstention or the by-laws provide for a
that he was abstaining because he was not GREATER majority
then ready to make a decision [Lopez v. Ercita,
G.R. No. L-32991 (1972)].
Page 98 of 494
I. Board of Directors and In case of close corporations, the
stockholders may manage the business of
Trustees the corporation rather than by a BOD, if the
Articles of Incorporation so provide [Sec.
1. Repository of Corporate Powers 96]
Doctrine of centralized management The power to purchase real property is vested

in the BOD or trustees. While a corporation
Board is Seat of Corporate Powers may appoint agents to negotiate for the
purchase of real property needed by the
General Rule: Unless otherwise provided in corporation, the final say will have to be with
this Code, the board of directors or trustees the board, whose approval will finalize the
shall exercise the corporate powers, conduct transaction [Spouses Constantine Firme v.
all business, and control all properties of the Bukal Enterprises and Development
corporation [Sec. 22]. Corporation, G.R. No. 146608 (2003)].
Governing Body of the Corporation Indisputably, one of the rights of a stockholder

It is well established in corporation law that the is the right to participate in the control or
corporation can act only through its board of management of the corporation. This is
directors in the case of stock corporations, or exercised through his vote in the election of
board of trustees in the case of non-stock directors because it is the BOD that controls or
corporations [De Leon]. manages the corporation [Gamboa v. Teves,
G.R. No. 176579 (2011)].
Exceptions:
Limitations on powers of BOD/BOT
In case of an Executive Committee duly 1. Limitations imposed by the Constitution,
authorized in the by-laws [Sec. 34]; statutes, articles of incorporation or by-
laws;
Exception to Exception: The following may 2. Certain acts of the corporation that require
not be delegated to the executive committee: joint action of the stockholders and BOD:
1. Approval of any action for which a. Removal of director [Sec. 27]
shareholders' approval is also b. Amendments of Articles of
required; Incorporation [Sec. 15]
2. The filing of vacancies in the board; c. Fundamental changes [Sec. 37]
3. The amendment or repeal of by-laws or d. Declaration of stock dividends
the adoption of new by-laws; [Sec. 42]
4. The amendment or repeal of any e. Entering into management
resolution of the board which by its contracts [Sec. 43]
express terms is not so amendable or f. Fixing of consideration of no- par
repealable; and shares [Sec. 61]
5. A distribution of cash dividends to the g. Fixing of compensation of directors
shareholders [Sec. 34.] [Sec. 29]
3. Cannot exercise powers notpossessed by
In case of a contracted manager which may the corporation.
be an individual, a partnership, or another
corporation Principle on Delegation of Board
Power
Note: In case the contracted manager is
another corporation, the special rule in Sec. 43 Under Sec. 23 (now Sec. 22, RCC), the power
applies. and the responsibility to decide whether the
corporation should enter a contract that will
bind the corporation is lodged in the board,
Page 99 of 494
subject to the articles of incorporation, by-laws, Term v. Tenure
or relevant provisions of law.
Term Tenure
However, just as a natural person may
Time during which The period within
authorize another to do certain acts for and on
the officer may claim which the director
his behalf, the BOD may validly delegate some
to hold the office as holds office,
of its functions and powers to officers,
of right and fixes the including the
committees, or agents. The authority of such
interval after which holdover period after
individuals to bind the corporation is generally
the several the end of his term
derived from law, corporate by-laws or
incumbents shall
authorization from the board, either expressly
succeed one
or impliedly by habit, custom or acquiescence
another.
in the general course of business [People’s
Aircargo v. CA, G.R. No. 117847 (1998)]. Not affected by the Includes holdover
holdover
Corporate powers may be directly conferred
upon corporate officers or agents by statute,
the articles of incorporation, the by-laws, or by Fixed by statute, and May be shorter or
resolution or other act of the board of directors it does not change longer (in case of a
[Citibank, N.A. v. Chua, 220 SCRA 75 (1993)]. simply because the holdover) than the
office may have term for reasons
2. Tenure, Qualifications, and become vacant, nor within or beyond the
because the power of the
Disqualifications of Directors
incumbent holds incumbentMay be
over in office beyond shorter or longer (in
a. Tenure the end of the term case of a holdover)
due to the fact that a than the term for
Directors – Term of 1 year from among the successor has not reasons within or
holders of stocks registered in the corporation’s been elected and beyond the power of
books [Sec. 22]. has failed to qualify. the incumbent
Trustees – Term not exceeding 3 years from
among the members of the corporation [Sec. [Valle Verde Country Club v. Africa, G.R. No.
22]. 151969 (2009)]
Holdover Principle Permanent representation not allowed in

BOD
Upon failure of a quorum at any meeting of the
stockholders or members called for an election, The board of directors of corporations must be
the directorate naturally holds over and elected from among the stockholders or
continues to function until another directorate members directors every year. Estoppel does
is chosen and qualified. not set in to legitimize what is wrongful (Grace
Each director and trustee shall hold office until Christian High School v. CA, G.R. No. 108905,
the successor is elected and qualified [Sec. October 23, 1997).
22].
b. Qualifications
The failure to elect does not terminate the
terms of incumbent officers nor dissolve the Director: Must own at least one (1) share of
corporation. stock.
Trustee: Must be a member of the corporation.
A director who ceases to own at least one (1)

share of stock or a trustee who ceases to be a
Page 100 of 494
member of the corporation shall cease to be Note: The foregoing is without prejudice to
such [Sec. 22]. qualifications or other disqualifications, which
the Commission, the primary regulatory
To be eligible as a director, what is material is agency, or the Philippine Competition
the legal title to, not beneficial ownership of, the Commission may impose in its promotion of
stock as appearing on the books of the good corporate governance or as a sanction in
corporation [Lee v. CA, G.R. No. 93695 its administrative proceedings.
(1992)].
An amendment to the corporation’s by-laws
Must be a natural person, of legal age, possess which renders a stockholder ineligible to be a
full legal capacity director, if he be also a director in a corporation
whose business is in competition with that of
Must not be convicted by final judgment of an the other corporation, has been sustained as
offense punishable by imprisonment for a valid. This is based upon the principle that
period exceeding 6 years [Sec. 26] where the director is so employed in the service
of a rival company, he cannot serve both, but
Other qualifications as may be prescribed in must betray one or the other. Such an
the by-laws of the corporation [Sec. 46]. amendment "advances the benefit of the
corporation and is good" [Gokongwei, Jr. v.
While additional qualifications may be SEC, G.R. No. L-45911 (1979)].
prescribed, this cannot conflict with the
requirements as set by the RCC. Note: See Sec. 160
Note: The RCC removed the requirement that 3. Requirement of Independent

majority of the directors or trustees must be Directors
residents of the Philippines.
Independent Directors
c. Disqualifications
An independent director is a person who, apart
A person shall be disqualified from being a from shareholdings and fees received from the
director, trustee, or officer of any corporation if, corporation, is independent of management
within five (5) years prior to the election or and free from any business or other
appointment as such, the person was: relationship which could or could reasonably
be perceived to materially interfere with the
a. Convicted by final judgment: exercise of independent judgment in carrying
1. Of an offense punishable by out the responsibilities as a director [Sec. 22].
imprisonment for a period exceeding six (6)
years;
2. For violating this Code; and
Requirement for Independent Directors
3. For violating Republic Act No. 8799,
Corporations vested with public interest are
otherwise known as “The Securities
now required to have independent directors
Regulation Code”; administratively liable for
constituting at least twenty percent (20%) of
any
the board [Sec. 22]. This is to promote good
governance.
b. Found administratively liable for any
offense involving fraud acts; and
These corporations include:
a. Corporations covered by the Securities
c. By a foreign court or equivalent foreign
Regulation Code, namely:
regulatory authority for acts, violations, or
1. Those whose securities are
misconduct similar to those enumerated in
registered with the Commission;
paragraphs (a) and (b) above [Sec. 26].
2. Corporations listed with an
exchange or with assets of at least Fifty
million pesos (P50,000,000.00); and
Page 101 of 494
3. Having two hundred (200) or more Rules Governing all Methods of Voting
holders of shares, each holding at least a. The total number of votes cast shall not
one hundred (100) shares of a class of exceed the number of shares owned by
its equity shares; the stockholders as shown in the books
b. Banks and quasi-banks, NSSLAs, of the corporation multiplied by the
pawnshops, corporations engaged in money whole number of directors to be elected
service business, pre-need, trust and b. No delinquent stock shall be voted
insurance companies, and other financial [Sec. 23].
intermediaries;
c. Other corporations engaged in business Straight Voting
vested with public interest like the above, as
may be determined by the Commission [Sec. Every stockholder may vote such number of
22]. shares for as many persons as there are
directors to be elected [Sec. 23].
Manner of Election
Cumulative Voting
Independent directors must be elected by the
shareholders present or entitled to vote in Cumulative Voting for One Candidate
absentia during the election of directors [Sec. A stockholder is allowed to concentrate his
22]. votes and give one candidate as many votes
as the number of directors to be elected
Independent directors shall be subject to rules multiplied by the number of his shares shall
and regulations governing their: equal [Sec. 23].
a. Qualifications, disqualifications, voting
requirements, duration of term and Illustration:
term limit, maximum number of board
memberships; and If there are 5 directors to be elected and Pedro,
b. Other requirements that the as shareholder, has 100 shares, Pedro can
Commission will prescribe to give 500 (5 x 100 shares) votes to just one
strengthen their independence and candidate.
align with international best practices
[Sec. 22]. Cumulative Voting by Distribution
4. Elections A stockholder may cumulate his shares by

multiplying the number of his shares by the
Number of Directors and Trustees number of directors to be elected and distribute
the same among as many candidates as he
Directors: Not more than fifteen (15) shall see fit [Sec. 23].
Trustees: May be more than fifteen (15) [Sec.
13 and 91] Illustration:
The RCC removed the minimum number of In the illustration above, Pedro instead may
directors which stood at five (5) under the old choose to give 100 votes to candidate 1, 100
code [Sec. 14, Old Corporation Code]. votes to candidate 2, 100 votes to candidate 3,
150 votes to candidate 4, and 50 votes to
Election of Directors or Trustees [Sec. 23] candidate 5.
Methods of Voting Quorum

a. Straight voting
b. Cumulative voting for one candidate At all elections of directors or trustees, there
c. Cumulative voting by distribution must be present, either in person or through a
representative authorized to act by written
proxy:
Page 102 of 494

a. Stock Corporations: The owners of b. The secretary, upon written
majority of the outstanding capital demand of the stockholders
stock representing or holding at least
b. Non-Stock Corporations: A majority of a MAJORITY of the capital
the members entitled to vote [Sec. 23]. stock or a MAJORITY of the
members entitled to vote;
It is necessary that there be a quorum. An 3. There must be previous notice to the
election without quorum is invalid. stockholders or members of the
intention to remove a director; and
If the owners of the majority of the outstanding 4. There must be a vote of the
capital stock or majority of the members stockholders representing 2/3 of
entitled to vote are not present in person, by outstanding capital stock or in case of
proxy, or through remote communication, or a nonstock corporation, 2/3 of
not voting in absentia at the meeting, such members entitled to vote.
meeting may be adjourned [Sec. 23].
New Power of the SEC under the Revised
Election Contests Corporation Code [Sec. 27]
All matters affecting the manner and conduct of The Commission shall, motu proprio or upon
the election of directors are properly verified complaint, and after due notice and
cognizable by the regular courts. Otherwise, hearing, order the removal of a director or
these matters may be brought before the SEC trustee elected despite the disqualification, or
for resolution based on the regulatory powers it whose disqualification arose or is discovered
exercises over corporations, partnerships, and subsequent to an election.
associations [SEC v. CA, 739 SCRA 99
(2014)]. The removal of a disqualified director shall be
without prejudice to other sanctions that the
5. Removal [Sec. 27] Commission may impose on the board of
directors or trustees who, with knowledge of
General Rule: Any Director or Trustee of a the disqualification, failed to remove such
corporation may be removed from office, with director or trustee. [Sec. 27]
or without cause. [Sec. 27]
6. Filling of Vacancies [Sec. 28]
Exception: If the director was elected by the
minority, there must be cause for removal Ways which the filling of a vacancy may
because the minority may not be deprived of occur:
the right to representation to which they may be 1. Expiration of term;
entitled to under Sec. 23 of the Code. [Sec. 27] 2. Removal;
3. Grounds other than the above, but the
Note: The right to representation refers to the remaining directors can constitute a
right to cumulative voting for one candidate. quorum.
4. Grounds other than the above, but the
Requisites for Removal: remaining directors cannot constitute a
1. It must take place either at a regular quorum for the purpose of filling the
meeting or special meeting of the vacancy;
stockholders or members called for the 5. By reason of an increase in the number
purpose; of directors or trustees.
2. A special meeting for the purpose of
removing directors or trustees must be
called by:
a. The secretary, on order of the
president; or
Page 103 of 494

Cause of Procedure 2. Emergency action is required to
Vacancy prevent grave, substantial, and
irreparable loss or damage to the
Expiration The election by stockholders shall corporation.
of term be held no later than the day of
such expiration at a meeting called
The action by the designated director or trustee
for that purpose.
shall be limited to the emergency action
Removal The election may be held on the necessary. [Sec. 28]
same day of the meeting
authorizing the removal and this Term of designated director or trustee
fact must be so stated in the
agenda and notice of said The term of the designated director or trustee
meeting. shall cease:
1. Within a reasonable time from the
termination of the emergency; or
Other The election must be held no later
2. Upon election of the replacement
grounds, than forty-five (45) days from the
but the time the vacancy arose.
director or trustee, whichever comes
remaining earlier. [Sec. 28]
directors
can 7. Compensation [Sec. 29]
constitute a
quorum General Rule: Directors or trustees are only
Other a. The vacancy must be filled by
entitled to reasonable per diems. They are not
grounds, the stockholders or members in a entitled to compensation as directors or
but the regular or special meeting for that trustees. [Sec. 29]
remaining purpose; or
directors b. In case of the necessity of Exceptions:
CANNOT emergency action, the vacancy a. When Articles of Incorporation, by-
constitute a may be temporarily filled from laws, or an advance contract provides
quorum: among the officers of the for compensation.
corporation by unanimous vote of b. Compensation other than per diems
the remaining directors or trustees.
may also be granted to directors by the
By reason Shall be filled only by an election vote of the stockholders representing
of an at a regular or at a special meeting at least a majority of the Outstanding
increase in of stockholders duly called for the Capital Stock or a majority of the
the number purpose, or in the same meeting members at a regular or special
of directors authorizing the increase of stockholders’ meeting.
or trustees directors or trustees if so stated in
the notice of the meeting.
Note: The total yearly compensation of
Note: In all elections to fill vacancies under this directors shall not exceed 10% of the net
section, the procedure set forth in Sections 23 income before income tax of the corporation
and 25 of the Revised Corporation Code shall during the preceding year. [Sec. 29]
apply. [Sec. 28]
Added in the RCC
Designation of director or trustee a. The directors or trustees shall NOT
participate in the determination of their
A vacancy may be temporarily filled from own per diems or compensation.
among the officers of the corporation by b. Corporations vested with public
unanimous vote of the remaining directors or interest shall submit to their
trustees when: shareholders and the Commission, an
1. The vacancy prevents the remaining annual report of the total compensation
directors from constituting a quorum; of each of their directors or trustees.
and
Page 104 of 494

Compensation of Directors as Corporate Duty of Diligence
Officers
The directors should not willfully and knowingly
The position of being Chairman and Vice- vote for or assent to patently unlawful acts of
Chairman, like that of treasurer and secretary, the corporation or act in bad faith or with gross
are not considered directorship positions, but negligence in directing the affairs of the
officership positions that would entitle the corporation. [Sec. 30]
occupants to compensation.
Note: The conditions for the application of Sec.
Likewise, the limitation placed under Sec. 30 31 (now Sec. 30, RCC) of the Corporation
(now Sec. 29, RCC) of the Corporation Code Code require factual foundations to be first laid
that directors cannot receive compensation out in appropriate judicial proceedings. Hence,
exceeding 10% of the net income of the concluding that a person breached fiduciary
corporation would not apply to the duties as an officer and member of the BOD of
compensation given to such positions since it a corporation without competent evidence
is being given in their capacity as officers of the thereon would be unwarranted and
corporation and not as board members. unreasonable. [Republic of the Philippines v.
[Western Institute of Technology v. Salas, G.R. Sandiganbayan (First Division) et al., G.R. No.
No. 113032 (1997)] 166859 (2011)]
8. Disloyalty Duty of Loyalty
Three-Fold Duty General Rule: Where a director, by virtue of

such office, acquires a business opportunity
In this jurisdiction, the members of the BOD which should belong to the corporation,
have a three-fold duty: duty of obedience, thereby obtaining profits to the prejudice of
duty of diligence, and duty of loyalty. such corporation, the director must account for
and refund to the latter all such profits.
1. Duty of Obedience - shall direct the
affairs of the corporation only in Exception: Unless the act has been ratified
accordance with the purposes for by a vote of the stockholders owning or
which it was organized; representing at least two-thirds (2/3) of the
2. Duty of Diligence - shall not willfully outstanding capital stock. [Sec. 33]
and knowingly vote for or assent to
patently unlawful acts of the Doctrine of Corporate Opportunity
corporation or act in bad faith or with
gross negligence in directing the affairs Unless his act is ratified, a director shall refund
of the corporation; and to the corporation all the profits he realizes on
3. Duty of Loyalty - shall not acquire any a business opportunity which:
personal or pecuniary interest in a. Corporation is financially able to
conflict with their duty as such directors undertake
or trustees. [Strategic Alliance b. From its nature, is in line with
Development Corp v. Radstock corporation’s business and is of
Securities Ltd., G.R. No. 178158 practical advantage to it; and
(2009)] c. One in which the corporation has an
interest or a reasonable expectancy.
Duty of Obedience
The rule shall be applied notwithstanding the
The Directors or Trustees and Officers should fact that the director risked his own funds in the
direct the affairs of the corporations only in venture. [Sec. 33]
accordance with the purposes for which it was
organized. By embracing the opportunity, the self-interest
of the officer or director will be brought into
Page 105 of 494

conflict with that of his corporation. Hence, the 10. Solidary Liabilities for Damages
law does not permit him to seize the
opportunity even if he will use his own funds in The directors and trustees are solidarily liable
the venture. [Sundiang & Aquino] for damages arising from the ff.
1. Willfully and knowingly voting for and
A director, trustee, or officer shall be liable as a assenting to patently unlawful acts of
trustee for the corporation and must account the corporation [Sec. 30];
for the profits which otherwise would have 2. Gross negligence or bad faith in
accrued to the corporation if: directing the affairs of the corporation
1. He attempts to acquire, or acquire any [Sec. 30];
interest adverse to the corporation 3. Acquiring any personal or pecuniary
in respect of any matter which has interest in conflict of duty [Sec. 30];
been reposed in them in confidence; 4. Consenting to the issuance of watered
and stocks, or, having knowledge thereof,
2. Upon which, equity imposes a disability failing to file objections with secretary
upon themselves to deal in their own [Sec. 64];
behalf. [Sec. 30] 5. Agreeing or stipulating in a contract to
hold himself liable with the corporation;
Note: Differences between Sec. 30 and Sec. or
33: 6. By virtue of a specific provision of law.
First, while both involve the same subject 11. Personal Liabilities
matter (business opportunity) they concern
different personalities; Sec. 33 is applicable
General rule: Members of the Board, who
only to directors and not to officers, whereas purport to act in good faith for and on behalf of
Sec. 30 applies to directors, trustees and
the corporation within the lawful scope of their
officers.
authority, are not liable for the consequences
of their acts. When the acts are of such nature
Second, Sec. 33 allows a ratification of a
and done under those circumstances, they are
transaction by a self-dealing director by vote of
attributed to the corporation alone and no
stockholders representing at least 2/3 of the
personal liability is incurred [Price v. Innodata
outstanding capital stock.
Phils., Inc., G.R. No. 178505 (2008)].
9. Business Judgment Rule Exception: When sufficient proof exists on

record that the officers acted fraudulently,
As a general rule, when a wrong is committed beyond his authority or when the officer agrees
against a corporation, whether to bring the suit to be personally liable on behalf of the
or not primarily lies within the discretion and corporation.
exercise of business judgment of the BOD.
Note: Members of the BOD who are also
1. But where corporate directors are guilty of a officers are held to a more stringent liability
breach of trust, not of mere error of judgment because they are in-charge of day-to-day
or abuse of discretion, and inta-corporate activities [Campos].
remedy is futile or useless, a shareholder may
institute a derivative suit in behalf of himself The provisions on seizing corporate
and other stockholders and for the benefit of opportunity and disloyalty [Secs. 30 and 33]
the corporation, shall also apply to corporate officers [Price v.
Innodata Phils., Inc., G.R. No. 178505 (2008)].
2. The purpose of the suit is to bring about a
redress of the wrong inflicted directly upon the
corporation and indirectly upon the
stockholders [Bitong v. C.A., G.R. No. 123553
(1998)].
Page 106 of 494

responsible for the violation or
Doctrine of Limited Doctrine of
indispensable to its commission; or
Liability Immunity
2. Anyone who shall aid, abet, counsel,
Shields the Protects a person command, induce, or procure any
shareholders from acting for and in violation of this Code, or any rule,
corporate liability behalf regulation, or order of the Commission
beyond their agreed corporation [Sec. 171-172].
contribution to the being
capital or personally liable for Criminal Liability of Corporate Agents
shareholding in the his authorized
corporation actions Criminal action is limited to the corporate
agents guilty of an act amounting to a crime
and never against the corporation itself.
Strains in Labor Law
Since the BOD is the repository of corporate
powers and acts as the agent of the
The Supreme Court appears to have different
corporation, the directors may be held
views regarding the personal liability of officers
criminally liable [Time Inc. v. Reyes, G.R. No.
when it comes to labor law violations:
L-28882 (1971)].
Absent proof that the manager exceeded his
Corporations, partnerships, associations, and
authority in dealing as regards the employee,
other juridical entities cannot be put to jail.
he cannot be held personally liable for the said
Hence, the criminal liability falls on the human
employee’s monetary compensation [Nicario v.
agent responsible for the violation of the Trust
NLRC, GR No. 125340 (1998)].
Receipts Law [Ong v. CA, G.R. No. 119858
(2003); see also Sec. 13, P.D. 115].
Officers can be held personally liable for 13th
month pay of employees after the corporation
has ceased to exist. This is because the 13. Special Fact Doctrine
officers are deemed to have acted on behalf of
the corporation [Restaurante Las Conchas v. General Rule:
Llego, 372 Phil 697 (1999)].
Majority view: Directors only owe their duty to
the corporation. They owe no fiduciary duty to
12. Responsibility for Crimes
stockholders, but they may deal with each
other at fair and reasonable terms, as if they
Since a corporation is a person by mere legal
were unrelated. No duty to disclose facts
fiction, it cannot be proceeded against
known to the director or officer. [Taylor v.
criminally because it cannot commit a crime in
Wright, 53 N.Y.S. 423 (1945)]
which personal violence or malicious intent is
required.
Note: Minority View (Realistic View)
recognizes the directors’ obligation to the
Note: However, violations of the Code, if it is
stockholders individually as well as collectively,
committed by a corporation, the same may,
and refuses to permit him to profit at the latter’s
after notice and hearing, be dissolved in
expense by the use of information obtained as
appropriate proceedings before the
a result of official position and duties.
Commission [Sec. 170].
Exception:
If the offender is a corporation, the penalty
may, at the discretion of the court, be imposed
Special Facts Doctrine
upon:
Conceding the absence of a fiduciary
1. Such corporation and/or upon its
relationship in the ordinary case, where special
directors, trustees, stockholders,
circumstances or facts are present which make
members, officers, or employees
Page 107 of 494

it inequitable for the director to withhold foregoing insiders. [Sec. 3.8, Securities
information from the stockholder – Regulation Code]
Courts nevertheless hold that the duty to
disclose arises and concealment is fraud 15. Contracts
Examples: a. By Self-Dealing Directors With the
Corporation [Sec. 31]
Concealment of the defendant-purchaser's
identity (the corporate officer had used an General Rule: A contract of the corporation
agent go-between to avoid detection of his with (1) one or more of its directors, trustees,
actions by the seller here) officers or their spouses and relatives within
the fourth civil degree of consanguinity or
Failure to disclose significant facts that affinity is voidable, at the option of such
materially affected the price of the stock. corporation. [Sec. 31]
[Strong v. Repide, 213 U.S. 419 (1909)]
Exception:
14. Inside Information Such contract is VALID if all of the following
conditions are present:
The fiduciary position of insiders, directors, and 1. The presence of such director or
officers prohibits them from using confidential trustee in the board meeting in which
information relating to the business of the the contract was approved was not
corporation to benefit themselves or any necessary to constitute a quorum for
competitor corporation in which they may have such meeting;
a mere substantial interest. 2. The vote of such director or trustee was
not necessary for the approval of the
Since loss and prejudice to the corporation is contract;
not a requirement for liability, the corporation 3. The contract is fair and reasonable
has a cause of action as long as there is unfair under the circumstances; and
use of inside information. 4. In case of corporations vested with
public interest: Material contracts are
It is inside information if it is not generally approved by at least two-thirds (2/3) of
available to others and is acquired because of the entire membership of the board,
the close relationship of the director or officer with at least a majority of the
to the corporation. independent directors voting to
approve the material contract; and
An INSIDER means: 5. In case of an officer: The contract has
1. The issuer; been previously authorized by the
2. A director or officer (or any person BOD. [Sec. 31]
performing similar functions) of, or a
person controlling the issuer; gives or Ratification
gave him access to material
information about the issuer or the In case of absence of the first three* conditions
security that is not generally available above, contract may be ratified if:
to the public; a. Stockholders representing at least 2/3
3. A government employee, director, or of the outstanding capital stock or at
officer of an exchange, clearing agency least 2/3 of the members in a meeting
and/or self-regulatory organization who called for the purpose voted to ratify the
has access to material information contract;
about an issuer or a security that is not b. There is full disclosure of the adverse
generally available to the public; or interest of the directors or trustees
4. A person who learns such information involved is made at such meeting; AND
by a communication from any c. The contract is fair and reasonable
under the circumstances. [Sec. 31]
Page 108 of 494
b. Between Corporations With 1. Full disclosure of the adverse interest
Interlocking Directors [Sec. 32] of the directors/trustees involved is
made on such meeting;
General Rule: A contract between two or more 2. The contract is fair and reasonable
corporations having interlocking directors shall under the circumstances. [Sec. 31-32]
NOT be invalidated on that ground alone. [Sec.
32] J. Capital Affairs
Exception: If contract is fraudulent or not fair 1. Certificate of Stock
and reasonable under the circumstances, such
contract is invalid. [Sec. 32]
a. Nature of the certificate
Interlocking, characterized
Shares of stock so issued are personal
Interlocking directors are persons who serve as property and may be transferred by delivery of
member of the board of directors of two or more the certificate or certificates indorsed by the
competing corporations or corporations owner, his attorney-in-fact, or any other person
engaged in practically the same kind of legally authorized to make the transfer [Sec.
business. 62, RCC].
Interlocking director with nominal and A certificate of stock is —

substantial interest An instrument formally issued by the
corporation with the intention that the same
Nominal Interest – His stockholdings are 20% constitute the best evidence of the rights and
or less of the OCS status of a shareholder
Substantial Interest – His stockholdings An instrument signed by the proper corporate

exceed 20% of the OCS officer acknowledging that the person named in
the document is the owner of a designated
If the interest of the interlocking director in one number of shares of stock. It is prima facie
of the corporations is substantial, while nominal evidence that the holder is a shareholder of a
in the other, the contract shall be VALID, if the corporation [Lao v. Lao, 567 SCRA 558,
following conditions are met, insofar as the 2008)].
latter corporation is concerned:
1. The presence of such director or The paper representative or tangible evidence
trustee in the board meeting in which of the stock itself and of the various interests
the contract was approved was NOT therein.
necessary to constitute a quorum for
such meeting; It is merely evidence of the holder’s interest
2. That the vote of such director or trustee and status in the corporation, his ownership of
was not necessary for the approval of the share represented thereby.
the contract; and
3. That the contract is fair and reasonable It expresses the contract between the
under the circumstances. corporation and the stockholder [Makati Sports
Club v. Cheng, G.R. No. 178523 (2010)].
Where (a) and (b) are absent, the contract can
be ratified by the vote of the stockholders A certificate of stock is NOT —
representing at least 2/3 of the outstanding 1. A condition precedent to the acquisition
capital stock or at least 2/3 of the members in of the rights and status of a shareholder
a meeting called for the purpose voted to ratify 2. A stock in the corporation
the contract, provided that: 3. The equivalent of ownership of the
share it represents
4. Essential to the existence of a share of
stock or the nature of the relation of
Page 109 of 494
shareholder to the corporation [Makati Transfers of Uncertificated Securities; How
Sports Club v. Cheng, G.R. No. Made
178523 (2010)]. Valid as between parties - validly made and
consummated by appropriate book-entries in
b. Uncertificated shares the securities intermediaries, or in the stock
and transfer book held by the corporation or the
An uncertificated share is a subscription duly stock transfer agent.
recorded in the corporate books but has no
corresponding certificate of stock yet issued. A transfer made pursuant to the foregoing has
the effect of delivery of a security in bearer form
Uncertificated shares or securities are those or duly indorsed in blank representing the
evidenced by electronic or similar records [Sec. amount of security or right transferred,
3.14, Securities Regulation Code]. including the unrestricted negotiability of that
security by reason of such delivery.
Added provision in Sec. 62 of the Revised
Corporation Code: Valid as to corporation – when the transfer is
recorded in the books of the corporation so as
The Commission may require corporations to show the names of the parties to the transfer
whose securities are traded in trading markets and the number of shares transferred [Sec.
and, which can reasonably demonstrate their 43.3, Securities Regulation Code].
capability to do so, to issue their securities or
shares of stocks in uncertificated or scripless c. Negotiability; requirements for valid
form in accordance with the rules of the transfer of stocks
Commission.
Theory of Quasi-Negotiability
Notwithstanding Sec. 62, RCC (Certificate of Although a stock certificate is sometimes
Stock and Transfer of Shares), a corporation regarded as quasi-negotiable, in the sense that
whose securities are registered pursuant to the it may be transferred by delivery, it is
SRC or listed on securities exchange may: wellsettled that the instrument is non-
negotiable, because:
If so resolved by the BOD and agreed by a 1. The holder thereof takes it without
shareholder, investor or securities prejudice to such rights or defenses as
intermediary, issue shares to, or record the the registered owner or creditor may
transfer of some or all its shares into the name have under the law
of such shareholders, investors or, securities 2. Except insofar as such rights or
intermediary in the form of uncertified defenses are subject to the limitations
securities. imposed by the principles governing
estoppels [Republic v. Sandiganbayan,
The use of uncertified securities in these G.R. Nos. 107789 & 147214, April 30,
circumstances shall be without prejudice to the 2003].
rights of the securities intermediary
subsequently to require the corporation to Certificates of stock are not negotiable
issue a certificate in respect of any shares instruments. Consequently —
recorded in its name; and 1. A transferee under a forged
assignment acquires no title which can
If so provided in its articles of incorporation and be asserted against the true owner
by-laws, issue all of the shares of a particular unless the latter’s negligence has been
class in the form of uncertificated securities such as to create an estoppel against
and subject to a condition that investors may him
not require the corporation to issue a certificate 2. If the owner of the certificate has
in respect of any shares recorded in their name endorsed it in blank, and it is stolen
[Sec. 43, Securities Regulation Code]. from him, no title is acquired by on
innocent purchaser for value [De los
Page 110 of 494
Santos v. Republic, G.R. No. L-4818 deed of assignment is not a fatal flaw which
(1955)]. renders the transfer invalid.
Street Certificate Requisites for a valid transfer per Sec. 62,

When a stock certificate is endorsed in blank RCC:
by the owner thereof, it constitutes what is 1. Between the parties:
termed as street certificate. 2. Delivery
3. Indorsement
Upon its face, the holder is entitled to demand 4. To be valid as to third persons:
its transfer into his name from the issuing Recorded in the books of the
corporation. corporation [Republic v. Estate of Hans
Menzi, G.R. No. 152578 (2005)].
Such certificate is deemed quasi-negotiable,
and as such the transferee thereof is justified The execution of a deed of sale does not
in believing that it belongs to the holder and necessarily make the transfer effective. The
transferor [Santamaria v. Hongkong and delivery of the stock certificate duly indorsed by
Shanghai Banking Corporation, 89 Phil. 780, the owner is the operative act that transfers the
788-789 (1951)]. shares. The absence of delivery is a fatal
defect which is not cured by mere execution of
Requirements for Valid Transfer of Stocks a deed of assignment [Rural Bank of Lipa City
For a valid transfer of stocks, the requirements v. CA, G.R. No. 124535 (2001)].
are as follows:
1. There must be delivery of the stock The stock and transfer book is the basis for
certificate; ascertaining the persons entitled to the rights
2. The certificate must be endorsed by and subject to the liabilities of a stockholder.
the owner or his attorney-in-fact or Where a transferee is not yet recognized as a
other persons legally authorized to stockholder, the corporation is under no
make the transfer; and specific legal duty to issue stock certificates in
3. To be valid against third parties, the the transferee’s name [Ponce v. Alsons
transfer must be recorded in the books Cement Corp., G.R. NO. 139802 (2002)].
of the corporation (i.e., showing the
names of the parties to the transaction, Citing Hager v. Bryan (1911): A mandamus
the date of the transfer, the number of should not issue to compel the secretary of a
the certificate or certificates and the corporation to make a transfer of the stock on
number of shares transferred) [Sec. 62, the books of the company, unless it
RCC] [Bitong v. CA, G.R. No. 123553 affirmatively appears that he has failed or
(1998)]. refused so to do, upon the demand either:
1. Of the person in whose name the stock
No shares of stock against which the is registered, or
corporation holds an unpaid claim shall be 2. Of some person holding a power of
transferable in the books of the corporation attorney for that purpose from the
[Sec. 62, RCC]. registered owner of the stock.
The Revised Corporation Code acknowledges The purpose of registration is two-fold:

that the delivery of a duly indorsed stock 1. To enable the transferee to exercise all
certificate is sufficient to transfer ownership of the rights of a stockholder, including
shares of stock in stock corporations. Such the right to vote and to be voted for, and
mode of transfer is valid between the parties. 2. To inform the corporation of any
change in share ownership so that it
In order to bind third persons, however, the can ascertain the persons entitled to
transfer must be recorded in the books of the the rights and subject to the liabilities of
corporation. Clearly then, the absence of a a stockholder [Batangas Laguna
Page 111 of 494

Tayabas Bus Co. v. Bitangas, G.R. No. It is not the domicile of the owner of a certificate
137934 (2001)]. but the domicile of the corporation which is
decisive [Chua Guan v. Samahang
Until challenged in a proper proceeding, a Magsasaka, Inc. (1935)].
stockholder of record has a right to participate
in any meeting. The residence of the corporation is the place
where the principal office of the corporation is
His vote can be properly counted to determine located as stated in its AOI, even though the
whether a stockholders’ resolution was corporation has closed its office therein and
approved, despite the claim of the alleged relocated to another place [Hyatt Elevators and
transferee. Escalators Corp. v. Goldstar Elevator Phils.,
Inc., G.R. No. 161026 (2005)].
On the other hand, a person who has
purchased stock, and who desires to be Exception: In property taxation – the situs of
recognized as a stockholder for the purpose of intangible property, such as shares of stocks,
voting, must secure such a standing by having is at the domicile or residence of the owner.
the transfer recorded in the corporate books.
Exception to the Exception:
Until the transfer is registered, the transferee is 1. When a nonresident alien has shares
not a stockholder, but an outsider of stock in a domestic corporation, then
the situs will be in the Philippines; and
d. Issuance 2. For purposes of the estate tax, the
gross estate of a resident decedent,
Full payment whether citizen or alien, or a citizen
decedent, whether resident or
General Rule: No certificate of stock shall be nonresident, includes his intangible
issued to a subscriber until the full amount of personal property wherever situated
his subscription together with interest and [De Leon]
expenses (in case of delinquent shares), if any
is due, has been paid [Sec. 63, RCC]. 2. Watered Stocks
Exception: Where it was the practice of the a. Definition

corporation since its inception to issue Watered stock are shares issued as fully paid
certificates of stock to its individual when in truth —
stockholders for unpaid shares of stock and to 1. No consideration is paid in any form; or
give full voting power to shares fully paid 2. The consideration received is known to
[Baltazar v. Lingayen Gulf Electric Power be less than the par value or issued
Company, G.R. No. L-16236 (1965)]. value of the shares [Sec. 64, RCC].
Payment pro-rata Watered stocks can either be par or no-par

value shares.
The entire subscription must be paid first
before the certificates of stock can be issued. A watered stock is a stock issued in exchange
Partial payments are to be applied pro rata to for:
each share of stock subscribed [Nava v. Peers 1. A consideration less than its par value
Mktg. Corp., G.R. No. L-28120 (1976)]. or issued price; and
2. A non-cash consideration valued in
e. Situs of the Shares of Stock excess of its fair value [Herbosa, 2019].
General Rule: The situs of shares of stock is Scope

the country where the corporation is domiciled Watered stocks include the following:
[Wells Fargo Bank v. CIR, G.R. No. L-46720 1. Issued without consideration (bonus
(1940)]. share)
Page 112 of 494
2. Issued as fully paid when the 3. Having knowledge of the insufficient
corporation has received less sum of consideration, does not file a written
money than its par or issued value objection with the corporate secretary.
(discounted share)
3. Issued for consideration other than The director or officer shall be liable to the
actual cash (i.e., property or services), corporation or its creditors, SOLIDARILY with
the fair valuation of which is less than the stockholder concerned to the corporation
its par or issued value and its creditors for the difference in value [Sec.
4. Issue stock dividend when there are no 64].
sufficient retained earnings or surplus
profit to justify it. Value received at time of Php XXX
issuance of the stock
Note: Subsequent increase in the value of the
property used in paying the stock does not do Par or issued value (XXX)
away with the watered stocks, nor cure the Liability for watered stock Php XXX
defect in issuance. The existence of watered
stocks is determined at the time of issuance of Personal liability of corporate directors,
the stock. trustees or officers attaches when they consent
to the issuance of watered-down stocks or
Rationale Behind Prohibition when, having knowledge of such issuance, do
Stock watering is prohibited because: not file with the corporate secretary their written
1. Corporation is deprived of needed objection [SPI Technologies Inc. V. Mapua,
capital and the opportunity to market its G.R. No. 191154 (2014)].
securities to its own advantage
2. Existing and future stockholders who c. Trust Fund Doctrine for Liability for
are also injured by the dilution of their Watered Stocks
proportionate interests in the
corporation Where the corporation issues watered stock
3. Present and future creditors who are and thereby assumes an ostensible
injured as the corporation is deprived of capitalization in excess of its real assets, the
the assets or capital and reduces the transaction necessarily involves —
value of the corporate assets, which 1. The misleading of subsequent
stand as a substitute for the creditors; and
stockholders’ personal liability to them 2. A constructive fraud upon creditors,
4. Persons who deal with it or purchase whether done with that purpose in mind
its securities who are deceived or not
because stock watering is invariable
accompanied with misleading Hence, it is held that recovery may be had by a
corporate accounts and financial creditor in such case, even though the
statements corporation itself has no cause of action
against the stockholders.
b. Liability of directors or officers [Sec. 1. Some of the earlier decisions put the
64] right of recovery in such a case upon
the so-called “trust fund doctrine.”
Any director or officer of a corporation who: 2. The creditors’ right of action to compel
1. Consents to the issuance of stocks for the making good of the representation
a consideration less than its par or as to the corporation’s capital is based
issued value; on fraud, and the trust fund doctrine is
2. Consents to the issuance of stocks for only another way of expressing the
a consideration other than cash, valued same underlying idea [De Leon].
in excess of its fair value; or
Despite the view of foreign authors that the
fraud theory is the prevailing view, in the
Page 113 of 494

Philippine jurisdiction, the trust fund doctrine 1. Become delinquent; and
on watered stock prevails. 2. Subject to sale under Sec. 67 of RCC,
unless the BOD orders otherwise.
3. Payment of Balance of Subscription
Requisites for a valid call
Time when the balance of the subscription
should be paid: SEC opined on July 21, 1976 that the following
1. On the date specified in the are the requisites for a valid call:
subscription contract, without need of 1. It must be made in the manner
demand or call. prescribed by law;
2. If no date of payment has been 2. It must be made by the BOD; and
specified, on the date specified on the 3. It must operate uniformly upon all the
call made by the BOD shareholders.
3. If no date of payment has been
specified on the call made, within 30 There are two instances when call is not
days from the date of call; and necessary to make the subscriber liable for
4. When insolvency supervenes upon a payment of the unpaid subscription:
corporation and the court assumes
jurisdiction to wind it up, all unpaid When, under the terms of the subscription
subscriptions become payable on contract, subscription is payable, not upon call,
demand, and are at once recoverable, but immediately, or on a specified day, or when
without necessity of any prior call. it is payable in installments at specified times;
[Sec. 66, RCC] and
a. Call by Board of Directors
If the corporation becomes insolvent, which
The BOD of any stock corporation may, at any makes the liability on the unpaid subscription
time: due and demandable, regardless of any
1. Declare due and payable to the stipulation to the contrary in the subscription
corporation unpaid subscriptions to the agreement [Villanueva].
capital stock; and
2. Collect the same or such percentage b. Notice Requirement
thereof, in either case with accrued
interest, if any, as it may deem Where call is necessary, notice must be given
necessary. to the stockholder concerned. A call without
notice to the subscriber is practically no
When Payment Should be Made call at all.
Payment shall be made: The notice is regarded as a condition

a. On the date specified in the contract of precedent to the right of recovery. It must,
subscription; or therefore, be alleged and proved to maintain an
b. On the date stated in the call. action for the call [Lingayen Gulf Electric Power
Co., Inc. v. Baltazar, G.R. No. L-4824 (1965)].
Failure to pay on such date shall —
1. Render the entire balance due and The right to notice of call, however, may be
payable; and waived by the subscriber [De Leon].
2. Make the stockholder liable for interest
at the legal rate on such balance, 4. Sale of Delinquent Shares
unless a different rate of interest is
provided for in the by-laws. Delinquent Shares - shares in which the
corresponding subscription or balance remains
If within 30 days from said date no payment is unpaid after a grace period of 30 days from —
made, all stocks covered by said subscription a. The date specified in the contract of
shall — subscription; or
Page 114 of 494

b. The date stated in the call made by the 2. The date, time and place of the sale,
BOD. which shall not be less than 30 days
nor more than 60 days from the date
All stocks covered by said subscription shall the stocks became delinquent, which is
thereupon become delinquent and shall be 30 days after the date specified in the
subject to delinquency sale, unless the BOD contract of subscription or on the date
orders otherwise [Sec. 67]. stated in the call.
a. Effect of Delinquency Notice of sale [Sec. 67]
Effects of Delinquency If the BOD resolves to proceed with the sale:

1. Notice of sale and a copy of the
Generally, delinquency suspends the rights of resolution shall be sent to every
a subscriber, except the right to receive delinquent stockholder either
dividends personally or by registered mail.
1. No delinquent stock shall be voted for 2. Notice of sale shall furthermore be
2. No delinquent stock shall be entitled to published once a week for 2
vote or to representation at any consecutive weeks in a newspaper of
stockholders’ meeting. general circulation in the province or
3. Delinquent stock shall be subject to city where the principal office of the
delinquency sale. corporation is located.
A subscriber acquires all the rights of a Auction sale

shareholder at the point of subscription. His
political and economic rights are not impaired Procedure for delinquency sale [Sec. 67,
by the fact that he has unpaid subscription. RCC]
1. Call for payment made by the BOD.
Delinquency suspends the rights of a 2. Notice of call served on each
subscriber, except the right to receive stockholder.
dividends. 3. Notice of delinquency issued by the
BOD upon failure of the stockholder to
The dividends corresponding to such shares, if pay within 30 days from date specified.
any, shall be applied against the unpaid 4. Service of notice of delinquency on the
amount. [Herbosa, 2019]. non-paying subscriber, PLUS
publication in a newspaper of general
Note: The holder thereof shall NOT be entitled circulation in the province or city where
to any of the rights of a stockholder except the the principal office of the corporation is
right to dividends. But the dividends it will located, once a week for 2 consecutive
receive will be subject to Sec. 42, RCC, that is weeks.
1. Cash dividends shall first be applied to
the unpaid balance on the subscription Note: Requirements on notice and publication
plus costs and expenses; and are mandatory. Lacking such requirements,
2. Stock dividends shall be withheld until the stockholder may question the sale as
the unpaid subscription is fully paid. provided under Sec. 67, RCC.
b. Call by Resolution of the Board of Public Auction

Directors
The highest bidder is one who is willing to pay
The BOD may, by resolution, order the sale of the balance of the subscription for the least
delinquent stock and shall specifically state — number of shares.
1. The amount due on each subscription
plus all accrued interest, and The stock so purchased shall be transferred to
such purchases in the books of the corporation
Page 115 of 494

and a certificate of such stock shall be issued of the stock certificate or certificates, indorsed
in his favor. by
a. The owner; or
The remaining shares, if any, shall be credited b. The owner’s attorney-in-fact; or
in favor of the delinquent stockholder who shall c. Other person legally authorized to
likewise be entitled to the issuance of a make the transfer [Sec. 62].
certificate of stock covering such shares.
Sale of partially paid shares
If there are no bidders, the corporation must bid
for the whole number of shares regardless of No shares of stock against which the
how much the shareholders has paid. Such corporation holds any unpaid claim shall be
stocks will pertain to the corporation as fully transferable in the books of the corporation
paid treasury stocks. [Sec. 62].
Payment by Delinquent Stockholder A corporation may refuse to acknowledge and

register a sale or assignment of shares which
The delinquent stockholder may stop the are not fully paid and may continue to hold the
auction by paying to the corporation on or original subscriber liable on the payment of the
before the date specified for the sale the subscription.
balance due on his subscription, plus accrued a. However, the above principle in
interest, costs of advertisement and expenses Section 62 cannot be utilized by the
of the sale. corporation to refuse to recognize
ownership over pledged shares
Otherwise, the public auction shall proceed purchased at public auction.
and the delinquent shares shall be sold to the b. The term “unpaid claims” refers to “any
bidder that will pay the full amount of the unpaid claims arising from unpaid
balance of subscription with accrued interest, subscription, and not to any
costs and expenses of the sale, for the smallest indebtedness which a subscriber or
number of shares or fraction of a share. stockholder may owe the corporation
arising from any other transactions
Irregularities in the delinquency sale [Sec. [China Banking Corp. v. CA, G.R. No.
68] 117604 (1997)].
Action to recover delinquent stock must be on Sale of a portion of shares not fully paid
the ground of irregularity or defect in:
a. the notice of sale or The SEC has opined on several occasions that
b. in the sale itself of delinquent stock a stockholder who has not paid the full amount
of his subscription cannot transfer part of his
Unless, party seeking to recover first pays or subscription in view of the indivisible nature of
tenders to the party holding the stock the sum a subscription contract.
for which the same was sold, with interest from
the date of sale at the legal rate. Rationale Behind Prohibition
The action must be commenced within 6 The reason behind the principle of disallowing
months from the date of sale. transfer of not fully paid subscription to several
transferee is that it would be difficult to
5. Alienation of Shares determine:
1. Whether or not the partial payments
Sale of fully paid shares made should be applied as —
a. Full payment for the
Shares of stock so issued are personal corresponding number of
property and may be transferred by the delivery shares which can only be
covered by such payment; or
Page 116 of 494

b. Proportional payment to each Restrictions on the Right to Encumber
and all of the entire number of Shares
subscribed shares
Restriction Valid/Invalid
2. The unpaid balance to be assumed by
each transferee [Villanueva]. Absolutely prohibits INVALID
the stockholders
Sale of all of shares not fully paid from pledging or It would be violative
mortgaging their of the statutory right
The SEC has opined that the entire shares without the of the stockholders
subscription, although not yet fully paid, may consent of the BOD to encumber shares
be transferred to a single transferee, who of stock as allowed
because of the transfer must assume the in Sec. 54
unpaid balance.
Merely allows the VALID and binding
It is necessary, however, to secure the consent corporation or
of the corporation, since the transfer of existing stockholders
subscription rights and obligations to accept the offer
contemplates a novation of contract which within the option
under Article 1293 of the Civil Code cannot be period, and
made without the consent of the creditor thereafter, if no one
[Villanueva]. accepts the offer,
the stockholder is
5. Alienation of Shares free to pledge or
mortgage his shares
a. Allowable Restrictions on the Sale of in favor of any 3rd
Shares party
General Rule: Free Transferability of Shares Right to Vote of Secured Creditors and
Shares of stock so issued are personal Administrators
property and may be transferred [Sec. 62]
General Rule: In case a stockholder grants
Exception: In CLOSE corporations, security interest in his or her shares in stock
restrictions on the right to transfer shares may corporations, the stockholder-grantor shall
be provided in the Articles of Incorporation, have the right to attend and vote at meetings of
bylaws, and certificates [Sec. 97]. Note: The stockholders
SEC has allowed corporations other than close
corporations to provide for restrictions on the Exception: Unless the secured creditor is
right to transfer share expressly given by the stockholder-grantor
Involuntary dealings such right in writing which is recorded in the
appropriate corporate books [Sec. 54].
Right to Encumber
Executors, administrators, receivers, and other
Shares Shares of stock are personal property, legal representatives duly appointed by the
and the owner has an inherent right, as incident court may attend and vote on behalf of the
of ownership to transfer the same at will, which stockholders or members without need of any
would include the power to encumber the written proxy [Sec. 54].
shares.
Attachment, Execution and Other
The right of a stockholder to pledge, mortgage Involuntary Dealings on Shares
or otherwise encumber his shares is
recognized under Sec. 54 of the RCC which Attachments of shares of stock are not
regulates the manner of voting on pledged or included in the term “transfer” as provided in
mortgaged shares. [Section 62, RCC]. Both the Revised Rules of
Page 117 of 494
Court and [Revised Corporation Code] do not There is a presumption of equality of the rights
require annotation in the corporation’s STB for and features of shares when nothing is
the attachment of shares to be valid and expressly provided to the contrary.
binding on the corporation and third parties a. Although a corporation has the power
[Chemphil Export & Import Corp. v. CA, 251 to classify its shares of stock, provide
SCRA 257 (1995)]. for preferences and other conditions,
no presumption should exist to
A bona fide transfer of shares, not registered in distinguish one share from another.
the corporate books, is not valid as against a b. Sec. 6 of the RCC now requires that the
subsequent lawful attachment of said shares, distinguishing features be stated also
regardless of whether the attaching creditor in the Certificate of Stock
had actual notice of said transfer or not. All
transfers not so entered on the books of the b. Requisites of a Valid Transfer
corporation are absolutely void as against third
parties; not because they are without notice or Same as requirements for valid transfer of
fraudulent in law or fact, but because they are stocks.
made so void by statute [Garcia v. Jomouad,
323 SCRA 424 (2000)]. No transfer shall be valid, except as between
the parties, until the transfer is recorded in the
Bias Against Voluntary Sales books of the corporation showing:
a. The names of the parties to the
By the strict application of Sec. 63 of the transaction
Corporation Code [now Sec. 62, RCC] to cover b. The date of the transfer
only the sale, assignment, or absolute c. The number of the certificate or
disposition of shares of stock, the SC has certificates and
placed a bias against voluntary sales, d. The number of shares transferred [Sec.
assignments or dispositions of shares of stock 62].
vis-à-vis pledges, mortgages, attachment or
levy thereof. The failure to register a sale or disposition of
shares of stock in the books of the corporation
To be valid and binding on third parties, the would render the same invalid to all persons,
voluntary sale, assignment or disposition of including the attaching creditors of the seller
shares requires the essential element of [Uson v. Diosomito, 61 Phil. 535 (1935)].
registration in the stock and transfer book
6. Corporate Books and Records
Otherwise the sale, assignment or disposition
is considered void as to third parties, even Every corporation shall keep and carefully
when they have actual notice. preserve at its principal office all information
including but not limited to:
In contrast, when it comes to pledge, 1. Articles of incorporation and by-laws
mortgage, encumbrance, attachment or levy of and all their amendments;
shares, registration thereof in the stock and 2. Current ownership structure and voting
transfer book is not essential either for validity rights of corporation
or as a species of notifying third parties 3. Names and addresses of all members
[Villanueva]. of BOD/trustees and the executive
officers
The doctrine of equality of shares states that 4. Record of all business transactions
all stocks issued by the corporation are 5. Record of resolutions of BOD/Trustees
presumed equal with the same privileges and and of stockholders/members
liabilities, provided that the Articles of 6. Copies of latest reportorial
Incorporation is silent on such differences [Sec. requirements submitted to the
6]. Commission; and
Page 118 of 494

7. Minutes of all meetings of appropriate by the Department of Finance, the
stockholders/members or of financial statements may be certified under
BOD/trustees. oath by the treasurer and the president.
Stock Corporations [Sec. 73] a. Right to Inspect Corporate Records
Stock corporations must also keep:

Who May Inspect
1. Books that record all business
transactions of the corporation which
Corporate records shall be open to inspection
shall include contract, memoranda, by any director, trustee, stockholder or
journals, ledgers, etc;
member of the corporation.
2. Minute book for meetings of the
stockholders/members;
A requesting party who is not a stockholder or
3. Minute book for meetings of the
member of record, or is a competitor, director,
board/trustees; officer, controlling stockholder or otherwise
4. Stock and transfer book, which shall
represents the interests of a competitor shall
contain: have no right to inspect or demand
a. A record of all stocks in the
reproduction of corporate records.
names of the stockholders
alphabetically arranged;
The inspecting or reproducing party shall
b. The installments paid and remain bound by confidentiality rules under
unpaid on all stocks for which
prevailing laws, such as the rules on trade
subscription has been made, secrets or processes under the Intellectual
and the date of payment of any
Property Code, Data Privacy Act, and the
installment; Securities Regulation Code.
c. A statement of every
alienation, sale or transfer of Manner and Time of Inspection
stock made, the date thereof,
by and to whom made; and Inspection may be in person or by a
d. Such other entries as the by-
representative at reasonable hours on
laws may prescribe
business days, and a demand in writing may be
made for copies of such records or excerpts
Note: The duty to keep these books is
from said records.
imperative and mandatory. The stockholder
can likewise inspect the financial statements of
Directors of a corporation have the unqualified
the corporation [Sec. 73]. right to inspect the books and records of the
corporation at all reasonable times.
Financial Statements [Sec. 74]
The right of inspection is not to be denied on
A corporation shall furnish a stockholder or the ground that the director or shareholder is
member its most recent financial statement
on unfriendly terms with the officers of the
within 10 days from receipt of written request. corporation whose records are sought to be
inspected.
At a regular meeting, the Board shall present a
financial report of the operations of the
A director or stockholder can make copies,
corporation for the preceding year, which shall abstracts, and memoranda of documents,
include financial statements duly signed and
books, and papers as an incident to the right of
certified in accordance with the Code.
inspection, but cannot, without an order of a
court, be permitted to take books from the
Exception: However, if the total assets or total
office of the corporation.
liabilities of the corporation is less than Six
hundred thousand pesos (P600,000.00), or
However, a director or stockholder does not
such other amount as may be determined have any absolute right to secure certified
Page 119 of 494
copies of the minutes of the corporation until Exception:
these minutes have been written up and If such refusal is made pursuant to a resolution
approved by the directors [Veraguth v. Isabela or order of the BOD/BOT, the liability shall be
Sugar, G.R. No. L-37064 (1932)]. imposed upon the directors or trustees who
voted for such refusal:
A stockholder of a sequestered company has
the right to inspect and/or examine the records Defenses
of the corporation pursuant to Sec. 74 of the It shall be a defense to any action under
Corporation Code (now Sec. 73, RCC) [Africa Section 73:
v. PCGG, G.R. No. 83831 (1992)]. 1. That the person demanding to examine
has improperly used any information
b. Effect of Refusal to Inspect Corporate secured through any prior examination
Records 2. That the person was not acting in
good faith or for a legitimate purpose
If the corporation denies or does not act on a in making the demand to examine
demand for inspection, the aggrieved party 3. That the person is a competitor,
may report such to the Commission. director, officer, controlling stockholder
or otherwise represents the interests of
The Commission shall conduct a summary a competitor.
investigation and issue an order directing the
inspection. Remedies when inspection is refused
a. Mandamus
Refusal to allow inspection is a criminal b. Injunction
offense. Such refusal, when done in violation of c. Action for damages
Sec. 74(4) of the Corporation Code (now Sec. d. File an action under Sec. 161 to impose
73, RCC), properly falls within the purview of a penal offense by fine and/or
Sec. 144 of the same code and thus may be imprisonment.
penalized as an offense [Yujuico and Sumbilla
v. Quiambao and Pilapil, G.R. No. 180416 Under the Rules of Court, the writ of
(2014)]. (please note that the Code’s mandamus should be granted only if the court
provisions have been changed under the RCC) is satisfied that justice so requires [Sec. 8, Rule
65].
General Rule:
Any officer or agent of the corporation who K. Dissolution and Liquidation
shall refuse to allow inspection shall be liable
to the director, trustee, stockholder or member
for damages, and shall be punished with a 1. Modes of dissolution
fine: [Sec. 73]
1. Ranging from P10,000.00 to Based on jurisprudence, the methods of
P200.000.00 effecting dissolution as prescribed by law are
2. When the violation is injurious or exclusive, and a corporation cannot be
detrimental to the public, the penalty is dissolved except in the manner prescribed by
a fine ranging from P20.000.00 to law [De Leon].
P400.000.00 [Sec. 161]
Dissolutions may be either 1) voluntary or 2)
Because the obligations provided for in Sec. involuntary
73, RCC fall on the corporation, violation of the
same is done by the corporation; thus, criminal
action based on such violation can only be Voluntary Involuntary
maintained against corporate officers or other
such persons acting on behalf of the Voluntary surrender Expiration of the
corporations. of its charter by the shortened corporate
vote of the BOD/T term [Sec 36
Page 120 of 494

Voluntary Involuntary a. Voluntary and involuntary dissolution
and the 1. Where no creditors are affected [Sec.

stockholders/membe 134]
rs where no
creditors are This type of dissolution is initiated by the
affected [Sec 134 corporation. It does not prejudice, or is not
consented by creditors.
By the judgment of By legislative
the SEC after enactment Procedure
hearing of petition If dissolution of a corporation does not
for voluntary prejudice the rights of any creditor (Sec. 134):
dissolution, where a. Notice of the meeting should be given
creditors are to the stockholders or members by
affected personal delivery, registered mail, or by
any means authorized under its bylaws
at least 20 days prior to the meeting.
Amending the AOI to Failure to organize b. The notice of meeting should also be
shorten its term [Sec and commence published once prior to the meeting
136] business within 5 1. Notice shall contain the time,
years from place and object of the meeting
incorporation [Sec 2. in a newspaper published in
21 the place where the principal
office of said corporation is
In case of a Cessation of located, or if no newspaper is
corporation sole, by business for 5 years published in such place, then in
submitting to the [Sec 21 a newspaper of general
SEC a verified circulation in the Philippines.
declaration of the c. The resolution to dissolve must be
dissolution for approved by the majority of the BOD/T
approval and approved by at least the majority of
the Outstanding Capital Stock or
By merger or By order of the SEC majority of the members.
consolidation on grounds under d. The corporation must submit the
existing laws [Sec following to the SEC:
138] 1. A verified request for
dissolution stating the
By order of the
following:
Courts following a
a. the reason for the
quo warranto
dissolution
proceeding, a
b. the form, manner, and
proceeding involving
time when the notices
a financially
were given
distressed
c. names of the
corporation, or for
stockholders and
grounds under
directors or members
existing laws.
and trustees who
approved of the
Note: Where the veil of corporate fiction is dissolution
pierced, it does not operate as a cause for the d. the date, place, and
dissolution of the corporation. time of the meeting in
which the vote was
made,
Page 121 of 494
e. date of publication a. A petition shall be filed with the SEC
2. Copy of the resolution certified containing the following:
by the majority of the BOD/T 1. signature by a majority of its
and countersigned by the BOD/T or other officers having
secretary. management of its affairs;
3. Proof of publication 2. verified by its president, or
4. Favorable recommendation secretary or one of its director
from the appropriate regulatory or trustees;
agency, when necessary 3. all claims and demands against
5. The signed and countersigned the corporation; and
copy will be filed with the SEC 4. resolved upon by affirmative
and the latter will issue the vote of the stockholders
certificate of dissolution. representing at least ⅔ of the
Outstanding Capital Stock or ⅔
Withdrawal of the request [Sec. 137] of members;
b. The corporation must submit the
The corporation may withdraw its verified following to the SEC.
request for dissolution within 15 days from 1. The petition for dissolution
receipt by the SEC. Otherwise, the SEC shall stating the following:
approve the request and issue the certificate of a. the reason for the
dissolution. dissolution;
b. the form, manner, and
Effectivity of the dissolution [Sec. 134] time when the notices
were given;
Dissolution shall take effect upon the issuance c. the date, place and
of the certificate of dissolution by the SEC. time of the meeting in
which the vote was
Favorable recommendation by the made
appropriate agency required [Sec. 134] 2. A copy of the resolution
authorizing the dissolution,
No application of dissolution will be approved certified by the majority of the
without the favorable recommendation of the BOD/T and countersigned by
appropriate government agency for: the secretary.
1. Banks, 3. A list of all its creditors
2. banking and quasi-banking institutions, c. If the petition is sufficient in form and
3. pre-need, insurance and trust substance, the SEC shall issue an
companies, order fixing the date on or before which
4. non-stock savings and loans objections to the petition may be filed.
associations (NSSLA), Such date shall not be less than 30
5. pawnshops, and days nor more than 60 days after the
6. other financial intermediaries entry of the order.
d. A copy of the order shall be published
2. Where creditors are affected [Sec. at least once a week for 3 consecutive
135] weeks in a newspaper of general
circulation published in the municipality
This covers a case where the corporation or city of the corporation’s principal
petitions for its dissolution which may prejudice office. If none, in a newspaper of
the rights of creditors or are not consented by general circulation in the Philippines. A
all of them. Here, the corporation is not under similar copy shall be posted for 3
financial distress or in a state of insolvency. In consecutive weeks in 3 public places in
those cases, the corporation must file a petition such municipality or city.
for rehabilitation or liquidation in court e. A hearing of any issue or objections
[Herbosa, 2019]. raised shall be conducted 5 days after
Page 122 of 494

the lapse of the expiration of the time to
Shortening of the Expiration of the
file objections.
Corporate Term Original Term
f. If the objections are insufficient or the
material facts in the petition are true, corporation, ipso corporate term, and
judgment shall be rendered dissolving facto, once the such term has
the corporation and directing the shortened term has expired, the
disposition of assets. The judgment arrived corporation may file
may include the appointment of a a petition for revival
receiver. of corporate
1. As long as 2/3 vote is obtained, existence.
no member/ stockholder can
prevent such dissolution unless
the majority stockholders acted 4. Withdrawal of Dissolution [Sec. 137]
in bad faith. The latter may be
held liable for damages A withdrawal of the request for dissolution shall
[Campos]. be:
2. Even where there are creditors a. Made in writing;
of the corporation who may be b. Duly verified by any incorporator,
prejudiced by the dissolution, it director, trustee, shareholder, or
is still possible for the member;
corporation to terminate its c. Signed by the same number of
existence prior to the expiration incorporators, directors, trustees,
of its term, provided said shareholders, or members necessary
creditors are given the to request for dissolution as set forth in
opportunity to present their Sec. 133-136;
claims and objections so that d. Submitted no later than fifteen (15)
their interests may be days from receipt by the Commission
protected [Campos]. of the request for dissolution.
3. By shortening of corporate term [Sec. A withdrawal of the petition for dissolution shall
136] be in the form of a motion and similar in
substance to a withdrawal of request for
A voluntary dissolution may be effected by dissolution but shall be verified and filed prior
amending the AOI to shorten the corporate to publication of the order setting the deadline
term under Sec 16. for filing objections to the petition.
Ipso Facto Dissolution SEC Action

Upon receipt of a withdrawal of request for
Upon approval of the expired shortened term, dissolution, the Commission shall withhold
the corporation shall be deemed dissolved action on the request for dissolution and shall,
without any further proceedings. The after investigation:
corporation shall be deemed dissolved without a. Make a pronouncement that the
any further proceedings, taking effect on the request for dissolution is deemed
day following the last day of the corporate term. withdrawn;
b. Direct a joint meeting of the board of
Shortening vs. Expiration [Divina] directors or trustees and the
stockholders or members for the
purpose of ascertaining whether to
Shortening of the Expiration of the proceed with dissolution; or
Corporate Term Original Term c. Issue such other orders as it may deem
appropriate.
Has the effect of Where a corporation
dissolving the elects to retain its
Page 123 of 494

5. Involuntary dissolution third persons or take away the vested
rights of its creditors [De Leon].
By Expiration of Corporate Term
Note: Thus, except for the expiration of
The RCC provides that a corporation shall its term, no dissolution can be effective
have perpetual existence. The AOIs of existing without some act of the State [Daguhoy
corporations shall be deemed amended to Enterprises v. Ponce, G.R. No. L-6515
reflect their perpetual term. The exception is (1954)].
when the AOIs of corporations created under
the effectivity of this Code provide for a specific Non-Use of Corporate Charter [Sec 21; Sec
period [Sec 11]. 138(a)]
If a corporation fails to formally organize and
An existing corporation may opt out of the rule commence the transaction of its business or
on perpetual existence by notifying the construction of its works within 5 years, its
Commission, provided it was approved by certificate of incorporation shall be deemed
shareholders, and without prejudice to the revoked, its corporate powers shall cease, and
appraisal right of dissenting stockholders the corporation shall be deemed dissolved
[Herbosa, 2019]. When such term has expired, [Sec. 21].
a petition for revival of corporate existence may
be filed [Divina]. Dissolution in this case is automatic [Campos].
Legislative Dissolution Formal organization includes not only the

The inherent power of Congress to make laws adoption of the by-laws but also the
carries with it the power to amend or repeal establishment of the body which will administer
them. Involuntary corporate dissolution may be the affairs of the corporation and exercise its
effected through the amendment or repeal of powers
the Revised Corporation Code [implied from
Sec. 184, De Leon]. By-laws should be adopted within one month of
receipt of official notice of the issuance of the
The limitations on the power to dissolve certificate of incorporation, otherwise the
corporations by legislative enactment are as certificate may be suspended or revoked [PD
follows: 902-A, Sec. 6 (i)(5)].
a. Under the Constitution, the
amendment, alteration, or repeal of the Continuous Inoperation of Corporation
corporate franchise of a public utility [Sec 21; 138(b)]
shall be made only “when the common
good so requires”; If a corporation commenced its business but
b. Under Sec. 84 of the Code, it is fails to continue operations after least 5
provided that: “No right or remedy in consecutive years, the corporation is first
favor of or against any corporation, its placed on delinquent status, after due notice
stockholders, members, directors, and hearing.
trustees, or officers, nor any liability
incurred by any such corporation, The delinquent corporation is given 2 years to
stockholders, members, directors, resume operations and comply with all the
trustees, or officers, shall be removed requirements that the SEC shall prescribe.
or impaired either by the subsequent Otherwise, the SEC will prescribe its
dissolution of said corporation or by dissolution. The corporation may have the
any subsequent amendment or repeal revocation reconsidered. Otherwise, the SEC
of this Code or of any part thereof”; may proceed to involuntary dissolution with
c. While Congress may provide for the notice and hearing.
dissolution of a corporation, it cannot
impair the obligation of existing Dissolution in this case is not automatic
contracts between the corporation and [Campos].
Page 124 of 494

Dissolution by the SEC on Grounds Under Upon receipt of a lawful court order
the Code and Other Existing Laws dissolving the corporation
The Revised Corporation Code also introduced The ground under (c) may involve or arise from
a number of changes on involuntary a quo warranto proceeding involving a de facto
dissolution. Sec. 138 codified the grounds that corporation (Sec 19, RCC) or a liquidation
may lead to involuntary dissolution by the proceeding involving an insolvent debtor under
Commission motu proprio or upon filing of a FRIA (infra).
verified complaint by any interested party.
Upon finding by final judgment that the
Grounds for dissolution [Sec. 21; Sec 138] corporation procured its incorporation
a. Non-use of corporate charter [Sec. 21]; through fraud
b. Continuous inoperation of a The ground under (d) constitutes cases where
corporation [Sec. 21]; a corporation misrepresented its purpose of
c. Upon receipt of a lawful court order incorporation, or when the incorporators used
dissolving the corporation; fictitious names, there was then fraud in the
d. Upon finding by final judgment that the procurement of the certificate.
corporation procured its incorporation
through fraud; Upon finding by final judgment that the
e. Upon finding by final judgment that the corporation was created for an unlawful
corporation: purpose
1. Was created for the purpose of
committing, concealing or The ground under (e) is a new provision. Here,
aiding the commission of a corporation found by final judgment to have
securities violations, been created for the purpose of committing,
smuggling, tax evasion, money concealing, or aiding the commission of
laundering, or graft and corrupt securities violations, smuggling, tax evasion,
practices; money laundering, or graft and corrupt
2. Committed or aided in the practices, may be subjected to involuntary
commission of securities dissolution by the SEC, motu proprio or upon
violations, smuggling, tax filing of a verified complaint by any interested
evasion, money laundering, or
graft and corrupt practices, and 2. Methods of liquidation
its stockholders knew; and
3. Repeatedly and knowingly Liquidation is the process by which all the
tolerated the commission of assets of the corporation are converted into
graft and corrupt practices or liquid assets (cash) in order to facilitate the
other fraudulent or illegal acts payment of obligations to creditors, and the
by its directors, trustees, remaining balance if any is to be distributed to
officers, or employees. the stockholders.
Non-use of corporate charter and Among corporate creditors, the rules on

continuous inoperation concurrence and preference of credits apply.
The grounds for dissolution under (a) and (b) It is a proceeding in rem.
as discussed above, will lead to the dissolution
of the corporation unless the corporation files a The end of corporate relations does not result
petition to set aside its delinquency status, and in the immediate termination of corporate
the SEC grants it. existence. A corporation shall have the
extended term of 3 years to wind up its
corporate affairs and liquidate its assets
[Herbosa].
Page 125 of 494

The RCC provides that any distributable asset It may not acquire new rights or incur new
to an unknown creditor or corporator shall be obligations.
escheated in favor of the national government.
This was previously in favor of the LGU where It may only have rights as may be required by
such assets are located, under the old Code. the process of liquidation [Herbosa].
Difference Between Liquidation and Pending actions against the corporation are not
Rehabilitation extinguished
Pending actions against the corporation may

Liquidation Rehabilitation
still be prosecuted against the corporation even
The winding up of a Contemplates a beyond the 3-year period.
corporation so that continuance of
assets are corporate life and General Rule: The creditors of the corporation
distributed to those activities in an effort who were not paid within the 3-year period may
entitled to receive to restore and follow the property of the corporation that may
them. It is the reinstate the have passed to its stockholders
process of reducing corporation to its
assets to cash, former position of Exceptions:
discharging liabilities successful operation 1. Unless the action is barred by
and dividing surplus and solvency. Both prescription or laches; or
or loss cannot be 2. Unless there was a disposition of said
undertaken at the property in favor of a purchaser in good
same time faith.
[Phil. Veterans Bank v. Employees Union, G.R. Suits not brought against the corporation
No. 105364 (2001)]. within the 3-year period may still be
prosecuted against the corporation, since there
Winding up of corporate affairs is nothing in Sec. 122, par. 1 which bars action
for the recovery of the debts of the corporation
Under Sec. 139 of the RCC, a corporation against the liquidator thereof after the lapse of
loses its juridical personality and can no longer the winding up period of 3 years [Republic of
enter into transactions that have the effect of the Philippines v. Marsman Dev. Co., G.R. No.
continuing its business. The only exception to L-175109 (1972)].
this is the “winding-up” period which takes
place for 3 years after the loss of the Right of the corporation to appeal a
corporation’s juridical personality. judgment is not extinguished by the
expiration of the 3-year period
It continues to be a body corporate for
purposes of prosecuting and defending suits by Corporations whose certificate of registration
and against it and to enable it to settle and was revoked by the SEC may still maintain
close its affairs, culminating in the disposition actions in court for the protection of its rights
and distribution of its remaining assets. which includes the right to appeal [Paramount
Insurance Corp. v. A.C. Ordonez Corp., G.R.
It may, during the 3-year term, appoint a trustee No. 175109 (2008)].
or a receiver who may act beyond that period.
Methods of Liquidation
A corporation in the process of liquidation has a. By the corporation itself or its board of
no legal authority to engage in any new directors or trustees (Sec. 139[1],
business, even if the same is in accordance RCC)
with the primary purpose stated in its article of b. By conveyance to a trustee within a
incorporation. three-year period (Sec. 139[2], RCC;
Page 126 of 494

Board of Liquidators v. Kalaw, G.R. No. When a corporation is liquidating pursuant to
L-18805, 1967) the statutory period of 3 years to liquidate, it is
c. By a management committee or only allowed to continue for the purpose of final
rehabilitation receiver appointed by closure of its business and no other purposes.
SEC (Sec. 119, RCC)
d. By liquidation after three years In fact, within that period, the corporation is
enjoined from “continuing the business for
a. By the Corporation Itself which it was established” [Alhambra Cigar and
Cigarette Mfg. v. SEC, G.R. No. L23606
The liquidation and distribution of the assets of (1968)]
a dissolved corporation is a matter of internal
concern of the corporation and falls within the b. Conveyance to A Trustee Within A 3-
power of the directors and stockholders or duly Year Period
appointed liquidation trustee [SEC Opinion,
July 23, 1996]. Liquidation may also be placed in the hands of
a trustee or assignee. All the corporate assets
The corporation through its board and/or are conveyed to such trustee or assignee by a
executive officers are in charge for this method resolution of stockholders at any time during
of liquidation. the 3-year period [Sec. 139].
The Legislature intended to let the In this method, the 3-year limitation DOES
shareholders have the control of the assets of NOT apply, provided that the designation of the
the corporation upon dissolution in winding up trustees is made within the period.
its affairs.
The normal method of procedure is for the General Rule: There is no time limit within
directors and executive officers to have charge which the trustee must finish the liquidation,
of the winding up operations, though there is and he may sue and be sued as such even
the alternative method of assigning the beyond the 3-year period.
property of the corporation to trustees for the
benefit of its creditors and shareholders [China Exception: The trusteeship is limited in its
Banking Corp. V. M. Michelin & Cie, 58 Phil. duration by the deed of trust. Trustees to whom
261 (1933)]. the corporate assets have been conveyed
pursuant to liquidation may sue and be sued as
The termination of the life of a corporate entity such in all matters connected with the
does not by itself cause the extinction or liquidation [National Abaca v. Pore, G.R. No. L-
diminution of the rights and liabilities of such 16779 (1961)].
entity.
The trustee of a dissolved corporation may
If the 3-year extended life has expired without commence a suit that can proceed to final
a trustee or receiver having been expressly judgment even beyond the 3-year period of
designated by the corporation, within that liquidation [Reburiano v. CA, G.R. No. 102965
period, the BOD (or trustees) itself, may be (1999)].
permitted to so continue as "trustees" by legal
implication. Unless the trusteeship is limited in its duration
by the deed of trust, there is no time limit within
Such designation as “trustees” is for the which the trustee must finish liquidation [Board
purpose of completing the corporate liquidation of Liquidators v. Kalaw, G.R. No. L-18805
[Pepsi-Cola Products Philippines, Inc. v. CA, (1967)].
G.R. No. 145855 (2004)].
Any corporate creditor, shareholder, member,
A corporation under liquidation may not amend or other person-in-interest may petition the
its articles of incorporation to extend its courts for the appointment of a different
lifespan. trustee/s in liquidation [Clemente et.al. v. CA,
Page 127 of 494
G.R. No. 82407 (1995), citing Gelano v. CA, The receiver’s principal duty is to:
103 SCRA 90] a. Preserve and maximize the value of
the assets of the debtor during the
c. By Management Committee or rehabilitation proceedings;
Rehabilitation Receiver b. Assess the viability of rehabilitation,
and implement a Rehabilitation Plan
In SEC’s judgment dissolving the corporation
Unless appointed by the court, the
and directing disposition of its assets as justice
rehabilitation receiver shall not take over the
requires, it may appoint a receiver to collect
management and control of the debtor but may
such assets and pay the debts of the
recommend the appointment of a management
corporation [Sec. 135].
committee over the debtor in the cases
provided by the FRIA [Sec. 31, FRIA].
In the exercise of its jurisdiction, the
Commission possesses the following powers:
What is a Management Committee
1. To appoint one or more receivers of the
property, real and personal, which is
The management committee is the body
the subject of the action pending before
appointed by the court who shall take the place
the Commission in such other cases
of the management and the governing body of
whenever necessary in order to
the debtor corporation and assume their rights
preserve the rights of the
and responsibilities. A rehabilitation receiver
partieslitigants and/or protect the
may also be appointed to assume the
interest of the investing public and
management of the corporation [Sec. 36,
creditors;
FRIA].
2. To create and appoint a management
committee, board, or body upon
A management committee may be appointed in
petition or motu propio to undertake the
the following cases:
management of corporations,
1. Actual or imminent danger of
partnerships or other associations not
dissipation, loss, wastage or
supervised or regulated by other
destruction of the debtor’s assets or
government agencies in appropriate
other properties;
cases [PD 902-A, as amended by PD
2. Paralyzation of the business
1799, Sec. 6].
operations of the debtor; or
3. Gross mismanagement of the debtor,
While the SEC has the authority to dissolve a
or fraud or other wrongful conduct on
corporation, it does not have the authority to
the part of, or gross or willful violation
settle disputes arising from its liquidation. A
of the FRIA by existing management of
commercial court is in the best position to
the debtor or the owner, partner,
convene all stakeholders, including creditors,
director, officer or representative/s in
to ascertain their claims and determine their
management of the debtor [Sec. 36,
preferences [Consuelo Metals Corporation v.
FRIA].
Planters Development Bank G.R. No. 152580
(2008)].
Effects of Appointing a Receiver
Who is a Rehabilitation Receiver
The appointment of a receiver suspends the
authority of the corporation, as well as its
A rehabilitation receiver is a natural or juridical
directors and officers, over the properties of the
person appointed by the court pursuant to RA
corporation.
10142 or the Financial Rehabilitation and
Insolvency Act (FRIA) of 2010, whenever
The receiver shall act as the representative of
necessary in order to preserve the rights of the
the corporation.
parties-litigants and/or protect the interest of
the investing public and creditors.
Page 128 of 494

The receivership shall exist indefinitely until the
Receivership Trusteeship
complete settlement and liquidation of the
corporation, unless otherwise limited are deemed officers the terms of the trust
[Herbosa]. of the court and agreement
must therefore be
The mere appointment of a receiver, without accountable to the
anything more, does not result in the court by provision of
dissolution of the corporation, nor bar it from law
the exercise of its corporate rights [Leyte
Asphalt and Mineral Oil Co. Ltd., v. Block Both are not subject to the 3-year period
Johnston and Breenbrawn, G.R. No. 9755 because the corporation is substituted in
(1928)]. either case by the trustee or the receiver
who may sue or be sued even after the
While the appointment of a receiver rests within expiration of the 3-year period.
the sound judicial discretion of the court, such
discretion must, however, always be exercised However, in the case of trusteeship, the
with caution and governed by legal and trustee must have been designated within
equitable principles, the violation of which will the 3-year period
amount to its abuse, and in making such
appointment the court should take into
consideration all the facts and weigh the 3-Year Period Does Not Apply
relative advantages and disadvantages of When the liquidation of a dissolved corporation
appointing a receiver to wind up the corporate has been placed in the hands of a receiver or
business [China Banking Corp. v. M. Michelin assignee:
& Cie, 58 Phil. 261 (1933)]. a. The 3-year period prescribed by law for
liquidation cannot be made to apply,
Receivership vs. Trusteeship and
b. The receiver or trustee may institute all
actions leading to the liquidation of the
Receivership Trusteeship assets of the corporation even after the
expiration of said period [Sumera v.
Receivership is Trusteeship is a Valencia, 67 Phil. 721 (1939)].
created by judicial contractual
appointment of a relationship that can
rehabilitation be created by a
d. Liquidation after three years
receiver and/or corporation through
management its Board of Under Sec. 139, after the expiration of the 3-
committee Directors. year winding-up period, pending actions by or
against the corporation are abated.
Both involve transfers of legal/naked title
from the corporation to the trustee, receiver, It should not, however, be construed as to
or management committee. prevent a corporation from pursuing activities
which would complete the final liquidation of a
From the time the assets of the corporation dissolved corporation.
are transferred to a trustee or receiver
pursuant to liquidation, all such assets are In this case, Northern Luzon Corporation Inc.
then held by and in the name of the trustee which term has long expired, was unable to
or receiver who can lawfully proceed with dispose of its remaining assets even during the
liquidation even if the corporation no longer 3- year period granted it by Sec. 122 [now Sec.
exists, because he has title to the assets 139, RCC].
The receiver and The trustee in Accordingly, it should be allowed to continue

management liquidation is liquidating its remaining assets in order to
committee members accountable under
Page 129 of 494

complete the process of dissolving the L. Other corporations
corporation.
Likewise, it should be allowed to distribute the 1. Close corporations

proceeds from said disposition to its
stockholders or creditors if any. A contrary Statutory Definition
interpretation would have unjust and absurd A close corporation is –
results. SEC-OGC Opinion No. 15-07 (2015) a. One whose AOI provides that:
citing SECAC No. 347 (1991). 1. All the corporation’s issued stock of
all classes, exclusive of treasury
Directors as Trustees shares, shall be held of record by
If full liquidation can only be effected after the not more than a specified number
3-year period and there is no trustee, the of persons, not exceeding twenty
directors may be permitted to complete the (20);
liquidation by continuing as trustees by legal 2. All the issued stock of all classes
implication [Reburiano v. CA, G.R. No. 102965 shall be subject to one or more
(1999)]. specified restrictions on transfer
permitted by this Title; and
A corporation’s BOD is not rendered functus 3. The corporation shall not list in any
officio by its dissolution. stock exchange or make any public
offering of its stocks of any class.
Sec. 122 [now Sec 139] allows a corporation to b. One where two-thirds (2/3) or more of
continue its existence for a limited purpose, its voting stock or voting rights is NOT
necessarily there must be a board that will owned or controlled by another
continue acting for and on behalf of the corporation, which is not a close
dissolved corporation for that purpose [Aguirre corporation within the meaning of this
v. FQB+7, Inc., G.R. No. 170770 (2013)]. Code [Sec. 95, RCC].
Continuation of Pending Suits A narrow distribution of ownership does not, by

The trustee of a corporation may continue to itself, make a close corporation. When a
prosecute a case commenced by the corporation’s AOI does not contain the
corporation within 3 years from its dissolution provisions enumerated under Sec. 96 of the
until rendition of the final judgment, even if such Code [now Sec. 95, RCC], such corporation is
judgment is rendered beyond the 3-year period not a “close corporation”. It does not become
allowed by Sec 139, RCC. one either, just because only a few individuals
a. However, an already defunct owned 99.866% of its subscribed capital stock
corporation is barred from initiating a [San Juan Structural and Steel Fabricators v.
suit after the lapse of the said 3-year CA, G.R. No. 129459 (1998)].
period.
b. If a petition is filed after the corporate “Incorporated Partnership”
existence, the effect is that petitioner A close corporation embodies what
lacks the capacity to sue as a businessmen perceive to be the best features
corporation. of a partnership and a corporation, such as –
c. To allow such petition to prosper, on a. Corporation: separate personality,
the ground that it is for the sole purpose limited liability, and the right of
of liquidating the corporation’s assets, succession
would be to circumvent the provisions b. Partnership: delectus personae (the
of Sec. 122 of the Corporation Code selection of a person satisfactory to
(now Sec. 139, RCC) [Alabang oneself for a position), and general
Development Corporation v. Alabang management by all partners of
Hills Village Association and Rafael business affairs [Villanueva].
Tinio, G.R. No. 187456 (2014)].
Page 130 of 494

Incorporating a Close Corporation 1. Deemed to be directors for the purpose
General Rule: Any corporation may be of applying the provisions of this Code;
incorporated as a close corporation. and, unless the context clearly requires
otherwise
Exceptions: The following cannot be 2. Subject to all liabilities of directors
incorporated as a close corporation – [Sec. 96, RCC].
a. Mining or oil companies
b. Stock exchanges Identity and Number of Stockholders
c. Banks 1. Stockholders of record not more than
d. Insurance companies 20
e. Public utilities 2. Stocks not publicly listed
f. Educational institutions; 3. Restricted transfer of ownership of
g. Corporations declared to be vested stocks [Sec. 95, RCC].
with public interest in accordance with
the provisions of this Code [Sec. 95, Voting Stock or Voting Rights Not Held by
RCC]. Another Corporation
A corporation cannot be deemed as a close
Applicability of RCC Provisions corporation when at least two-thirds (2/3) of its
The provisions of Title XII (Close Corporations) voting stock or voting rights is owned or
primarily govern close corporations, while other controlled by another corporation, which is not
Titles of the RCC apply suppletory, except as a close corporation within the meaning of this
otherwise provided under Title XII [Sec. 95, Code [Sec. 95, RCC].
RCC].
b. Validity of restrictions on transfer of
a. Characteristics of a Close shares
Corporation
In order to be binding on any purchaser in good
Direct Management by Stockholders faith, restrictions on the right to transfer shares
The AOI of a close corporation may provide must appear in the:
that the business of the corporation shall be 1. AOI;
managed by the stockholders of the 2. By-laws; and
corporation rather than by a board of directors 3. Certificate of stock [Sec. 97, RCC].
[Sec. 96, RCC].
Right of First Refusal
The feature of a close corporation, whereby Restrictions on transfer shall not be more
there is a merger of stock ownership and active onerous than granting the existing
management is what significantly distinguishes stockholders or the corporation the option to
it from other corporations [Villanueva]. purchase the shares of the transferring
stockholder.
Identity of Stock Ownership and Active a. Said option is subject to such
Management reasonable terms, conditions or period
All or most of the stockholders of a close stated in the AOI, by-laws, and
corporation are active in the corporate certificate of stock.
business either as directors, officers, or other b. If upon the expiration of said period, the
key men in management [Campos]. existing stockholders or the corporation
fails to exercise the option to purchase,
Stockholders’ Meeting Unnecessary the transferring stockholder may sell
So long as the abovementioned AOI provision their shares to any third person [Sec.
continues in effect, no meeting of stockholders 97, RCC].
need be called to elect directors.
The right of first refusal, as discussed above, is
Provided, that the stockholders of the the most onerous transfer restriction allowed.
corporation shall be:
Page 131 of 494
● Such right is a control scheme Exception: The AOI provides otherwise. [Sec.
essential to a close corporation. 101, RCC].
● It allows the existing stockholders the
power to maintain the character of d. Amendment of Articles of
delectus personae by preventing an Incorporation
outsider from coming into and
interfering with the affairs of the close Contents of the AOI of Close Corporations
corporation [Villanueva]. Mandatory Provisions
A transfer restriction should NOT amount to a The AOI of a close corporation must provide
deprivation of a stockholder’s right to ultimately that:
dispose of his shareholdings [Rural Bank of 1. All the corporation’s issued stock of all
Salinas v. CA, 210 SCRA 510 (1992)]. classes, exclusive of treasury shares,
shall be held of record by not more
c. Pre-emptive right than a specified number of persons,
not exceeding twenty (20);
Definition 2. All the issued stock of all classes shall
The preemptive right is a right granted to be subject to one or more specified
stockholders to subscribe to all issues or restrictions on transfer permitted by
disposition of shares of any class, in proportion this Title; and
to their respective shareholdings. [Sec. 38, 3. The corporation shall not list in any
RCC]. stock exchange or make any public
offering of its stocks of any class [Sec.
No limit to pre-emptive rights. Thus, includes 95, RCC].
sale of treasury shares and for acquisition of
properties Optional Provisions
Scope of Pre-emptive Right in Ordinary The AOI of a close corporation may provide for:
Corporations 1. A classification of shares or rights, the
In ordinary corporations, the pre-emptive right qualifications for owning or holding the
shall not extend to – same, and restrictions on their
1. Shares issued in compliance with laws transfers, subject to the provisions of
requiring stock offerings or minimum the following section;
stock ownership by the public; or 2. A classification of directors into one (1)
2. Shares issued in good faith with the or more classes, each of whom may be
approval of the stockholders voted for and elected solely by a
representing two-thirds (2/3) of the particular class of stock;
outstanding capital stock, in exchange 3. Greater quorum or voting requirements
for property needed for corporate in meetings of stockholders or directors
purposes or in payment of a previously than those provided in this Code;
contracted debt [Sec. 38, RCC]. 4. The management by the stockholders
of the business of the corporation,
Scope of Pre-emptive Right in Close rather than by a board of directors; and
Corporations 5. The election or appointment by the
stockholders of all officers or
General Rule: The pre-emptive right of employees, or specified officers or
stockholders in close corporations shall extend employees, instead of by the board of
to ALL stock to be issued, including reissuance directors [Sec. 96, RCC].
of treasury shares, whether:
1. For money, property or personal

services; or
2. In payment of corporate debts.
Page 132 of 494
Amendments Essence of a Non-Stock Corporation
Any amendment to the AOI, which seeks: It is legally possible for a corporation having
1. To delete or remove any provision capital stock to still be considered a non-stock
required by this Title; or corporation.
2. To reduce a quorum or voting
requirement stated in said articles of For this reason, the essence of a non-stock
Incorporation corporation is NOT the non-existence of shares
of stock, but that:
Shall require, at a meeting duly called for the 1. Its primary purpose should be
purpose, the affirmative vote – eleemosynary in nature; and
1. Of at least two-thirds (2/3) of the 2. There is a prohibition in its AOI and by-
outstanding capital stock, whether with laws that no part of the income or any
or without voting rights; or form of dividend is distributable to the
2. Of such greater proportion of shares as members, trustees, or officers of the
may be specifically provided in the AOI corporation [Villanueva].
for amending, deleting, or removing
any of the aforesaid provisions [Sec. Purpose
102, RCC].
Non-stock corporations may be formed or
2. Non-Stock Corporations organized for the following purposes:
1. Charitable;
2. Religious;
a. Definition
3. Educational;
4. Professional;
Corporation Code (RA 11232) 5. Cultural;
6. Fraternal;
Section 3. Classes of Corporations. –
Corporations formed or organized under this Code
7. Literary;
may be stock or nonstock corporations. Stock 8. Scientific;
corporations are those which have capital stock 9. Social;
divided into shares and are authorized to distribute 10. Civic service;
to the holders of such shares, dividends, or 11. Similar purposes, like trade, industry,
allotments of the surplus profits on the basis of the agricultural and like chambers; or
shares held. All other corporations are nonstock
corporations. The territorial and political
12. Any combination thereof, subject to the
subdivisions shall enjoy local autonomy. special provisions of this Title governing
particular classes of non- stock
corporations [Sec. 87, RCC].
A non- stock corporation is one where no part
of its income is distributable as dividends to its A non-stock corporation may not include in its
members,trustees, or officers [Sec. 86, RCC]. AOI a purpose which would change or
contradict its nature as such [Sec. 13(b), RCC].
All other corporations are non-stock
corporations [Sec. 3]. A nonstock corporation may not engage in an
investment business, where profit is the main or
Its governing body is usually the Board of underlying purpose [People v. Menil, 340 SCRA
Trustees (BoT). However, non-stock 125 (2000)].
corporations may, through their articles of
incorporation or their by-laws, designate their b. Treatment of Profit
governing boards by any name other than as
board of trustees [Sec. 174]. Any profit which a non-stock corporation may
obtain incidental to its operations shall,
whenever necessary or proper, be used for the
furtherance of the purpose or purposes for
Page 133 of 494

which the corporation was organized, subject to
the provisions of this Title [Sec. 86, RCC].
A non-stock corporation holds its funds in trust

for the carrying out of the objectives and
purposes expressed in its AOI. Thus, if it were
to be converted to a stock corporation, it must
be dissolved first, otherwise, such
transformation would be tantamount to an
unauthorized distribution of its assets or income
to its members [Villanueva].
Earning of Profits Merely Incidental
It is not inconsistent with the nature of a

nonstock corporation to incidentally earn profits
in pursuing its eleemosynary purpose [CIR v.
University of Visayas, 1 SCRA 669 (1961)].
The incurring of profit or losses does not

determine whether an activity is for profit or non-
profit, what the courts will consider is:
1. Whether dividends have been declared;
or
2. Whether its profit was ever used for
personal or individual gain, and not for
the purpose of carrying out the
objectives of the enterprise [Manila
Sanitarium and Hospital v. Gabuco, 7
SCRA 14 (1963)]
Page 134 of 494

Summary: Stock v. Non-Stock Corporations
Stock Non-Stock
Stock corporations are those which have All other corporations [Sec. 3, RCC]. One where
capital stock divided into shares and are no part of its income is distributable as dividends
authorized to distribute to the holders of such to its members, trustees, or officers [Sec. 87,
shares, dividends, or allotments of the surplus RCC].
profits based on the shares held [Sec. 3,
RCC].
Purpose
Primarily to make profits for its shareholders. Non-stock corporations may be formed or
organized for charitable, religious, educational,
professional, cultural, fraternal, literary,
scientific, social, civic service, or similar
purposes, like trade, industry, agricultural and
like chambers, or any combination thereof,
subject to the special provisions of this Title
governing particular classes of non-stock
corporations [Sec. 87, RCC].
Distribution of Profits
Profit is distributed to shareholders. A nonstock corporation is one where no part of

its income is distributable as dividends to its
members, trustees, or officers: Provided, that
any profit which a non-stock corporation may
obtain incidental to its operations shall,
whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which
the corporation was organized, subject to the
provisions of this Title [Sec. 86, RCC].
Scope of Voting Rights
Each stockholder votes according to the Each member, regardless of class, is entitled to
proportion of his shares in the corporation. No one (1) vote UNLESS such right to vote has
share may be deprived of voting rights except been limited, broadened, or denied in the AOI or
those classified and issued as “preferred” or by- laws [Sec. 88, RCC].
“redeemable” shares, unless otherwise
provided in this Code: Provided, That there
shall always be a class or series of shares
with complete voting rights [Sec. 6, RCC].
Voting by Proxy
Page 135 of 494

Summary: Stock v. Non-Stock Corporations
Stock Non-Stock
Stockholders and members may vote in May be denied by the AOI or the by-laws [Sec.
person or by proxy in all meetings of 88, RCC]
stockholders or members.
When so authorized in the by-laws or by a

majority of the board of directors, the
stockholders or members of corporations may
also vote through remote communication or in
absentia: Provided, That the votes are
received before the corporation finishes the
tally of votes [Sec. 57, RCC].
Who Exercises Corporate Power
Board of Directors or Trustees [Sec. 22, 92, Board of Trustees, which may or may not be
RCC]. more than 15 trustees, as provided by the AOI
or by-laws [Sec. 23, 91, RCC].
Term of Directors of Trustees
Directors / trustees shall hold office for 1 year Directors/trustees shall hold office for not more
and until their successors are elected and than 3 years [Sec. 91].
qualified [Sec. 23].
Election of Officers
Directors shall be elected for a term of one (1) Trustees shall be elected for a term not
year from among the holders of stocks exceeding three (3) years. Except with respect
registered in the corporation’s books Each to independent trustees of nonstock
director and trustee shall hold office until the corporations vested with public interest, only a
successor is elected and qualified [Sec. 22, member of the corporation shall be elected as
RCC]. trustee [Sec. 91, RCC].
The articles of incorporation may provide that Officers may directly be elected by the members
all officers or employees or that specified UNLESS the AOI or by-laws provide otherwise
officers or employees shall be elected or [Sec. 91, RCC].
appointed by the stockholders, instead of by
the board of directors [Sec. 97].
Transferability of interest or membership
Transferable. Generally non-transferable since membership

and all rights arising therefrom are personal.
However, the AOI or by-laws can provide
otherwise [Sec. 89, RCC].
Page 136 of 494

3. Educational Corporations Non-Stock Stock
Definition way; and

3. The term of
A stock or nonstock corporation organized for 1/5 of them
educational purposes. [Sec. 105, RCC] expires
every year
Educational corporations shall be governed by [Sec. 106, RCC].
special laws and the general provisions [of the
Revised Corporation Code]. [Sec. 105, RCC]
Rules as to Vacancies
If organized as a non-stock corporation
Trustees thereafter elected to fill vacancies,
Trustees of educational institutions organized occurring before the expiration of a particular
as non-stock corporations shall not be less term, shall hold office only for the unexpired
than five (5) nor more than fifteen (15). Period.
Provided, however, that the number of trustees
shall be in multiples of five (5). They shall Trustees elected thereafter to fill vacancies
classify themselves in such a way that the term caused by expiration of term shall hold office
of 1/5 of them expires every year, unless for five (5) years [Sec. 106, RCC].
otherwise provided by the AOI or BL [Sec. 106].
Quorum
If organized as a stock corporation
A majority of the trustees shall constitute a
For institutions organized as stock quorum for the transaction of business [Sec.
corporations, the number and term of directors 106, RCC].
shall be governed by the provisions on stock
corporations [Sec. 106]. Constitutional Provisions Related to
Educational Corporations
Composition of the Board
Educational institutions, other than those
established by religious groups and mission
Non-Stock Stock boards, shall be owned solely by citizens of the
Philippines or corporations or associations at
Trustees of For institutions least sixty per centum of the capital of which is
educational organized as stock owned by such citizens. The Congress may,
institutions corporations, however, require increased Filipino equity
organized as non- the number, and participation in all educational institutions. The
stock corporations term of directors control and administration of educational
shall not be less shall be institutions shall be vested in citizens of the
than five (5) nor governed Philippines [CONST, Art. XIV, Sec. 4(2), par. 1].
more than fifteen by the
(15). Provided, provisions on No educational institution shall be established
however, that: stock corporations exclusively for aliens and no group of aliens
1. The number [Sec. 106, RCC]. shall comprise more than one-third of the
of trustees enrollment in any school. The provisions of this
shall be in The powers and subsection shall not apply to schools
multiples of authority of trustees established for foreign diplomatic personnel
five; shall be defined in and their dependents and, unless otherwise
2. They the bylaws. provided by law, for other foreign temporary
shall residents [CONST, Art. XIV, Sec. 4(2), par. 1].
classify
themselves
in such a
Page 137 of 494
4. Religious Corporations Register of Deeds of Davao City, G.R. No. L-
8451 (1957)].
Classification
Religious corporations may be incorporated by Incorporation Contents of the AOI
one or more persons. Such corporations may
be classified into: The AOI of the corporation sole must set forth
1. Corporations sole; and the following:
2. Religious societies [Sec. 107, RCC]. 1. That the applicant chief archbishop,
bishop, priest, minister, rabbi, or
Religious corporations shall be governed by presiding elder represents the religious
Title XIII, and by the general provisions on denomination, sect, or church who
nonstock corporations insofar as applicable desires to become a corporation sole;
[Sec. 107, RCC]. 2. That the rules, regulations and
discipline of the religious
a. Corporation Sole denomination, sect or church are
consistent with becoming a corporation
A corporation sole may be formed by the chief sole and do not forbid it;
archbishop, bishop, priest, minister, rabbi, or 3. That such chief archbishop, bishop,
other presiding elder of such religious priest, minister, rabbi, or presiding
denomination, sect, or church [Sec. 108, RCC]. elder is charged with:
4. The administration of the temporalities;
A corporation sole consists of only one person 5. The management of the affairs, estate
and his successors (who will always be one at and properties of the religious
a time), in some particular station [Roman denomination, sect, or church within
Catholic Apostolic Adm. of Davao v. LRC, 102 the territorial jurisdiction, so described
Phil. 596 (1957)]. succinctly in the AOI; and
6. The manner by which any vacancy
Purpose occurring in the office of chief
archbishop, bishop, priest, minister,
A corporation sole is incorporated for the rabbi, or presiding elder is required to
purpose of administering and managing, as be filled, according to the rules,
trustee, the affairs, property and temporalities regulations or discipline of the religious
of any religious denomination, sect or church denomination, sect, or church; and
[Sec. 108, RCC]. 7. The place where the principal office of
the corporation sole is to be
A corporation sole is not the owner of the established and located, which place
properties that he may acquire, but merely the must be within the territory of the
administrator thereof [Roman Catholic Philippines [Sec. 109, RCC].
Apostolic Adm. of Davao v. LRC, 102 Phil. 596 Submission of the AOI The chief
(1957)] archbishop, bishop, priest, minister,
rabbi or presiding elder of any religious
Nationality denomination, sect or church must file
the AOI with the Commission [Sec.
A corporation sole has no nationality, but for 109, RCC].
the purpose of applying nationalization laws,
nationality is determined not by the nationality The articles of incorporation must be:
of its presiding elder but by the nationality of its 1. Verified, by affidavit or affirmation of
members constituting the sect in the the chief archbishop, bishop, priest,
Philippines. minister, rabbi, or presiding elder, as
the case may be; and
Thus, the Roman Catholic Church can acquire 2. Accompanied by a copy of the
lands in the Philippines even if it is headed by commission, certificate of election or
the Pope [Roman Catholic Apostolic, etc v. letter of appointment of such chief
Page 138 of 494

archbishop, bishop, priest, minister, If such approval mechanism is made to operate
rabbi, or presiding elder, duly certified in a corporation sole, its one member in whom
to be correct by any notary public [Sec. all the powers of the corporation technically
110, RCC]. belong, needs to get the concurrence of 2/3 of
its membership. The one member is but a
From and after filing with the Commission of trustee of its membership.
the said AOI:
1. Such chief archbishop, bishop, priest, There is no point to dissolving the corporation
minister, rabbi, or presiding elder shall sole of one member to enable the corporation
become a corporation sole; and aggregate to emerge from it. The one member,
2. All temporalities, estate and properties with the concurrence of two-thirds of the
of the religious denomination, sect or membership of the organization for whom he
church theretofore administered or acts as trustee, can self-will the amendment.
managed as such chief archbishop, He can, with membership concurrence,
bishop, priest, minister, rabbi, or increase the technical number of the members
presiding elder shall be personally held of the corporation from “sole” or one to the
in trust as a corporation sole. greater number authorized by its amended
a. For the use, purpose, exclusive articles [Iglesia Evangelica Metodista En Las
benefit and on behalf of the Filipinas (Corporation Sole) Inc., et al v. Bishop
religious denomination, sect,or Nathanael Lazaro, et al, G.R. No. 184088
church. (2010)].
b. This includes hospitals,
schools, colleges, orphan Filing of Vacancies
asylums, parsonages, and
cemeteries thereof [Sec. 110, The successors in office of any chief
RCC]. archbishop, bishop, priest, minister, rabbi, or
presiding elder in a corporation sole:
Power to Amend AOI 1. Shall become the corporation sole on
their accession to office; and
Note that Sec. 107 allows the application to 2. Shall be permitted to transact business
religious corporations of the general provisions as such upon filing a copy of their
governing non-stock corporations, insofar as commission, certificate of election, or
applicable. letters of appointment, duly certified by
any notary public with the Commission
For non-stock corporations, the power to [Sec. 112, RCC].
amend its Articles of Incorporation lies in its
members. The code requires two-thirds of their During any vacancy in the office, all the powers
votes for the approval of such an amendment. and authority of the corporation sole during
such vacancy shall be exercised by the person
So how will this requirement apply to a or persons authorized by the rules, regulations
corporation sole that has technically but one or discipline of the religious denomination,
member (the head of the religious sect, or church represented by the corporation
organization) who holds in his hands its broad sole to:
corporate powers over the properties, rights, 1. Administer the temporalities and
and interests of his religious organization? 2. Manage the affairs, estate, and
properties of the corporation sole [Sec.
Although a non-stock corporation has a 112, RCC].
personality that is distinct from those of its
members who established it, its AOI cannot be Alienation of Property
amended solely through the action of its BOT.
The amendment needs the concurrence of at A corporation sole may sell, or mortgage real
least 2/3 of its membership. property held by it by:
Page 139 of 494

1. Obtaining an order for that purpose the purpose of winding up its affairs [Sec. 113,
from the Regional Trial Court of the RCC].
province where the property is situated
2. Adducing proof that: b. Religious Societies
a. The notice of the application for
leave to sell or mortgage has Definition
been made through publication
or as directed by the Court; and A religious corporation incorporated by more
b. It is in the interest of the than one person. Also called “corporation
corporation that leave to sell or aggregate.”
mortgage be granted.
Incorporation
The application for leave to sell or mortgage:
1. Must be made by petition, duly verified, General Rule: Any religious society, religious
by the chief archbishop, bishop, priest, order, diocese, synod, or district organization
minister, rabbi, or presiding elder of any religious denomination, sect, or church,
acting as corporation sole, and; may incorporate for the administration of its
2. May be opposed by any member of the temporalities or for the management of its
religious denomination, sect, or church affairs, properties, and estate:
represented by the corporation sole. 1. Upon written consent of at least two-
thirds (2/3) of its membership; and/or
Provided, that in cases where the rules, 2. By an affirmative vote at a meeting
regulations, and discipline of the religious called for the purpose of at least two-
denomination, sect, or church, religious thirds (2/3) of its membership
society, or order concerned represented by
such corporation sole regulate the method of Exception: Unless forbidden by competent
acquiring, holding, selling, and mortgaging real authority, the Constitution, pertinent rules,
estate and personal property: regulations, or discipline of the religious
1. Such rules, regulations and discipline denomination, sect, or church of which it is a
shall control; and part [Sec. 114, RCC].
2. The intervention of the courts shall not
be necessary [Sec. 111, RCC]. Filing and Contents of the AOI
The AOI must be:
1. Verified by the affidavit of the presiding
Voluntary Dissolution elder, secretary, or clerk or other
A corporation sole may be dissolved and its member of such religious society or
affairs settled voluntarily by submitting to the religious order, or diocese, synod, or
Commission a verified declaration of district organization of the religious
dissolution, setting forth: denomination, sect, or church; and
1. The name of the corporation; 2. Filed with the Commission [Sec. 114,
2. The reason for dissolution and winding RCC].
up;
3. The authorization for the dissolution of The AOI must set forth the following:
the corporation by the particular 1. That the religious society or religious
religious denomination, sect or church; order, or diocese, synod, or district
4. The names and addresses of the organization is a religious organization
persons who are to supervise the of a religious denomination, sect or
winding up of the affairs of the church;
corporation [Sec. 113, RCC]. 2. That at least two-thirds (2/3) of its
membership has given written consent
Upon approval of such declaration of or has voted to incorporate, at a duly
dissolution by the Commission, the corporation convened meeting of the body;
shall cease to carry on its operations except for
Page 140 of 494

3. That the incorporation of the religious Sole proprietorship v. OPC
society or religious order, diocese,
synod, or district organization is not
Sole Proprietorship OPC
forbidden by competent authority or by
the Constitution, rules, regulations or Has no separate Has a legal
discipline of the religious legal personality personality separate
denomination, sect, or church of which from the proprietor and distinct from the
it forms part; conducting the sole stockholder of
4. That the religious society or religious business the corporation
order, diocese, synod, or district
organization desires to incorporate for The assets of the The assets of the
the administration of its affairs, sole proprietorship OPC are not owned
properties and estate; are similarly owned by its sole
5. The place within the Philippines where by the proprietor stockholder unless
the principal office of the corporation is conducting the the OPC is not
to be established and located; and business adequately financed
6. The names, nationalities, and and or the assets.
residence addresses of the trustees,
not less than five (5) nor more than The obligations that The obligations of
fifteen (15) elected by the religious the sole the OPC cannot be
society or religious order, or the proprietorship enforced against its
diocese, synod, or district organization incurred in sole stockholder,
to serve for the first year, or such other conducting the unless the situation
period as may be prescribed by the business may be warrants the piercing
laws of the religious society, or enforced against the of the veil of
religious order, or of the diocese, proprietor. corporate fiction.
synod, or district organization [Sec.
114, RCC]. Registered with the Registered with the
DTI. SEC.
5. One-Person Corporations [Divina, “Highlights of the Revised Corporation
Code”]
Definition
a. Excepted Corporations
A corporation with a single stockholder. [Sec.
116, RCC] Only a natural person, trust, or an estate may
form a One Person Corporation.
Who may form OPCs
The following may NOT incorporate as OCPs:
Only the following may form OPCs: 1. Banks;
1. A natural person; 2. Quasi-banks;
2. A trust; or 3. Pre-need companies;
3. An estate 4. Public and publicly-listed companies;
and
Note: A natural person who is licensed to 5. Non-chartered GOCCs. [Sec. 116,
exercise a profession may not organize as a RCC]
OPC for the purpose of exercising such
profession, except as otherwise provided A natural person who is licensed to exercise a
under special laws [Sec. 116, RCC]. profession may not organize as a One Person
Corporation for the purpose of exercising such
profession except as otherwise provided under
special laws. [Sec. 10, RCC]
Page 141 of 494

b. Capital Stock Requirement Treasurer, Corporate Secretary, and Other
Officers
A One Person Corporation shall not be
required to have a minimum authorized capital Within fifteen (15) days from the issuance of its
stock, except as otherwise provided by special certificate of incorporation, the OPC shall
law [Sec. 117, RCC]. appoint:
1. A treasurer;
c. Articles of Incorporation and By- 2. A corporate secretary; and
Laws 3. Other officers as it may deem
necessary
Articles of Incorporation
Note: The single stockholder may NOT be
A One Person Corporation shall file articles of appointed as the corporate secretary.
incorporation in accordance with the
requirements under Section 14 of this Code. It Within five (5) days from appointment, the OPC
shall likewise substantially contain the shall notify the Commission thereof [Sec. 122,
following: RCC].
1. If the single stockholder is a trust or an
estate: Treasurer’s Bond
a. The name, nationality, and
residence of the trustee, A single stockholder who is likewise the self-
administrator, executor, appointed treasurer of the corporation, shall
guardian, conservator, give a bond to the Commission in such a sum
custodian, or other person as may be required: Provided, that:
exercising fiduciary duties 1. The said stockholder/treasurer shall
b. Proof of such authority to act on undertake in writing:
behalf of the trust or estate; and a. To faithfully administer the
2. Name, nationality, residence of the OPC’s funds to be received as
nominee and alternate nominee, and treasurer, and
the extent, coverage and limitation of b. To disburse and invest the
the authority [Sec. 118, RCC]. same according to the articles
of incorporation as approved
By-Laws by the Commission.
2. The bond shall be renewed every two
The OPC is not required to submit and file (2) years or as often as may be
corporate by-laws [Sec. 119, RCC]. required [Sec. 122, RCC].
d. Corporate Name Corporate Secretary’s Special Functions
A One Person Corporation shall indicate the In addition to the functions designated by the
letters “OPC” either below or at the end of its OPC, the corporate secretary shall:
corporate name [Sec. 120, RCC]. 1. Be responsible for maintaining the
minutes book and/or records of the
corporation;
e. Corporate Structure and Officers
2. Notify the nominee or alternate
nominee of the death or incapacity of
Single Stockholder as Director, President The
the single stockholder
single stockholder shall be the sole director
a. Such notice shall be given no
andpresident of the One Person Corporation
later than five (5) days from
[Sec. 121, RCC].
such occurrence;
3. Notify the Commission of the death of
the single stockholder within five (5)
Page 142 of 494

days from such occurrence and stating Term of Alternate Nominee
in such notice:
a. The names, residence In case of the nominee’s inability, incapacity,
addresses, and contact details death, or refusal to discharge the functions as
of all known legal heirs; and director and manager of the corporation:
4. Call the nominee or alternate nominee 1. The alternate nominee shall sit as
and the known legal heirs to a meeting director and manage the One Person
and advise the legal heirs with regard Corporation; and
to, among others: 2. The alternate nominee shall serve only
a. The election of a new director; for the same term, and under the same
b. Amendment of the AOI; and conditions applicable to the nominee
c. Other ancillary and/or [Sec. 125, RCC].
consequential matters [Sec.
123, RCC]. Change of Nominee or Alternate Nominee
f. Nominee The single stockholder may, at any time,

change its nominee and alternate nominee by
The single stockholder shall designate in the submitting to the Commission:
AOI a nominee and an alternate nominee who 1. The names of the new nominees; and
shall, in the event of the single stockholder’s 2. The new nominees’ corresponding
death or incapacity: written consent. Note: For this purpose,
1. Take the place of the single the AOI need not be amended [Sec.
stockholder as director; and 126, RCC].
2. Manage the corporation’s affairs [Sec.
124, RCC]. g. Liability
Term of Nominee Limited Liability
When the single stockholder is temporarily An important advantage of the corporation is

incapacitated: the limitation of an investor’s liability to the
1. The nominee shall sit as director and amount of investment, which flows from the
manage the affairs of the OPC; and legal theory that a corporate entity is separate
2. The nominee shall serve only until the and distinct from its stockholders [San Juan
stockholder, by self-determination, Structural and Steel, Inc. v. CA, 296 SCRA 631
regains the capacity to assume such (1998)].
duties. [Sec. 125, RCC].
3. Liability of Single Shareholder
In case of death or permanent incapacity of the A sole shareholder claiming limited liability has
single stockholder: the burden of affirmatively showing that the
1. The nominee shall sit as director and corporation was adequately financed.
manage the affairs of the OPC
2. The nominee shall serve until: Where the single stockholder cannot prove that
a. The legal heirs of the single the property of the OPC is independent of the
stockholder have been lawfully stockholder’s personal property, the
determined; and stockholder shall be jointly and severally liable
b. The heirs have designated one for the debts and other liabilities of the OPC.
of them or have agreed that the
estate shall be the single Applicability of the Doctrine of Piercing the
stockholder of the OPC [Sec. Corporate Veil
125, RCC].
The principle of piercing the corporate veil
applies with equal force to OPCs, as with other
corporations[Sec. 130, RCC]. When the veil of
Page 143 of 494

corporate fiction is pierced the corporation will 1. Within seven (7) days from receipt of
be considered as a mere association of either an affidavit of heirship or self-
persons; and the liability will directly attach to adjudication executed by a sole heir, or
the stockholders or to the other corporation. any other legal document declaring the
legal heirs of the single stockholder,
h. Conversion of Corporation to One the nominee or alternate nominee
Person Corporation and Vice-Versa shall:
a. Transfer the shares to the duly
Conversion from an Ordinary Corporation designated legal heir or estate;
to an OPC and
b. Notify the Commission of the
When a single stockholder acquires ALL the transfer.
stocks of an ordinary stock corporation, the 2. Within sixty (60) days from the transfer
latter may apply for conversion into a One of the shares, the legal heirs shall notify
Person Corporation, subject to the submission the Commission of their decision to
of such documents as the Commission may either:
require. a. Wind up and dissolve the One
Person Corporation; or
If the application for conversion is approved: b. Convert it into an ordinary
1. The Commission shall issue certificate stock corporation.
of filing of amended articles of
incorporation reflecting the conversion The ordinary stock corporation converted
2. The OPC converted from an ordinary from a One Person Corporation shall
stock corporation shall succeed the succeed the latter and be legally responsible
latter and be legally responsible for all for all the latter’s outstanding liabilities as of
the latter’s outstanding liabilities as of the date of conversion [Sec. 132, RCC].
the date of conversion [Sec. 131,
RCC]. 6. Foreign Corporations
Conversion from a OPC to an Ordinary Definition

Stock Corporation
Those formed, organized, or existing under any
A One Person Corporation may be converted laws other than those of the Philippines and
into an ordinary stock corporation after: whose laws allow Filipino citizens and
1. Due notice to the Commission of such corporations to do business in its own country
fact and of the circumstances leading or state [Sec. 140].
to the conversion; and
a. Such notice shall be filed with In contrast, a domestic corporation is one
the Commission within sixty formed, organized, or existing under the laws
(60) days from the occurrence of the Philippines
of the circumstances leading to
the conversion into an ordinary a. Bases of Authority Over Foreign
stock corporation Corporations
2. Compliance with all other requirements
for stock corporations under this Code
Consent
and applicable rules.
As a rule, a foreign corporation can have no
If all requirements have been complied with,
legal existence or status beyond the bounds of
the Commission shall issue an amended the State or sovereignty by which it is created
certificate of incorporation reflecting the
or incorporated and organized. It exists only in
conversion [Sec. 132, RCC]. contemplation of law and by force of the law.
In case of death of the single stockholder:
Page 144 of 494
Where that law ceases to operate, the Said business activities serve as the basis by
corporation can have no existence. which a host state is deemed to have authority
over a foreign corporation within its territorial
However, this principle does not prevent a jurisdiction [Villanueva].
corporation from acting in another State or
country with the latter’s express or implied Concept of doing business
consent.
The concept of "doing business" implies a
Consent Doctrine continuity of commercial dealings and
arrangements and the performance of
The legal standing of foreign corporations in acts/works/exercise of some of the functions
the host state is founded on international law normally incident to the purpose or object of a
on the basis of consent, whether implied or foreign corporation’s organization
express. [Mentholatum Co., Inc. v. Mangaliman, 72 Phil.
525 (1941)].
A corporation can exercise none of the
functions and privileges conferred by its charter It is the crucial point to determine:
in another State or country except by the 1. Whether foreign corporations and
comity and consent of such State or country. multinational enterprises have come
[DE LEON] within the territorial jurisdictions of the
host countries; and
Under Philippine law, the condition is that it 2. To what extent they are bound to obtain
must obtain a license to do business in the licenses within various host countries
Philippines [CAMPOS]. before they can sue with local courts
and administrative bodies [Villanueva].
Consent as Basis for Exercise of
Jurisdiction Jurisprudential Tests of “Doing Business in
the Philippines”
To obtain jurisdiction over foreign corporations, 1. Twin Characterization Test
the considerations of due process and fair play Continuity Test: Doing business
require that consent be obtained. [Villanueva] implies a continuity of commercial
dealings and arrangements, or
The jurisdiction of courts to render judgment in performance of acts normally incidental
personam is grounded on their de facto power to the purpose and object of the
over the defendant's person. His presence organization.
within the territorial jurisdiction of a court is
prerequisite to its rendition of judgment Substance Test: Doing business
personally binding him. [Pennoyer v, Neff, 95 implies that a foreign corporation is
U.S. 714 (1877)] continuing the body or substance of the
enterprise of business for which it was
Thus, a foreign corporation may be subjected organized [Agilent Technologies v.
to jurisdiction by reason of consent, ownership Integrated Silicon Technology, G.R.
of property within the State, or by reason of No. 154618 (2004)].
activities within or having an effect within the 2. Contract Test: A foreign corporation is
state. [Villanueva citing Salonga] doing business in the Philippines if the
contracts entered into by the foreign
Doctrine of “Doing Business” corporation or by an agent acting under
the control and direction of the foreign
When a foreign corporation undertakes corporation are consummated in the
business activities within the territorial Philippines [Pacific Vegetable Oil v.
jurisdiction of a host state, then it ascribes to Singson, G.R. No. L-7917 (1955)].
the host state standing to enforce its laws,
rules, and regulations [Villanueva].
Page 145 of 494
b. Necessity of a License to Do 5. The names and addresses of the
Business present directors and officers of the
corporation;
Every foreign corporation, which on the date of 6. A statement of its authorized capital
the effectivity of this Code, is authorized to do stock and the aggregate number of
business in the Philippines under a license shares which the corporation has
issued to it, shall continue to have such authority to issue, itemized by class,
authority under the terms and conditions of its par value of shares, shares without par
license, subject to the provisions of this Code value, and series, if any;
and other special laws [Sec. 141, RCC]. 7. A statement of its outstanding capital
stock and the aggregate number of
A foreign corporation transacting business in shares which the corporation has
the Philippines is required to secure a license issued, itemized by class, par value of
to have the personality to sue before Philippine shares, shares without par value, and
courts. (See c. Personality to Sue and series, if any;
Suability) 8. A statement of the amount actually
paid in; and
Requisites for the issuance of a license 9. Such additional information as may be
A foreign corporation shall submit: necessary or appropriate in order to
1. A copy of its articles of incorporation enable the Commission to determine
and bylaws, certified in accordance whether such corporation is entitled to
with law; and a license to transact business in the
2. Their translation to an official language Philippines, and to determine and
of the Philippines, if necessary. [Sec assess the fees payable [Sec. 142,
142, RCC] RCC].
The application shall be under oath and, unless Issuance of a License

already stated in its articles of incorporation,
shall specifically set forth the following: Upon issuance of the license, such foreign
1. The date and term of incorporation; corporation may commence to transact
2. The address, including the street business in the Philippines and continue to do
number, of the principal office of the so for as long as it retains its authority to act as
corporation in the country or State of a corporation under the laws of the country or
incorporation; State of its incorporation, unless such license
3. The name and address of its resident is:
agent authorized to accept summons 1. Surrendered;
and process in all legal proceedings 2. Revoked;
and all notices affecting the 3. Suspended; or
corporation, pending the establishment 4. Annulled in accordance with this Code
of a local office; or other special laws [Sec. 143, RCC].
4. The place in the Philippines where the
corporation intends to operate; The Deposit of Securities
specific purpose or purposes which the
corporation intends to pursue in the Within 60 days, the licensee, except foreign
transaction of its business in the banking or insurance corporations, shall
Philippines: deposit with the Commission for the benefit
a. Provided, That said purpose or of present and future creditors of the licensee
purposes are those specifically in the Philippines, securities satisfactory to
stated in the certificate of the Commission, consisting of:
authority issued by the 1. Bonds or other evidence of
appropriate government indebtedness of the Government of the
agency; Philippines, its political subdivisions
and instrumentalities, or of
Page 146 of 494
government-owned or - controlled 2. Upon proof to the satisfaction of the
corporations and entities; Commission that the licensee has no
2. Shares of stock or debt securities that liability to Philippine residents,
are registered under RA 8799 (The including the Government of the
Securities Regulation Code); Republic of the Philippines [Sec. 143,
3. Shares of stock in domestic RCC].
corporations listed in the stock
exchange; Amendment of License
4. Shares of stock in domestic insurance
companies and banks, any financial A foreign corporation shall obtain an amended
instrument determined suitable by the license in the event it changes its corporate
Commission, or; name, or desires to pursue other or additional
5. Any combination thereof with an actual purposes in the Philippines
market value of at least Five hundred
thousand(P500,000.00) pesos or such Said amendment may be made by submitting
other amount that may be set by the an application with the Commission, endorsed
Commission [Sec. 143, RCC]. by the appropriate government agency [Sec.
148, RCC].
Within 6 Months After Each Fiscal Year of the
License, the Commission shall require: 1. Resident Agent
1. The licensee to deposit additional
securities or financial instruments Definition
equivalent in actual market value to 2%
of the amount by which the licensee’s A resident agent may be either:
gross income for that fiscal year 1. An individual residing in the Philippines
exceeds P10,000,000.00. (must be of good moral character and
2. The deposit of additional securities or sound financial standing) or
financial instruments if the actual 2. A domestic corporation (must likewise
market value of the deposited be of sound financial standing and
securities or financial instruments has must show proof of good standing)
decreased by at least 10% of their lawfully transacting business in the
actual market value at the time they Philippines [Sec. 144, RCC].
were deposited [Sec. 143, RCC]. The foreign corporation shall file a written
power of attorney:
The Commission may: 1. Designating a person (Philippine
1. At its discretion, release part of the resident), on whom summons and
additional deposit if the gross income other legal processes may be served in
of the licensee has decreased, or if the all actions or other legal proceedings
actual market value of the total deposit against such corporation; and
has increased, by more than ten (10%) 2. Consenting that service upon such
percent of their actual market value at resident agent shall be admitted and
the time they were deposited. held as valid, as if served upon the duly
2. Allow the licensee to make substitute authorized officers of the foreign
deposits for those already on deposit corporation at its home office [Sec.
as long as the licensee is solvent [Sec 144, RCC].
143, RCC].
It shall be the duty of the resident agent to
In the event the licensee ceases to do business immediately notify the Commission in writing of
in the Philippines, its deposits shall be any change in the resident agent’s address
returned: [Sec. 144, RCC].
1. Upon the licensee’s application
therefore; and
Page 147 of 494

c. Personality to Sue and Suability contracting with a foreign corporation from later
taking advantage of its noncompliance with the
Summary of Rules statutes chiefly in cases where such person
has received the benefits of the contract
[Communications Materials and Design, Inc. v.
Status Consequence Court ofAppeals, 260 SCRA 673 (1996)].
Doing Business in Can sue and be
the PH, WITH a sued Suability of Foreign Corporations
license
No foreign corporation transacting business in
the Philippines without a license, or its
successors or assigns, shall be permitted to
Doing Business in General Rule: maintain or intervene in any action, suit or
the PH, WITHOUT a Cannot sue, but may proceeding in any court or administrative
license be sued in the PH agency of the Philippines.
Exception: Nevertheless, such corporation may be sued or

Capacity to sue proceeded against before Philippine courts or
may not be administrative tribunals on any valid cause of
questioned if the action recognized under Philippine laws [Sec.
other party is 150, RCC].
estopped
A foreign corporation cannot claim exemption
NOT doing business May sue
from being sued in Philippine courts for acts
in the PH, on May be
done against a person or persons in the
isolated transactions sued
Philippines [Facilities Management
Corporation v. De La Osa, G.R. No. L-38649
(1979)].
Capacity to Sue
e. Instances When Unlicensed Foreign
Foreign corporations which conduct regular Corporations May be Allowed to Sue
business should be denied any access to (Isolated Transactions)
courts until they secure a license to ensure that
they will abide by the decisions of the local Doctrine of Isolated Transactions
courts [Eriks Ltd. v. CA, 267 SCRA 567 (1997)].
Foreign corporations are not required to obtain
A foreign corporation transacting business in a license to obtain relief from local courts or
the Philippines is required to secure a license agencies [Villanueva].
to have the personality to sue before, or
intervene in, any court or administrative In an isolated transaction, there is no intent on
proceeding [Sec. 150, RCC; Campos]. the part of the foreign corporation to engage in
a progressive pursuit of the purpose of a
By filing an action before Philippine courts, a business transaction [Eriks Ltd. v. CA, 267
foreign corporation puts itself under their SCRA 567 (1997)].
jurisdiction [Communication Materials v. CA,
260 SCRA 673 (1996)]. General Rule: No foreign corporation
transacting business in the Philippines without
By estoppel a license, or its successors or assigns, shall be
permitted to maintain or intervene in any
One who has dealt with a corporation of foreign action, suit or proceeding in any court or
origin as a corporate entity is estopped to deny administrative agency of the Philippines.
its corporate existence and capacity: The
principle will be applied to prevent a person
Page 148 of 494
Exceptions: which such corporation is authorized
1. But such may be sued or proceeded under its license;
against before Philippine courts or ● Transacting business in the Philippines
administrative tribunals on any valid as agent of or acting on behalf of any
cause of action recognized under foreign corporation or entity not duly
Philippine laws [Sec. 150, RCC]. licensed to do business in the
2. One who has dealt with a corporation Philippines; or
of foreign origin as a corporate entity is ● Any other ground as would render it
estopped to deny its corporate unfit to transact business in the
existence and capacity Philippines. [Sec. 151, RCC]
[Communications Materials and
Design, Inc. v. Court of Appeals, 260 M. Merger and Consolidation
SCRA 673 (1996)].
3. If a foreign corporation is not doing
business in the Philippines, it needs no
1. Concept
license to sue before Philippine courts
Definitions
on an isolated transaction or on a
cause of action entirely independent of
Merger - A corporation absorbs the other and
any business transaction [Agilent
remains in existence while the others are
Technologies v. Integrated Silicon,
dissolved [Sec.75, RCC].
G.R. No. 154618 (2004)].
Mergers may be horizontal (between competing
f. Grounds for Revocation of License
firms), vertical (if a corporation acquires another
which uses or distributes its products) or
Grounds for revocation of license:
conglomerate (neither competing nor related in
the chain of production or distribution)
● Failure to file its annual report or pay
[Campos].
any fees as required by this Code;
● Failure to appoint and maintain a
Consolidation – a new corporation is created,
resident agent in the Philippines as
and consolidating corporations are
required by this Title;
extinguished [Sec.75, RCC].
● Failure, after change of its resident
agent or address, to submit to the
Commission a statement of such Merger Consolidation
change as required by this Title;
● Failure to submit to the Commission an One or more Union of 2 or more
authenticated copy of any amendment corporations are corporations to form
to its articles of incorporation or bylaws absorbed by another a new corporation
or of any articles of merger or which survives and
consolidation within the time continues the
prescribed by this Title; combined business
● A misrepresentation of any material
matter in any application, report, One of All constituent
affidavit or other document submitted the constituent corporations
by such corporation pursuant to this corporations disappear
Title; remains as an with the
● Failure to pay any and all taxes, existing juridical emergence of a new
imposts, assessments or penalties, if person, whereas the corporate entity
any, lawfully due to the Philippine other corporation
Government or any of its agencies or shall cease to exist
political subdivisions;
The surviving The new corporate
● Transacting business in the Philippines
corporation shall entity shall obtain all
outside of the purpose or purposes for
Page 149 of 494

The Plan must be approved by the board of
Merger Consolidation
directors or trustees of each constituent
acquire all the the assets of corporation by majority vote [Sec. 75, RCC].
assets, rights of the disappearing
action, and corporations, 4. Articles of Merger or Consolidation
assuming all the and likewise shall
liabilities of assume all their The Articles of Merger or Consolidation takes
the disappearing liabilities. the place of the AOI of the consolidated
corporation/s. corporation or amends the AOI of the surviving
corporation. [Sec. 77, RCC]
There is no liquidation of the assets of the
dissolved corporation, all rights, properties Requisites
and franchises are acquired by the 1. Executed by each of the constituent
surviving/new corporation. corporations;
2. Signed by the president/vice president;
Merger and consolidation involve fundamental 3. Certified by the secretary/assistant
changes in the corporation, the rights of secretary of each corporation. [Sec. 77,
stockholders and creditors. There must be an RCC]
express provision of law that authorizes them.
Otherwise, such combinations are ultra vires. Contents
With the approval of the Corporation Code, The Articles must contain the following:
such express authority has been granted 1. Plan of the merger/consolidation
[Campos]. 2. As to stock corporations, the number of
shares outstanding, or in the case of
non-stock corporations, the number of
2. Constituent Corporation vs. members;
Consolidated Corporation 3. As to each corporation, the number of
shares or members voting for or
Constituent Consolidated Surviving against such plan, respectively;
Corporation Corporation Corporation 4. the carrying amounts and fair values of
the assets and liabilities of the
The parties to The new One of the respective companies as of the agreed
a merger or single constituent cut-off date
consolidation. corporation corporation 5. The method to be used in the merger
created s which or consolidation of accounts of the
through remain in companies;
consolidation. existence 6. The provisional or pro-forma values, as
after the merged or consolidated, using the
merger. accounting method; and
7. Such other information as may be
3. Plan of Merger or Consolidation prescribed by the Commission [Sec.
77, RCC].
Each of the constituent corporations must draw
up a Plan of Merger or Consolidation which Procedure
shall set forth:
1. Names of the corporation involved; Approval of Plan or Merger or
Consolidation by BOD and Stockholders of
2. Terms and mode of carrying it to effect;
3. Statement of changes, if any, in the Constituent Corporations [Sec. 76, RCC]
present articles of the surviving 1. Approval by majority vote of each of the
corporation to be formed in the case of board of directors or trustees of the
merger; and with respect to the constituent corporations of the plan of
merger or consolidation.
consolidated corporation in case of
consolidation
Page 150 of 494
2. Approval by the stockholders or Execution of Articles of Merger or
members of each of such corporations Consolidation
at separate corporate meetings duly
called for that purpose. Articles of Merger or Articles of Consolidation
a. The affirmative vote of shall be executed by each of the constituent
stockholders representing at corporations.
least two-thirds (2/3) of the
outstanding capital stock of Submission to SEC of the Articles
each corporation in the case of
stock corporations or at least The Articles of Merger or Consolidation are
two-thirds (2/3) of the members submitted to the SEC for approval.
in the case of non-stock
corporations shall be Mergers and consolidations of corporations
necessary for the approval of governed by special laws require a
such plan. recommendation from the appropriate
b. Holders of non-voting shares government agency [Sec. 78 (1), RCC].
are entitled to vote on the plan
[Sec. 6, par. 6(6)]. Action by SEC
3. Notice of such meetings shall be given 1. If necessary, the SEC shall set a
to all stockholders or members in the hearing, notifying all corporations
same manner as giving notice of concerned at least 2 weeks before.
regular or special meetings under 2. SEC shall issue a certificate approving
Section 49. The notice shall state the the articles and plan of merger or of
purpose of the meeting and include a consolidation. [Sec. 78, RCC]
copy or a summary of the plan of
merger or consolidation. Upon the issuance of the certificate of
merger or consolidation, such merger or
Any dissenting stockholder in stock consolidation shall become effective [Sec.
corporations may exercise his appraisal right in 78, RCC].
accordance with the Code. Provided that if
after the approval by the stockholders of such A merger or consolidation does not
plan, the board of directors decides to abandon become effective by mere agreement of
the plan, the appraisal right shall be the constituent corporations. The approval
extinguished. of the SEC is required [PNB v. Andrada
Electric and Engr. Co., Inc. (2002)].
Amendment to the plan of merger or
consolidation Notwithstanding Sec. 79 (now, sec. 78,
RCC), parties may stipulate a specific
An amendment to the Plan may be made by effective date of merger (or consolidation)
approval of the majority vote of the where no 3rd party will be prejudiced [SEC
respective boards of directors or trustees of Opinion No. 09-13, July 1, 2009].
all the constituent corporations and ratified
by the affirmative vote of stockholders 5. Effects
representing at least two-thirds (2/3) of the
outstanding capital stock or of two-thirds As enumerated in the RCC, the following are
(2/3) of the members of each of the the legal effects of merger/consolidation:
constituent corporations. Such plan, together 1. The constituent corporations shall
with any amendment, shall be considered as become a single corporation which, in
the agreement of merger or consolidation case of merger, shall be the surviving
corporation designated in the plan of
merger; and, in case of consolidation,
shall be the consolidated corporation
designated in the plan of consolidation;
Page 151 of 494

2. The separate existence of the Unlike regular transfer/acquisition, it is able to
constituent corporations shall cease, achieve a continuous flow of the juridical
except that of the surviving or the personalities and business enterprises of the
consolidated corporation; constituent corporations. There is no “legal
3. The surviving or the consolidated break” in their juridical personalities and
corporation shall possess all the rights, business enterprises.
privileges, immunities, and powers and
shall be subject to all the duties and Thus, merger/consolidation is not a violation of
liabilities of a corporation organized a non-transfer clause. The surviving or
under this Code; consolidated corporation is not considered a
4. The surviving or the consolidated transferee.
corporation shall possess all the rights,
privileges, immunities and franchises Unlike regular transfer of assets/business
of each constituent corporation; and all enterprise, there is no gain or loss in the pursuit
real or personal property, all of merger or consolidation, thus it is not subject
receivables due on whatever account, to taxable gains under Section 40(C)(2)(a) of
including subscriptions to shares and the NIRC, as amended by the Train Law.
other choses in action, and every other
interest of, belonging to, or due to each As to Constituent Corporations Corporate
constituent corporation, shall be existence
deemed transferred to and vested in
such surviving or consolidated The constituent corporations shall become a
corporation without further act or deed; single corporation. The separate existence of
and the constituents shall cease, except that of the
5. The surviving or consolidated surviving or the consolidated corporation. The
corporation shall be responsible for all absorbed or constituent corporations are ipso
the liabilities and obligations of each facto dissolved by operation of law [SEC
constituent corporation as though such Opinion, July 16, 1981].
surviving or consolidated corporation
had itself incurred such liabilities or Assets and liabilities
obligations; and any pending claim,
action or proceeding brought by or There is no liquidation of the assets of the
against any constituent corporation dissolved corporations [Campos].
may be prosecuted by or against the
surviving or consolidated corporation. The surviving or the consolidated corporation
The rights of creditors or liens upon the shall possess all the rights, privileges,
property of such constituent immunities, powers, and franchises of each
corporations shall not be impaired by constituent corporation and the properties shall
the merger or consolidation [Sec. 79, be deemed transferred to and vested in the
RCC]. surviving or consolidated corporation without
further act or deed.
Although in a merger, there is dissolution of the
absorbed corporations, there is no winding up The surviving or the consolidated corporation
of their affairs, because the surviving shall be subject to all the duties and liabilities
corporation automatically acquires all their of the dissolving corporation(s).
rights, privileges, powers, and liabilities
[Associated Bank v. CA, 291 SCRA 511]. As to Creditors
Same goes for the consolidated corporation.
The creditors of a corporation cannot prevent
Salient Advantages of its merger or consolidation with another even if
Mergers/Consolidation the surviving or new corporation is not as
acceptable a debtor as the absorbed
corporation [Campos].
Page 152 of 494

Any claim, action or proceeding pending by or
against any of the constituent corporations may
be prosecuted by or against the surviving or
consolidated corporation.
The rights of the creditors or lien upon the

property of any of each constituent corporation
shall not be impaired by such merger or
consolidation.
Mergers and Consolidations in Employees
Because there is no legal break by the act of

merging, consolidating, it is logical to expect
that the contractual rights of employees and
the existing collective bargaining agreement, if
any, would have to be absorbed by the
surviving/consolidated corporation. However,
SC has made contrary rulings.
The rule on automatic assumption/absorption

does not impair the right of an employer to
terminate the employment of the absorbed
employees for a lawful or authorized cause or
the right of such an employee to resign, retire,
or otherwise sever his employment, whether
before or after the merger, subject to existing
contractual obligations [The Philippine
Geothermal Inc. Employees Union v. Unocal
Philippines, Inc., (2016)].
Page 153 of 494

BANKING LAWS
COMMERCIAL LAW
BANKING LAWS COMMERCIAL LAW
(c) five (5) members who shall come from the private
sector, all of whom shall serve full-time: Provided,
A. NEW CENTRAL however, That of the members first appointed under
the provisions of this subsection, three (3) shall have
BANK ACT a term of six (6) years, and the other two (2), three
(3) years.
No member of the Monetary Board may be

1. State Policies reappointed more than once.
Section 7. Vacancies. – Any vacancy in the

New Central Bank Act
Monetary Board created by the death, resignation,
or removal of any member shall be filled by the
Section 1. Declaration of Policy. – The State shall
appointment of a new member to complete the
maintain a central monetary authority that shall
unexpired period of the term of the member
function and operate as an independent and
concerned.
accountable body corporate in the discharge of its
mandated responsibilities concerning money,
Section 8. Qualifications. – The members of the
banking and credit. In line with this policy, and
Monetary Board must be natural-born citizens of the
considering its unique functions and responsibilities,
Philippines, at least thirty-five (35) years of age, with
the central monetary authority established under this
the exception of the Governor who should at least
Act, while being a government-owned corporation,
be forty (40) years of age, of good moral character,
shall enjoy fiscal and administrative autonomy.
of unquestionable integrity, of known probity and
patriotism, and with recognized competence in
social and economic disciplines.
2. Monetary Board and its Powers and
Functions Section 9. Disqualifications. – In addition to the
disqualifications imposed by Republic Act No. 6713,
a. Composition a member of the Monetary Board is disqualified from
being a director, officer, employee, consultant,
lawyer, agent or stockholder of any bank, quasi-
New Central Bank Act bank or any other institution which is subject to
supervision or examination by the Bangko Sentral,
Section 6. Composition of the Monetary Board. – in which case such member shall resign from, and
The powers and functions of the Bangko Sentral divest himself of any and all interests in such
shall be exercised by the Bangko Sentral Monetary institution before assumption of office as member of
Board, hereafter referred to as the Monetary Board, the Monetary Board.
composed of seven (7) members appointed by the
President of the Philippines for a term of six (6) The members of the Monetary Board coming from
years. the private sector shall not hold any other public
office or public employment during their tenure.
The seven (7) members are:
No person shall be a member of the Monetary Board
(a) the Governor of the Bangko Sentral, who shall be if he has been connected directly with any
the Chairman of the Monetary Board. The Governor multilateral banking or financial institution or has a
of the Bangko Sentral shall be head of a department substantial interest in any private bank in the
and his appointment shall be subject to confirmation Philippines, within one (1) year prior to his
by the Commission on Appointments. Whenever the appointment; likewise, no member of the Monetary
Governor is unable to attend a meeting of the Board, Board shall be employed in any such institution
he shall designate a Deputy Governor to act as his within two (2) years after the expiration of his term
alternate: Provided, That in such event, the except when he serves as an official representative
Monetary Board shall designate one of its members of the Philippine Government to such institution.
as acting Chairman;
Section 10. Removal. – The President may remove
(b) a member of the Cabinet to be designated by the any member of the Monetary Board for any of the
President of the Philippines. Whenever the following reasons: (a)If the member is subsequently
designated Cabinet Member is unable to attend a disqualified under the provisions of Section 8 of this
meeting of the Board, he shall designate an Act; or (b)If he is physically or mentally incapacitated
Undersecretary in his Department to attend as his that he cannot properly discharge his duties and
alternate; and responsibilities and such incapacity has lasted for
more than six (6) months; or(c)If the member is guilty
Page 155 of 494

of acts or operations which are of fraudulent or illegal Power to impose administrative sanctions
character or which are manifestly opposed to the on erring banks.
aims and interests of the Bangko Sentral; or (d)If the
member no longer possesses the qualifications 3. The Bangko Sentral ng Pilipinas
specified in Section 8 of this Act.
and Banks in Distress
b. Powers, Duties and Functions a. Conservatorship
Power to close banks. New Central Bank Act

The action of the MB on this matter is final and
executory. Such exercise may nonetheless be Section 29. Appointment of Conservator. -
subject to judicial inquiry and can be set aside Whenever, on the basis of a report submitted by the
if found to be in excess of jurisdiction or with appropriate supervising or examining department,
such grave abuse of discretion as to amount to the Monetary Board finds that a bank or a quasi-
bank is in a state of continuing inability or
lack or excess of jurisdiction. [Bangko Sentral unwillingness to maintain a condition of liquidity
ng Pilipinas Monetary Board v. Antonio- deemed adequate to protect the interest of
Valenzuela, G.R. No. 184778] depositors and creditors, the Monetary Board may
appoint a conservator with such powers as the
In cases involving the BSP, power to Monetary Board shall deem necessary to take
authorize the BSP Governor to represent it charge of the assets, liabilities, and the management
thereof, reorganize the management, collect all
personally or through a counsel, even a monies and debts due said institution, and exercise
private counsel, and the authority to all powers necessary to restore its viability. The
represent the BSP may be delegated to any conservator shall report and be responsible to the
of its officers. [Bangko Sentral ng Pilipinas v. Monetary Board and shall have the power to
Legaspi, G.R. No. 205966] overrule or revoke the actions of the previous
management and board of directors of the bank or
quasi-bank.
Duty to cause the prosecution of those
alleged violators. The conservator should be competent and
However, nothing under the Central Bank Act knowledgeable in bank operations and
and the General Banking Act imposes a clear, management. The conservatorship shall not exceed
specific duty on the former to do the actual one (1) year.
prosecution of the latter.
The conservator shall receive remuneration to be
fixed by the Monetary Board in an amount not to
Being an artificial person, The Central Bank is exceed two-thirds (2/3) of the salary of the president
limited to its statutory powers and the nearest of the institution in one (1) year, payable in twelve
power to which prosecution of violators of (12) equal monthly payments: Provided, That, if at
banking laws may be attributed is its power to any time within the one-year period, the
sue and be sued. But this corporate power of conservatorship is terminated on the ground that the
institution can operate on its own, the conservator
litigation evidently refers to civil cases only. shall receive the balance of the remuneration which
[Perez v. Monetary Board, G.R. No. L-23307] he would have received up to the end of the year;
but if the conservatorship is terminated on other
Exclusive authority to assess, evaluate and grounds, the conservator shall not be entitled to
determine the condition of any bank, and such remaining balance. The Monetary Board may
finding such condition to be one of insolvency, appoint a conservator connected with the Bangko
Sentral, in which case he shall not be entitled to
or that its continuance in business would receive any remuneration or emolument from the
involve a probable loss to its depositors or Bangko Sentral during the conservatorship. The
creditors, forbid bank or non-bank financial expenses attendant to the conservatorship shall be
institution to do business in the Philippines. borne by the bank or quasi-bank concerned.
To this end, they shall designate an official of
the BSP or other competent person as receiver The Monetary Board shall terminate the
conservatorship when it is satisfied that the
to immediately take charge of its assets and institution can continue to operate on its own and the
liabilities. [Koruga v. Arcenas, Jr., G.R. Nos. conservatorship is no longer necessary. The
168332, 169053] conservatorship shall likewise be terminated should
Page 156 of 494

the Monetary Board, on the basis of the report of the Procedure for Damages under
conservator or of its own findings, determine that the Conservatorship
continuance in business of the institution would
involve probable loss to its depositors or creditors, in
which case the provisions of Section 30 shall apply. Damages arising Damages arising
from the MB's act of from the acts of the
placing the bank conservator
Requisites before the order of under
conservatorship may be set aside by a conservatorship
court:
1. The appropriate pleading must be filed by May be claimed only Comes with
the stockholders of record representing the if the MB's action is injunction to restrain
majority of the capital stock of the bank in the plainly arbitrary and the enforcement of
proper court; made in bad faith, the CB's
2. Said pleading must be filed within ten (10) and that the action implementing
days from receipt of notice by said majority therefor is resolutions.
stockholders of the order placing the bank inseparable from an
under conservatorship; and action to set aside the The fifth paragraph of
3. There must be convincing proof, after conservatorship. Section 29 of the
hearing, that the action is plainly arbitrary and Central Bank Act
made in bad faith. [Central Bank of the Must be filed within equally applies
Philippines v. Court of Appeals, G.R. No. 10 days from receipt because the
88353, 08 May 1992] of notice of the order questioned acts are
placing the bank but incidental to the
The powers of a conservator are described as under conservatorship.
vast and far-reaching. However, such powers conservatorship.
must be related to the "(preservation of) the
assets of the bank, (the reorganization of) the
2. Closure
management thereof and (the restoration of) its
viability." Such powers cannot extend to the
The action of the MB on closure is final and
post-facto repudiation of perfected
executory. [Bangko Sentral ng Pilipinas
transactions, otherwise they would infringe
Monetary Board v. Antonio-Valenzuela, G.R.
against the non-impairment clause of the
No. 184778, 02 October 2009]
Constitution.
The closure of a bank may be considered as an
The conservator merely takes the place of a
exercise of police power. Such exercise may
bank's board of directors. What the said board
nonetheless be subject to judicial inquiry and
cannot do — such as repudiating a contract
can be set aside if found to be in excess of
validly entered into under the doctrine of
jurisdiction or with such grave abuse of
implied authority — the conservator cannot do
discretion as to amount to lack or excess of
either. [First Philippine International Bank v.
jurisdiction. [Bangko Sentral ng Pilipinas
Court of Appeals, G.R. No. 115849, 24 January
Monetary Board v. Antonio-Valenzuela, G.R.
1996)]
No. 184778, 02 October 2009]
RA 7653 no longer requires that an

examination be made before the MB can issue
a closure order. [Rural Bank of San Miguel Inc.
v. Monetary Board, Central Bank of the
Philippines, G.R. No. 150886, 16 February
2007]
Under the law, the sanction of closure could be

imposed upon a bank by the BSP even without
notice and hearing. [Bangko Sentral ng
Page 157 of 494
Pilipinas Monetary Board v. Antonio- cases, the Monetary Board may summarily and
Valenzuela, G.R. No. 184778, 02 October without need for prior hearing forbid the institution
2009] from doing business in the Philippines and designate
the Philippine Deposit Insurance Corporation as
The "close now, hear later" doctrine has receiver of the banking institution.
already been justified as a measure for the
For a quasi-bank, any person of recognized
protection of the public interest. Swift action is competence in banking or finance may be
called for on the part of the BSP when it finds designated as receiver.
that a bank is in dire straits. Unless adequate
and determined efforts are taken by the The receiver shall immediately gather and take
government against distressed and charge of all the assets and liabilities of the
institution, administer the same for the benefit of its
mismanaged banks, public faith in the banking
creditors, and exercise the general powers of a
system is certain to deteriorate to the prejudice receiver under the Revised Rules of Court but shall
of the national economy itself, not to mention not, with the exception of administrative
the losses suffered by the bank depositors, expenditures, pay or commit any act that will involve
creditors, and stockholders, who all deserve the transfer or disposition of any asset of the
the protection of the government. [Bangko institution: Provided, That the receiver may deposit
or place the funds of the institution in nonspeculative
Sentral ng Pilipinas Monetary Board v.
investments. The receiver shall determine as soon
Antonio-Valenzuela, G.R. No. 184778, 02 as possible, but not later than ninety (90) days from
October 2009] take-over, whether the institution may be
rehabilitated or otherwise placed in such a condition
The period during which the bank cannot do so that it may be permitted to resume business with
business due to insolvency is not a fortuitous safety to its depositors and creditors and the general
public: Provided, That any determination for the
event, unless it is shown that the government's
resumption of business of the institution shall be
action to place a bank under receivership or subject to prior approval of the Monetary Board.
liquidation proceedings is tainted with
arbitrariness, or that the regulatory body has xxx
acted without jurisdiction. [Spouses Poon v.
Prime Savings Bank, G.R. No. 183794, 13
The law entrusts to the MB the appreciation
June 2016]
and determination of whether any or all of the
statutory grounds for the closure and
3. Receivership
receivership of the erring bank are present.
The MB, under R.A. No. 7653, has been
New Central Bank Act invested with more power of closure and
placement of a bank under receivership for
Section 30. Proceedings in Receivership and
insolvency or illiquidity, or because the bank’s
Liquidation. – Whenever, upon report of the head of
the supervising or examining department, the continuance in business would probably result
Monetary Board finds that a bank or quasi-bank: in the loss to depositors or creditors. [Vivas, v.
Monetary Board of the Central Bank of the
(a) is unable to pay its liabilities as they become due Philippines, G.R. No. 191424, 07 August
in the ordinary course of business: Provided, That 2013)]
this shall not include inability to pay caused by
extraordinary demands induced by financial panic in
the banking community; To address the growing concerns in the
banking industry, the legislature has sufficiently
(b) has insufficient realizable assets, as determined empowered the MB to effectively monitor and
by the Bangko Sentral, to meet its liabilities; or supervise banks and financial institutions and,
if circumstances warrant, to forbid them to do
(c) cannot continue in business without involving
business, to take over their management or to
probable losses to its depositors or creditors; or
place them under receivership. The legislature
(d) has willfully violated a cease and desist order has clearly spelled out the reasonable
under Section 37 that has become final, involving parameters of the power entrusted to the MB
acts or transactions which amount to fraud or a and assigned to it only the manner of enforcing
dissipation of the assets of the institution; in which said power. In other words, the MB was given
Page 158 of 494
a wide discretion and latitude only as to how proceed with the liquidation of the institution. The
the law should be implemented in order to receiver shall:
attain its objective of protecting the interest of
the public, the banking industry and the (1) file ex parte with the proper regional trial court,
economy. [Vivas, v. Monetary Board of the and without requirement of prior notice or any other
action, a petition for assistance in the liquidation of
Central Bank of the Philippines, G.R. No.
the institution pursuant to aliquidation plan adopted
191424, 07 August 2013] by the Philippine Deposit Insurance Corporation for
general application to all closed banks. In case of
The assets of the bank pass beyond its control quasi-banks, the liquidation plan shall be adopted by
into the possession and control of the receiver the Monetary Board. Upon acquiring jurisdiction, the
whose duty it is to administer the assets for the court shall, upon motion by the receiver after due
notice, adjudicate disputed claims against the
benefit of the creditors of the bank. Thus, the
institution, assist the enforcement of individual
appointment of a receiver operates to suspend liabilities of the stockholders, directors and officers,
the authority of the bank and of its directors and and decide on other issues as may be material to
officers over its property and effects, such implement the liquidation plan adopted. The receiver
authority being reposed in the receiver, and in shall pay the cost of the proceedings from the assets
this respect, the receivership is equivalent to of the institution.
an injunction to restrain the bank officers from
(2) convert the assets of the institution to money,
intermeddling with the property of the bank in dispose of the same to creditors and other parties,
any way. [Abacus Real Estate Development for the purpose of paying the debts of such institution
Center, Inc. v. Manila Banking Corporation, in accordance with the rules on concurrence and
G.R. No. 162270, 06 April 2005] preference of credit under the Civil Code of the
Philippines and he may, in the name of the
institution, and with the assistance of counsel as he
A bank receiver only has powers of
may retain, institute such actions as may be
administration. [Abacus Real Estate necessary to collect and recover accounts and
Development Center, Inc. v. Manila Banking assets of, or defend any action against, the
Corporation, G.R. No. 162270, 06 April 2005] institution. The assets of an institution under
receivership or liquidation shall be deemed in
Granting or approving an "exclusive option to custodia legis in the hands of the receiver and shall,
from the moment the institution was placed under
purchase" is not an act of administration, but
such receivership or liquidation, be exempt from any
an act of strict ownership, involving, as it does, order of garnishment, levy, attachment, or
the disposition of property of the bank. [Abacus execution.
Real Estate Development Center, Inc. v.
Manila Banking Corporation, supra The actions of the Monetary Board taken under this
section or under Section 29 of this Act shall be final
and executory, and may not be restrained or set
If circumstances warrant it, the MB may forbid
aside by the court except on petition for certiorari on
a bank from doing business and place it under the ground that the action taken was in excess of
receivership without prior notice and hearing. jurisdiction or with such grave abuse of discretion as
(Vivas, v. Monetary Board of the Central Bank to amount to lack or excess of jurisdiction. The
of the Philippines, supra) petition for certiorari may only be filed by the
stockholders of record representing the majority of
the capital stock within ten (10) days from receipt by
4. Liquidation
the board of directors of the institution of the order
directing receivership, liquidation or
New Central Bank Act conservatorship.
Section 30. Proceedings in Receivership and The designation of a conservator under Section 29
Liquidation. – xxx of this Act or the appointment of a receiver under this
section shall be vested exclusively with the
If the receiver determines that the institution cannot Monetary Board. Furthermore, the designation of a
be rehabilitated or permitted to resume business in conservator is not a precondition to the designation
accordance with the next preceding paragraph, the of a receiver.
Monetary Board shall notify in writing the board of
directors of its findings and direct the receiver to
Page 159 of 494

Court with Jurisdiction "Disputed claims" refer to all claims, whether
they be against the assets of the insolvent
Section 29 only finds operation in cases where bank, for specific performance, breach of
there are claims against an insolvent bank. The contract, damages, or whatever. [Miranda v.
exclusive jurisdiction of the liquidation court Philippine Deposit Insurance Corporation,
pertains only to the adjudication of claims supra]
against the bank. It does not cover the reverse
situation where it is the bank which files a claim The rationale behind judicial liquidation is
against another person or legal entity. [Manalo intended to prevent multiplicity of actions
v. Court of Appeals, G.R. No. 141297, 08 against the insolvent bank. It is a pragmatic
October 2001] arrangement designed to establish due
process and orderliness in the liquidation of the
The requirement that all claims against the bank, to obviate the proliferation of litigations
bank be pursued in the liquidation proceedings and to avoid injustice and arbitrariness. The
filed by the Central Bank is intended to prevent lawmaking body contemplated that for
multiplicity of actions against the insolvent convenience, only one court, if possible, should
bank and designed to establish due process pass upon the claims against the insolvent
and orderliness in the liquidation of the bank, to bank and that the liquidation court should
obviate the proliferation of litigations and to assist the Superintendent of Banks and
avoid injustice and arbitrariness. The regulate his operations. [Miranda v. Philippine
lawmaking body contemplated that for Deposit Insurance Corporation, supra]
convenience, only one court, if possible, should
pass upon the claims against the insolvent In the absence of fraud, the purchase of a
bank and that the liquidation court should cashier's check, like the purchase of a draft on
assist the Superintendents of Banks and a correspondent bank, creates the relation of
regulate his operations. [Manalo v. Court of creditor and debtor, not that of principal and
Appeals, supra] agent, with the result that the purchaser or
holder thereof is not entitled to a preference
A bank which had been ordered closed by the over general creditors in the assets of the bank
monetary board retains its juridical personality issuing the check, when it fails before payment
which can sue and be sued through its of the check. However, in a situation involving
liquidator. The only limitation being that the the element of fraud, where a cashier's check
prosecution or defense of the action must be is purchased from a bank at a time when it is
done through the liquidator. Otherwise, no suit insolvent, as its officers know or are bound to
for or against an insolvent entity would prosper. know by the exercise of reasonable diligence,
In such situation, banks in liquidation would it has been held that the purchase is entitled to
lose what justly belongs to them through a a preference in the assets of the bank on its
mere technicality. [Manalo v. Court of Appeals, liquidation before the check is paid. [Miranda v.
supra] Philippine Deposit Insurance Corporation,
supra]
The power and authority of the Monetary Board
to close banks and liquidate them thereafter Differences in the procedure for involuntary
when public interest so requires is an exercise dissolution and liquidation of a corporation
of the police power of the State. Police power, under the Corporation Code, and that of a
however, is subject to judicial inquiry. It may not banking corporation under the New Central
be exercised arbitrarily or unreasonably and Bank Act:
could be set aside if it is either capricious,
discriminatory, whimsical, arbitrary, unjust, or
is tantamount to a denial of due process and
equal protection clauses of the Constitution.
[Miranda v. Philippine Deposit Insurance
Corporation, G.R. No. 169334, 08 September
2006]
Page 160 of 494

Dissolution of Corporation v. Liquidation of
Dissolution of Liquidation of Bank
Bank
Corporation
Dissolution of Liquidation of Bank a tax clearance stock. PDIC, as the

Corporation having been issued. appointed receiver,
The corporation is shall file ex parte with
May be done upon The Monetary Board allowed to continue the proper RTC, and
the filing of a verified may summarily and as a body corporate without requirement
complaint and after without need for prior for three years after of prior notice or any
proper notice and hearing, forbid the its dissolution, for the other action, a
hearing, on grounds banking corporation purpose of petition for
provided by existing from doing business prosecuting and assistance in the
laws, rules, and in the Philippines, for defending suits by or liquidation of the
regulations. causes enumerated against it, to settle bank. The bank is not
in Section 30 of the and close its affairs, given the option to
Upon receipt by the New Central Bank and to dispose of and undertake its own
corporation of the Act; and appoint the convey its property liquidation.
order of suspension PDIC as receiver of and distribute its
from the SEC, it is the bank. assets, but not for the Nothing in Section 30
required to notify and purpose of continuing of RA 7653 requires
submit a copy of the PDIC shall its business. The the BSP, through the
said order, together immediately gather corporation may Monetary Board, to
with its final tax and take charge of all undertake its own make an·
return, to the BIR. the assets and liquidation, or at any independent
liabilities of the time during the said determination of
The SEC is also closed bank and three years, it may whether a bank may
required to furnish the administer the same convey all of its still be rehabilitated
BIR a copy of its order for the benefit of its property to trustees or not. As expressly
of suspension. creditors. for the benefit of its stated in the afore-
stockholders, cited provision, once
The BIR is supposed The summary nature members, creditors, the receiver
to issue a tax of the procedure for and other persons in determines that
clearance to the the involuntary interest. rehabilitation is no
corporation within 30 closure of a bank is longer feasible, the
days from receipt of especially stressed in Monetary Board is
the foregoing Section 30 of the simply obligated to:
documentary New Central Bank (a) notify in writing
requirements. Act, which explicitly the bank's board of
states that the directors of the same;
The SEC shall issue actions of the and (b) direct the
the final order of Monetary Board PDIC to proceed with
dissolution only after under the said liquidation.
the corporation has Section or Section 29
[In Re: Petition for Assistance in the Liquidation
submitted its tax shall be final and
in the Rural Bank of Bokod Benguet v. Bureau
clearance; or in case executory, and may of Internal Revenue, G.R. No. 158261, 18
of involuntary not be restrained or
December 2006]
dissolution, the SEC set aside by the court
may proceed with the except on a Petition
Make a separate and distinct factual
dissolution after 30 for Certiorari filed by
determination before it can order the liquidation
days from receipt by the stockholders of
of a bank or quasi-bank when the PDIC has
the BIR of the record of the bank
already made such determination. (Apex
documentary representing a
Bancrights Holdings, Inc. et. al. v. Bangko
requirements without majority of the capital
Page 161 of 494
Sentral Ng Pilipinas, G.R. No. 214866, 2
October 2017)
B. GENERAL
The liquidation court has the exclusive
jurisdiction to adjudicate disputed claims BANKING LAW OF
against the closed bank, assist in the
enforcement of individual liabilities of the 2000
stockholders, directors and officers, and decide
on all other issues as may be material to 1. Definition and Classification of
implement the distribution plan adopted by the
Banks
PDIC for general application to all closed
banks. Simply put, if there is a judicial
liquidation of an insolvent bank, all claims
a. Definition
against the bank should be filed in a liquidation
A bank has been defined as a moneyed
proceeding. (Allan Cu v. Small Business
Guarantee and Finance Corporation, G.R. No. institute founded to facilitate the borrowing,
lending and safe-keeping of money and to
218381, July 14, 2021)
deal, in notes, bills of exchange, and
credits. (Republic v. Security Credit and
Section 30 of RA 7653 is curative in character
when it declared that the liquidation court shall Acceptance Corporation, G.R. No. L-20583, 23
January 1967)
have jurisdiction in the same proceedings to
assist in the adjudication of the disputed claims
An investment company which loans out the
against the Bank. (Hermosa Savings and Loan
Bank v. Development Bank of the Philippines, money of its customers, collects the
G.R. No. 222972, February 10, 2021) interest and charges a commission to both
lender and borrower, is a bank. (Republic v.
The rationale for consolidating all claims Security Credit and Acceptance Corporation,
against the bank with the liquidation court is "to G.R. No. L-20583, 23 January 1967)
prevent multiplicity of actions against the
insolvent bank and x x x to establish due Any person engaged in the business
process and orderliness in the liquidation of the carried on by banks of deposit, of discount,
or of circulation is doing a banking business,
bank, to obviate the proliferation of litigations
and to avoid injustice and arbitrariness. although but one of these functions is
exercised. (Republic v. Security Credit and
(Hermosa Savings and Loan Bank v.
Development Bank of the Philippines, G.R. No. Acceptance Corporation, G.R. No. L-20583, 23
January 1967)
222972, February 10, 2021)
Section 30 of RA 7653 gives the liquidation General Banking Law of 2000

court the authority to "adjudicate disputed
claims against the institution, assist the Section 3. Definition and Classification of Banks.
enforcement of individual liabilities of the 3.1. "Banks" shall refer to entities engaged in the
stockholders, directors and officers, and decide lending of funds obtained in the form of deposits.
on other issues as may be material to
implement the liquidation plan adopted."
(Hermosa Savings and Loan Bank v. b. Classification
Development Bank of the Philippines, G.R. No.
222972, February 10, 2021) General Banking Law of 2000
Section 3. Definition and Classification of Banks.

Banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
Page 162 of 494

Banks Quasi- Trust

(c) Thrift banks, composed of: (i) Savings and Banks Entities
mortgage banks, (ii) Stock savings and loan
associations, and (iii) Private development banks, as G.R. No. L-
defined in the Republic Act No. 7906 (hereafter the
"Thrift Banks Act");
20583, 23
January
(d) Rural banks, as defined in Republic Act No. 73S3 1967)
(hereafter the "Rural Banks Act");
An
(e) Cooperative banks, as defined in Republic Act investment
No 6938 (hereafter the "Cooperative Code");
company
(f) Islamic banks as defined in Republic Act No. which loans
6848, otherwise known as the "Charter of Al out the
Amanah Islamic Investment Bank of the money of its
Philippines"; and customers,
collects the
(g) Other classifications of banks as determined by
the Monetary Board of the Bangko Sentral ng interest and
Pilipinas. charges a
commission
to both
2. Distinction of Banks from Quasi- lender and
Banks and Trust Entities borrower.
(Republic v.
Banks Quasi- Trust Security
Banks Entities Credit and
Acceptance
Entities Entities A stock Corporation,
engaged in engaged in corporation G.R. No. L-
the lending of the borrowing or a person 20583, 23
funds of funds duly January
obtained in through the authorized by 1967)
the form of issuance, the Monetary
deposits. endorsement Board to Pawnshops
(Sec. 3) or engage in They are non-banks/banking institutions.
assignment trust
A moneyed with recourse business. The nature of their business activities partakes
institute or (Sec. 79) that of a financial intermediary in that its
founded to acceptance principal function is lending.
facilitate the of deposit Only such a
borrowing, substitutes as corporation Furthermore, pawnshops are under the
lending and defined in may act as a regulatory supervision of the Bangko Sentral
safe- Section 95 of trustee or ng Pilipinas and covered by its Manual of
keeping of Republic Act administer Regulations for Non-Bank Financial
money and No. 7653 for any trust or Institutions. (First Planters Pawnshop, Inc. v.
to deal, in purposes of hold property Commissioner of Internal Revenue, G.R. No.
notes, bills re-lending or in trust or on 174134, 30 July 2008)
of exchange, purchasing of deposit for
and credits. receivables the use,
(Republic v. and other benefit, or
Security obligations. behoof of
Credit and (Sec. 4) others. (Sec.
Acceptance 79)
Corporation,
Page 163 of 494
3. Diligence Required of Banks 138569, 11 September 2003; Citystate
Savings Bank v. Tobias, G.R. No. 227990]
New Civil Code
Strict care in the selection and supervision of
Article 1173. The fault or negligence of the obligor its employees [Citystate Savings Bank v.
consists in the omission of that diligence which is Tobias, G.R. No. 227990]
required by the nature of the obligation and
corresponds with the circumstances of the persons, Care and trustworthiness expected of bank
of the time and of the place. When negligence shows
employees and officials is far greater than
bad faith, the provisions of articles 1171 and 2201,
paragraph 2, shall apply. those of ordinary clerks and employees.
[Philippine National Bank v. Raymundo, G.R.
If the law or contract does not state the diligence No. 208672, 07 December 2016]
which is to be observed in the performance, that
which is expected of a good father of a family shall However, the banks' compliance with this
be required.
degree of diligence is to be determined in
accordance with the particular circumstances
of each case. [Spouses Carbonell v.
General Banking Law of 2000
Metropolitan Bank And Trust Company, G.R.
Section 2. Declaration of Policy. - The State No. 178467, 26 April 2017]
recognizes the vital role of banks providing an
environment conducive to the sustained A bank's disregard of its own banking policy
development of the national economy and the amounts to gross negligence.
fiduciary nature of banking that requires high
standards of integrity and performance. In
furtherance thereof, the State shall promote and Payment of the amounts of checks without
maintain a stable and efficient banking and financial previously clearing them with the drawee bank,
system that is globally competitive, dynamic and especially so where the drawee bank is a
responsive to the demands of a developing foreign bank and the amounts involved were
economy. large, is contrary to normal or ordinary banking
practice. [Philippine National Bank v.
a. Standards of Diligence Raymundo, G.R. No. 208672, 07 December
2016]
Higher than that of a good father of a family
[Philippine National Bank v. Raymundo, G.R. Rationale:
No. 208672, 07 December 2016; Consolidated The business and industry is imbued with
Bank and Trust Corporation v. Court of public interest. [Ong Bun v. Bank of the
Appeals, G.R. No. 138569, 11 September Philippine Islands, G.R. No. 212362]
2003]
There is a fiduciary relationship between the
Treat the depositor's account with the utmost bank and its depositors.
fidelity. [Simex International (Manila) Inc. v.
Court of Appeals, G.R. No. 88013, 19 March A blunder on the part of the bank, such as the
1990] dishonor of a check without good reason, can
cause the depositor not a little embarrassment
Treat the accounts of its depositors with if not also financial loss and perhaps even civil
meticulous care. [Simex International (Manila) and criminal litigation. [Simex International
Inc. v. Court of Appeals, G.R. No. 88013, 19 (Manila) Inc. v. Court of Appeals, G.R. No.
March 1990; Consolidated Bank and Trust 88013, 19 March 1990]
Corporation v. Court of Appeals, G.R. No.
138569, 11 September 2003] The relationship between the bank and
depositor is fiduciary. [Consolidated Bank and
Observe "high standards of integrity and Trust Corporation v. Court of Appeals, G.R. No.
performance." [Consolidated Bank and Trust 138569, 11 September 2003]
Corporation v. Court of Appeals, G.R. No.
Page 164 of 494
The very nature of their work in handling negligence of the defendant, who had the last
millions of pesos in daily transactions. fair chance to prevent the impending harm by
[Philippine National Bank v. Raymundo, G.R. the exercise of due diligence. Moreover, in
No. 208672, 07 December 2016] situations where the doctrine has been applied,
it was defendant's failure to exercise such
Their stability depends on the confidence of the ordinary care, having the last clear chance to
people in their honesty and efficiency. avoid loss or injury, which was the proximate
[Citystate Savings Bank v. Tobias, G.R. No. cause of the occurrence of such loss or injury.
227990] [Bank of the Philippine Islands v. Spouses.
Quiaoit, G.R. No. 199562, 16 January 2019]
The contract between the bank and its
depositor is governed by the provisions of the A bank is liable for wrongful acts of its officers
Civil Code on simple loan or mutuum, with the done in the interests of the bank or in the
bank as the debtor and the depositor as the course of dealings of the officers in their
creditor. [Citystate Savings Bank v. Tobias, representative capacity but not for acts outside
G.R. No. 227990 (2018)] the scope of their authority. [Citystate Savings
Bank v. Tobias, G.R. No. 227990]
Liability of Banks
Banking institutions may be held liable for Application of these principles is especially
damages for failure to exercise the diligence necessary because banks have a fiduciary
required of it resulting to contractual breach or relationship with the public and their stability
where the act or omission complained of depends on the confidence of the people in
constitutes an actionable tort. [Citystate their honesty and efficiency. Such faith will be
Savings Bank v. Tobias, G.R. No. 227990] eroded where banks do not exercise strict care
in the selection and supervision of its
When the action against the bank is premised employees, resulting in prejudice to their
on breach of contractual obligations, a bank's depositors. [Citystate Savings Bank v. Tobias,
liability as debtor is not merely vicarious but G.R. No. 227990)]
primary, in that the defense of exercise of due
diligence in the selection and supervision of its 4. Nature of Bank Funds and Bank
employees is not available. Liability of banks is Deposits
also primary and sole when the loss or damage
to its depositors is directly attributable to its The complaint filed with the Bangko Sentral ng
acts, finding that the proximate cause of the Pilipinas was an invocation of the BSP’s
loss was due to the bank's negligence or supervisory powers over banking operations
breach. [Citystate Savings Bank v. Tobias, which does not amount to a judicial
G.R. No. 227990] proceeding. It brought to the attention of the
BSP the alleged questionable actions of the
The doctrine of last clear chance, stated bank’s Board of Directors in violation of the
broadly, is that the negligence of the plaintiff principles of good corporate governance. It
does not preclude a recovery for the prayed for the conduct of an investigation over
negligence of the defendant where it appears the alleged unsafe and unsound business
that the defendant, by exercising reasonable practices of the bank and to make necessary
care and prudence, might have avoided corrective measures to prevent the collapse of
injurious consequences to the plaintiff the bank.
notwithstanding the plaintiff's negligence. The
doctrine necessarily assumes negligence on A ruling by the BSP concerning the soundness
the part of the defendant and contributory of the bank operations will not adversely or
negligence on the part of the plaintiff, and does directly affect the resolution of the intra-
not apply except upon that assumption. Stated corporate controversies pending before the
differently, the antecedent negligence of the trial court. [Suan v. Gonzales, A.C. No. 6377,
plaintiff does not preclude him from recovering 12 March 2007]
damages caused by the supervening
Page 165 of 494

5. Stipulation on Interests Equitable PCI Bank, G.R. No. 208336, 21
November 2018)
High interest rates
There is nothing inherently wrong with the
Stipulated interest rates of 3% per month and escalation clause because it is validly
higher are excessive, iniquitous, stipulated in commercial contracts as one of
unconscionable and exorbitant. Such the means adopted to maintain fiscal stability
stipulations are void for being contrary to and to retain the value of money in long term
morals, if not against the law. [Macalinao v. contracts.
Bank of the Philippine Islands, G.R. No.
175490, 17 September 2009] The escalation clause that "grants the creditor
an unbridled right to adjust the interest
Since the stipulation on the interest rate is void, independently and upwardly, completely
it is as if there was no express contract thereon. depriving the debtor of the right to assent to an
Hence, courts may reduce the interest rate as important modification in the agreement" is
reason and equity demand. [Macalinao v. Bank void. Such escalation clause violates the
of the Philippine Islands, G.R. No. 175490, 17 principle of mutuality of contracts, and should
September 2009] be annulled.
Central Bank Circular No. 905 did not repeal There should be a corresponding de
nor in any way amend the Usury Law but escalation clause that authorizes a reduction in
simply suspended the latter’s effectivity. The the interest rates corresponding to downward
illegality of usury is wholly the creature of changes made by law or by the Monetary
legislation. A Central Bank Circular cannot Board. (Villa Crista Monte Realty &
repeal a law. Only a law can repeal another Development Corporation v. Equitable PCI
law. Bank, G.R. No. 208336, 21 November 2018)
However, nothing in CB Circular No. 905 6. Prohibitive Transactions by Bank

grants lenders a carte blanche authority to Directors and Officers
raise interest rates to levels which will either
enslave their borrowers or lead to a
hemorrhaging of their assets. a. Single Borrower’s Limit
The nullity of the stipulation of usurious interest General Banking Law of 2000
does not affect the lender’s right to recover the
principal of a loan, nor affect the other terms Section 35. Limit on Loans, Credit Accommodations
thereof. [Advocates for Truth in Lending Inc. v. and Guarantees
Bangko Sentral ng Pilipinas, Monetary Board, 35.1 Except as the Monetary Board may otherwise
G.R. No. 192986, 15 January 2013] prescribe for reasons of national interest, the total
amount of loans, credit accommodations and
Escalation clauses guarantees as may be defined by the Monetary
Board that may be extended by a bank to any
Requisites for a valid escalation clause: person, partnership, association, corporation or
other entity shall at no time exceed twenty percent
(1) that there can be an increase in interest (20%) of the net worth of such bank. The basis for
rates if allowed by law or by the Monetary determining compliance with single borrower limit is
Board; and the total credit commitment of the bank to the
(2) that there must be a stipulation for the borrower.
reduction of the stipulated interest rates in the
event that the applicable maximum rates of 35.2. Unless the Monetary Board prescribes
otherwise, the total amount of loans, credit
interest are reduced by law or by the Monetary accommodations and guarantees prescribed in the
Board (de-escalation clause). (Villa Crista preceding paragraph may be increased by an
Monte Realty & Development Corporation v. additional ten percent (10%) of the net worth of such
bank provided the additional liabilities of any
Page 166 of 494

borrower are adequately secured by trust receipts,

shipping documents, warehouse receipts or other 35.7. Certain types of contingent accounts of
similar documents transferring or securing title borrowers may be included among those subject to
covering readily marketable, non-perishable goods these prescribed limits as may be determined by the
which must be fully covered by insurance. Monetary Board.
35.3 The above prescribed ceilings shall include (a)

the direct liability of the maker or acceptor of paper If the loans were of a DOSRI nature or without
discounted with or sold to such bank and the liability the benefit of the required approvals or in
of a general endorser, drawer or guarantor who excess of the Single Borrower’s Limit, they
obtains a loan or other credit accommodation from
or discounts paper with or sells papers to such bank;
would not be void for that reason. Instead, the
(b) in the case of an individual who owns or controls bank or the officers responsible for the
a majority interest in a corporation, partnership, approval and grant of the DOSRI loan would be
association or any other entity, the liabilities of said subject only to sanctions under the law.
entities to such bank; (c) in the case of a corporation, (Republic v. Sandiganbayan, G.R. Nos.
all liabilities to such bank of all subsidiaries in which 166859, 169203, 180702, 12 April 2011)
such corporation owns or controls a majority
interest; and (d) in the case of a partnership,
association or other entity, the liabilities of the b. Restrictions on Bank Exposure to
members thereof to such bank. DOSRI (Directors, Officers,
35.4. Even if a parent corporation, partnership,
Stockholders and their Related
association, entity or an individual who owns or Interests
controls a majority interest in such entities has no
liability to the bank, the Monetary Board may
prescribe the combination of the liabilities of
subsidiary corporations or members of the
Section 36. Restriction on Bank Exposure to
partnership, association, entity or such individual
Directors, Officers, Stockholders and Their Related
under certain circumstances, including but not
Interests. - No director or officer of any bank shall,
limited to any of the following situations: (a) the
directly or indirectly, for himself or as the
parent corporation, partnership, association, entity
representative or agent of others, borrow from such
or individual guarantees the repayment of the
bank nor shall he become a guarantor, endorser or
liabilities; (b) the liabilities were incurred for the
surety for loans from such bank to others, or in any
accommodation of the parent corporation or another
manner be an obligor or incur any contractual liability
subsidiary or of the partnership or association or
to the bank except with the written approval of the
entity or such individual; or (c) the subsidiaries
majority of all the directors of the bank, excluding the
though separate entities operate merely as
director concerned: Provided, That such written
departments or divisions of a single entity.
approval shall not be required for loans, other credit
accommodations and advances granted to officers
35.5. For purposes of this Section, loans, other
under a fringe benefit plan approved by the Bangko
credit accommodations and guarantees shall
Sentral. The required approval shall be entered
exclude: (a) loans and other credit accommodations
upon the records of the bank and a copy of such
secured by obligations of the Bangko Sentral or of
entry shall be transmitted forthwith to the appropriate
the Philippine Government: (b) loans and other
supervising and examining department of the
credit accommodations fully guaranteed by the
Bangko Sentral. Dealings of a bank with any of its
government as to the payment of principal and
directors, officers or stockholders and their related
interest; (c) loans and other credit accommodations
interests shall be upon terms not less favorable to
covered by assignment of deposits maintained in the
the bank than those offered to others. After due
lending bank and held in the Philippines; (d) loans,
notice to the board of directors of the bank, the office
credit accommodations and acceptances under
of any bank director or officer who violates the
letters of credit to the extent covered by margin
provisions of this Section may be declared vacant
deposits; and (e) other loans or credit
and the director or officer shall be subject to the
accommodations which the Monetary Board may
penal provisions of the New Central Bank Act. The
from time to time, specify as non-risk items.
Monetary Board may regulate the amount of loans,
credit accommodations and guarantees that may be
35.6. Loans and other credit accommodations,
extended, directly or indirectly, by a bank to its
deposits maintained with, and usual guarantees by
directors, officers, stockholders and their related
a bank to any other bank or non-bank entity, whether
interests, as well as investments of such bank in
locally or abroad, shall be subject to the limits as
enterprises owned or controlled by said directors,
herein prescribed.
officers, stockholders and their related interests.
Page 167 of 494

However, the outstanding loans, credit (b) Furnish false or make misrepresentation or
accommodations and guarantees which a bank may suppression of material facts for the purpose of
extend to each of its stockholders, directors, or obtaining, renewing, or increasing a loan or other
officers and their related interests, shall be limited to credit accommodation or extending the period
an amount equivalent to their respective thereof;
unencumbered deposits and book value of their
paid-in capital contribution in the bank: Provided, (c) Attempt to defraud the said bank in the event of
however, That loans, credit accommodations and a court action to recover a loan or other credit
guarantees secured by assets considered as non- accommodation; or
risk by the Monetary Board shall be excluded from
such limit: Provided, further, That loans, credit (d) Offer any director, officer, employee or agent of
accommodations and advances to officers in the a bank any gift, fee, commission, or any other form
form of fringe benefits granted in accordance with of compensation in order to influence such persons
rules as may be prescribed by the Monetary Board into approving a loan or other credit accommodation
shall not be subject to the individual limit. The application.
Monetary Board shall define the term "related
interests." The limit on loans, credit 55.3 No examiner, officer or employee of the Bangko
accommodations and guarantees prescribed herein Sentral or of any department, bureau, office, branch
shall not apply to loans, credit accommodations and or agency of the Government that is assigned to
guarantees extended by a cooperative bank to its supervise, examine, assist or render technical
cooperative shareholders. assistance to any bank shall commit any of the acts
enumerated in this Section or aid in the commission
of the same. (87-Aa)
The making of false reports or misrepresentation or
Section 55. Prohibited Transactions. suppression of material facts by personnel of the
Bangko Sental ng Pilipinas shall be subject to the
55.1. No director, officer, employee, or agent of any administrative and criminal sanctions provided
bank shall - under the New Central Bank Act.
(a) Make false entries in any bank report or 55.4. Consistent with the provisions of Republic Act
statement or participate in any fraudulent No. 1405, otherwise known as the Banks Secrecy
transaction, thereby affecting the financial interest Law, no bank shall employ casual or non regular
of, or causing damage to, the bank or any person; personnel or too lengthy probationary personnel in
the conduct of its business involving bank deposits.
(b) Without order of a court of competent jurisdiction,
disclose to any unauthorized person any information
relative to the funds or properties in the custody of A direct borrowing is obviously one that is
the bank belonging to private individuals, made in the name of the DOSRI himself or
corporations, or any other entity: Provided, That with where the DOSRI is a named party, while an
respect to bank deposits, the provisions of existing indirect borrowing includes one that is made by
laws shall prevail;
a third party, but the DOSRI has a stake in the
(c) Accept gifts, fees, or commissions or any other transaction. (Soriano v. People, G.R. No.
form of remuneration in connection with the approval 162336, 01 February 2010)
of a loan or other credit accommodation from said
bank; If the loans were of a DOSRI nature or without
the benefit of the required approvals or in
(d) Overvalue or aid in overvaluing any security for
excess of the Single Borrower’s Limit, they
the purpose of influencing in any way the actions of
the bank or any bank; or would not be void for that reason. Instead, the
bank or the officers responsible for the
(e) Outsource inherent banking functions. approval and grant of the DOSRI loan would be
subject only to sanctions under the law.
55.2. No borrower of a bank shall - [Republic v. Sandiganbayan, G.R. Nos.
166859, 169203, 180702, 12 April 2011]
(a) Fraudulently overvalue property offered as
security for a loan or other credit accommodation Section 83 of RA 337 actually imposes three
from the bank; restrictions.
Page 168 of 494

The approval requirement (found in the first
sentence of the first paragraph of the law)
refers to the written approval of the majority of C. SECRECY OF
the bank’s board of directors required before
bank directors and officers can in any manner BANK DEPOSITS
be an obligor for money borrowed from or
loaned by the bank. Failure to secure the (R.A. No. 1405, as
approval renders the bank director or officer
concerned liable for prosecution and, upon amended, and R.A.
conviction, subjects him to the penalty provided
in the third sentence of first paragraph of
No. 6426, as
Section 83.
amended)
The reportorial requirement, on the other hand,
mandates that any such approval should be 1. Purpose [Sec. 1]
entered upon the records of the corporation,
and a copy of the entry be transmitted to the It is hereby declared to be the policy of the
appropriate supervising department. The Government to:
reportorial requirement is addressed to the 1. give encouragement to the people to
bank itself, which, upon its failure to do so, deposit their money in banking
subjects it to quo warranto proceedings under institutions and ;
Section 87 of RA 337. 2. to discourage private hoarding so that the
same may be properly utilized by banks
The ceiling requirement under the second in authorized loans to assist in the
paragraph of Section 83 regulates the amount economic development of the country.
of credit accommodations that banks may
extend to their directors or officers by limiting The absolute confidentiality rule in R.A. No.
these to an amount equivalent to the respective 1405 actually aims at protection from
outstanding deposits and book value of the unwarranted inquiry or investigation if the
paid-in capital contribution in the bank. Again, purpose of such inquiry or investigation is
this is a requirement directed at the bank. In merely to determine the existence and nature,
this light, a prosecution for violation of the first as well as the amount of the deposit in any
paragraph of Section 83, such as the one given bank account. [BSB. Group, Inc. v. Go,
involved here, does not require an allegation G.R. No. 168644 (2010)]
that the loan exceeded the legal limit. Even if
the loan involved is below the legal limit, a 2. Prohibited Acts [Secs. 2 & 3]
written approval by the majority of the bank’s
directors is still required; otherwise, the bank
director or officer who becomes an obligor of 1. Examination, inquiry, or looking into deposits
of whatever nature with banks or banking
the bank is liable. Compliance with the ceiling
requirement does not dispense with the institutions in the Philippines including
approval requirement. investments in bonds issued by the
(Go v. Bangko Sentral ng Pilipinas, G.R. No. Government of the Philippines, its political
178429, 23 October 2009) subdivisions and its instrumentalities;
2. Disclosure by banking institutions' officials or

employees to unauthorized persons
regarding information about covered
deposits and investments
Page 169 of 494

3. Deposits Covered limited only to accounts which give rise to a
creditor-debtor relationship between the
a. General Rule depositor and the bank. [Estrada v.
All [peso] deposits of whatever nature with Sandiganbayan (Special Division), G.R. Nos.
banks or banking institutions in the Philippines 157284-95, 30 November 2006]
including investments in bonds issued by the
Government of the Philippines, its political d. Presumption in favor of
subdivisions and its instrumentalities, are confidentiality
hereby considered as of an absolutely
confidential nature. [Sec. 2 of RA No. 1405]
Any exception to the rule of absolute
confidentiality must be specifically legislated.
The phrase "of whatever nature" proscribes
any restrictive interpretation of "deposits."
By force of statute, all bank deposits are
absolutely confidential, and that nature is
Moreover, it is clear from the immediately
unaltered even by the legislated exceptions
quoted provision that, generally, the law
referred to above.
applies not only to money which is deposited
but also to those which are invested. This
There is disfavor towards construing these
further shows that the law was not intended to
exceptions in such a manner that would
apply only to "deposits" in the strict sense of the
authorize unlimited discretion on the part of the
word. Otherwise, there would have been no
government or of any party seeking to enforce
need to add the phrase "or invested." [Estrada
those exceptions and inquire into bank
v. Sandiganbayan (Special Division), G.R.
deposits.
Nos. 157284-95, 30 November 2006]
If there are doubts in upholding the absolutely
b. Deposits and Funds Covered by confidential nature of bank deposits against
Other Laws on Confidentiality affirming the authority to inquire into such
accounts, then such doubts must be resolved
All foreign currency deposits authorized under in favor of the former. Such a stance would
this Act, as amended by Presidential Decree persist unless Congress passes a law
No. 1035, as well as foreign currency deposits reversing the general state policy of preserving
authorized under Presidential Decree No. the absolutely confidential nature of Philippine
1034, are hereby declared as and considered bank accounts. [Republic v. Eugenio, Jr., G.R.
of an absolutely confidential nature [Sec. 8 of No. 174629, 14 February 2008]
RA No. 6426]
e. Zones of Privacy
Funds placed in a bank not in the nature of a
deposit by private individuals or entities.
Disclosure to any unauthorized information Under the RA 1405, bank deposits are
relative to said funds is also prohibited [Sec. statutorily protected or recognized zones of
55.1 of Ra No. 8791, The General Banking Law privacy. [People v. Estrada, G.R. No. 164368
of 2000] (2009); Marquez v. Desierto, G.R. No. 135882
(2001); Ople v. Torres, G.R. No. 127685
c. Trust Accounts (1998)]
While the fundamental law has not bothered

The contention that trust accounts are not with the triviality of specifically addressing
covered by the term "deposits," as used in R.A. privacy rights relative to banking accounts,
1405, by the mere fact that they do not entail a there, nevertheless, exists in our jurisdiction a
creditor-debtor relationship between the trustor legitimate expectation of privacy governing
and the bank, does not lie. An examination of such accounts. The source of this right of
the law shows that the term "deposits" used expectation is statutory, and it is found in R.A.
therein is to be understood broadly and not No. 1405, otherwise known as the Bank
Page 170 of 494
Secrecy Act of 1955. [BSB Group, Inc., v. Go, tax information from a foreign tax
G.R. No. 168644 (2010)] authority pursuant to an
international convention or
4. Exceptions agreement on tax matters to which
the Philippines is a signatory or a
Deposits: party of [Sec. 6(f), NIRC]
1. Upon written permission of the depositors; b. Unexplained wealth under Sec. 8 of the
2. Case of impeachment; Anti-Graft and Corrupt Practices Act
3. Upon order of a competent court in cases of (RA 3019). [PNB v. Gancayco, G.R. No.
bribery or dereliction of duty of public officials; L-18343 (1965)]’
4.Cases where the money deposited or
invested is the subject matter of the litigation; Not necessarily an exception: Power of the
[Sec. 2 of RA No. 1405] Ombudsman to “examine and have access to
bank accounts and records” under Sec. 15[8]
Where the money deposited or invested is of RA 6770. [Morales, The Philippine General
the subject matter: Banking Law (Annotated) (2017) citing
a. The inquiry into bank deposits allowable Marquez v. Desierto, infra]
under R.A. No. 1405 must be premised
on the fact that the money deposited in 5. Garnishment of Deposits, Including
the account is itself the subject of the Foreign Deposits
action [BSB Group v. Go, G.R. No.
168644, 16 February 2010] General rule: The prohibition against
b. Whether the transaction is considered a examination of or inquiry into a bank deposit
sale or money placement does not under Republic Act 1405 does not preclude its
make the money the "subject matter of being garnished to insure satisfaction of a
litigation" [Oñate v. Abrogar, G.R. Nos. judgment. [China Banking Corporation v.
107303 & 107491, February 23, 1995] Ortega, G.R. No. L-34964, 31 January 1973]
c. Inasmuch as [the case] is aimed at
recovering the amount converted by the In the garnishment of deposits to insure
[defendants] for their own benefit, satisfaction of a judgment, there is no real
necessarily, an inquiry into the inquiry, and if the existence of the deposit is
whereabouts of the illegally acquired disclosed, the disclosure is purely incidental to
amount extends to whatever is the execution process. It is hard to conceive
concealed by being held or recorded in that it was ever within the intention of Congress
the name of persons other than the one to enable debtors to evade payment of their just
responsible for the illegal acquisition debts, even if ordered by the Court, through the
[Mellon Bank v. Magsino, G.R. No. expedient of converting their assets into cash
71479, 18 October 1990] and depositing the same in a bank. [China
Banking Corporation v. Ortega, supra]
Other Exceptions:
a. The Commissioner of Internal Revenue Exception: Foreign Currency Deposits
is hereby authorized to inquire into the The foreign currency deposits shall be exempt
bank deposits and other related from attachment, garnishment, or any other
information held by financial institutions order or process of any court, legislative body,
of: government agency or any administrative body
1. A decedent in order to determine his whatsoever. [Sec. 8, RA No. 6426]
gross estate; and
2. Any taxpayer who has filed an Penalties [Sec. 5]
application to compromise his tax Any violation of this law will subject offender
liability on the ground of financial upon conviction, to an imprisonment of not
incapacity. more than five years or a fine of not more than
3. A specific taxpayer or taxpayers twenty thousand pesos or both, in the
subject of a request for the supply of discretion of the court.
Page 171 of 494
securities or rendering services as
investment agent, advisor, or
D. ANTI-MONEY consultant,
b. Mutual funds, close – end investment
LAUNDERING ACT companies, common trust funds, pre
– need companies and other similar
The section numbers hereinafter generally entities
pertain to RA 9160 or the Anti-Money c. Foreign exchange corporations,
Laundering Act, as amended by RA 9194 and money changers, money payment,
RA 10365, unless otherwise indicated. remittance and transfer companies
and other similar entities, and
Money Laundering is a crime where the d. Other entities administering or
proceeds of an unlawful activity are transacted, otherwise dealing in currency,
thereby making them appear to have originated commodities or financial derivatives
from legitimate sources. based thereon, valuable objects, cash
substitutes and other similar
It is governed by RA 9160, as amended by RA monetary instruments or property
9194 (2003), RA 10167 (2012), RA 10365 supervised or regulated by the
(2013) and RA 10927 (2017). Securities and Exchange
Commission (SEC).
1. Policy of the Law 4. Jewelry dealers in precious metals, who, as
a business, trade in precious metals, for
It is the policy of the State to: transactions in excess of Php1,000,000.
1. Protect and preserve the integrity and 5. Jewelry dealers in precious stones, who, as
confidentiality of bank accounts; a business, trade in precious stones, for
2. Ensure that the Philippines shall not be transactions in excess of Php1,000,000
used as a money laundering site for the 6. Company service providers which, as a
proceeds of any criminal activity. business, provide any of the following
services to third parties:
Consistent with its foreign policy, the State a. Acting as a formation agent of juridical
shall extend cooperation in transnational persons;
investigations and prosecutions of persons b. Acting as, or arranging for another
involved in money laundering activities person to act as:
whenever committed. [Sec. 2] 7. A director or corporate secretary of a
company
2. Covered Institutions and Their 8. A partner of a partnership, or
9. A similar position in relation to other juridical
Obligations
persons;
a. Providing a registered office, business
Covered Institutions address or accommodation,
1. Banks, non-banks, quasi–banks, trust correspondence or administrative
entities, foreign exchange dealers, address for a company, a partnership
pawnshops, money changers, remittance or any other legal person or
and transfer companies and other similar arrangement; and
entities and all other persons and their b. Acting as, or arranging for another
subsidiaries and affiliates supervised or person to act as, a nominee
regulated by the BSP; shareholder for another person
2. Insurance companies, pre-need companies 10. Persons who provide any of the following
and all other persons supervised or services:
regulated by the Insurance Commission; 11. Managing of client money, securities or other
3. Those who are: assets;
a. Securities dealers, brokers, 12. Management of bank, savings or securities
salesmen, investment houses and accounts;
other similar entities managing
Page 172 of 494
13. Organization of contributions for the Record Keeping
creation, operation or management of All records of all transactions of covered
companies; and institutions shall be maintained and safely
14. Creation, operation or management of stored for five (5) years from the dates of
juridical persons or arrangements and transactions.
buying or selling business entities. [Sec. 1] With respect to closed accounts, the records
15. Casinos, including internet and ship-based on customer identification, account files and
casinos, with respect to their casino cash business correspondence, shall be preserved
transactions related to their gaming and safely stored for at least five (5) years from
operations. [Sec. 1] the dates when they were closed.
The term ‘covered persons’ excludes lawyers Reporting of Covered and Suspicious
and accountants acting as independent legal Transactions
professionals, (1) in relation to information
concerning their clients; or (2) where disclosure General Rule: Covered institutions shall report
of information would compromise client to the AMLC all covered transactions within
confidences or the attorney-client relationship. five (5) working days from occurrence.
Provided, (1) that these lawyers and
accountants are authorized to practice in the Exception: If the Anti Money Laundering
Philippines and (2) shall continue to be subject Council (AMLC) prescribed a longer period not
to the provisions of their respective codes of exceeding fifteen (15) working days. [Sec.
conduct and/or professional responsibility or 9(c)]
any of its amendments. [Sec. 1]
When reporting covered transactions to the
Obligations of Covered Institutions AMLC:
a. Customer Identification 1. Covered institutions and their officers,
b. Record Keeping and employees are prohibited from
c. Reporting of Covered and Suspicious communicating, directly or indirectly,
Transactions in any manner, to any person, entity, or
the media:
Customer Identification a. The fact that a covered
Covered institutions shall: transaction report has or is
a. Establish and record a true identity of about to be reported;
its clients, based on official documents b. The contents thereof;
b. Maintain a system of verifying the true c. Any other information in
identity of their clients relation thereto; and
c. In case of corporate clients, require a 2. Neither may such reporting be
system to verify: published or aired in any manner or
1. Legal existence and organizational form by the mass media, electronic
structure; and mail, or other similar devices. [Sec. 9,
2. Authority and identification of RA 10365]
persons purporting to act on their
behalf In case of violation, criminal liability ensues as
against the concerned officer and employee of
Anonymous accounts, accounts under fictitious the covered person and media.
names, and all other similar accounts shall be
absolutely prohibited. Peso and foreign Anti-money laundering regulations
currency non- checking numbered accounts Republic Act No. 9160, otherwise known as the
shall be allowed. The BSP may conduct annual Anti-Money Laundering Act, as amended
testing solely limited to the determination of the (AMLA) and its 2018 implementing rules and
existence and true identity of the owners of regulations (IRR) impose certain obligations
such accounts. [Sec. 9] upon covered persons to ensure that the
Philippines will not be used as a money
Page 173 of 494

laundering site for the proceeds of any unlawful risk-based approach, which include the
activity. Below are the key obligations of following procedures:
covered persons under the AMLA and its IRR.
Customer identification process
Customer due diligence (CDD) Covered persons shall identify and record the
obligations true identity of their customers, whether
permanent or occasional, and whether natural
Under the AMLA IRR, covered persons must or juridical person, or legal arrangement.
conduct CDD for the following purposes: Note that in case the customer engages in a
1. To identify the customer, and its agents transaction with a covered person for the first
and beneficial owners; time, the covered person must require the
2. To determine the risk posed by each customer to present the original and submit a
customer; clear copy of, at least, one identification
3. To establish, maintain, close or terminate document (ID). In case the ID presented does
the account or business relationship; and not bear any photo of the customer, or the
4. To assess the level of monitoring to be photo-bearing ID or a copy thereof does not
applied. clearly show the face of the customer, a
covered person may utilize information and
CDD measures must be undertaken when: communication technology or any other
establishing business or professional technology to take the photo of the customer.
relationship;
1. Carrying out occasional transactions Customer verification process
above PHP100,000 or any other Covered persons shall implement and maintain
threshold as may be determined by the a system of verifying the true identity of their
relevant supervising authority, with clients, including validating the truthfulness of
notice to the Anti-Money Laundering the information and confirming the authenticity
Council (AMLC), including situations of the identification documents presented,
where the transaction is carried out in a submitted and provided by the customer, using
single operation or in several reliable and independent sources, documents,
operations that appear to be linked; data, or information.
2. Carrying out occasional wire transfers
under certain circumstances; The covered persons must independently
3. There is a suspicion of money verify the collected data during customer
laundering/terrorism financing (ML/TF), identification process, through any of the
regardless of any exemptions or following:
thresholds; or 1. Face-to-face contact;
4. The covered person has doubts about the 2. Use of information and communication
veracity or adequacy of previously technology;
obtained identification information and/or 3. By confirming the authenticity of the
data. identification documents to the issuing
office;
Further, the AMLA IRR requires covered 4. Reliance on third parties and service
persons to apply CDD requirements to existing providers; or
customers on the basis of materiality and risk, 5. Such other methods of validation
and conduct due diligence on existing based on reliable and independent
relationships at appropriate times, taking into sources, documents, data, or
account whether and when CDD measures information.
have previously been undertaken and the
adequacy of information and document Identification and verification of agents
obtained. Covered persons shall verify that any person
purporting to act on behalf of a customer is so
In conducting CDD, the covered persons must authorized, and identify and verify the identity
adopt appropriate CDD measures following a of that person.
Page 174 of 494

The covered person must verify the validity of availed of by the customers;
the authority of the agent. In case of doubt as 2. The purpose of the account or
to whether the person purporting to act on transaction;
behalf of the customer is being used as a 3. The source of fund and source of wealth;
dummy in circumvention of existing laws, the 4. The nature of business and/or
covered person must apply enhanced due employment;
diligence and file a suspicious transaction 5. Country of origin and residence of
report, if warranted. operations, or the fact that a customer
came from a high- risk jurisdiction or
Beneficial ownership verification geographical area;
Covered persons shall identify the beneficial 6. Watchlist of individuals and entities
owner and take reasonable measures to engaged in illegal activities or terrorist
verify the identity of the beneficial owner, related activities as circularized by the
using the relevant information or data BSP, AMLC, and other international
obtained from a reliable sources, such that the entities or organizations, such as the
covered person is satisfied that it knows who Office of Foreign Assets Control of the
the beneficial owner is. U.S. Department of the Treasury and
United Nations Sanctions List;
The covered person must obtain a copy of the 7. The existence of suspicious transaction
written document evidencing the relationship indicators; and
and apply the same standards for assessing 8. Such other factors as the covered
the risk profile and determining the standard persons may deem reasonable or
of CDD to be applied to both. necessary to consider in assessing the
risk of a customer, including the amount
Determination of the purpose of of funds to be transacted by a customer
relationship or the size of transactions undertaken,
Covered persons shall understand and, as regularity or duration of the transaction,
appropriate, obtain information on, the and/or are included in the negative list.
purpose and intended nature of the account,
transaction, or the business or professional Where the risks are higher, covered persons
relationship with their customers. must conduct enhanced due diligence. On the
other hand, where lower risks of ML/TF have
Ongoing monitoring process been identified, through an adequate analysis
Covered persons shall, on the basis of of risk by the covered person, reduced due
materiality and risk, conduct ongoing diligence procedures may be applied.
monitoring by establishing a system that will
enable them to understand the normal and Transaction reporting
reasonable account or business activity of
customers, and scrutinize transactions The AMLA IRR provides that covered persons
undertaken throughout the course of the must report to the AMLC all covered
business or professional relationship to transactions within five working days, unless
ensure that the customers’ accounts, the AMLC prescribes a different period not
including transactions being conducted, are exceeding 15 working days. Further,
consistent with the covered person’s suspicious transactions shall be filed with the
knowledge of its customer, their business and AMLC within the period prescribed under the
risk profile, including where necessary, the registration and reporting guidelines of the
source of funds. AMLC.
Covered persons must develop a clear set of Record keeping

criteria for customer risk profiling and
assessment, which must include at least three Under the AMLA IRR, covered persons are
of the following: required to maintain and safely store for five
1. The nature of the service or product to be years from the dates of transactions all records
Page 175 of 494

of customer identification and transactions keeping and reporting requirements;
documents. Further, covered persons must 7. Compliance with freeze, bank inquiry
keep the electronic copies of all covered and and asset preservation orders, and all
suspicious transaction reports, for at least five directives of the AMLC;
years from the dates of submission to the 8. Adequate safeguards on the
AMLC. In addition, covered persons shall keep confidentiality and use of information
all records obtained through CDD, account files exchange, including safeguards to
and business correspondence, and the results prevent tipping-off; and
of any analysis undertaken, for, at least, five 9. Cooperation with the AMLC and
years following the closure of account, supervising authority.
termination of the business or professional
relationship or after the date of the occasional Designation of an AML compliance
transaction. officer
If a case has been filed in court involving the Covered persons must designate an AML
account, records must be retained and safely compliance officer or create a compliance unit,
kept beyond the five-year period, until it is responsible for the covered person’s day-to-
officially confirmed by the AMLC Secretariat day compliance with the AMLA and TFPSA,
that the case has been resolved, decided or their respective IRR, and other AMLC
terminated with finality. issuances. The internal auditor, general
manager or proprietor, as the case maybe,
Adoption of a money laundering shall be the compliance officer in case the
terrorist financing prevention program resources of the covered person hamper the
(MTPP) establishments of the compliance unit. The
compliance officer or the head of the
Under the AMLA IRR, covered persons must compliance unit must be of senior
formulate and implement a comprehensive management level.
and risk-based MTPP that is compliant with
the AMLA and Republic Act 10168 (otherwise 3. Covered and Suspicious
known as Terrorism Financing Prevention Transactions
and Suppression Act or TFPSA), their
respective IRR, and other AMLC issuances, General Rule: A covered transaction is a
and the AML/CTF guidelines of their transaction in cash or other equivalent
supervising authorities. The MTPP must be monetary instrument involving a total amount in
commensurate to the size and risk profile of excess of Php 500,000 within one banking day.
the covered person. The covered person must [Sec. 3(b)]
consider the results of the national risk
assessment and its own risk assessment in Exception: for Casinos or “covered persons
the development and/or updating of its MTPP. under Section 3(a)(8),” a single casino
The MTPP shall be in writing and shall transaction involving an amount in excess of
include, at the minimum, internal policies, Php 5,000,000 or its equivalent in any other
controls and procedures on the following: currency.
1. Risk management;
2. Compliance management setup, Suspicious Transactions are transactions
including the designation of a with covered institutions, regardless of the
compliance officer at the management amount involved, where any of the following
level or creation of compliance unit; circumstances exist:
3. Screening procedures to ensure high 1. There is no underlying legal or trade
standards when hiring employees; obligation, purpose or economic
4. Continuing education and training justification;
program; 2. The client is not properly identified;
5. Independent audit function;
6. Details of implementation of CDD, record-
Page 176 of 494
3. The amount involved is not 3. Conceals or disguises the true nature,
commensurate with the business or source, location, disposition, movement
financial capacity of the client; or ownership of or rights with respect to
4. Taking into account all known said monetary instrument or property;
circumstances, it may be perceived that 4. Attempts or conspires to commit money
the client’s transaction is structured to laundering offenses referred to in
avoid being the subject of reporting paragraphs (a), (b) or (c);
requirements under this Act; 5. Aids, abets, assists in or counsels the
5. Any circumstance relating to the commission of the money laundering
transaction which is observed to deviate offenses referred to in paragraphs (a),
from the profile of the client and/or the (b) or (c) above; and
client’s past transactions with the 6. Performs or fails to perform any act as a
covered institution; result of which he facilitates the offense
6. The transaction is in any way related to of money laundering referred to in
an unlawful activity or offense under this paragraphs (a), (b) or (c) above.
Act that is about to be, is being or has
been committed. [Sec. 3(b-1)] Money laundering is also committed by any
covered person who, knowing that a covered
5. Safe Harbor Provision or suspicious transaction is required under this
Act to be reported to the Anti-Money
The Safe Harbor Provision states that no Laundering Council (AMLC), fails to do so.
administrative, criminal or civil [Sec. 4, RA 10365].
proceedings shall lie against any person for
having made a covered transaction report in Unlawful activity refers to any act or omission
the regular performance of his duties and in or series or combination thereof involving or
good faith, whether or not such reporting having direct relation to the following:
results in any criminal prosecution under this 1. Kidnapping for ransom under Article
Act or any other Philippine law. [Sec. 9] 267 of Act No. 3815, otherwise known as
Lawyers and accountants acting as the Revised Penal Code, as amended;
independent legal professionals are not subject 2. Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15,
to the reporting requirement if the relevant and 16 of RA 9165, otherwise known as
information was obtained in circumstances the Comprehensive Dangerous Drugs
subject to professional secrecy or legal Act of 2002;
professional privilege. [Sec. 9(c)] 3. Section 3 paragraphs B, C, E, G, H and I
of RA. 3019, as amended; otherwise
6. When and How Money Laundering known as the Anti-Graft and Corrupt
is Committed (Including Predicate Practices Act;
4. Plunder under RA 7080, as amended;
Crimes) 5. Robbery and extortion under Articles
294, 295, 296, 299, 300, 301 and 302 of
Money laundering is a crime whereby the
the Revised Penal Code, as amended;
proceeds of an unlawful activity are transacted,
6. Jueteng and Masiao punished as illegal
thereby making them appear to have originated
gambling under Presidential Decree No.
from legitimate sources.
1602;
7. Piracy on the high seas under the
Money Laundering is committed by any
Revised Penal Code, as amended and
person who, knowing that any monetary
Presidential Decree No. 532;
instrument or property represents, involves, or
8. Qualified theft under Article 310 of the
relates to the proceeds of any unlawful activity:
Revised Penal Code, as amended;
1. Transacts said monetary instrument or
9. Swindling under Article 315 of the
property;
Revised Penal Code, as amended;
2. Converts, transfers, disposes of, moves,
10. Smuggling under RA Nos. 455 and
acquires, possesses or uses said
1937;
monetary instrument or property;
Page 177 of 494
11. Violations under RA 8792, otherwise 10. Violations of Sections 101 to 107, and
known as the Electronic Commerce 110 of RA 7942, otherwise known as the
Act of 2000; Philippine Mining Act of 1995;
12. Hijacking and other violations under RA 11. Violations of Section 27(c), (e), (f), (g)
6235; destructive arson and murder, and (i), of RA 9147, otherwise known as
as defined under the Revised Penal the Wildlife Resources Conservation
Code, as amended, including those and Protection Act;
perpetrated by terrorists against non- 12. Violation of Section 7(b) of RA 9072,
combatant persons and similar targets; otherwise known as the National Caves
13. Fraudulent practices and other and Cave Resources Management
violations under RA 8799, otherwise Protection Act;
known as the Securities Regulation 13. Violation of RA 6539, otherwise known
Code of 2000; as the Anti-Carnapping Act of 2002, as
14. Felonies or offenses of a similar amended;
nature that are punishable under the 14. Violations of Sections 1, 3 and 5 of PD
penal laws of other countries. [Sec. 3 (i)] 1866, as amended, otherwise known as
the decree Codifying the Laws on
RA 10365 further added the following: Illegal/Unlawful Possession,
1. Terrorism and conspiracy to commit Manufacture, Dealing In, Acquisition
terrorism as defined and penalized or Disposition of Firearms,
under Sections 3 and 4 of RA No. 9372; Ammunition or Explosives;
2. Financing of terrorism under Section 4 15. Violation of PD 1612, otherwise known
and offenses punishable under Sections as the Anti-Fencing Law;
5, 6, 7 and 8 of RA 10168, otherwise 16. Violation of Section 6 of RA 8042,
known as the Terrorism Financing otherwise known as the Migrant
Prevention and Suppression Act of 2012; Workers and Overseas Filipinos Act
3. Bribery under Articles 210, 211 and 211- of 1995, as amended by RA 10022;
A of the Revised Penal Code, as 17. Violation of RA 8293, otherwise known
amended, and Corruption of Public as the Intellectual Property Code of
Officers under Article 212 of the the Philippines;
Revised Penal Code, as amended; 18. Violation of Section 4 of RA 9995,
4. Frauds and Illegal Exactions and otherwise known as the Anti-Photo and
Transactions under Articles 213, 214, Video Voyeurism Act of 2009;
215 and 216 of the Revised Penal Code, 19. Violation of Section 4 of RA 9775,
as amended; otherwise known as the Anti-Child
5. Malversation of Public Funds and Pornography Act of 2009;
Property under Articles 217 and 222 of 20. Violations of Sections 5, 7, 8, 9, 10(c),
the Revised Penal Code, as amended; (d) and (e), 11, 12 and 14 of RA 7610,
6. Forgeries and Counterfeiting under otherwise known as the Special
Articles 163, 166, 167, 168, 169 and 176 Protection of Children Against Abuse,
of the Revised Penal Code, as amended; Exploitation and Discrimination.
7. Violations of Sections 4 to 6 of RA 9208,
otherwise known as the Anti-Trafficking 7. Authority to Inquire Into Bank
in Persons Act of 2003; Deposits
8. Violations of Sections 78 to 79 of Chapter
IV, of Presidential Decree No. 705, General Rule: The AMLC may inquire into or
otherwise known as the Revised examine any particular deposit or investment,
Forestry Code of the Philippines, as including related accounts, with any banking
amended; institution or non-bank financial institution upon
9. Violations of Sections 86 to 106 of order of any competent court in cases of
Chapter VI, of RA 8550, otherwise violation of this Act when it has been
known as the Philippine Fisheries established that there is probable cause that
Code of 1998;
Page 178 of 494

the deposits or investments involved are 8. Freezing and Forfeiture
related:
1. To an unlawful activity as defined in Sec. Application for Freeze Orders
3(i); or
2. To any money laundering offense under Who may apply
Sec. 4 Upon verified ex parte petition by the AMLC
and after determination that probable cause
Related Accounts refers to accounts, funds exists that any monetary instrument or property
and sources of which originated from and/or is in any way related to an unlawful activity, the
are materially linked to the monetary Court of Appeals may issue a freeze order,
instrument(s) or property(ies) subject of the which shall be effective immediately, directing
freeze order(s). the concerned covered persons and
Exception: No court order shall be required in government agency to desist from allowing any
the following cases – transaction, withdrawal, transfer, removal,
1. Kidnapping for ransom under Article 267 conversion, concealment, or other disposition
of the RPC of the subject monetary instrument or property.
2. Sections 4, 5, 7, 8, 9, 10, 12, 13, 14 ,15 [Rule 10(a), Revised IRR]
and 16 of RA No. 9615
3. Hijacking and other violations under RA
Effectivity
No. 6235; destructive arson and murder
The freeze order shall be effective
as defined under the RPC
immediately and shall not exceed six (6)
4. Felonies or offenses of a nature similar to
months depending upon the circumstances of
those mentioned in Section 3(i) (1), (2),
the case.
and (12) which are punishable under the
penal laws of other countries;
On motion of the AMLC filed before the
5. Terrorism and conspiracy to commit
expiration of the original period of the freeze
terrorism as defined and penalized under
order, the court may, for good cause shown,
RA No. 9372.
extend its effectivity. Upon the timely filing of
The authority of AMLC to inquire into or
such motion and pending resolution by the
examine the main account and the related
Court of Appeals, the freeze order shall remain
accounts shall comply with the Due Process
effective. [Rule 10(a)(3), Revised IRR]
requirements (Art. III, Sec. 2 and 3) of the 1987
Constitution. Likewise, the constitutional
injunction against ex post facto laws and bills Duties of covered institutions
of attainder shall be respected. [Sec. 21, as 1. Implement Freeze Order. - Upon receipt
amended by RA 10365] of the notice of the freeze order, the
covered person and government agency
A bank inquiry order may be availed of without concerned shall immediately freeze the
need of a pre-existing case under the AMLA. If monetary instrument or property subject
the contrary position is adopted, the AMLC thereof, and shall immediately desist
would be virtually deprived of its character as a from and not allow any transaction,
discovery tool, and thus would become less withdrawal, transfer, removal,
circumspect in filing complaints against conversion, other movement or
suspect account holders. However, unlike a concealment thereof.
freeze order, it cannot be issued ex parte. 2. Freeze Related Accounts. - Upon receipt
Without doubt, a requirement that the of the freeze order and upon verification
application for a bank inquiry order be done by the covered person that there are
with notice to the account holder will alert the accounts related to the monetary
latter that there is a plan to inspect his bank instrument or property subject of the
account on the belief that the funds therein are freeze order, the covered person shall
involved in an unlawful activity or money immediately freeze these related
laundering offense. [Republic v Eugenio, G.R. accounts wherever these may be found.
No. 174629 (2008)] If the related accounts cannot be
determined within 24 hours from receipt
Page 179 of 494
of the freeze order due to the volume 1. With due diligence, the former cannot be
and/or complexity of the transactions, or located, or
any other justifiable factors, the covered 2. It has been substantially altered,
person shall effect the freezing of the destroyed, diminished in value or
related accounts within a reasonable otherwise rendered worthless by any act
period and shall submit a supplemental or omission, or
return thereof to the Court of Appeals 3. It has been concealed, removed,
and the AMLC within 24 hours from the converted, or otherwise transferred, or
freezing of said related accounts. 4. It is located outside the Philippines or has
3. Furnish Copy of Freeze Order to Owner been placed or brought outside the
or Holder. - The covered person and jurisdiction of the court, or
government agency concerned shall 5. It has been commingled with other
likewise immediately furnish a copy of monetary instrument or property
the notice of the freeze order upon the belonging to either the offender himself
owner or holder of the monetary or a third person or entity, thereby
instrument or property or related rendering the same difficult to identify or
accounts subject thereof. be segregated for purposes of forfeiture.
4. Submit Detailed Return. - Within 24 hours [Sec. 12(a), as amended by RA 10365]
from receipt of the freeze order, the
covered person and government agency Claim on Forfeited Assets
concerned shall submit, by personal Where the court has issued an order of
delivery, to the Court of Appeals and to forfeiture of the monetary instrument or
the AMLC, a written detailed return on property in a criminal prosecution for any
the freeze order. money laundering offense defined under
Section 4 of this Act, the offender or any other
The covered person shall also submit to the person claiming an interest therein may apply,
AMLC, through the internet, an electronic by verified petition, for a declaration that the
detailed return in a format to be prescribed by same legitimately belongs to him and for
the latter. [Rule 10(e), Revised IRR] segregation or exclusion of the monetary
instrument or property corresponding thereto.
Forfeiture Provisions
Where filed: With the court which rendered the
Civil Forfeiture judgment of forfeiture.
Upon determination by the AMLC that
probable cause exists that any monetary When filed: Within 15 days from the date of
instrument or property is in any way related to the finality of the order of forfeiture, in default of
an unlawful activity or a money laundering which the said order shall become final and
offense, the AMLC shall file with the executory. [Sec. 12(b)]
appropriate court (through the OSG) a Note: This provision shall apply in both civil and
verified ex parte petition for forfeiture. [Sec. criminal forfeiture.
12(a), as amended by RA 10365]
Payment in Lieu of Forfeiture
Procedural rule applicable: The Rules of The court may, instead of enforcing the order
Court on Civil Forfeiture. of forfeiture of the monetary instrument or
property or part thereof or interest therein,
What is covered by the forfeiture accordingly order the convicted offender to
The forfeiture shall include those other pay an amount equal to the value of said
monetary instrument or property having an monetary instrument or property, where:
equivalent value to that of the monetary 1. The court has issued an order of forfeiture
instrument or property found to be related in of the monetary instrument or property
any way to an unlawful activity or a money subject of a money laundering offense
laundering offense, when: (defined under Section 4), and
2. Said order cannot be enforced because:
Page 180 of 494
a. Any particular monetary instrument covered transaction or suspicious
or property cannot, with due transaction report or request for
diligence, be located, or assistance from a foreign State, or
b. It has been substantially altered, believed by the Council, on the basis of
destroyed, diminished in value or substantial evidence, to be, in whole or
otherwise rendered worthless by in part, wherever located, representing,
any act or omission, directly or involving, or related to, directly or
indirectly, attributable to the indirectly, in any manner or by any
offender, or means, the proceeds of an unlawful
c. It has been concealed, removed, activity;
converted, or otherwise 3. To institute civil forfeiture proceedings
transferred to prevent the same and all other remedial proceedings
from being found or to avoid through the Office of the Solicitor
forfeiture thereof, or General;
d. It is located outside the Philippines 4. To cause the filing of complaints with the
or has been placed or brought Department of Justice or the
outside the jurisdiction of the court, Ombudsman for the prosecution of
or money laundering offenses;
e. It has been commingled with other 5. To investigate suspicious transactions
monetary instruments or property and covered transactions deemed
belonging to either the offender suspicious after an investigation by
himself or a third person or entity, AMLC, money laundering activities, and
thereby rendering the same other violations of this Act;
difficult to identify or be segregated 6. To apply before the Court of Appeals, ex
for purposes of forfeiture [Sec. parte, for the freezing of any monetary
12(c)] instrument or property alleged to be
laundered, proceeds from or
Note: This provision shall apply in both civil and instrumentalities used/ intended for use
criminal forfeiture. in any unlawful activity (as defined in
Section 3(i) hereof);
9. Anti-Money Laundering Council; 7. To implement such measures as may be
Functions necessary and justified under this Act to
counteract money laundering;
The Anti-Money Laundering Council shall be 8. To receive and take action in respect of,
composed of the Governor of the Bangko any request from foreign states for
Sentral ng Pilipinas (BSP) as chairman, and assistance in their own anti-money
the Commissioner of the Insurance laundering operations provided in this
Commission and the Chairman of the Act;
Securities and Exchange Commission (SEC) 9. To develop educational programs on
as members. [Sec. 7] the pernicious effects of money
laundering, the methods and techniques
Functions used in money laundering, the viable
The AMLC shall act unanimously in the means of preventing money laundering
discharge of its functions as defined and the effective ways of prosecuting
hereunder: and punishing offenders;
1. To require and receive covered or 10. To enlist the assistance of any branch,
suspicious transaction reports from department, bureau, office, agency or
covered institutions; instrumentality of the government,
2. To issue orders addressed to the including government-owned and -
appropriate Supervising Authority or the controlled corporations, in undertaking
covered institution to determine the true any and all anti-money laundering
identity of the owner of any monetary operations, which may include the use of
instrument or property subject of a its personnel, facilities and resources for
Page 181 of 494

the more resolute prevention, detection
and investigation of money laundering
offenses and prosecution of offenders;
and
11. To impose administrative sanctions
for the violation of laws, rules,
regulations and orders and resolutions
issued pursuant thereto; [Sec. 7]
12. To require the Land Registration
Authority and all its Registries of Deeds
to submit to the AMLC, reports on all real
estate transactions involving an amount
in excess of Php 500,000 within 15 days
from the date of registration of the
transaction, in a form to be prescribed by
the AMLC. The AMLC may also require
the Land Registration Authority and all its
Registries of Deeds to submit copies of
relevant documents of all real estate
transactions. [Sec. 7]
Page 182 of 494

INSURANCE
COMMERCIAL LAW
INSURANCE LAW COMMERCIAL LAW
2. Wherein one undertakes for a
consideration;
INSURANCE 3. To indemnify another against loss,
damage, or liability;
4. Arising from an unknown or contingent
I. Basic Concepts event.
1. Definition
Contingent Event Unknown Event
a. Insurance Event that is not Event which is
certain to take place. certain to happen,
Insurance is essentially a contract by which but the time of its
one party (the insurer), for a consideration that happening is not
is usually paid in money, either in a lump sum known.
or at different times during the continuance of
the risk, promises to make a certain payment,
usually of money, upon the destruction or injury General Rule: A past event cannot be a
of “something” in which the other party (the designated event in an insurance contract.
insured) has an interest [Carale, The Philippine
Insurance Law (2014)]. Exception: It may be a designated event only
in cases where it has happened already, but
On August 15, 2013, RA 10607 (An Act the parties do not know about it e.g., prior loss
Strengthening the Insurance Industry, Further of a ship at sea (applicable only to marine
Amending Presidential Decree No. 612, insurance) [De Leon, The Insurance Code of
Otherwise Known as “The Insurance Code,” as the Philippines Annotated (2014)].
Amended by Presidential Decree Nos. 1141,
1280, 1455, 1460, 1814 and 1981, and Batas The unknown event may be past or future.
Pambansa Blg. 874, and for Other Purposes) Even if the proximate cause of the loss is a
was signed into law. It is a restatement of the fortuitous event, the insurer may still be liable if
Insurance Code (PD 612), with it is the event or peril insured against [De Leon].
amendments.
2. Form
The section numbers hereinafter generally
pertain to RA 10607, unless otherwise There is no particular form required for a
indicated. contract of insurance.
b. Contract of Insurance May an Insurance Contract be Oral?

The Insurance Code has no provision requiring
A contract of insurance is an agreement a particular form for the validity of an insurance
whereby one undertakes for a consideration to contract. In our jurisdiction, the Supreme Court
indemnify another against loss, damage or has not made a categorical ruling against the
liability arising from an unknown or contingent validity of an oral contract of insurance
event [Sec. 2(a)]. [Carale].
Note: A contract of suretyship shall be Note: An insurance policy is different from the
deemed to be an insurance contract, within the contract of insurance. The policy is the
meaning of the Insurance Code, only if made formal written instrument evidencing the
by a surety who or which, as such, is doing contract of insurance entered into between the
an insurance business as hereinafter insured and the insurer [Sec. 232].
provided.
Thus, a contract of insurance is:

1. A contract of indemnity;
Page 184 of 494

3. Doing or Transacting Insurance b. From such determination, it concludes
Business that:
1. If these are the principal
The term “doing an insurance business or objectives, the business is that
transacting an insurance business” of insurance.
includes: 2. But if they are merely incidental
a. Making or proposing to make, as and service is the principal
insurer, any insurance contract; purpose, then the business is
b. Making or proposing to make, as not insurance.
surety, any contract of suretyship as a
vocation and not as merely incidental 4. Governing Law
to any other legitimate business or
activity of the surety; General Rule: The Insurance Code primarily
c. Doing any kind of business, including a governs insurance contracts.
reinsurance business, specifically
recognized as constituting the doing Exception: When there is a special law which
of an insurance business within the specifically governs (e.g., insurance contract
meaning of the Insurance Code; under R.A. 1161 or the Social Security Act), in
d. Doing or proposing to do any business which case, the Insurance Code governs
in substance equivalent to any of the subsidiarily.
foregoing in a manner designed to
evade the provisions of the Insurance Matters not expressly provided for in the
Code [Sec. 2(b)]. Insurance Code and special laws are regulated
by the Civil Code.
Note: That no profit is derived from the making
of insurance contracts, agreements, or Other Special Laws:
transactions, or that no separate or direct a. National Health Insurance Act of 2013
consideration is received therefor, shall not be (RA 10606, amending RA 7875)
deemed conclusive to show that the making b. The Revised Government Service
thereof does not constitute the doing or Insurance Act of 1997 (RA 8291)
transacting of an insurance business [Sec. c. The Social Security Act (RA 8282)
2(b)]. d. The Property Insurance Law (RA 656,
as amended by PD 245)
General Rule: An insurance business consists e. The Philippine Deposit Insurance Act
in undertaking, for a consideration, to of 1963 (RA 3591).
indemnify another against loss, damage or f. RA 4898, as amended by RA 5756
liability arising from an unknown or contingent providing life, disability, and accident
event. insurance to barangay officials
g. Universal Health Care Act (RA 11223)
Exception: Those not formally designated as
insurance businesses but are deemed “doing 5. Parties to an Insurance Contract
or transacting an insurance business” as listed
in Sec. 2(b). a. Insurer
Principal Object and Purpose Test The insurer is the party who assumes or
The “principal object and purpose test” ! accepts the risk of loss and undertakes for
a. Determines: consideration to indemnify the insured or to pay
1. Whether the assumption of risk a certain lump sum on the happening of the
and indemnification of loss are event or peril insured against. May be any
the principal object and corporation, partnership, or association, duly
purpose of the organization; or authorized to transact insurance business
2. Whether they are merely [Sec. 6].
incidental to its business.
Page 185 of 494
b. Insured designated peril. It is based on probability of
loss and extent of liability [43 Am. Jur. 2d326].
The insured is the person in whose favor the
contract is operative and whose loss is the Premium Assessment
occasion for the payment of the insurance
proceeds by the insurer [Carale]. A sum levied and A sum collected to
paid to meet meet actual loss
c. Exception anticipated loss [Vance].
[Vance].
Anyone except a public enemy may be A sum specifically
insured [Sec. 7]. levied by mutual
insurance
There is no definition of what a “public enemy” companies or
is, but a definition that is generally accepted associations, upon a
and in keeping with the nature of an insurance fixed and definite
contract is one where a person possesses the plan, to pay losses
nationality of the state with which another is at and expenses [Sec.
war [Carale]. 403]
A. Elements of an Insurance 3. Risk of Loss or Damage

Contract
Peril is any contingent or unknown event which
Elements [C2R2IM] may cause a loss. Its existence creates a risk
1. Cause — event or peril insured against and its occurrence results in loss.
2. Consideration — premium payments
paid by the insured The event or peril insured against must be such
3. Risk of loss or damage being assured that its happening will:
by the insurer a. Damnify or cause loss to a person; or
4. Risk-distributing scheme — b. Create liability against him [Sec. 3]
distribution and transfer by the insurer
of risk of loss, damage or liability 4. Risk-Distributing Scheme
among persons having similar risks
5. Insurable interest — the insured Insurance contracts serve to distribute the
possesses an interest of some kind, risk of economic loss, damage or liability
susceptible of pecuniary estimation, among as many as possible of those who are
which the event insured against may subject to the same kind of risk.
cause loss or damage
6. A meeting of minds of the parties Scheme:
upon all the foregoing essentials a. The payment of premiums by all will
inure to a general fund, out of which
1. Cause payment will be made for anyone who
has suffered an economic loss.
Cause refers to an event or peril insured b. Hence, each member contributes to a
against. small degree toward compensation for
losses suffered by any member of the
2. Consideration group.
An insurance premium is the agreed price for 5. Insurable Interest

assuming and carrying the risk. It is the
consideration paid to the insurer for Insurable interest is the interest which the law
undertaking to indemnify the insured against a requires the owner of an insurance policy to
have in the person or thing insured [Carale].
Page 186 of 494

In terms of the event insured against, it is the and acceptance. The insurance policy merely
relation between the insurer and the risk evidences the terms and conditions thereof.
insured, such that the occurrence of the risk will
cause substantial loss or harm of some kind to Exception: It is stipulated that the policy is
the insured [Carale]. essential to the existence of the contract
[Campos].
Under the Code, the following are void:
a. Stipulation in a policy for the payment b. Aleatory
of loss whether the person insured has
or has not any interest in the property It is aleatory because it depends upon some
insured; contingent event. The obligation of the insurer
b. Stipulation that the policy shall be to pay depends on the happening of an event
received as proof of such interest; which is uncertain, or though certain, is to occur
c. Policy executed by way of gaming or at an indeterminate time [Art. 2010, NCC].
wagering [Sec. 25].
Being an aleatory contract does not
Note: Insurable interest is not required in necessarily mean that it is a “contract of
industrial life insurance. chance” because in a contract of insurance,
the parties seek to distribute possible loss by
6. Meeting of the Minds reason of mischance, unlike a wagering
contract [Carale].
The two parties to a contract of insurance
whose minds need to meet regarding the c. Voluntary
essential elements are the insurer and the
insured. General Rule: Parties may incorporate
appropriate provisions and conditions they
The insured is not always the person to whom choose, as long as they are not contrary to law,
the proceeds are paid. Such person is the morals, good customs, public order, or public
beneficiary [Vance]. policy [Art. 1305, NCC].
B. Characteristics/Nature of Exception: Some insurance contracts,

particularly liability insurance, may be required
Insurance Contracts by law in certain instances:
1. Compulsory motor vehicle liability
1. In General insurance for motor vehicles [Secs.
386-402];
An insurance contract is [CAVE-CCPU] 2. Compulsory coverage in state
a. Consensual; insurance fund for employees [Arts.
b. Aleatory; 168-184, Labor Code];
c. Voluntary; 3. As a condition to granting a license to
d. Executory and unilateral but conduct business or calling affecting
synallagmatic; the public safety or welfare [De Leon];
e. Conditional; 4. Social insurance for members of the
f. Contract of adhesion; GSIS and for employees of the private
g. Personal contract; sector covered by the SSS.
h. Uberrimae fides contract
d. Executory and Unilateral but
a. Consensual Synallagmatic
General Rule: An insurance contract is Once the insured pays the premium, the
perfected by the meeting of the minds of the contract already takes effect. After the payment
parties. There must be a concurrence of offer of premiums, the insurance imposes a
Page 187 of 494

unilateral obligation on the insurer who h. Uberrimae fides Contract (i.e. a
promises to indemnify in case of loss. contract of the highest degree of good
faith)
It is also synallagmatic [Vitug, J., Separate
Opinion in UCPB General Insurance Co., Inc. Each party is required to:
v. Masagana Telemart, Inc., G.R. No. 137172 1. Deal with each other in utmost good
(2001)] and reciprocal such that even if the faith;
contingent event or designated peril does not 2. Disclose conditions affecting the risk of
occur, the insurer has still provided protection which he is aware;
against the risk for the period covered by the 3. Disclose any material fact which the
insurance contract. applicant knows and ought to know.
e. Conditional Violation of this duty gives the aggrieved party

the right to rescind the contract. Where the
It is conditional because the insurer incurs aggrieved party is the insured, the bad faith of
liability only upon the happening of the event the insurer will preclude it from denying liability
insured against. However, many other on the policy based on breach of warranty
conditions are usually required (e.g. payment [Campos].
of premium or performance of other acts) as
precedent to the right of the insured to claim 2. For Specific Kinds of Insurance
benefits under the insurance.
Contracts
f. Contract of Adhesion (Fine Print Rule)
a. For Non-Life Insurance
Insurance contracts are already presented to
Contract of Indemnity
the insured in its printed form on a “take it or
The insured who has insurable interest over
leave it” basis. The insured merely must agree
the property is only entitled to recover the
to its terms. Such contracts of adhesion are
amount of actual loss sustained. The burden
valid.
is upon him to establish the amount of such
loss. Property insurance is personal in the
General Rule: When the terms of the contract
sense that it is the damage to the personal
are clear and leave no doubt upon the intention
interest and not the property that is being
of the contracting parties, the literal meaning of
reimbursed.
its stipulations shall control [Art. 1370, NCC].
General Rule: Only non-life insurance or
Exception: Where the terms of the contract
property insurance contracts are contracts
are ambiguous and susceptible to various
of indemnity. Life insurance contracts are not
interpretations, the issue is to be resolved
contracts of indemnity because the value of life
against the insurer, being the party who
cannot be quantified.
prepared the contract [Art. 1377, NCC].
Ambiguity is interpreted liberally in favor of the
Exception: The basis of the insurable interest
insured and strictly against the insurer who
of the policy owner on the life of the insured is
prepared the same.
a commercial relationship (e.g. creditor-
debtor, mortgagor/guarantor-mortgagee).
g. Personal Contract
b. For Life Insurance
The contract of insurance is basically between
the insurer and the insured.
Nature of Property
Life insurance policies, unlike property
The insured cannot assign, before the
insurance, are generally assignable or
happening of the loss, his rights under a
transferable as they are in the nature of
property policy to others without the consent of
property [Sec. 81].
the insurer [Secs. 20, 58, 83].
Page 188 of 494
C. Classes of Insurance b. Goods or cargoes;
c. Earnings such as freight, passage
money, commissions, or profits; and
1. Marine Insurance
d. Liability (protection and indemnity
insurance).
a. Definition
2. Inland Marine Insurance
Marine insurance covers loss or damage to
property and persons in connection with all
Inland marine insurance covers the land or
risks or perils of navigation. It includes “marine
over-the-land transportation perils of property
protection and indemnity insurance” against
shipped by railroads, motor trucks, airplanes,
liability incidental to ownership, operation,
and other means of transportation. It also
maintenance or construction of vessels and
covers risks of lake, river or other inland
facilities therefor [Carale].
waterway transportation and other waterborne
perils outside those covered by ocean marine
Marine insurance includes:
insurance.
1. Loss or damage to:
a. Vessels, cargo, freightage,
profits, and all kinds of property
c. Loan on Bottomry and Loan on
and interests therein, in Respondentia Distinguished
connection with any and all Loan on Bottomry Loan on
risks or perils of navigation; Respondentia
b. Person or property
appertaining to a marine, Loan obtained for the Loan obtained as
inland marine, transit or value of the vessel security for the value
transportation insurance; on a voyage of the cargo to be
c. Precious stones, jewels, transported
jewelry, precious metals,
whether in course of Both depend upon the safe conclusion of the
transportation or otherwise; voyage [Carale]
d. Instrumentalities of
transportation and In a loan on bottomry, the insurable interest
communication, excluding of a shipowner on its bottomed boat is the
buildings, aids to navigation difference between the amount of the loan and
and transportation, and the value of the boat. Thus, if the amount of the
appurtenant facilities for the loan does not cover the total value of the boat,
control of waterways. the owner can still insure the boat.
2. Marine protection and indemnity
insurance against liability incidental to
d. Risks
ownership, operation, maintenance or
construction of vessels and facilities
1. Types of Risk
therefore [Sec. 101; Carale].
Perils of the Sea
b. Divisions Ocean marine insurance protects ships at sea
and the cargo or freight on such ships from
1. Ocean Marine Insurance standard “perils of the sea” or “perils of
navigation.”
Ocean marine insurance insures against risk
connected with navigation to which a ship, Perils of the sea include:
cargo, freightage, profits, or other insurable a. Losses caused by sea damage, or by
interest in movable property, may be exposed the violence of the elements;
during a certain voyage or a fixed period of b. Losses from extraordinary occurrences
time. Its scope includes: or those which cannot be guarded
a. Ships or hulls;
Page 189 of 494
against by the ordinary exertion of usually contemplated and avoids putting upon
human skill or prudence; the insured the burden of establishing that the
c. Barratry or the willful and intentional act loss was due to peril falling within the policy’s
on the part of the master or the crew, in coverage. The insurer avoids liability by
pursuance of some unlawful or demonstrating that a specific provision
fraudulent purpose, without the expressly excludes the loss from coverage
consent of the owner, and to the [Choa Tiek Seng v. Court of Appeals, G.R. No.
prejudice of his interest (e.g., burning 84507 (1990)].
the ship, unlawfully selling the cargo).
Exception: In an all-risk policy, all risks are
Perils of the sea do not include ordinary wear covered unless expressly excepted. The
and tear of the voyage and injuries suffered by burden rests on the insurer to prove that the
the vessel in consequence of her not being loss is caused by a risk that is excluded
unseaworthy [Roque v. IAC, G.R. No. L-66935 [Filipino Merchants Ins. Co. v. CA, G.R. No.
(1985)]. 85141(1989)].
Perils of the Ship e. Loss

Perils of the ship are those which cause a loss
which, in the ordinary course of events, results Loss may be total (actual or constructive) or
from the: partial.
a. Ordinary, natural, and inevitable action
of the sea; 1.Total Loss
b. Ordinary wear and tear of the ship; and
c. Negligent failure of the shipowner to 2. Actual Loss
provide the vessel with the proper Actual total loss exists when the subject
equipment to convey the cargo under matter of the insurance is wholly destroyed or
ordinary conditions [De Leon]. lost or when it is so damaged that it no longer
exists in its original character [Vance].
Perils of the Sea Perils of the Ship
Actual loss is caused by:
Covers casualties Covers losses a. A total destruction of the thing insured;
due to unusual resulting from b. The irretrievable loss of the thing by
violence or ordinary wear and sinking, or by being broken up;
extraordinary tear or other damage c. Any damage to the thing which renders
causes connected to incidental to the it valueless to the owner for the
navigation voyage purpose for which he held it;
d. Any other event which effectively
Covers losses which Covers losses which deprives the owner of the possession,
cannot be guarded result from the at the port of destination of the thing
against by prudence negligent failure of insured [Sec. 132].
and the ordinary the shipowner to
exertion of human provide the vessel Actual loss may be presumed from the
skill with the proper continued absence of a ship without being
equipment, and can heard of. The length of time which is sufficient
thus be guarded to raise this presumption depends on the
against by ordinary circumstances of the case [Sec. 134].
exertion of human
skill 3. Constructive Loss
Constructive total loss or “technical total
loss” is one in which the loss, although not
2. Rules on All Risks Covered
actually total, is of such character that the
insured is entitled, if he thinks fit, to treat it as
General Rule: An “all risks” provision of a
total by abandonment [45 CJS 1150]. A
marine policy extends coverage to risks not
Page 190 of 494
constructive total loss is one which gives to a Note: Freightage cannot, in any case, be
person insured a right to abandon [Sec. 133]. abandoned, unless the ship is also abandoned.
Three rules exist as to determining when there f. Abandonment

is a constructive total loss:
1. English rule Abandonment is the act of the insured by
There is constructive total loss when the which, after a constructive total loss, he
subject matter of the insurance, while still declares the relinquishment to the insurer of his
existent in specie, is so damaged as not to be interest in the thing insured [Sec. 140].
worth, when repaired, the cost of the repairs.
Aside from the requirements under Sec. 141
2. American rule above-mentioned:
There is constructive total loss when it is so 1. An abandonment must be neither
damaged that the costs of repairs would partial nor conditional [Sec. 142];
exceed one-half of the value of the thing as 2. An abandonment must be made
acquired (also known as the “fifty percent within a reasonable time after
rule”). receipt of reliable information of the
loss, but where the information is of a
3. Philippine rule doubtful character, the insured is
The insured may not abandon the thing insured entitled to a reasonable time to make
unless the loss or damage is more than three- inquiry [Sec. 143];
fourths of its value [De Leon]. 3. Abandonment is made by giving
notice thereof to the insurer, which
A person insured by a contract of marine may be done orally, or in writing:
insurance may abandon the thing insured and Provided, That if the notice be done
recover for a total loss thereof when the cause orally, a written notice of such
of the loss is a peril insured against— abandonment shall be submitted within
a. If more than 3⁄4 thereof in value is seven days from such oral notice [Sec.
actually lost, or would have to be 145];
expended to recover it from the peril; 4. Abandonment must be absolute and
b. If it is injured to such an extent as to total.
reduce its value by more than 3⁄4;
c. If the thing insured is a ship, and the No notice of abandonment is required for
contemplated voyage cannot be recovery of loss in cases of actual total loss.
lawfully performed without incurring
either an expense to the insured of Where the information upon which an
more than 3⁄4 the value of the thing abandonment has been made proves
abandoned or a risk which a prudent incorrect, or the thing insured was so far
man would not take under the restored when the abandonment was made
circumstances; or that there was in fact no total loss, the
d. If the thing insured is cargo or abandonment becomes ineffectual.
freightage, and the voyage cannot be
performed, nor another ship procured A valid abandonment has the following
by the master, within a reasonable time characteristics:
and with reasonable diligence, to 1. There must be an actual
forward the cargo without incurring relinquishment by the person insured
either an expense to the insured of of his interest in the thing insured;
more than 3⁄4 the value of the thing 2. There must be a constructive total
abandoned or a risk which a prudent loss;
man would not take under the 3. It must be factual [Sec. 144];
circumstances [Sec. 141]. 4. The notice of abandonment must be
explicit and must specify the
Page 191 of 494

particular cause of the abandonment
Gross/General Simple/Particular
[Sec. 146].
Average Average
Effects of abandonment: vessel, her cargo, or persons interested in
1. An abandonment is equivalent to a both at the same the vessel and her
transfer by the insured of his interest to time from a real and cargo [Art. 809]
the insurer, with all the chances of known risk [Art. 811,
recovery and indemnity [Sec. 148]; Code of Commerce]
2. If a marine insurer pays for a loss as if
it were an actual total loss, he is entitled Loss is borne by all Loss is borne alone
to whatever may remain of the thing the owners of the by the owner of the
insured, or its proceeds or salvage, as interests involved, cargo or of the
if there had been a formal who are pro tanto vessel, as the case
abandonment [Sec. 149]; obliged to give may be [De Leon];
3. Upon an abandonment, acts done in proportionate such loss is not
good faith by those who were agents of contributions to suffered by all
the insured in respect to the thing make up for such persons contributing
insured, subsequent to the loss, are at loss, since the ratably [Carale]
the risk of the insurer, and for his sacrifice was made
benefit [Sec. 150]. for the common
benefit of all who
g. Average have an interest in
the venture [Art. 812;
The following are considered averages: Carale]
1. All extraordinary or accidental
expenses which may be incurred
during the navigation for the Requisites to claim general average
preservation of the vessel or cargo, or contributions:
both; 1. There must be a common danger to the
2. All damages or deterioration the vessel vessel or cargo;
may suffer from the time she puts to 2. The sacrifice must be for the common
sea from the port of departure until she safety or for the benefit of all;
casts anchor in the port of destination, 3. It must be successful (i.e. resulted in
and those suffered by the merchandise the saving of the vessel and/or cargo);
from the time it is loaded in the port of 4. Expenses or damages should have
shipment until it is unloaded in the port been incurred or inflicted after taking
of consignment [Art. 806, Code of proper legal steps and authority
Commerce]. [Magsaysay v. Agan, G.R. No. L-6393
(1955)].
There are two kinds of averages:
1. Gross or general Vance, however, includes as part of the
2. Simple or particular requisites:
1. Sacrifice was made by the master or
upon his authority; and
Gross/General Simple/Particular 2. That it was not caused by any fault of
Average Average the party asking for the contribution.
Includes damages Includes damages An example of particular average loss would

and expenses which and expenses be the wages of the crew when the vessel is
are deliberately caused to the vessel detained by reason of force majeure. In such a
caused by the or her cargo, which case, the loss is only partial and must be borne
master of the vessel have not inured to by the owner of the vessel alone [Carale].
or upon his authority, the common benefit
in order to save the and profit of all the
Page 192 of 494
Rules on averages in marine insurance condition [Roque v. Intermediate Appellate
Where it has been agreed that an insurance Court, G.R. No. L-66935 (1985)].
upon a particular thing, or class of things, shall
be free from particular average: A vessel should be seaworthy at the time
1. A marine insurer is not liable for any commencement of the risk or start of the
particular average loss not depriving voyage, except:
the insured of the possession of the 1. Time policy: When the insurance is
whole of such thing, or class of things made for a specified length of time, the
at the port of destination (even though implied warranty is not complied with
it becomes entirely worthless); unless the ship be seaworthy at the
2. However, such insurer is liable for his commencement of every voyage it
proportion of all general average loss undertakes during that time;
assessed upon the thing insured [Sec. 2. Cargo policy: When the insurance is
138]. upon the cargo which, by the terms of
the policy, description of the voyage, or
h. Warranties established custom of the trade, is to
be transhipped at an intermediate port,
Implied warranties in marine insurance: the implied warranty is not complied
1. Implied warranty of seaworthiness with unless each vessel upon which the
2. Implied warranty against improper cargo is shipped, or transhipped, be
deviation seaworthy at the commencement of
3. Implied warranty of proper each particular voyage [Sec. 117].
documentation
Where different portions of the voyage
Implied Warranty of Seaworthiness contemplated by a policy differ in respect to the
things requisite to make the ship seaworthy
In every marine insurance upon a ship or therefor, a warranty of seaworthiness is
freight, or freightage, or upon anything which is complied with if, at the commencement of each
the subject of marine insurance, a warranty is portion, the ship is seaworthy with reference to
implied that the ship is seaworthy [Sec. 115]. that portion [Sec. 119].
A vessel is seaworthy if: The insurer is not liable despite breach of

1. It is fit to perform the service and to warranty when the ship becomes unseaworthy
encounter the ordinary perils of the during the voyage to which an insurance
voyage contemplated by the parties to relates, but there is an unreasonable delay in
the policy [Sec. 116]; repairing the defect [Sec. 120].
2. It is properly laden;
3. It is provided with a competent master; Implied Warranty Against Improper
4. It is provided with a sufficient number Deviation
of competent officers and seamen;
5. It is provided with the requisite A deviation is a departure from the course of
appurtenances and equipment; the voyage insured, or an unreasonable delay
6. It is provided with other necessary or in pursuing the voyage or the commencement
proper stores and implements for of an entirely different voyage [Sec.125].
voyage [Sec.118].
There is proper deviation when:
Note: There is an implied warranty of 1. Caused by circumstances over which
seaworthiness in every contract of ordinary neither the master nor the owner of the
marine insurance, as provided in Sec. 113 in ship has any control;
relation to Sec. 99. It becomes the obligation of 2. Necessary to comply with a warranty,
a cargo owner to look for a reliable common or to avoid a peril, whether or not the
carrier which keeps its vessels in seaworthy peril is insured against;
Page 193 of 494

3. Made in good faith, and upon Exception: It is caused by lightning or a natural
reasonable grounds of belief in its disaster or casualty not attributable to human
necessity to avoid a peril; or agency [Phil. Home Assurance Corp. v. CA,
4. Made in good faith, for the purpose of G.R. No. 106999 (1996)].
saving human life or relieving another
vessel in distress [Sec. 126]. Fire or other so-called “allied risks”
enumerated in Sec. 169 must be the
Note: In instances when deviation is proper, proximate cause of the damage or loss.
insurer remains liable.
The presence of heat, steam, or even smoke is
Every deviation not specified in the last section evidence of fire, but taken by itself will not
is improper [Sec. 127]. prove the existence of fire.
The effect of any loss subsequent to an b. Risks

improper deviation is that the insurer is not
liable [Sec. 128]. The risk assumed by the insurer is the loss and
damage caused by hostile fire and not
Implied Warranty of Proper Documentation friendly fire.
Where the nationality or neutrality of a ship or

Hostile Fire Friendly Fire
cargo is expressly warranted, it is implied that
the ship will carry the requisite documents to
Fire that escapes Fire that burns in a
show such nationality or neutrality and that it
from the place where place where it is
will not carry any documents which cast
it was intended to intended to burn
reasonable suspicion thereon [Sec. 122].
burn and ought to be, and ought to be (e.g.
or one which remains fire burning in a stove
2. Fire completely within its or a lamp) [De Leon].
proper place but
a. Definition because of the But friendly fire may
unsuitable materials become hostile fire
Fire insurance is a contract of indemnity by used to light it, by escaping from the
which the insurer, for a stipulated premium, becomes inherently place where it ought
agrees to indemnify the insured against loss dangerous and to be to some place
by: uncontrollable [De in which it ought not
1. Fire, lightning, windstorm, tornado, or Leon]. to be [Carale].
earthquake; and
2. Other allied risks, when such risks are
covered by extension to fire insurance The principle underlying this distinction is that
policies or under separate policies the policy shall not be construed to protect the
[Sec. 169]. insured from injury consequent upon his
negligent use or management of fire, so long
Fire is oxidation which is so rapid as to produce as it burns in the place where it ought to be
either a flame or a glow. Spontaneous [Carale].
combustion is usually rapid oxidation. Fire is
always caused by combustion, but combustion c. Alterations in Use or Condition
does not always cause fire [Western Woolen
Mills Co. v. Northern Assurance Co., 139 Fed An alteration in the use or condition of a thing
637 (1905)]. insured from that to which it is limited by the
policy:
General Rule: Fire cannot be considered a 1. Entitles an insurer to rescind a contract
natural disaster or calamity or an act of God of fire insurance if such alteration:
since it almost always arises from acts of man a. Increases the risks, and
or by human means. b. Was made:
Page 194 of 494

1. Without the consent of In an open policy, the actual loss, as
the insurer, and determined, will represent the total indemnity
2. By means within the due the insured except only that the total
control of the insured. indemnity shall not exceed the total value of the
2. Does not affect a contract of fire policy [Development. Ins. Corp. v. IAC, G.R.
insurance if the alteration does not No. 71360 (1986)].
increase the risk [Secs. 170-171].
Valued policy
Note: A contract of fire insurance is not affected If there is a valuation, the effect shall be like a
by any act of the insured after the execution of marine insurance policy wherein the valuation
the policy, which does not violate its provisions, is conclusive between the parties in adjusting
even though it increases the risk and is the the loss [Sec. 158].
cause of the loss [Sec. 172].
Option-to-rebuild clause
Transferring machinery to another location, Whenever the insured desires to have a
despite a provision in the policy stating that the valuation named in his policy, insuring any
machine cannot be transferred without the building or structure against fire, he may
consent of the insurer, is considered an require such building or structure to be
alteration in the condition and location of the examined by an independent appraiser and the
thing insured [Malayan Insurance Co, Ltd. v. value of the insured’s interest therein may then
PAP Co., Ltd., G.R. No. 200784 (2013)]. be fixed as between the insurer and the
insured. The cost of such examination shall be
d. Measure of Indemnity paid for by the insured. A clause shall be
inserted in such policy stating substantially that
In an open policy, only the expense necessary the value of the insured’s interest in such
to replace the thing lost or injured in the building or structure has been thus fixed [Sec.
condition it was at the time of the injury will be 174].
paid.
3. Casualty
In a valued policy, the parties are bound by
the valuation, in the absence of fraud or a. Definition
mistake [Sec. 173].
Casualty insurance is insurance covering loss
The parties may provide for an option-to- or liability arising from accident or mishap.
rebuild clause concerning the repairing,
rebuilding, or replacing of buildings or Casualty insurance includes but is not limited
structures wholly or partially damages [Sec. to:
174]. 1. Employer’s liability insurance;
2. Motor vehicle liability insurance;
Note: No policy of fire insurance shall be 3. Plate glass insurance;
pledged, hypothecated, or transferred to any 4. Burglary and theft insurance;
person, firm, or company who acts as agent for 5. Personal accident and health
or otherwise represents the issuing company insurance, as written by non-life
[Sec. 175]. insurance companies; and
6. Other substantially similar kinds of
Open policy insurance.
In the absence of express valuation in a fire
insurance policy, the insured is only entitled to Casualty insurance does not include certain
recover the amount of actual loss sustained types of loss which, by law or custom, are
and the burden of proof is upon him to establish considered as falling exclusively within the
the amount of such loss by preponderance of scope of other types of insurance, such as fire
evidence. or marine [Sec. 176].
Page 195 of 494

b. Intentional Injury and Accidental Under this kind of insurance, no action will lie
Injury Distinguished against the insurer unless brought by the
insured for loss actually sustained and paid by
Intentional Injury Accidental Injury him. Liability of the insurer attaches only after
the insured has paid his liability to the third
Injury involves the Injury happens by
party [De Leon].
exercise of the chance or
reasoning faculties, fortuitously, without
Note: Except with respect to compulsory motor
consciousness, intention or design,
vehicle liability insurance, the Insurance Code
and volition which is unexpected,
contains no other provisions applicable to
unusual and
casualty insurance or to robbery insurance in
unforeseen
particular. These contracts are, therefore,
Where a provision of The terms do not, governed by the general provisions applicable
the policy excludes without qualification, to all types of insurance. Outside of these, the
intentional injury, it is exclude events rights and obligations of the parties must be
the intention of the resulting in damage determined by the terms of their contract,
person inflicting the due to fault, taking into consideration its purpose and
injury that is recklessness, or always in accordance with the general
controlling negligence of third principles of insurance law [Fortune Insurance
parties & Surety Co. v. CA, G.R. No. 115278 (1995)].
If the injuries
suffered by the d. No-Action Clause
insured clearly
resulted from the A no-action clause is a requirement in a policy
intentional act of the of liability insurance which provides that a suit
third person, the must first be instituted, and a final judgment be
insurer is relieved first obtained against the insured before the
from liability as person injured can recover on the policy.
stipulated
However, a no-action clause cannot prevail
over Rules of Court provisions which are aimed
c. Divisions at avoiding multiplicity of suits. Parties (i.e. the
insured and the insurer) may be joined as
1. Liability Insurance defendants in a case commenced by the third
party claiming under a liability insurance, as the
This is insurance against specified perils which right to relief in respect to the same
may give rise to liability on the part of the transactions is alleged to exist [Sec. 5, Rule 2;
insured. Sec. 6, Rule 3, 2019 Rules of Civil Procedure;
Guingon v. Del Monte, G.R. No. L- 22042
The insurer assumes the obligation to pay the (1967)].
third party in whose favor the liability of the
insured arises. The liability of the insurer 4. Suretyship
attaches as soon as the liability of the insured
to the third party is established. It covers a. Definition
liability incurred from quasi-delict or criminal
negligence but cannot cover deliberate criminal A contract of suretyship is an agreement
acts [De Leon]. whereby a party, called the surety, guarantees
the performance by another party, called the
2. Indemnity Insurance principal or obligor, of an obligation or
undertaking in favor of a third party called the
This is insurance against specified perils which obligee [Sec. 177].
may affect the persons.
Page 196 of 494

It includes official recognizances, stipulations, 5. Life
bonds, or undertakings issued by any company
by virtue of and under the provisions of Act. No Life insurance is insurance on human lives
536, as amended by 2206 [Sec. 177]. and insurance appertaining thereto or
connected therewith.
Note: The Civil Code shall be applied in a
suppletory character whenever necessary in The following shall be considered a life
interpreting the provisions of a contract of insurance contract for purposes of the
suretyship [Sec. 180]. Insurance Code:
a. Every contract or undertaking for the
b. Nature of Contract payment of annuities, including
contracts for the payment of lump sums
It shall be deemed as insurance contract if under a retirement program where a
the surety’s main business is that of suretyship, life insurance company manages or
and not where the contract is merely incidental acts as a trustee for such retirement
to any other legitimate business or activity of program;
the surety. b. Every contract or pledge for the
payment of endowments or annuities
It is an accessory contract unlike a contract [Secs. 181-182].
of insurance which is the principal contract
itself. An insurance upon life may be made payable:
a. On the death of the person;
The contract of a surety is evidenced by a b. On his surviving a specified period; or
document called surety bond which is c. On the continuance or cessation of life
essentially a promise to guarantee the [Sec. 182].
obligation of the obligor. In turn, the obligor
executes an indemnity agreement in favor of The parties to a life insurance are the
the insurer [De Leon]. following:
a. Owner of the policy: One who has the
When the obligee accepts the bond, the bond power to name the beneficiary, assign
becomes valid and enforceable, whether or not it, cash it in or use as collateral, with the
the premium has been paid by the obligor, obligation to pay the premiums.
unlike in an insurance contract where payment b. Cestui que vie: One on whose life
of premium is necessary for the contract to be insurance is obtained.
valid. If the obligee has not yet accepted, then c. Beneficiary: One to whom the
payment of premium is still necessary for the proceeds may be paid.
contract of suretyship to be valid.
Note: There may be only one person for all
c. Liability of Surety three parties.
The liability of the surety or sureties under a a. Types

bond is joint and several, or solidary [Sec. 178].
This means that upon the default of the 1. Individual Life
principal obligor, the surety becomes primarily
liable. Unlike a guarantor, a surety is not Individual life insurance is insurance on
entitled to the benefit of exhaustion of the human lives and insurance appertaining
principal obligor’s assets and assumes as a thereto or connected therewith. It may be made
regular party to the undertaking. payable on the death of the person, or after his
surviving a specified period (as an annuity or
Said liability is limited or fixed to the amount of endowment), or otherwise contingently on the
the bond. continuation or cessation of life.
Page 197 of 494

2. Group Life b. Other Classifications of Life Policies
Group life insurance is a blanket policy 1. Ordinary or Whole Life Policy

covering a number of individuals who are 2. Term Life Insurance
usually a cohesive group (e.g. employees of a 3. Modified Life Insurance
company) and are subjected to a common risk.
No medical examination is usually required of
Ordinary or whole life policy is where the
each person insured (in contrast to individual
insurer agrees to pay the face value of the
life insurance).
policy upon the death of the insured.
Group insurance is a single insurance
The following are distinct variations of whole
contract that provides coverage for many
life policy:
individuals. The employer-policy holder is the
1. Ordinary Life Insurance — Premiums
agent of the insurer in collecting the premium
are paid throughout the lifetime of the
[Pineda v. CA, G.R. No. 105562 (1993)].
person insured or until the person
reaches a predetermined specified age
Typically, the policy owner is an employer, and
at which point the coverage continues
the policy covers the employees or members of
without the payment of additional
the group, with one master contract kept by the
premiums.
employer. Where the employee is required to
2. Limited Payment Life Insurance —
pay a portion of the premium, the arrangement
Premiums are paid only during a
is called a contributory plan, wherein his
specified number of years or until a
share is deducted from his wages [Carale].
specified event occurs.
3. Single Premium Life Insurance —
3. Industrial Life
The coverage is acquired by the
payment of a single premium.
Industrial life insurance refers to an
4. Joint Life Insurance — Coverage is
insurance policy under which the premiums are
payable upon the first death among two
payable either monthly or oftener, if:
or more insured (normally purchased
a. The face amount of insurance provided
by business partners or spouses) and
in any policy is not more than 500 times
paid to the survivor.
that of the current statutory minimum
5. Universal Life Insurance —
daily wage in the City of Manila; and
Emphasizes the separation of the
b. The words “industrial policy” are
portion of the premium that is used to
printed upon the policy as part of the
cover the insurance protection from the
descriptive matter [Sec. 235].
portion of the premium allocated to an
investment.
It provides insurance coverage to industrial
6. Variable Life Insurance — Some
workers or people who are unable to afford
amount of death benefit provided by a
insurance for bigger amounts.
variable life insurance policy is
guaranteed by the insurer, but the total
It shall not lapse after non-payment of
death benefit and the cash value of the
premiums in 3 months after the expiration of
insurance before death depend on the
the grace period if such non-payment is due to
investment performance of that portion
the failure of the company to send its
of the premium which is allocated to a
representatives to the insured to collect
separate fund.
premium [Sec. 235].
7. Pure Endowment Policy — Where
the insurer pays the insured if the
4. Microinsurance insured survives a specified period. If
Infra. the insured dies within the period, the
insurer is released from liability and
unless the contract otherwise provides,
Page 198 of 494

need not reimburse any part of the Note: Any stipulation extending the 2-
premiums paid. year period is void.
8. Endowment Policy — Where the
insured is paid the face value of the b. Suicide is committed in a state of
policy if he outlives the designated insanity, regardless of the date of the
period. If he dies within said period, the commission, unless suicide is an
insurer pays the proceeds to the excepted peril [Sec. 183].
beneficiary. This is a combination of
term policy and pure endowment Since suicide is contrary to the laws of nature
policy. and the ordinary rules of conduct, it is never
presumed. The burden of proving lies with the
Term life insurance provides for the payment insurer, who seeks to avoid liability under a life
of a specified amount if death occurs within the policy, excepting it from coverage [Campos].
period designated in the policy, usually for
periods of one to five years. Suicide as an Excepted Risk vs. Willful
Exposure to Needless Peril
Modified life insurance is a policy that Suicide and willful exposure to needless peril
combines term and whole life insurance into a are in pan materia because they both signify a
single insurance policy. Premiums paid by the disregard for one's life. The only difference is in
insured are substantially less during the first degree, as suicide imports a positive act of
few years then later increases during the ending such life whereas the second act
remaining term of the policy [Carale]. indicates a reckless risking of it that is almost
suicidal in intent. To illustrate, a person who
c. Risks walks a tightrope one thousand meters above
the ground and without any safety device may
Five important risks: not actually be intending to commit suicide, but
1. Death or Survival; his act is nonetheless suicidal. He would thus
2. Suicide be considered as 'willfully exposing himself to
3. Death at the hands of the law; needless peril [Sun Life Insurance v. Court of
4. Killing by the beneficiary; and Appeals, G.R. No. 92383 (1992)].
5. Accidental Death
3. Death at the Hands of the Law
1. Death or Survival
Death at the hands of the law (e.g. legal
Life insurance may be made payable on the execution) is one of the risks assumed by the
death of the person, or on his surviving a insurer under a life insurance policy in the
specified period, or otherwise contingently on absence of a valid policy exception [Campos].
the continuation or cessation of life [Campos].
4. Killing by the Beneficiary
Death of the insured must be proven by the
beneficiary before the insurer can be made to General Rule: The interest of a beneficiary in
pay. a life insurance policy shall be forfeited when
the beneficiary is the principal, accomplice, or
2. Suicide accessory in willfully bringing about the death
of the insured. In such an event, the other
Insurer is liable only when: beneficiaries so named shall receive their
a. Suicide is committed after the policy share and divide among them the forfeited
has been in force for a period of 2 years share of the “guilty” beneficiary. In the absence
from the date of its issue or of its last of other beneficiaries, proceeds shall be paid
reinstatement unless the policy according to the policy contract, and if silent, it
provides a shorter period. shall be paid to the estate of the insured [Sec.
12].
Page 199 of 494

Exceptions: The fact that there were nine wounds in total is
a. Accidental killing proof that the victim was killed intentionally, as
b. Self-defense this cannot be considered accidental. Thus, the
c. Insanity of the beneficiary at the time incident is not covered by the supplemental
he killed the insured insurance on death by accident [Biagtan v.
d. Negligence Insular G.R. No. L-25579 (1972)].
Note: Conviction of the beneficiary is 6. Microinsurance

necessary before his interest in the insurance
policy is forfeited in favor of the others indicated Microinsurance is a financial product or
in Sec. 12. service that meets the risk protection needs of
the poor, where:
5. Accidental Death a. The number of contributions,
premiums, fees, or charges, computed
The terms “accident” and “accidental means” on a daily basis, does not exceed 7.5%
have been taken to mean that they happen by of the current daily minimum wage rate
chance or fortuitously, without intention and for nonagricultural workers in Metro
design and are unexpected, unusual, and Manila; and
unforeseen. b. The maximum sum of guaranteed
benefits is not more than 1,000 times of
Where the death or injury is not the natural or the said current daily minimum wage
probable result of the insured’s voluntary act, rate [Sec. 187].
or if something unforeseen occurs in the doing
of the act which produces the injury, the No insurance company or mutual benefit
resulting death is within the protection of the association shall engage in the business of
policies insuring against death or injury from microinsurance unless it possesses all the
accident [Carale]. requirements as may be prescribed by the
Commissioner [Sec. 188].
General Rule: Death or injury does not result
from accident or accidental means within the 7. Compulsory Motor Vehicle Insurance
terms of an accident-policy if it is the natural
result of the insured’s voluntary act, Compulsory motor vehicle liability
unaccompanied by anything unforeseen insurance is a policy of insurance or guaranty
except the death or injury. in cash or surety bond to indemnify the death,
bodily injury, and/or damage to property of a
There is no accident when a deliberate act is third-party or passenger arising from the use of
performed, unless some additional, a motor vehicle.
unexpected, independent, and unforeseen
happening occurs which produces or brings It shall be unlawful for any land transportation
about the result of injury or death [Finnman operator or owner of a motor vehicle to operate
General Assurance Corp. v. CA, G.R. No. the same in the public highways unless there is
100970 (1992)]. in force, a policy of insurance or guaranty in
cash or surety bond:
An event is not an accident if it is due to a a. Issued in accordance with the
voluntary and intentional act on the part of provisions of this chapter;
anyone, including third parties. In the absence b. To indemnity the death, bodily injury
of proof that the incident was intentional, the and/or damage to property of a third-
insurer shall pay the beneficiary the value of party or passenger arising from the use
the supplemental policy covering death by thereof [Sec. 387].
accident [Calanoc v. CA, G.R. No. L-8151
(1955)]. It is a requisite for registration or renewal of
registration of a motor vehicle by every land
transportation operator or owner [Sec. 390]. It
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is the only type of compulsory insurance Any claim for death or injury to any passenger
provided for under the Insurance Code. or third party shall be paid without the necessity
of proving fault or negligence of any kind,
It applies to all vehicles whether public or provided the total indemnity in respect of any
private. person shall not exceed P15,000.
To the extent that motor vehicle insurance is The claim shall be made against only one
compulsory, it must be a liability policy, and motor vehicle. It shall lie against the insurer of
the provision making it merely an indemnity the vehicle in which the occupant is riding, and
insurance contract cannot have any effect no other. The claimant is not free to choose
[Campos]. from which insurer he will claim the no fault
indemnity [Perla Compania de Seguros v.
The insurer’s liability is direct and primary, so Ancheta, G.R. No. L-49699 (1988)].
the insurer need not wait for final judgment in
the criminal case to be liable. The purpose is to 8. Compulsory Insurance Coverage for
give immediate financial assistance to victims Agency-Hired Workers
of motor vehicle accidents and/or their
dependents, regardless of the financial a. Definition
capability of motor vehicle owners or operators
responsible for the accident sustained [Shafer Compulsory insurance coverage for
v. Judge, RTC Olongapo, G.R. No. 78848 agency-hired workers is an insurance
(1988)]. mechanism made available by the law to
provide insurance protection for OFWs.
The claimants/victims may be a passenger or
a third party. The insured may be the party at Each migrant worker to be deployed by a
fault as against claims of third parties (i.e. third- recruitment/manning agency shall be covered
party liability) or the victim of the contingent by a compulsory insurance contract which shall
event. be secured at no cost to the said worker.
The following clauses are relevant to Basis: It is the policy of the State to provide
compulsory motor vehicle liability insurance: adequate protection to the overseas Filipino
a. Authorized Driver Clause is a workers by ensuring coverage under the
stipulation in a motor vehicle insurance compulsory insurance requirement in Section
policy which provides that the driver, 37-A of the Migrant Workers and Overseas
other than the insured owner, must be Filipinos Act of 1995, as amended [Sec. 1(b),
duly licensed to drive the motor vehicle, Guideline I, Insurance Guidelines on Rule XVI
otherwise the insurer is excused from of the Omnibus Rules and Regulations
liability; Implementing RA 8042].
b. Theft Clause is a stipulation including
theft as one of the risks insured b. Qualifications
against. If there is such a provision and
the vehicle was unlawfully taken, the To be qualified to provide for the Migrant
insurer is liable under the theft clause Workers’ Compulsory Insurance Coverage, the
and the authorized driver clause does insurance company must:
not apply. The insured can recover 1. Be a reputable private life, non-life and
even if the thief has no driver’s license. composite insurance company;
c. No Fault Clause is a provision 2. Be duly licensed by IC;
required in every compulsory motor 3. Be in existence and operational for at
vehicle liability insurance regarding least five (5) years;
claims for death or injury to a 4. Have a net worth of at least Php
passenger or third party on a liability 500,000,000 based on the audited
insurance policy covering the vehicle. financial statements for the
immediately preceding year;
Page 201 of 494

5. Have a current year certificate of General Rule: Insurable interest must be
authority; and capable of pecuniary estimation because the
6. Have an IC-approved standard polic purpose of insurance is to indemnify. It would
[Sec. 1, Guideline III, Insurance be difficult to measure if the benefit derived or
Guidelines on Rule XVI of the Omnibus the loss incurred is not capable of pecuniary
Rules and Regulations Implementing estimation.
RA 8042].
Exception: The insurable interest need not
c. Disqualifications always be pecuniary in nature (e.g. in insuring
the life of a person, the purpose is not to
Insurance companies who have directors, indemnify but to act as an investment or
partners, officers, employees, or agents with savings instrument) [Lucena v. Crawford, 2Bos
relatives within the fourth civil degree of & PNR 269 (1806)].
consanguinity or affinity who work or have
interest in any of the licensed Ratio: It is a deterrence to the insured.
recruitment/manning agencies or in any of the
government agencies involved in the overseas A policy issued to a person without insurable
employment program shall be disqualified from interest is a mere wager policy or contract and
providing the migrant worker’s insurance is void for illegality [De Leon].
coverage.
Evidence that life insurance is regarded as a
It shall be the duty of the said directors, wager policy:
partners, officers, employees, or agents to 1. The original proposal to take out
disclose any such interest to the IC and POEA insurance was that of the beneficiary;
[Sec. 2, Guideline III, Insurance Guidelines on 2. The premiums are paid by the
Rule XVI of the Omnibus Rules and beneficiary;
Regulations Implementing RA 8042]. 3. The beneficiary has no interest,
economic or emotional, in the
D. Insurable Interest continued life of the insured [De Leon].
Insurable interest (or what may be insured) is The insurable interest is the measure of the
that interest which a person is deemed to have upper limit of his provable loss under the
in the subject matter insured, where he has a contract. Insurance should not provide the
relation or connection with or concern in it, such insured means of making a net profit from the
that the person will: happening of the event insured against [De
1. Derive pecuniary benefit or advantage Leon].
from the preservation of the subject
matter insured; and D. When insurable interest
2. Suffer pecuniary loss or damage from should exist
its destruction, termination, or injury by
the happening of the event insured Insurable Interest Required
against [Lalican v. Insular Life Ins.,
G.R. No. 183526 (2009)]. Life/Health Property
An insurable interest is one of the most basic Inception ✓ ✓

and essential requirements in an insurance
contract. The existence of an insurable interest Intervening
gives a person the legal right to insure the Period
subject matter of the policy of insurance
[Lalican v. Insular Life Ins., G.R. No. 183526 Occurrence ✓
(2009)]. It may not be waived by stipulation. of Loss
Absence of insurable interest renders the
insurance contract void [Sec. 25].
Page 202 of 494
For Life Insurance: Insurable interest over may become the owner of the interest
life/health must exist at the time of the inception insured during the circumstance of the
of the contract but may be lost after [Sec. 19]. risk [Sec. 57].
For Property Insurance: Insurable interest It is an exception to the general rule that upon
must exist at the time of the inception of the maturity, the proceeds of a policy shall be given
contract and at the occurrence of the loss. But exclusively to the proper interest if the person
it need not exist during the intervening period in whose name or for whose benefit it is made.
or from the time between when the policy takes
effect, and the loss occurs. The alienation of In case of an express prohibition against
insured property will not defeat a recovery if the alienation in the policy [Art. 1306, NCC],
insured has subsequently reacquired the alienation will not merely suspend the contract
property and possesses an insurable interest but avoid it entirely.
at the time of loss [Sec. 19].
1. In Life/Health
Change of interest means the absolute Every person has an insurable interest in the
transfer of the property insured. life and health:
a. Of himself, of his spouse and of his
General Rule: A change of interest in the thing children;
insured does not transfer the policy but b. Of any person on whom he depends
suspends the insurance to an equivalent extent wholly or in part for education or
until the interest in the thing and the interest in support, or in whom he has a pecuniary
the insurance policy are vested in the same interest;
person. Thus, the contract is not rendered void
but is merely suspended [Sec. 20]. General Rule: For blood relationships,
no pecuniary relationship is needed.
Exception: The relationship suffices for family
1. Life, health, and accident insurance. members regardless of whether or not
2. A change of interest in the thing insured financial interest exists.
after the occurrence of an injury which
results in a loss does not affect the Ratio: One would naturally protect the
policy [Sec. 21]. life of his family member regardless of
3. A change in the interest in one or more whether there is monetary
of several things, separately insured by consideration. Good faith is presumed.
one policy, such as a conveyance of
one or more things, does not affect the Exception: Relationships with lesser
policy with respect to the others not so degree of kinship (e.g., aunt, niece,
conveyed [Sec. 22]. nephew, cousin). Pecuniary benefit is
4. A change of interest by will or essential. Relationships by affinity (in-
succession on the death of the insured. laws) and gratitude and affection are
His interest passes to his heir or legal not deemed sufficient. There must be
representative who may continue the actual pecuniary benefit.
insurance policy on the property by c. Of any person under a legal obligation
continuing paying premiums [Sec. 23]. to him for the payment of money, or
5. A transfer of interest by one of several respecting property or services, of
partners, joint owners, or owners in which death or illness might delay or
common, who are jointly insured, to the prevent the performance; and
others. This will avoid the policy only as d. Of any person upon whose life any
to the selling partners or co-owners, estate or interest vested in him
but not as to others [Sec. 24]. depends [Sec. 10].
6. Automatic transfers of interest in cases
in which the policy is so framed that it A person is not allowed to take out insurance
will inure to the benefit of whosoever upon the life of a stranger [Carale].
Page 203 of 494
There is no insurable interest in the life of a. Must be a pecuniary interest;
an illegitimate spouse. A creditor may take b. Exists whenever the relation between
out insurance on the life of his debtor, but his the assured and the insured is such
insurable interest is only up to the amount of that the assured has a reasonable
the debt, and only when the debt is unsecured expectation of deriving benefit from the
[Carale]. continuation of the life insured or of
suffering detriment through its
The Insurance Code does not expressly termination [De Leon].
provide the type of spouse, whether illegitimate
or legitimate. However, it can be presumed that General Rule: When the owner of the policy
the provision refers to legitimate spouses, insures the life of another, and designates a
based on Art. 195 of the Family Code on third party as beneficiary, both the owner
support, as well as Art. 739, NCC on prohibited and beneficiary must have an insurable
donations. interest in the life of the cestui que vie.
On the insurable interest of children: the law Exception: An assignee of the insurance
does not make any qualifications on the status contract is not required to have insurable
of the child. This is in accord with Art. 195 of interest in the life of the insured, since insurable
the Family Code. interest over life should exist only during the
inception of the contract.
Measure of Indemnity
General Rule: The measure of indemnity Note: An assignment of the insurance contract
under a policy of insurance upon life or health is different from a change in the designated
is the sum fixed in the policy. beneficiary.
Exception: The interest of a person insured is But if a person obtains a policy on the life of
susceptible of exact pecuniary measurement another and names himself as the beneficiary,
[Sec. 186]. he must have insurable interest therein [De
Leon].
a. In Life Insurance
iii. Beneficiary
Life insurance policies may be divided into two
general classes: A beneficiary is the person named or
1. Insurance upon one’s life designated in a contract of life, health, or
2. Insurance upon the life of another accident insurance as the person who is to
receive the proceeds or benefits which become
i. Interest in One’s Own Life payable, if the insured risk occurs.
The cestui que vie is the insured himself. The General Rule: A person may designate a
insured can designate anyone to be the beneficiary, irrespective of the beneficiary’s
beneficiary of the policy. lack of insurable interest, provided he acts in
good faith and without intent to make the
Each person has unlimited interest in his own transaction merely a cover for a forbidden
life, whether the insurance is for the benefit of wagering contract [De Leon].
himself or another [40 CJS 909].
Exception: Any person who is forbidden from
The beneficiary designated need not have any receiving any donation under Art. 739, NCC
interest in the life of the insured when the latter cannot be named beneficiary of a life insurance
takes out policy on his own life [De Leon]. policy by the person who cannot make any
donation to him [Art. 2012, NCC].
ii. Interest in Life of Another
The insurable interest in the life of another:
Page 204 of 494

Art. 739, NCC. The following donations are void: interest disappears once the debt has
1. Those made between persons who been paid;
were guilty of adultery or 2. In the case of a company’s insurance
concubinage at the time of the taken on the life of an employee,
donation; insurable interest disappears once the
2. Those made between persons found employee leaves the company.
guilty of the same criminal offense,
in consideration thereof; 2. In Property
3. Those made to a public officer or his
wife, descendants and ascendants, The following are considered as insurable
by reason of his office. (…) interest, provided that they are of such nature
that a contemplated peril might directly damnify
iv. Changing the Beneficiary the insured:
Every interest in real or personal
General Rule: The insured shall have the right property; or (e.g. Ownership)
to change the beneficiary he designated in the Any relation thereto; or (e.g. Interest of
policy [Sec. 11]. a trustee or a commission agent)
Any liability in respect thereof [Sec. 13]
Exception: If the insured expressly waived his (e.g. Interest of a carrier or depository
right to change the beneficiary, this makes the of goods)
latter an irrevocable beneficiary. But despite
the waiver, he can still change the beneficiary, A person has an insurable interest in property
provided he obtained the beneficiary’s consent when he sustains such relation with respect to
[Sec. 11]. it that he has a reasonable expectation of:
a. Benefit to be derived from its continued
Under the Slayer Statute, when the existence; or
beneficiary is the principal, accomplice or b. Loss or liability from its destruction
accessory in willfully bringing about the death [Carale; Gaisano Cagayan Ins. V. Ins.
of the insured, the interest of beneficiary in life Co. of North America, G.R. No. 147839
insurance policy is forfeited [Sec. 12]. (2006)].
v. Transfer of Policy An insurable interest in property may consist in:

a. An existing interest [Sec. 14];
The life insurance policy can be transferred Existing interest in property may be a legal
whether the transferee has insurable interest or title or equitable title [De Leon].
not. Notice of the transfer to the insurer is not
required for the validity of the same [Secs. 184- Examples of those having existing interest
185]. are:
1. Owners as regards their properties,
There is no right of subrogation in life 2. A buyer in a perfected contract of
insurance, because it is not a contract of sale,
indemnity. 3. A carrier or depository [Sec 15],
4. A warehouseman [General Bonded
b. In Health Insurance Warehouse Act],
5. Trustees in the case of the seller of
General Rule: Interest in the life or health of a property not yet delivered,
person must exist at the inception of the 6. Mortgagors over the property
insurance contract but need not exist thereafter mortgaged, and lessor, lessee and
or when the loss occurs [Sec. 19]. sublessee over the property leased
[De Leon].
Exception:
1. In the case of a creditor’s insurance
taken on the life of the debtor, insurable
Page 205 of 494

b. An inchoate interest founded on an 3. A change in interest by will or
existing interest [Sec. 14]; or succession upon the death of the
Inchoate interest in property exists but insured [Sec. 23];
is incomplete or unripe until the 4. A transfer of interest by one of several
happening of an event [De Leon]. partners, joint owners, or owners in
common who are jointly insured. The
Examples of inchoate interests are: acquiring co-owner has the same
1. The interest of stockholders with interest; his interest merely increases
respect to dividends in case of upon acquiring other co-owners
profits and shares in the assets, interest [Sec. 24].
and
2. The interest of a partner in the Note: This makes a distinction between a
properties belonging to the transfer in favor of a partner and in favor of a
partnership [De Leon]. stranger. The latter will avoid the policy while
c. An expectancy, coupled with an the former will not [Carale].
existing interest in that out of which
the expectancy arises [Sec. 14]. Mere transfer of the property does not transfer
- For example, a farmer who the policy but suspends it until the same person
planted crops has insurable becomes the owner of both the policy and the
interest over his harvest which can thing insured [Sec. 20].
be expected [De Leon].
b. Measure of Indemnity
A mere contingent or expectant interest in
anything, not founded on an actual right to the Being a contract of indemnity, the measure of
thing, nor upon any valid contract for it, is not insurable interest in property is the extent to
insurable [Sec. 16]. A son has no insurable which the insured might be damnified by the
interest over the property of his father because loss of injury thereof [Sec. 17].
such is just a mere expectancy and has no
legal basis before he inherits such property The insured cannot recover a greater value
[Carale]. than that of his actual loss because it would be
a wagering policy contrary to public policy and
a. Time of Existence void.
General Rule: Interest in property insured A carrier or depository of any kind has an
must exist both at inception and at time of loss, insurable interest in a thing held by him as
but not in the intervening period [Sec. 19]. such, to the extent of his liability but not to
exceed the value thereof [Sec. 15].
This means that the insurable interest in the
property must exist both at the inception of the c. Interest in Property and Life
contract and at the time of the loss [Carale]. Distinguished
Exceptions: Property Life

1. A change in interest over the thing
Extent
insured after the loss contemplated.
The insured may sell the remains Limited to actual Unlimited (save in life
without prejudice to his right to recover value of the interest insurance effected by
[Sec. 21]; thereon a creditor on the life
2. A change of interest in one or more of the debtor –
several distinct things, separately amount of debt only)
insured by one policy. This does not
avoid the insurance as to the others Existence
[Sec. 22].
Page 206 of 494

requires disclosure of other existing insurance
Property Life
policy. In such case, non-disclosure will avoid
Must exist when the Must exist at the time the policy. It is intended to prevent over
insurance takes the insurance takes insurance and thus avert the perpetration of
effect and when the effect, BUT need not fraud.
loss occurs, BUT exist thereafter
need not exist in the If there is double insurance and loss occurs:
meantime a. Each of the insurers will be liable only
up to the face value of their respective
Expectation of benefit to be derived policies; and
b. The insured has the option of choosing
Must have legal Need not have legal the order by which he will claim from
basis basis the insurers [Carale].
Interest of beneficiary Over insurance occurs when the value of the
insurance exceeds the value of the insurable
Must have insurable Need not have
interest.
interest over the insurable interest
thing insured over the life of the
Over insurance It is not per se void, however,
insured if the insured
recovery is allowed only to the extent of the
himself secured the
loss or damage incurred by the insured
policy. But if the
[Carale].
insurance was
obtained by the
An insurer may cancel an insurance policy,
beneficiary, the latter
other than life, based on a “discovery of other
must have insurable
insurance coverage that makes the total
interest over the life
insurance in excess of the value of the property
of the insured
insured,” subject to the requirement of prior
[Sundiang; Aquino]
notice [Sec. 64(f)].
E. Double Insurance and Over- The insured is entitled to a ratable return of the
premium, proportioned to the amount by which
insurance the aggregate sum insured in all the policies
exceeds the insurable value of the thing at risk
Double insurance exists where the same
(in case of an over insurance by several
person is insured by several insurers
insurers other than life) [Sec. 83].
separately in respect to the same subject and
interest [Sec. 95].
If there is over-insurance and loss occurs, then
the insurers will pay pro-rata or in the order as
Requisites of double insurance:
stated in contract or excess clause.
a. The same person is insured;
b. Two or more insurers insuring
separately; Double Insurance Over-insurance
c. The same subject matter;
d. The same interest insured; and Amount of insurance Amount of insurance
e. The same risk or peril insured against may or may not exceeds the value of
[Malayan Insurance v. Philippine First exceed the value of the insured’s
the insured’s insurable interest
Insurance, G.R. No. 184300 (2012)].
insurable interest
Double insurance is not prohibited under the

law unless the policy contains a stipulation to There are always There may be one or
the contrary. Usually, insurance policies several insurers more insurers
contain other insurance clause, which
Page 207 of 494
Rules for Payment the person in whose name or for whose benefit
Where the insured in a policy other than life is it is made.
over insured by double insurance:
a. The insured, unless the policy Exception: It is otherwise specified in the
otherwise provides, may claim policy [Sec. 53].
payment from the insurers in such
order as he may select, up to the Examples wherein multiple persons may each
amount for which the insurers are have insurable interest over the same property:
severally liable under their respective a. Corporations — the corporation and its
contracts; stockholders have insurable interest
b. Each insurer is bound, as between over the corporate assets.
himself and the other insurers, to
b. Partnerships — the partnership and the
contribute ratably to the loss in
partners composing it have insurable
proportion to the amount for which he
is liable under his contract [Sec. 96]. interest over its assets.
c. Assignments — the assignor and
Rules for claiming payment under Valued assignee have insurable interest over
Policies vs. Unvalued Policies [Sec. 96] the property assigned.
Valued Policy Unvalued policy d. Trusts — the trustor and trustee have
insurable interest over the property in
trust.
Any sum received by Any sum received by
him under any other him under any policy e. Lease Agreements — the lessor,
policy shall be shall be deducted lessee and sub-lessees have insurable
deducted from the against the full interest over the property in lease.
value of the policy insurable value for f. Mortgages — the mortgagor and
without regard to the any sum received by mortgagee/s have insurable interest
actual value of the him under any policy
over the property mortgaged.
subject matter
insured
F. No Fault, Suicide, and
Where the insured receives any sum in
Incontestability Clauses
excess of the valuation (for valued policies),
or of the insurable value (for unvalued
policies), the insured must hold such sum in
a. No Fault Clause
trust for the insurers, according to their right
of contribution among themselves The “no fault” clause connotes that the victim
of a tort can recover for his loss from his insurer
without regard to his own contributory fault or
the fault of the tortfeasor. This is to guarantee
Sec. 96 enunciates the principle of contribution
compensation or indemnity to persons
which requires each insurer to contribute
suffering loss in motor vehicle accidents
ratably to the loss or damage considering that
[Campos].
the several insurances cover the same subject
matter and interest against the same peril. If
Its essence is in seeking to provide victims of
the loss is greater than the sum of all the
vehicular accidents or their heirs immediate
policies issued, each insurer is liable for the
compensation, although in a limited amount,
amount of his policy.
pending final determination of who is
responsible for the accident and liable for the
4. Multiple or Several Interests on victims’ injuries or death [Campos].
Same Property
General Rule: The insurance proceeds shall

be applied exclusively to the proper interest of
Page 208 of 494

i. Multiple Interests over Mortgaged mortgagee’s rights and the mortgagee
Property can no longer recover the mortgagor’s
indebtedness.
The Insurance Code recognizes that both the d. If the proceeds are less than the credit,
mortgagor and mortgagee have each separate then the mortgagee may recover from
and distinct insurable interest in the mortgaged the mortgagor the deficiency. Upon
property. They may take out separate policies payment, the insurer is subrogated to
with the same or different insurance the rights of the mortgagee against the
companies. Insurance taken by one on his own mortgagor to the extent of the amount
name only, does not inure to the benefit of the paid.
other [Sec. 53].
When a mortgagee insured his own interest
Thus, a mortgagor has an insurable interest and a loss occurs, he is entitled to recover on
equal to the value of the mortgaged property the insurance. The mortgagee, however, is not
and a mortgagee, only to the extent of the debt allowed to retain his claim against the
secured by the mortgage [Geagonia v. CA, mortgagor, but it passes by subrogation to the
G.R. No. 114427(1995)]. insurer, to the extent of the insurance money
paid [Palileo v. Cosio, G.R. No. L- 7667
(1955)].
Mortgagor Mortgagee
When a mortgagor takes out an insurance for
As owner, the Only to the extent of his own benefit, only he can recover from the
interest is to the the debt secured insurer but the mortgagee has a lien on the
extent of the value of proceeds by virtue of the mortgage. A
the property, mortgagor can make the proceeds payable to
regardless of or assigned to the mortgagee [De Leon].
whether it equals to
the mortgage debt or Ways where a mortgagee may be the
not beneficial payee:
a. As assignee with the consent of the
His interest lies in What is insured is not insurer
that the loss or the property, but his b. A pledge without such consent;
destruction of the interest as c. The original policy may contain a
property will not mortgagee, which mortgage clause;
extinguish his subsists until the d. A rider making the policy payable to the
mortgage debt mortgage debt is mortgagee “as his interest may appear”
extinguished may be attached;
[Carale]. e. A “standard mortgage clause,”
containing a collateral independent
When mortgagee takes out insurance contract between the mortgagee and
policy the insurer may be attached;
a. When a mortgagee insures his own f. The policy, though by its terms payable
interest in the mortgaged property absolutely to the mortgagor, may have
without reference to the right of the been procured by a mortgagor under a
mortgagor, the mortgagee is entitled to contract duty to insure for the
the proceeds of the policy in case of mortgagee's benefit [Geagonia v. CA,
loss to the extent of his credit [De G.R. No. 114427 (1995)].
Leon].
b. If the proceeds are more than the total ii. Open Loss Payable Mortgage Clause
amount of credit, then the mortgagee
has no right to the excess. An open loss payable clause states that the
c. If the proceeds are equal to the credit, proceeds of the insurance contract is payable
then the insurer is subrogated to the to the mortgagee as beneficiary.
Page 209 of 494

The contract, however, is procured by the So long as an application for insurance has not
mortgagor for his interest in the property. He is been either accepted or rejected, it is merely a
the party to the contract, not the mortgagee. proposal or an offer to make a contract [Perez
v. CA, G.R. No. 112329 (2000)].
The acts of the mortgagor prior to the loss,
which would otherwise avoid the insurance, The insurance contract becomes effective
affects the mortgagee, even if the property is in upon payment of first premium, provided there
the hands of said mortgagee. has been an approval of the application.
3. Union Mortgage or Standard Mortgage The parties may impose additional conditions
Clause precedent to the validity of the policy as a
contract as they see fit. Usually, it is stipulated
A standard or union mortgage clause makes a in the application that the contract shall not
separate and distinct contract of insurance on become binding until the policy is delivered and
the interest of the mortgagee, thus any act of the first premium is paid [De Leon].
the mortgagor will not affect the mortgagee
[Carale]. Cognition Theory: An acceptance made by
letter shall not bind the person making the offer,
This clause is like an open loss payable clause, except from the time it came to his knowledge.
except that it is stipulated that the acts of the
mortgagor cannot invalidate the insurance, In Enriquez v. Sun Life Assurance Co. [G.R.
provided that if the mortgagor fails to pay the No. L-15895 (1920)] the Court held that:
premiums due, the mortgagee shall, on a. The submission of an application, even
demand, pay said premiums [De Leon]. with premium payment is a mere offer
on the part of the applicant, and does
b. Suicide Clause not bind the insurer;
b. An insurance contract is also not
[See IV. Classes, E. Life, 3. Risks, b) Suicide,
p. 16] perfected where the applicant dies
before the approval of his application or
c. Incontestability Clause it does not appear that the acceptance
of the application ever came to the
[See VIII. Rescission of Insurance Contracts, knowledge of the applicant.
A. Concealment, 7. Incontestability Clause, p.
35] a. Delay in Acceptance
II. Perfection of the Delay in acting on the application does not

constitute acceptance even though the insured
Insurance Contract has forwarded his first premium with his
application [Perez v. CA, G.R. No. 112329
1. Offer and (2000)].
Acceptance/Consensuality
When there is delay in acceptance due to the
An insurance contract is consensual, it is negligence of the insurance company which
therefore perfected by mere consent. Consent takes unreasonably long time before the
is manifested by the meeting of the offer and application is processed and the applicant dies,
the acceptance upon the object or the cause the contract is not perfected.
which are to constitute the contract.
The insurer can be liable for damages in
There is an offer when the insured submits an accordance with the “tort theory:” An
application to the insurer. There is acceptance insurance contract is imbued with public
when the insurer approves the application. interest. Thus, the insurer should act on an
application for insurance within a reasonable
Page 210 of 494
time, otherwise the applicant loses the Exceptions:
opportunity to obtain insurance from other a. Whenever the grace period provision
sources. Unreasonable delay in the applies in the case of a life or an
acceptance or rejection of these applications industrial life policy [Sec. 77].
can constitute negligence under Art. 2176 of b. Whenever under the broker and
the Civil Code. agency agreements with duly licensed
intermediaries, a 90-day credit
An acceptance made by letter shall bind the extension is given.
person making the offer from the date it came
to his knowledge [Enriquez v. Sun Life, 41 Phil. Note: No credit extension to a duly
269 (1920)]. licensed intermediary should exceed
90 days from the date of issuance of
The insurance business is imbued with public the policy [Sec. 77].
interest; thus, it is the duty of the insurer to act c. When there is an acknowledgment in
with reasonable promptness in acting on the contract that the premium has been
applications submitted to it [Wallace v. Hartford paid [Sec. 79].
Fire Insurance Co, 31 Idaho 48r (1918)]. d. Payment to an agent [South Sea
Surety v. CA 244 SCRA 744 (1995);
b. Delivery of Policy Arreola v. CA 236 SCRA 643 (1994)].
Now included In Section 315 of the
Delivery is the act of placing the insurance Insurance Code [American Home
policy (i.e. the physical document) into the Assurance v. Chua 309 SCRA 250
possession of the insured. (1999)].
e. Credit Extension [UCPB General
The delivery can be proof of the acceptance of Insurance v. Masagana 356 SCRA 307
the insurer of the offer of the insured. (2001)].
It is not, however, a pre-requisite of a valid Jurisprudence decided before the enactment of

contract of insurance. RA 10607 has provided two further exceptions:
a. Agreement to grant payment of
Note: Actual manual delivery is not necessary premium in installment basis and
[Vda. De Sindayen v. Insular Life, 62 Phil 51 partial payment has been made
(1935)]. [Makati Tuscany v. CA, G.R. No. 95546
(1992)].
Delivery to the agent cannot be considered b. When parties are barred by estoppel
delivery to the insured, as the agent of the [UCPB v. Masagana Telemart, G.R.
insurance company is not the agent of the No. 137172 (2001)].
insured [Bradley v. New York Life Ins., 275 F.
657 (1921)]. a. Authority of Agent to Receive
Premium
2. Premium Payment
Where an insurer authorizes an insurance
An insurance premium is the agreed price for agent or broker to deliver a policy to the
assuming and carrying the risk, i.e. the insured, it is deemed to have authorized said
consideration paid to an insurer for undertaking agent to receive the premium on its behalf.
to indemnify the insured against the specified
peril. The insurer is bound by its agent’s
acknowledgement of receipt of payment of
General Rule: No insurance policy issued or premium [American Home Assurance Co. v.
renewal is valid and binding until actual Chua, G.R. No. 130421 (1999)].
payment of the premium. Any agreement to
the contrary is void [Sec. 77].
Page 211 of 494

b. Payment by Post-Dated Check d. Non-Default Options in Life Insurance
The payment of premium by a postdated check In the case of individual life or endowment
at a stated maturity subsequent to the loss is insurance, the policy shall contain a provision
insufficient to put the insurance into effect. specifying the options to which the policyholder
is entitled to in the event of default in a premium
But payment by a check bearing a date prior payment after three (3) full annual premiums
to the loss, assuming availability of funds, shall have been paid [Sec. 233(f)].
would be sufficient, even if it remains
unencashed at the time of the loss. The Such option shall consist of:
subsequent effects of encashment would • A cash surrender value payable upon
retroact to the date of the instrument and its surrender of the policy which shall not
acceptance by the creditor [Vitug]. be less than the reserve on the policy.
c. Non-Payment of Premium The basis of which shall be indicated,

for the then current policy year; and
1. Effects
a. Prevents the contract from becoming Any dividend additions thereto, shall be
binding, unless waived [Philippine reduced by a surrender charge, which
Phoenix Surety and Insurance v. shall not be more than one-fifth (1/5) of
Woodworks, G.R. No. L-25317 (1979)]. the entire reserve or two and one-half
b. Does not affect the validity of the percent (2½%) of the amount insured
contracts unless, by express and any dividend additions thereto
stipulation, it is provided that the policy
shall, in that event, be suspended or • One or more paid-up benefits on a plan
shall lapse. or plans specified in the policy of such
value as may be purchased by the cash
2. Applicable Grace Periods surrender value [Sec. 233(f)].
In case of individual life insurance, the policy 1. Cash Surrender Value (CSV)
holder is entitled a grace period of either 30
days or one month within which payment of any The CSV is the amount that the insured is
premium after the first may be made [Sec. 233]. entitled to receive if he surrenders the policy
and releases his claims upon it.
In cases of industrial life insurance, the grace a. The right to CSV accrues only after
period is four weeks, and where premiums are three full annual premium payments.
paid monthly, either 30 days or one month b. The insured is given the right to claim
[Sec. 236]. the amount less than the reserve,
reduced by surrender charge [Sec.
3. Excuses for Non-Payment 233(f)(1)].
a. Fortuitous events which render The CSV is an amount which the insurance
payment by the insured wholly company holds in trust for the insured to be
impossible will not prevent forfeiture of delivered to him upon demand. When the
the policy when the premium remains company’s credit for advances is paid out of the
unpaid. In other words, it is not an cash value or cash surrender value, that value
excuse. and the company’s liability is diminished
b. Non-payment of premiums occasioned [Manufacturer’s Life Ins. v. Meer, G.R. No. L-
by war causes an insurance to be not 2910 (1951)].
merely suspended, but completely
abrogated [Constantino v. Asia Life Ratio: The premium is uniform throughout a
Ins. Co. G.R. No. L-1669 (1950)]. lifetime, but the risk is varied (i.e. higher risk
when older, lower when young). Thus, the cost
Page 212 of 494
of protection is more expensive during the early In effect, the insurance policy continues in
years of the policy. force for a period covered by the payment.
2. Alternatives to CSV After the period, if the insured still does not
resume paying his premiums, the policy
Extended Insurance / Term Insurance lapses, unless CSV still remains. If there is still
This is where the insured, after having paid CSV, APL continues until CSV is exhausted.
three full annual premiums, is given the right
to have the policy continued in force from date e. Reinstatement of a Lapsed Policy of
of default for a time either stated or equal to the Life Insurance
amount of the CSV, taken as a single premium.
In the case of individual life or endowment
The face value of the policy remains the same insurance, the policy shall contain a provision
but only within the term. that the policyholder shall be entitled to have
the policy reinstated:
If death occurs during this period, the 1. At any time within three (3) years from
beneficiary can recover the face value of the the date of default of premium payment
policy, but if the insured survives, the a. Unless the cash surrender
beneficiary gets nothing. value has been duly paid
b. Unless the extension period
Reinstatement is allowed if made within the has expired
term purchased; no reinstatement after the 2. Upon production of evidence of
lapse of the term purchased. insurability satisfactory to the
company; and
Paid-up insurance 3. Upon payment of all overdue premiums
This is where, after the insurance is “paid-up,” and any indebtedness to the company
the insured who has paid three full annual upon said policy, with interest rate not
premiums is given the right, upon default, to exceeding that which would have been
have the policy continued from the date of applicable to said premiums and
default for the whole period of insurance indebtedness in the policy years prior
without further payment of premiums. to reinstatement [Sec. 233(j)].
It is also called “reduced paid-up'' because, in Reinstatement of a lapsed life insurance policy
effect, the policy, terms, and conditions are the is NOT a non-default option. It does not create
same but the face value is reduced to the “paid- a new contract, but merely revives the original
up” value. policy so the insurer cannot require a higher
premium than the amount stipulated in the
The terms and conditions of the original policy contract. It does not apply to group/industrial
remain the same, however, the amount will be life insurance.
less than the original face value.
Requisites [Sec. 233(j)]:
Automatic premium loan (APL) • It must be exercised within three years
This is where, upon default, the insurer lends from date of default;
or advances to the insured without any need of • The insured must present evidence of
application on his part, the amount necessary insurability satisfactory to the insurer;
to pay overdue premium, but not to exceed the • He must pay all back premiums and all
CSV of the policy. indebtedness to the insurer (with
interest);
It only applies if requested in writing by the • The CSV must not have been duly paid
insured either in the application or at any time to the insured nor the extension period
before expiration of the grace period. expired;
Page 213 of 494

• The application must be filed during the III. Rights and Obligations
insured’s lifetime [Andres v. Crown Life
Ins., G.R. No. L-10874 (1958)]. of Parties
f. Refund of Premiums
Return of premiums can be made in the A. Insurer
following cases:
1. If the thing insured was never exposed The party who assumes or accepts the risk of
to the risks insured against, the whole loss and undertakes for a consideration to
premium should be refunded [Sec. indemnify the insured or to pay him a certain
80(a)]. sum on the happening of a specified
2. When the contract is voidable due to contingency or event;
the fraud or misrepresentation of the
insurer or his agent, the whole An insurer may be:
premium should be refunded [Sec. 82]. (1) A foreign or domestic company or
3. When by any default of the insured corporation; or
other than actual fraud, the insurer (2) A partnership or an association
never incurred any liability under the
policy and the whole premium should Insurance Corporations are corporations
be refunded [Sec. 82]. formed or organized:
4. When the contract is voidable because
of the existence of facts of which the 1. To save any person or persons or other
insured was ignorant without his fault, corporations harmless from loss,
the whole premium should be refunded damage, or liability from any unknown or
[Sec. 82]. future or contingent event, or
5. Where the insurance is for a definite 2. To indemnify or to compensate any
period and the insured surrenders his person or persons or other corporations
policy, to such portion of the premium for any such loss, damage, or liability, or
as corresponds with the unexpired time 3. To guarantee the performance of, or
at a pro rata rate, unless a short period compliance with, contractual obligations
rate has been agreed upon and or the payment of debt of others.
appears on the face of the policy, the
premium should be returned [Sec. An Insurance Corporation must have:
80(b)]. 1. Sufficient Capital and assets required
6. When there is over-insurance by under the Insurance Code and pertinent
several insurers, the return premiums regulations issued by the Commission;
should be proportioned to the amount and
by which the aggregate sum insured in 2. A Certificate of Authority to operate
all the policies exceeds the insurable issued by the Insurance Commission
value of the thing at risk [Sec. 83]. which should be renewable every 3
7. When rescission is granted due to the years. (New Insurance Code, Sec. 193)
insurer’s breach of contract.
Page 214 of 494

● If the insurance company, however,
Rights Obligations
has already recovered the amount it
● Right to receive ● To obtain a paid from its reinsurer, it has no more
premium certificate of right of subrogation. [Pioneer v. CA,
payment (Sec. authority from 175 SCRA 668 (1989)]
77) the office of the
● Right to be Insurance B. Insured
subrogated to Commission
the rights of the ● Honor the The person in whose favor the contract is
insured upon insurance policy operative and who is indemnified against or is
payment of the and promptly to receive a sum upon the happening of a
claim (Art. 2207, settle the claim specified event.
Civil Code) (within 60 days in
● Right to cancel case of policy Requisites in Order that a Person May Be
the non-life payable upon Insured Under a Contract of Insurance:
insurance policy death, or within (CIP) (Insurance Code, Sec. 3)
in cases covered 30 days in case 1. He must be competent to enter into a
by Sec. 64 of NL policy; See contract;
● Right not to Sec. 248 and 2. He must possess an insurable interest in
renew the non- 249)
the subject of the insurance; and
life insurance
3. He must not be a public enemy (citizen or
policy provided
notice is given at subject of a country with whom the
least 45 days in Philippines is at war) (Insurance Code,
advance (sec. Sec. 7)
66)
Rights Obligations
On Subrogation
● Right to be ● To pay the
● Insurance company which has paid the indemnified by premium
insured is subrogated to the rights of the insurer ● To disclose
the insured as against the wrongdoer. ● Right to change material facts
If the amount paid by the insurance beneficiary in ● To comply with
company does not fully cover the injury Life Insurance representations
or loss, aggrieved party can recover when and warranties
the deficiency from the person who designation is
caused the loss or injury. (Art. 2207, revocable
Civil Code) ● Right to grace
● Insurer steps into the shoes of the period in Life
insured and becomes entitled to claim Insurance
whatever the insured can claim from ● Non-default
the third party responsible for the loss. options in Life
● If the insured did not file a notice of loss Insurance
with the carrier within the time ● Right to reinstate
prescribed by law, no right would be subject to certain
subrogated to the insurer despite its conditions
payment to the insured. [Federal ● Right to refund of
Express v. American Home, 473 SCRA premium (Sec.
50 (2004)] 80-83)
● If the insured releases the party at fault, ● Right to abandon
insurer can no longer have the right of in case of
subrogation. [Manila Mahogany v. CA, constructive total
164 SCRA 652 (1957)]
Page 215 of 494
Rights Obligations C. Beneficiary

loss in marine Person designated to receive proceeds of
insurance policy when risk attaches since it is possible
● Right to assign that the insured may assign the proceeds of the
insurance to someone else.
Effect of War on Existing Insurance
Note: There are only two parties to a contract
Contracts
of insurance, the insured and the insurer. The
beneficiary is NOT a party to the contract
1. Property Insurance
unless he is the party to be insured.
An insurance policy ceases to become valid
and enforceable as soon as the insured IV. Rescission of Insurance
becomes a public enemy.
Contracts
However, premium paid by the insured (public
enemy) shall be returned by the insurer 1. Concealment
(Filipinas Compania de Seguros v. Christern
Huenefield & Co., G.R. No. L-2294, 1951) Concealment is the failure to disclose facts
which the applicant, at the time of application,
2. Life Insurance knows or ought to know and are material to the
insurance applied for [Carale].
The contract is abrogated but the insured is
entitled to the case or reserve value of the A neglect to communicate that which a party
policy (if any), which is the excess of the knows and ought to communicate, is called a
premiums paid over the actual risk carried concealment [Sec. 26].
during the years when the policy had been in
force (Constantino v. Asia Life Insurance, G.R. A concealment, whether intentional or
No. L-1669, 1950) unintentional, entitles the injured party to
rescind a contract of insurance [Sec. 27].
Note: Where the loss occurs after the end of
the war, the contract is not revived. Ratio: The contract of insurance is one of
perfect good faith (uberrimae fides) not for the
Rule on Married Persons insured alone, but equally for the insurer [Qua
Chee Gan v. Law Union & Rock Insurance,
The consent of the spouse is not necessary for G.R. No. L-4611(1955)].
the validity of an insurance policy taken out by
a married person on his or her life or that or his Four primary concerns of parties to an
or her children (Insurance Code, Sec. 3, 2) or insurance contract
that of her husband (Insurance Code, Sec. 10) a. Correct estimation of risk – wherein the
insurer will assume the risk
She may also take out insurance on her b. Precise delimitation of the risk – to
paraphernal or separate property, or on determine the duty to pay of insure
property given to her by her husband (Harding
c. Control of risk by insurer – to guard
v. Commercial Union Assurance, G.R. No. L-
12707, 1918) against the increase of risk and change
of conditions, and
Note: Family Code, Art. 73: While either d. Determining whether loss occurred,
spouse may exercise any legitimate activity and if so, the amount of loss
without the consent of the other, the latter may
object on valid, serious, and moral grounds.
Page 216 of 494

Five devices for ascertaining and 2. Matters which each party are bound to
controlling risk and loss i.e. Risk Limiting know [Sec. 30(b) and Sec. 32];
Devices 3. Matters of which the insurer waives
a. Concealment and representations – communication [Sec. 30(c) and Sec.
developed to enable the insurer to 33];
secure the same information from the 4. Matters which prove or tend to prove
applicant so that he can form a just the existence of a risk excluded by a
estimate of its quality warranty and which are not otherwise
b. Warranties and conditions – created to material [Sec. 30(d)];
make more definite the general words 5. Matters which relate to a risk excepted
to describe the risk as to designation of in the policy, and which are not
specific property interest to be covered otherwise material [Sec. 30(e)];
and the specification of the perils 6. Information of the nature or amount of
c. Exception – also makes more definite the interest of one insured unless if
the coverage by excluding certain inquired upon by the insurer, except if
specified risks that otherwise would required by Sec. 51 [Sec. 34];
have been included under the general 7. Matters of opinion [Sec. 35].
language
d. Executory warranties and conditions – Each party to a contract of insurance is bound
conditions that should no longer exist in to know all the general causes which are open
the future, otherwise, the insurer can to his inquiry, equally with that of the other, and
rescind the contract because he is no which may affect the political or material perils
longer to bear the risk contemplated; and all general usages of trade
e. Conditions precedent – used by the [Sec. 32].
insurer to protect himself from
fraudulent claims of loss c. Requisites
a. Duty to Communicate by the Insured 1. A party knows a fact which he neglects

to communicate or disclose to the
Each party to a contract of insurance must other;
communicate to the other, in good faith, all
2. Such party concealing is duty bound to
facts within his knowledge:
1. Which are material to the contract; disclose such fact to the other;
2. As to which he makes no warrant; and 3. Such party concealing makes no
3. Which the other has not the means of warranty of the fact concealed;
ascertaining [Sec. 28]. 4. The other party has not the means of
ascertaining the fact concealed;
An intentional or fraudulent omission, on the 5. The fact concealed is material.
part of one insured, to communicate
information of matters proving or tending to
Failure of the insured to disclose conditions
prove the falsity of a warranty, entitles the
affecting the risk, of which he is aware, makes
insurer to rescind [Sec. 29].
the contract voidable at the insurer’s option, the
ratio being that a contract of insurance is of
Note: If the applicant is aware of the existence
good faith.
of some circumstance which he knows would
influence the insurer in acting upon his
However, Sec. 27 uses the phrase “injured
application, good faith requires him to disclose
party;” thus, the insured may also rescind the
that circumstance, though unasked [Vance].
contract.
b. Matters which Need Not be Disclosed Concealment may be committed by either the
insurer or the insure [Qua Chee Gan v. Law
1. Matters already known to the insurer Union & Rock Ins. Co. G.R. No. L-4611(1955)].
[Sec. 30(a)];
Page 217 of 494

d. Proof of Fraud in Concealment Exceptions:
1. Concealment after the contract has
General Rule: Fraud need not be proven in become effective, because
order to prove concealment. Good faith is not a concealment must take place at the
defense [Saturnino v. Phil. American Life time the contract is entered into in order
Insurance, G.R. No. L-16163 (1963)]. that the policy may be avoided [Vance];
2. Waiver or estoppel;
Exception: When the concealment is made by 3. In marine insurance, where
the insured in relation to the falsity of a concealment of the following matters
warranty, the non-disclosure must be does not vitiate the entire contract, but
intentional and fraudulent in order that the merely exonerates the insurer from a
contract may be rescinded [Sec. 29]. loss resulting from the risk concealed:
a. The national character of the
Ratio: The insured is under no obligation to insured;
reveal things of which he makes a warrant b. The liability of the thing insured
because it would constitute a superfluity of to capture and detention;
disclosure [Carale]. c. The liability to seizure from
breach of foreign laws of trade;
e. Test of Materiality d. The want of necessary
documents; and
The test of materiality is whether the insurer e. The use of false and simulated
would have agreed to issue the policy had it papers [Sec. 112].
known of the facts concealed or, perhaps, 4. Incontestability clause: stipulates that
impose additional terms or require higher the policy shall be incontestable after
premium [Carale]. two years from its date of issue or of its
last reinstatement. The incontestability
Materiality relates to the probable and clause is a mandatory provision in life
reasonable influence of the facts upon the and endowment policies [Sec. 233 (b)
party to whom the communication should have and Sec. 48].
been made, in:
1. Assessing the risk involved; g. Incontestability Clause
2. Making or omitting to make further
inquiries; and In the case of individual life or endowment
3. Accepting the application for insurance insurance, the policy shall contain a provision
[Sec. 31]. that the policy shall be incontestable.
The test is the effect which the knowledge of After it shall have been in force during the
the fact in question would have on the contract. lifetime of the insured for a period of two (2)
It is sufficient if the knowledge of it would years from its date of issue as shown in the
influence the party in making the contract [De policy, or date of approval of last reinstatement
Leon]. [Sec. 233(b)].
In several cases, the cause of death may have Exceptions:

no relation to the fact or facts concealed 1. Non-payment of premium
[Carale]. 2. Violation of the conditions of the policy
relating to military or naval service in
f. Effects time of war [Sec. 233(b)]
General Rule: Concealment vitiates the Effect

contract and entitles the insurer to rescind, The insurer cannot prove that the policy is void
even if the death or loss is due to a cause not ab initio or is rescindable by reason of the
related to the concealed matter [Sec. 27]. fraudulent concealment or misrepresentation
of the insured or his agent:
Page 218 of 494

1. After a policy of life insurance made h. Concealment in Marine and Ordinary
payable on the death of the insured Private Insurance Distinguished
shall have been in force during the
lifetime of the insured for a period of Marine Ordinary
two (2) years from the date of its issue Insurance Insurance
or of its last reinstatement [Sec. 48]
2. The insurer’s right to rescind a contract Required Exact and Substantial
is not exercised previous to the Disclosure whole truth truth
commencement of an action on the
contract [Sec. 48].
Effect of Concealment Any kind of
The incontestability clause is made for the Concealment of the matters concealme
benefit of the insured, and not the insurer, specified in nt will make
considering that its effect and purpose is to cut Sec. 112 will the insurer
off, after a considerable period, any assertion not entirely not liable.
that the policy is invalid. avoid the
contract but
Defenses, other than concealment, will merely
misrepresentation and breach of warranty are exonerate the
still available to the insurer, subsequent to the insurer from
2-year period [Carale]. losses
resulting from
Grounds still available: the risk
1. Non-payment of premium to make the concealed.
policy effective or remain in force
2. Lack of insurable interest
3. Coverage such that the loss/damage
i. Concealment in Non-Medical
did not arise from the risks covered Insurance
4. Violation of military or naval service
provisions of the policy (also an issue The cause of death is not important because it
of coverage) is well settled that the insured need not die of
5. Failure to commence action within the disease he had failed to disclose to the
reglementary period insurer. It is sufficient that his nondisclosure
6. Failure to comply with conditions (proof misled the insurer in forming his estimates of
of loss, etc.) after the loss; or the risks of the proposed policy or in making
7. The viciousness of the fraud employed inquiries [Sunlife v. Sps. Bacani G.R. No.
by the insured to procure the contract, 105135 (1995)].
such as:
Where the policy was taken Where matters of opinion or judgment are
pursuant to a scheme to murder the called for, answers made in good faith and
insured, or without intent to deceive will not avoid the
the insured substitutes himself with policy even though they are untrue. The reason
another during the medical for this is because the insurer cannot simply
examination. rely on those statements; he must make further
inquiry [Philamcare Health Systems v. CA,
G.R. No. 125678 (2002)].
2. Misrepresentation/Omissions
Representations are factual statements made

by the insured at the time of, or prior to, the
issuance of the policy, which give information
to the insurer and induce him to enter the
Page 219 of 494

insurance contract. It may be about a past, an b. Kinds
existing fact, or a future happening [Carale].
1. Affirmative
A representation:
a. May be oral or written [Sec. 36]. This refers to any allegation as to the existence
b. May be made at the time of or before, or non-existence of a fact when the contract
the issuance of the policy [Sec. 37]. begins [De Leon].
c. May be altered or withdrawn before the
insurance is effected, but not 2. Promissory
afterwards [Sec. 41].
d. Must be presumed to refer to the date This refers to any promise to be fulfilled after
on which the contract goes into effect the contract has come into existence, or any
[Sec. 42]. statement concerning what is to happen during
the existence of the insurance [Sec. 39]. A
Misrepresentation is a false representation promissory representation is substantially a
which the insured states with knowledge that is condition or warranty [De Leon].
untrue, intended to deceive the insurer into
accepting risk. It can be distinguished from c. Test of Materiality
concealment in a sense that it is an active form
of deception, while concealment is the passive The materiality of a representation is
form thereof [Carale]. determined by the same rules as the materiality
of a concealment [Sec. 46].
Just like concealment, misrepresentation is
committed before or at the time of the Materiality is a judicial question and not left to
commencement of the insurance contract. the insurance company’s sole discretion.
After this time, an insured may no longer be
guilty of misrepresentation as the insurer had d. Effects
already been persuaded to assume the risk
[Carale]. General Rule: The injured party is entitled to
rescind from the time when the representation
There is no false representation if the matter is becomes false [Sec. 45].
true at the time the contract takes effect
although false at the time it was Exceptions:
made/represented. 1. Incontestability clause;
2. Misrepresentation after contract takes
a. Requisites of misrepresentation effect;
1. The insured stated a fact which is 3. Waiver, made by acceptance of insurer
untrue; of premium payments despite
2. Such fact was stated with knowledge knowledge of the ground for rescission
that it is untrue and with intent to [Sec. 45];
deceive or which he states positively as 4. A representation of the expectation,
true without knowing it to be true and belief, opinion, or judgment of the
which has a tendency to mislead; insured, although false, and even if
3. Such fact in either case is material to material to the risk [Philamcare Health
the risk. Systems, Inc. v. CA, G.R. No. 125678
(2002)];
Like in concealment, fraud or intent is not 5. Representation by insured based on
essential to entitle the insurer to rescind on the information obtained from third persons
ground of misrepresentation [Sec. 45]. (not his agent), provided the insured:
a. Has no personal knowledge of
the facts;
b. Believes them to be true; and
Page 220 of 494

c. Explains to the insurer that he
Concealment Misrepresentation
does so on the information of
others; Passive form Active form
6. A misrepresentation as to age does not
constitute a ground for rescission. If the
age of the insured was considered in Insured Insured makes
determining the premium and the withholds erroneous statements
benefits under the policy and the age is information of of facts with the intent of
misstated, the amount payable for the material facts from inducing the insurer to
policy shall be as if the policy was the insurer; he enter into the insurance
purchased at the correct age [Sec. maintains silence contract
233(d); Carale]. when he ought to
speak
A representation cannot qualify an express
provision or an express warranty of insurance Materiality
[Sec. 40] because a representation is not part
Determined by the same rules
of the contract but only a collateral inducement
to it. However, it may qualify as an implied
warranty.
Effects
It is sufficient that the representation is
substantially or materially true, and in case of
Same effects on the part of the insured;
promissory representation, it is sufficient that it
insurer has right to rescind
is substantially complied with [Carale].
The insurer is not entitled to rescission for Injured party is entitled to rescind a contract
misrepresentation of age if the birth date on the of insurance on the ground of concealment
policy leads to the conclusion that the insured or false representation, whether intentional
is beyond the age covered. Insurer is deemed or not.
estopped [Edillon v. Manila Bankers Life, G.R.
No. L-34200 (1982)].
3. Breach of Warranties
Despite not answering the questions and
A warranty is a statement or promise by the
keeping blank certain questions in the
insured set forth in the policy itself or
application regarding ailments he has suffered,
incorporated in it by proper reference, the
when the insured signed the pension plan
untruth or nonfulfillment of which in any respect
application, he adopted the written
and without reference to whether the insurer
representations and declarations embodied in
was in fact prejudiced by such untruth or non-
as his own. Therefore, it is clear from these
fulfillment, renders the policy voidable by the
representations that he concealed his chronic
insurer [Vance].
heart ailment and diabetes [Florendo v. Philam
Plans, G.R. No. 186983 (2012)].
Statements or promises agreed upon by both
parties to the insurance contract which are
e. Concealment vs. Misrepresentation
contained in the contract or properly
Concealment Misrepresentation incorporated constitute warranties [Carale].
Who may commit A warranty may:

a. Relate to the past, the present, the
May be committed Committed only by future, or to all of these [Sec. 68]
by either insured insured b. Be made in any form of words [Sec. 69]
or insurer c. Also be made by the insurer [Carale].
Act involved
Page 221 of 494

a. Warranties, Riders, and the person or thing insured or to the risk as a
Endorsements fact [Sec. 71].
A rider is a printed or typed stipulation Thus, it is not enough, for a stipulation to

contained in a slip of paper attached to the become a warranty, that the parties intended it
policy and forming an integral part thereof. as such. It must form part of the contract of
Thus, it does not need to be signed by the insurance.
insured.
2. Implied Warranty
The signature of the insured is required only if
the warranties, or endorsements are in another This is deemed included in the contract
instrument. although not expressly mentioned (e.g. implied
warranty of seaworthiness of the vessel in
For any rider, clause, warranty, or marine insurance and implied warranty not to
endorsement to be binding on the insured [Sec. alter the circumstances of the thing insured).
50]: This is only available for marine insurance.
1. Such rider, clause, warranty or
endorsement, must be pasted or 3. Affirmative Warranty
attached to the policy;
2. The descriptive title or name of the This asserts the existence of a fact or condition
rider, clause, warranty or endorsement at the time it is made.
must also be mentioned and written on
the blank spaces provided in the policy; c. Effect of Breach
3. Such rider, clause, warranty or
endorsement issued after the original 1. Material Warranty
policy must be countersigned by the The violation of a material warranty, or other
insured or owner. material provision of the policy, on the part of
a. Unless the same is applied for either the insured or insurer, entitles the other
by the insured or owner to rescind [Sec. 74].
b. Such countersignature shall be
taken as his agreement to the Breach of a material warranty may either be:
contents of such rider, clause, a. Without fraud, in which case, the
warranty or endorsement insurer will be exonerated from the time
it occurs. If made during the inception,
Notwithstanding the foregoing, the policy may
it will prevent the policy from taking
be in electronic form subject to the pertinent
provisions of Republic Act No. 8792, effect [Sec. 76].
(Electronic Commerce Act) and to such rules b. With fraud, in which case, the policy is
and regulations as may be prescribed by the avoided ab initio and the insured is not
Commissioner. entitled to the return of the premiums
paid [De Leon].
b. Kinds
Exceptions:
1. Express Warranty a. Loss occurs before the time of
performance of the warranty [Sec. 73];
The Code does not prescribe a particular form
b. Performance becomes unlawful [Sec.
for a warranty to be considered as such [Sec.
69]. 73];
c. Performance becomes impossible
However, the Code prescribes a requirement [Sec. 73];
for express warranties. It must be an d. Waiver or estoppel.
agreement contained in the policy or clearly
incorporated therein as part thereof, relating to
Page 222 of 494
2. Immaterial Warranty Warranty Representation
A policy may declare that a violation of Applicability of incontestability clause
specified provisions thereof shall avoid it,
otherwise the breach of an immaterial provision Does not apply Applies
does not avoid the policy [Sec. 75].
General Rule: Breach of an immaterial

provision does not avoid the policy [Sec. 75].
Exception: The parties stipulate that violation

of a particular provision, though immaterial,
shall avoid the policy. In effect, the parties
converted the immaterial provision into a
material one [Sundiang and Aquino].
A condition in the policy which requires the

insured to disclose to the insurer of any
insurance that, if violated by the insured, would
ipso facto avoid the contract [Pioneer v. Yap,
G.R. No. L-36232 (1974)].
Insurer is barred by waiver (or estoppel) to

claim violation of the so-called hydrants
warranty when, despite knowing fully that only
2 fire hydrants existed (out of the 11 hydrants
required), it still issued the insurance policies
and received the premiums [Qua Chee Gan v.
Law Union, G.R. No. L-4611 (1955)].
Warranty Representation
Nature
Part of the Mere collateral

contract inducement
Form
Written on the May be written in the

policy, actually or policy or may be oral
by reference
Materiality
Presumed Must be proved to be

material material
Compliance
Must be strictly Requires only

complied with substantial truth and
compliance
Page 223 of 494

TRANSPORTATION LAW
COMMERCIAL LAW
TRANSPORTATION LAW COMMERCIAL LAW
b. Engaged in the business of carrying or
transporting;
TRANSPORTATION LAW c. Passengers or goods or both,
d. By land, water, or air;
e. For compensation,
A. Common Carriers f. Offering their services to the public [Art.
1732, NCC].
1. Common Carriers
Art. 1732, Civil Code makes no distinction:
Contract of Transportation a. Between one whose principal business
A contract of transportation is one whereby a activity is the carrying of persons or
certain person or association of persons goods or both, and one who does such
obligate themselves to transport persons, carrying only as an ancillary activity
things, or news from one to another for a fixed [Fabre v. CA, G.R. No. 111127 (1996)];
price [Crisostomo v. CA, G.R. No. 138334 b. Between a person or enterprise
(2003)]. offering transportation service on a
regular or scheduled basis and one
Parties offering such service on an occasional,
a. Shipper - one who gives rise to the episodic, or unscheduled basis
contract of transportation by agreeing [Loadstar Shipping Co., Inc. v. CA,
to deliver the things or news to be G.R. No. 131621 (1999)];
transported, or to present his own c. Between a carrier offering its services
person or those of other/s in the case to the general public and one who
of transportation of passengers. offers services or solicits business only
b. Carrier (may sometimes be referred to from a narrow segment of the general
as conductor) - one who binds himself population [De Guzman v. CA, G.R.
to transport persons, things, or news, No. L-47822 (1988)];
or one employed in or engaged in the d. Between a carrier that maintains
business of carrying goods for others terminals or issues tickets with fixed
for hire. and publicly known routes and one that
c. Consignee - The party to whom the does not [Asia Lighterage and Shipping
carrier is to deliver the things being v. CA, G.R. No. 147246 (2003)].
transported, or to whom the carrier may
lawfully make delivery in accordance 2. Test for a Common Carrier
with its contract of carriage; the shipper
and the consignee may be the same Whether the undertaking is a part of the activity
person. engaged in by the carrier, which it has held out
to the public as its business or occupation.
Carriers are persons or corporations who a. Determined by the character of the
undertake to transport or convey goods, business carried on by the carrier; Not
property, or persons, from one place to the quantity or extent of the business
another, gratuitously or for hire, and are transacted [Bascos v. Court of
classified as: Appeals, G.R. No. 101089 (1993)].
a. Private or special carriers, who b. If the undertaking is a single
transport or undertake to transport in a transaction, not a part of the general
particular instance for hire or reward business or occupation engaged in, as
[Agbayani, Commercial Laws of the advertised and held out to the general
Philippines (1987)]; and public, the individual or the entity
b. Common or public carriers [Art. 1732, rendering such service is a private, not
Civil Code]. a common, carrier [Perena v. Nicolas,
G.R. No. 157917 (2012)].
Common carriers are:
a. Persons, corporations, firms or
associations;
Page 225 of 494
Test for a Common Carrier services in its resort operations is underscored
a. He must be engaged in the business of by having its own boats [Cruz v. Sun Holidays,
carrying goods for others as a public G.R. No. 186312 (2010)].
employment and must hold himself out
as ready to engage in the Operators of a school bus service were: (a)
transportation of goods for persons engaged in transporting passengers generally
generally as a business and not a as a business, not just as a casual occupation;
casual occupation. (b) undertaking to carry passengers over
b. He must undertake to carry goods of establishing roads by the method by which the
the kind to which his business is business was conducted; and (c) transporting
confined. students for a fee [Teodoro v. Nicolas, G.R. No.
c. He must undertake to carry by the 157917 (2012)].
methods of which his business is
conducted and over his established 3. Common Carrier vs. Private Carrier
roads.
d. The transportation must be for hire Common Carrier Private Carrier
[Agbayani].
Availability
One engaged in the business of transporting
petroleum products from refineries via pipeline Holds himself out in Agrees in some
is a common carrier. It is engaged in the common, that is, to all special case with
business of transporting or carrying goods, i.e., persons who choose some private
petroleum products, for hire as a public to employ him, as individual to carry for
employment. It undertakes to carry for all ready to carry for hire.
persons indifferently, that is, to all persons who hire.
choose to employ its services, and transports
the goods by land and for compensation. The Binding Effect
fact that it has a limited clientele does not
exclude it from the definition of a common
Bound to carry all Not bound to carry
carrier [First Phil. Industrial v. CA, G.R. No.
who offer and tender for any reason, such
125948 (1998)].
reasonable goods as it is
compensation for accustomed to carry,
A customs broker may be regarded as a
carrying them. unless it enters into a
common carrier as long as a person holds itself
special agreement to
to the public for the purpose of transporting
do so.
goods as a business, regardless of if it owns
the vehicle used or has to hire one [Schmitz Diligence Required
Transport v. CA, G.R. No. 150255 (2005)].
A travel agency is not a common carrier. It is Extraordinary Ordinary diligence.

not an entity engaged in the business of diligence.
transporting either passengers or goods and is
therefore neither a private nor a common Governing Law
carrier. Its covenant with its customers is
simply to make travel arrangements on their Civil Code; Code of Law on obligations
behalf [Crisostomo v. CA, G.R. No. 138334 Commerce and and contracts.
(2003)]. special laws, if not
regulated by the Civil
A beach resort may be regarded as a common Code (Art. 1766, Civil
carrier when its ferry services are so Code); law of the
intertwined with its main business as to be country to which the
properly considered ancillary thereto. In this goods are to be
case, the constancy of respondent’s ferry transported, if
Page 226 of 494
2. For the safety of the passengers
Common Carrier Private Carrier
transported by them [Art. 1733, Civil
regarding liability for Code].
loss, destruction, or
deterioration of Extraordinary Diligence
goods (Art. 1753, Requires carrying passengers safely:
Civil Code). 1. As far as human care and foresight can
provide;
Regulation 2. Using the utmost diligence of very
cautious persons;
3. With a due regard for all the
A public service, Not subject to circumstances [Art. 1755, Civil Code].
therefore subject to regulation as a
provisions governing common carrier. Note: A common carrier is not an insurer of the
common carriers and safety of its passengers and is not bound
public utilities. absolutely and at all events to carry them safely
and without injury [Yobido v. CA, G.R. No.
It is not necessary that the carrier be issued a 113003 (1997)].
certificate of public convenience [Loadstar
Shipping Co., Inc. v. CA, G.R. No. 131621 b. Presumption of Negligence
(1999)].
For Carriage of Goods
The owner and driver of a vehicle owe to The mere proof of:
accommodation passengers (passengers 1. Delivery of goods in good order to a
which are merely accommodated and who do carrier; and
not pay fees for the service) or invited guests 2. Their arrival at the place of destination
merely the duty to exercise reasonable care in bad order
so that they may be transported safely to their makes out a prima facie case against the
destination. Thus, the rule is established by carrier, so that if no explanation is given as to
weight of authority that the owner or operator how the injury occurred, the carrier must be
of an automobile owes the duty to an invited held responsible [Ynchausti Steamship v.
guest to exercise reasonable care in its Dexter and Unson, G.R. No. L-15652 (1920)].
operation, and not unreasonably to expose him
to danger and injury by increasing the hazard Effects of Presumption
of travel. [Lara v. Valencia, G.R. No. L-9907 1. Makes out a prima facie case against
(1968)]. In other words, since driver is not a the carrier - i.e., the carrier is presumed
common carrier, he is only required to observe to have been at fault or to have acted
ordinary diligence and not extraordinary negligently;
diligence. 2. Makes it incumbent upon the carrier to
prove that the loss/death/injury was
4. Diligence Required of Common due to some other circumstance
Carrier inconsistent with its liability, or that it
observed extraordinary diligence [Art.
1756, Civil Code; Ynchausti Steamship
a. Standard of Diligence
v. Dexter and Unson, G.R. No. L-15652
(1920)].
Common carriers, from the nature of their
business and for reasons of public policy, are
Burden of Proof
bound to observe extraordinary diligence,
It is incumbent upon the carrier to prove that
according to all the circumstances of each
the loss was due to accident or some other
case:
circumstance inconsistent with its liability
1. In the vigilance over the goods, [Arts.
[Ynchausti Steamship v. Dexter and Unson,
1734, 1735, and 1745, Nos. 5, 6, and
G.R. No. L-15652 (1920)].
7, Civil Code] and
Page 227 of 494
Note: While delay in the delivery of goods is a negligent operation of the vehicle although the
breach of contract of carriage, it does not raise same was already sold [Filcar Transport v.
the presumption of negligence because the Espinas, G.R. No. 174156 (2012)].
goods are not lost, deteriorated, or destroyed
[Art. 1735, Civil Code]. c. Kabit System
For Carriage of Passengers 1. It is an arrangement whereby a person

In case of death of or injuries to passengers, who has been granted a certificate of
common carriers are presumed to have been convenience allows another person
at fault or to have acted negligently, unless they who owns motor vehicles to operate
prove that they observed extraordinary under such franchise for a fee [Lita
diligence as prescribed in Arts 1733 and 1755 Enterprises, Inc. v. IAC, G.R. No. L-
[Art. 1756, Civil Code]. 64693 (1984)].
2. It is invariably recognized as being
Note: Mere failure to reach one’s destination, contrary to public policy and therefore
absent injury or death, does not raise the void and inexistent under Art. 1409.
presumption of negligence because it does not Thus, for the safety of passengers and
involve safety of the passengers. the public, the registered owner of the
vehicle is not allowed to prove that
5. Liabilities of Common Carriers another person has become the owner
so that he may be thereby relieved of
The obligation of the common carrier consists responsibility [Lim v. CA, G.R. No.
in the transportation of passengers or goods or 125817 (2002)].
both [Art. 1732, Civil Code]. 3. One of the primary factors considered
in the granting of a certificate of public
a. Principles Governing the Liability of convenience for the business of public
Common Carriers transportation is the financial capacity
of the holder of the license, so that
1. The liability of a carrier is contractual liabilities arising from accidents may be
and arises upon breach of its duly compensated. The kabit system
obligation. renders illusory such purpose and,
a. There is breach if it fails to exert worse, may still be availed of by the
extraordinary diligence grantee to escape civil liability caused
according to all circumstances by a negligent use of a vehicle owned
of each case; by another and operated under his
2. A carrier is obliged to carry its license [Dizon v. Octavio (1955)].
passenger with the utmost diligence of 4. However, one who has availed of the
a very cautious person, having due kabit system is not precluded from filing
regard for all the circumstances; for damages against another who
3. A carrier is presumed to be at fault or caused the injury, as the policy against
to have acted negligently in case of the kabit system will not be defeated by
loss of goods and/or death of, or injury giving such person standing to sue
to, passengers, it being its duty to [Lim v. CA, G.R. No. 125817 (2002)].
prove that it exercised extraordinary
diligence; and d. Classification of Transport Network
4. The carrier is not an insurer against all Vehicle Services and Transport
risks of travel [Isaac v. A.L. Ammen, Network Companies
G.R. No. L-9671 (1957)].
1. Transport Network Company or TNC is
b. Registered Owner Rule defined as an organization whether a
corporation, partnership, or sole
The person who is the registered owner of a proprietor, that provides pre-arranged
vehicle is liable for any damage caused by the transportation services for
Page 228 of 494
compensation using an internet-based compliance of jurisdictional
technology application or a digital requirements, as may be determined
platform technology to connect by LTFRB. The LTFRB shall also set
passengers with drivers using their the fare for the TNVS after public
personal vehicles [DOTC D.O. No. hearing or in consultation with the
2015-011]. TNCs and TNVS [DOTr D.O. No. 2018-
2. Transport Network Vehicle Service or 012].
TNVS refers to a TNC-accredited
private vehicle owner, which is a Despite the limited market scope of its
common carrier, using the internet- app, Angkas’ bikers offer transportation
based technology application or digital services to willing public consumers
platform technology transporting and these services may be readily
passengers from one point to another, accessed by anyone who chooses to
for compensation. The TNVS cannot download the Angkas app. While they
operate as a common carrier outside of may refuse to offer their service by
or independent from the use of the simply not going online or not logging
internet-based technology of the TNC in, when they do log in, they make their
or TNCs to which they are accredited services publicly available. As such,
[DOTr D.O. No. 2018-012]. DBDOYC (Angkas) is a transportation
provider and its accredited drivers are
TNVs and TNCs are expressly common carriers [LTFRB v.
considered common carriers. They are Valenzuela and DBDOYC, Inc. G.R.
subject to full regulation and No. 242860 (2019)].
supervision by the LTFRB, including
but not limited to: B. Obligations and Liabilities
• Application and approval/ denial of
franchise, 1. Vigilance Over Goods
• Setting of fares, routes, operating
conditions, and The liability of the common carrier with respect
• Imposition of fines, suspension, to vigilance over goods, in general, are as
and cancellation of franchise. follows:
a. Common carriers are responsible for
Note re: (b) setting of fares: In 2017, the loss, destruction, or deterioration of
MyTaxi.PH, Inc. (GRAB) filed a case the goods [Art. 1734, Civil Code]. In
before the LTFRB which did not reach fact, they are liable even in those cases
the Supreme Court, LTFRB held that where the cause of the loss or damage
under D.O. 2015-011 then in force, a is unknown [Agbayani].
TNC is not granted unilateral authority b. If the goods are lost, destroyed, or
to set fares as the same would be deteriorated, common carriers are
constitutive of an undue delegation of presumed to have been at fault or to
legislative authority. Subsequently, have acted negligently [Art. 1735, Civil
D.O. 2017-011 and D.O. 2018-013 Code].
were issued, removing the “confusing
language” of D.O. 2015-011 and Note: Two-pronged analysis in determining
explicitly stating that rate-fixing liability:
authority shall be limited to the LTFRB a. Whether or not the cause of the loss,
in accordance with the law [Case No. destruction, or deterioration is included
CO-EB-2018-04-0039, Accreditation under Art. 1734;
No. 2015-TNC-001]. b. If not, whether the common carrier
exercised extraordinary diligence or
The LTFRB shall grant the TNCs and not.
their accredited TNVS a Certificate of
Public Convenience (CPC) upon full
Page 229 of 494

a. Presumption of Negligence 2. Act of Public Enemy
General Rule: Common carriers are Requisites

responsible for the loss, destruction, or a. The act of the public enemy was
deterioration of the goods. committed either in an international or
civil war [Art. 1734 (2), Civil Code];
Exception: Common carriers are not liable b. The act of the public enemy must have
when such loss, destruction, or deterioration is been the proximate and only cause;
due to any of the following causes only: and
1. Flood, storm, earthquake, lightning, or c. The common carrier must exercise due
other natural disaster or calamity; diligence to prevent or minimize the
2. Act of the public enemy in war, whether loss before, during and after the act of
international or civil; the public enemy causing the loss,
3. Act of omission of the shipper or owner destruction or deterioration of the
of the goods; goods [Art. 1739, Civil Code].
4. The character of the goods or defects
in the packing or in the containers; Thieves, rioters, robbers, and insurrectionists,
5. Order or act of competent public though at war with social order, are not in a
authority [Art. 1734, Civil Code]. legal sense classed as public enemies, but are
merely private depredators for whose acts a
In all other cases of loss, destruction, or carrier is answerable. Pirates on the high seas,
deterioration, the common carrier is presumed however, stand as an exception to this rule.
to have been at fault or to have acted They are considered the enemies of all civilized
negligently, unless they prove that they nations, and indeed of the human race, and
observed extraordinary diligence [Art. 1735, consequently their depredations on a common
Civil Code]. carrier will excuse him from liability [Aquino].
b. Exempting Causes 3. Act or omission of shipper or owner
1. Natural Disaster or Calamity The act or omission of the shipper must have
been the proximate and only cause of the
Requisites: loss, destruction, or deterioration of the goods.
a. The natural disaster must have been
the proximate and only cause of the If the shipper or owner merely contributed to
loss; the loss, destruction or deterioration of the
b. The common carrier must exercise due goods, the proximate cause being the
diligence to prevent or minimize the negligence of the common carrier, the latter
loss before, during and after the shall be liable for the damages, which shall,
occurrence of the flood, storm, or however, be equitably reduced [Art. 1741, Civil
natural disaster [Art. 1739, Civil Code]; Code].
and
c. The common carrier must not have 4. Character of Goods
negligently incurred delay [Art. 1740,
Civil Code]. Requisites
a. The loss, destruction, or deterioration
Fire may not be considered a natural disaster of the goods is due to the character of
or calamity because it arises almost invariably the goods or defects in the packing or
from some act of man or by human means. It in the containers [Art. 1734 (4), Civil
does not fall within the category of an act of Code]; and
God unless caused by lightning or by other b. The common carrier must exercise due
natural disaster or calamity [Eastern Shipping diligence to forestall or lessen the loss
Lines v. IAC, G.R. No. L-69044 (1987)]. [Art. 1742, Civil Code].
Page 230 of 494

If the fact of improper packing is known to the Note: There must be an entire exclusion of
carrier or its servants or apparent upon human agency from the cause of injury or loss.
ordinary observation, but it accepts the goods
notwithstanding such condition, it is not A common carrier may not be absolved from
relieved of liability for loss or injury resulting liability in case of force majeure or fortuitous
therefrom [Southern Lines v. CA, G.R. No. L- event alone. The common carrier must still
16629 (1962)]. prove:
a. That it was not negligent in causing the
5. Order of Competent Authority death or injury resulting from an
accident [Yobido v. CA, G.R. No.
Requisites 113003 (1997)];
a. There must be an order or act of b. That the loss or destruction of the
competent public authority through merchandise was due to accident and
which the goods are seized or force majeure and not fraud, fault, or
destroyed [Art. 1734 (5), Civil Code]; negligence on the part of the captain or
and owner of the ship [Tan Chiong Sian v.
b. The said public authority must have Inchausti, G.R. No. L-6092 (1912)].
had the power to issue the order [Art.
1743, Civil Code]. Loss of a ship and of its cargo, in a wreck due
to accident or force majeure must, as a general
To be exempted from liability, the intervention rule, fall upon their respective owners, except
of the competent public authority must be of a in cases where the wrecking or stranding of the
character that would render impossible the vessel occurred through the malice,
fulfillment by the carrier of the obligation carelessness, or lack of skill on the part of the
[Ganzon v. CA, G.R. No. L-48757 (1988)]. captain or because the vessel put to sea is
insufficiently repaired and prepared.
6. Force Majeure
In order that the exemption due to force
Force majeure – in general, has also been majeure would apply, the carrier must prove
invoked as an exempting cause based on Art. that the loss or destruction of the merchandise
1174, which states that no person shall be was due to accident and force majeure and not
responsible for a fortuitous event which could to fraud, fault, or negligence on the part of the
not be foreseen, or which, though foreseen, captain or owner of the ship [Tan Chiong Sian
was inevitable. v. Inchausti, G.R. No. L-6092 (1912)].
A fortuitous event has the following Requirement of Absence of Negligence

characteristics: If the common carrier is found to have acted
a. The cause of the unforeseen and negligently, it is precluded from invoking the
unexpected occurrence, or the failure exempting causes under Art. 1734, and will be
of the debtor to comply with his liable for damages suffered by the goods it
obligations, must be independent of carried if such damages arise from its
human will; negligence [Agbayani].
b. It must be impossible to foresee the
event which constitutes the caso The exempting circumstance should be the
fortuito, or if it can be foreseen, it must proximate and only cause of the loss,
be impossible to avoid; destruction, or deterioration of the goods for
c. The occurrence must be such as to the common carrier to be exempted from
render it impossible for the debtor to liability on any of the ff. grounds:
fulfill his obligation in a normal manner; a. Natural Disaster/Calamity
and b. Act of Public Enemy
d. The obligor must be free from any c. Character of the Goods [Art. 1739,
participation in the aggravation of the 1742, Civil Code]
injury resulting to the creditor.
Page 231 of 494

When the common carrier’s negligence is the carrier to the consignee or to the
proximate cause of the loss, destruction, or person who has a right to receive them;
deterioration of the goods, the act or omission 2. When goods are temporarily unloaded
of the shipper will only mitigate the carrier’s or stored in transit, unless the shipper
liability [Art. 1741, Civil Code]. or owner has made use of the right of
stoppage in transitu [Art 1737, Civil
Absence of Delay Code];
To be free from responsibility on the ground of 3. During storage in a warehouse of the
natural disaster/calamity, the common carrier carrier at the place of destination, until
should not have negligently incurred in delay consignee has been advised of the
[Art. 1740, Civil Code]. arrival of the goods and has had
reasonable opportunity to remove or
Due Diligence to Prevent or Lessen the dispose them [Art 1738, Civil Code].
Loss In dealing with the contract of common carriage
The common carrier should have exercised of passengers, for purpose of accuracy, there
due diligence to prevent, forestall or lessen the are two (2) aspects of the same, namely:
loss, destruction, or deterioration of the goods, 1. Contract ‘to carry (at some future
to be exempted from liability on any of the ff. time),’ which contract is consensual
grounds: and is necessarily perfected by mere
a. Natural Disaster/Calamity consent; and
b. Act of Public Enemy 2. Contract ‘of carriage’ or ‘of common
c. Character of the Goods [Art. 1739, carriage,’ which should be considered
1742, Civil Code] as a real contract for not until the carrier
is used can the carrier be said to have
Meeting a typhoon head-on falls short of due already assumed the obligation of a
diligence required from a common carrier [Asia carrier [Paras, Civil Code Annotated,
Lighterage and Shipping Inc. v. CA, G.R. No. 11th Ed].
147246 (2000)].
Note: The distinction is important in
c. Contributory Negligence determining when the common carrier is
required to exercise extraordinary
The liability of the common carrier shall be responsibility. The birth of the contract is not
equitably reduced when the loss, destruction, necessarily the birth of the duty to exercise
or deterioration of the goods when: extraordinary responsibility.
1. The negligence of the common carrier
was the proximate cause thereof; and 1. Delivery of Goods to Common Carriers
2. The shipper or owner merely
contributed to such loss, destruction, or Delivery means unconditionally placing the
deterioration [Art. 1741, Civil Code]. goods in the possession of the carrier and the
carrier receiving them for transportation [Art.
d. Duration of Liability 1736, Civil Code].
Instances when carrier has responsibility to Unconditionally placing the goods in the
exercise extraordinary diligence: possession of the carrier means the shipper
1. From the time the goods are cannot get them back from the common carrier
unconditionally placed in the at will.
possession of, and received by the
carrier [Art 1736, Civil Code] or its Thus, the liability of the carrier as common
authorized agent [Compania Maritima carrier and its duty of extraordinary diligence
v. Insurance Co., G.R. No. L-18965 begins with the actual delivery of the goods,
(1964)], until the same are delivered NOT:
actually and constructively by the
Page 232 of 494

a. When the common carrier received the The common carrier remains liable to the
goods not for transportation but only for consignee when the goods were lost because
safekeeping; or the ports authorities released them to
b. When a receipt or bill of lading is unauthorized persons, absent a stipulation in
formally executed, since the issuance the bill of lading [Nedlloyd Lijnen B.V.
of a bill of lading is not necessary to Rotterdam v. Glow Laks Enterprises, Ltd. G.R.
complete delivery and acceptance No. 156330 (2014)].
[Compania Maritima v. Insurance Co.,
G.R. No. L-18965 (1964)]. 3. Temporary Unloading or Storage
2. Actual or Constructive Delivery General Rule: Extraordinary diligence over the

goods remains even when the goods are
The extraordinary responsibility of the common temporarily unloaded or stored in transit.
carrier ends when, subject to Art. 1738, the
goods are delivered actually or Exception: The duty to observe such diligence
constructively by the carrier to: ceases when shipper or owner makes use of
a. The consignee; or the right of stoppage in transitu [Art 1737,
b. The person who has a right to receive Civil Code].
them, such as agents, brokers, and the
like. Stoppage in transitu is the act by which the
unpaid vendor of goods stops their progress
Art. 1738 provides that the extraordinary and resumes possession of them
liability of the common carrier continues to be constructively, while they are during transit
operative even during the time the goods are from him to the purchaser and not yet actually
stored in a warehouse of the carrier at the place delivered to the latter [Agbayani].
of destination, until the consignee has:
a. Been advised of the arrival of the Basis: Under Art. 1530, when the buyer of the
goods; and goods becomes insolvent, the unpaid seller
b. Had reasonable opportunity thereafter who has parted with the possession of the
to remove them or otherwise dispose of goods, at any time while they are in transit, may
them. resume the possession of the goods as he
would have had if he had never parted with the
Delivery of the cargo to the customs authorities possession.
is not delivery to the consignee or “to the
person who has a right to receive them” as When the right of stoppage in transitu is
contemplated in Art. 1736 because in such exercised, the common carrier holds the goods
case the goods are still in the hands of the in the capacity of an ordinary bailee or
government and the owner cannot exercise warehouseman upon the theory that the
dominion over them. However, the parties may exercise of the right of stoppage in transitu
agree to limit the liability of the carrier terminates the contract of carriage. Hence,
considering that the goods still have to go only ordinary diligence is required
through the inspection of the customs [Agbayani].
authorities before they are actually turned over
to the consignee. It is unfair that the carrier be e. Stipulations for Limitation of Liability
made responsible for what may happen during
the interregnum [Lu Do v. Binamira, G.R. No. There are two possible stipulations limiting the
L-9840 (1957)]. liability of the common carrier:
1. Stipulation limiting the common
It is settled in maritime law jurisprudence that carrier’s liability as to the diligence
cargoes while being unloaded generally remain required;
under the custody of the carrier [Asian 2. Stipulation limiting the common
Terminals, Inc. v. Philam Insurance Co., G.R. carrier’s liability as to the amount of
No. 181163 (2013)]. liability.
Page 233 of 494

An agreement limiting the common carrier’s damage occasioned by its own
liability for delay on account of strikes or riots is negligence;
also valid [Art. 1748, Civil Code]. 9. Stipulation providing for an unqualified
limitation of such liability to an agreed
As to Diligence Required stipulation [Heacock v. Macondray,
A stipulation between the common carrier and G.R. No. L-16598 (1921)];
the shipper or owner limiting the liability of the 10. Stipulation which practically leaves the
former for the loss, destruction, or deterioration date of arrival of the subject shipment
of the goods to a degree less than on the sole determination and the will
extraordinary diligence shall be valid, of the carrier [Maersk Line v. CA, G.R.
provided it be: No. 94761 (1993)].
1. In writing, signed by the shipper or
owner; Note: Under Art. 1745 (6), Civil Code, a
2. Supported by a valuable consideration common carrier cannot be held liable where
other than the service rendered by the the thieves or robbers acted with grave or
common carrier; and irresistible threat, violence, or force [De
3. Reasonable, just and not contrary to Guzman v. CA, G.R. No. L-47822 (1988)].
public policy [Art. 1744, Civil Code].
Limitation of Liability to Fixed Amount
Void Stipulations A contract fixing the sum that may be
Any of the following or similar stipulations shall recovered by the owner or shipper for the loss,
be considered unreasonable, unjust and destruction or deterioration of the goods is valid
contrary to public policy: if:
1. That the goods are transported at the 1. It is reasonable and just under
risk of the owner or shipper; circumstances; and
2. That the common carrier will not be 2. It has been fairly and freely agreed
liable for any loss, destruction, or upon [Art. 1750, NCC].
deterioration of the goods;
3. That the common carrier need not While a passenger may not have signed the
observe any diligence in the custody of plane ticket, he is nevertheless bound by the
the goods; provision thereof, regardless of the latter’s lack
4. That the common carrier shall exercise of knowledge or assent to the regulation. It is
a degree of diligence less than that of what is known as a contract of adhesion
a good father of a family, or of a man of wherein one party imposes a ready-made form
ordinary prudence in the vigilance over of contract on the other. The one who adheres
the movables transported; to the contract is free to reject it entirely. A
5. That the common carrier shall not be contract limiting liability upon an agreed
responsible for the acts or omission of valuation does not offend against the policy of
his or its employees; the law forbidding one from contracting against
6. That the common carrier’s liability for his own negligence [Ong Yiu v. CA, G.R. No.
acts committed by thieves, or of L-40597 (1979)].
robbers who do not act with grave or
irresistible threat, violence or force, is [However], the fact that the conditions are
dispensed with or diminished; printed at the back of the ticket stub in letters
7. That the common carrier is not so small that they are hard to read would not
responsible for the loss, destruction, or warrant the presumption that the [shipper] was
deterioration of goods on account of not aware of those conditions such that he had
the defective condition of the car, “fairly and freely agreed” to those conditions
vehicle, ship, airplane or other [Shewaram v. PAL, G.R. No. L-20099 (1966)].
equipment used in the contract of
carriage [Art. 1745, Civil Code];
8. That the common carrier is exempt
from any and all liability for loss or
Page 234 of 494

Factors Affecting Agreement of the carrier [Ong Yiu v. CA, G.R. No. L-
The effect of these stipulations is subject to the 40597(1979)].
following provisions:
1. An agreement limiting the common f. Liability for Baggage of Passengers
carrier’s liability may be annulled by the
shipper or owner if the common carrier Baggage are things that a passenger will bring
refuses to carry the goods unless the with him consistent with a temporary absence
former agreed to such stipulation [Art. from where he lives. Passenger’s baggage
1746, Civil Code]; must have a direct relationship with the
2. If the common carrier, without just passenger who is traveling.
cause, delays the transportation of the
goods or changes the stipulated or For instance, a balikbayan box or suitcase is a
usual route, the contract limiting the passenger’s baggage. However, 500 boxes of
common carrier’s liability cannot be perfume are not considered as passenger
availed of in case of the loss, baggage. They are considered goods and are
destruction, or deterioration of the not part of the contract of carriage [of the
goods [Art. 1747, Civil Code]; passenger]. A separate contract of carriage [or
3. The fact that the common carrier has bill of lading] must be entered into to transport
no competitor along the line or route, or them [Agbayani].
a part thereof, to which the contract
refers shall be taken into consideration There are two kinds of passenger’s baggage,
on the question of whether or not a which are governed differently:
stipulation limiting the common 1. Passenger baggage in the custody of
carrier’s liability is reasonable, just, and the passenger (or carry-on luggage);
in consonance with public policy [Art. and
1751, Civil Code]; 2. Passenger baggage NOT in the
4. Even when there is an agreement custody of the passenger (or checked-
limiting the liability of the common in baggage).
carrier in the vigilance over the goods,
the common carrier is disputably The liability is greater for baggage that is in the
presumed to have been negligent in custody of the carrier (checked-in baggage) as
case of their loss, destruction or compared to those in the possession of the
deterioration [Art. 1752, Civil Code]. passenger.
5. An agreement limiting the common
carrier's liability for delay on account of 1. Checked-In baggage
strikes or riots is valid [Art. 1748, Civil
Code]. The provisions of Arts. 1733-1753 shall not
apply to passenger’s baggage which is not in
Limitation of Liability in Absence of his personal custody or in that of his employee
Declaration of Greater Value [Art. 1754, Civil Code].
A stipulation that the common carrier’s liability
is limited to the value of the goods appearing in In other words, the rules governing the
the bill of lading, unless the shipper or owner responsibility of a common carrier in the
declares a greater value, is binding [Art. 1749, transportation of goods apply. Thus,
Civil Code]. extraordinary diligence is required.
Where the liability has been limited due to a 2. Baggage in Possession of Passengers
stipulation written at the back of a ticket, to the
effect that the liability is limited to a certain As to baggage other than checked-in baggage,
amount unless the passenger declares a they are governed by Arts. 1998 and 2000-
higher valuation, a passenger who did not 2003, concerning the responsibility of
declare a higher valuation, or did not pay hotelkeepers [Art. 1754, Civil Code].
additional charges, cannot increase the liability
Page 235 of 494

Art. 1998, as applied by analogy, the baggage notices to the effect that he is not liable
of passengers in their personal custody or in for the articles brought by the
that of their employees, while being passenger;
transported, are regarded as necessary c. Any stipulation whereby the
deposits. The common carriers are responsible responsibility of the common carrier as
as depositaries, provided that: set forth in Arts. 1998-2001 is
a. Notice was given to them, or to their suppressed or diminished shall be void
employees, of the effects brought by [Art. 2003, Civil Code].
the passengers; and
b. The passengers take the precautions
Checked-In Baggage in
which the common carrier advised
Baggage Custody of
relative to the care and vigilance of
Passenger
their baggage.
Legal Considered Necessary
Note: In one case, the Court held that there Nature of as “Goods” Deposit
was sufficient notice under Art. 1998 when the Baggage
common carrier allowed the passenger to
board the vessel with his belongings without Diligence Extraordinary Ordinary
any protest [Sulpicio Lines v. CA, G.R. No. Required Diligence Diligence
172682 (2016)].
Applicable Arts. 1733 to Arts. 1998,
In case of loss or injury to the baggage of Rules 1735 2000 to 2003
passengers in their personal custody, or in that
of their employees, while being transported,
the carrier is liable if the loss or injury is 2. Safety of Passengers
caused by:
a. His servants; The liability of the common carrier with respect
b. His employees; to the safety of passengers, in general, are as
c. Strangers [Art. 2000, Civil Code]; or follows:
d. A thief or robber, without the use of 1. A common carrier is bound to carry the
arms or irresistible force [Art. 2001, passengers safely as far as human
Civil Code]. care and foresight can provide, using
the utmost diligence of very cautious
The carrier is not liable if loss or injury is persons, with a due regard for all the
caused by: circumstances [Art. 1755, Civil Code];
a. Force majeure [Art. 2000, Civil Code]; 2. In case of death of or injuries to
b. Theft or robbery with the use of arms or passengers, common carriers are
irresistible force [Art. 2001, Civil Code]; presumed to have been at fault or to
c. The acts of the passenger, his family, have acted negligently, unless they
servants, or visitors; prove that they observed extraordinary
d. The character of the baggage [Art. diligence [Art. 1756, Civil Code].
2002, Civil Code].
Note: It is not enough that the accident was
The following provisions also figure in caused by force majeure, the common carrier
determining the liability of the common carrier: must still prove that it was not negligent in
a. The fact that passengers are causing the injuries resulting from such
constrained to rely on the vigilance of accident [Bachelor Express v. CA, G.R. No.
the common carrier shall be 85691 (1990)]. Bachelor Express illustrates
considered in determining the degree that force majeure is not itself a defense; the
of care required of him [Art. 2000, Civil exercise of the diligence required by law is the
Code]; defense.
b. The common carrier cannot free
himself from responsibility by posting Certain instances wherein the common carrier
was held liable:
Page 236 of 494
1. Defects in the automobile – passenger As in the contract of carriage of goods, the
has neither the choice nor control over perfection of the contract of carriage of
the selection and use of the carrier’s passengers does not necessarily coincide with
equipment and appliances [Landingin the commencement of the duty of extraordinary
v. Pantranco, G.R. No. L-28014-15 diligence. It may occur at the same time or
(1970)]. later.
2. Defect in an appliance purchased by
the carrier from a manufacturer – the Based on jurisprudence, the duty that the
manufacturer is considered as an carrier of passengers owes to its patrons
agent of the common carrier [Necesito extends to persons boarding the cars as well
v. Paras, G.R. No. L-10605 (1958)]. as those alighting therefrom [Del Prado v.
3. Injuries suffered by a crew member or Manila Electric Company, G.R. No. L-29462
employee – utmost diligence is not only (1929)].
for the safety of passengers, but also
for the members of the crew or the This is also reflected in Art. 17, Warsaw
complement operating the carrier [PAL Convention, which applies to international air
v. CA, G.R. No. L-46558 (1981)]. carriage. It provides that the liability of a
4. Injuries suffered by an individual whose common carrier for injury to the passenger
presence was called for by the contract lasts from embarkation to disembarkation,
of carriage (e.g. stevedore) [Sulpicio including the period when the passenger is on
Lines v. CA, G.R. No. 106279 (1995)]. board the aircraft.
Note: A common carrier is not liable for its In maritime commerce, Art. 698, Code of
failure to deliver the passenger to the agreed Commerce relates to the period of the voyage:
destination because of sovereign acts [JAL v.
Asuncion, G.R. No. 161730 (2005)]. In case a voyage already begun should be
interrupted:
a. Void Stipulations 1. The passengers shall be obliged to pay
the fare in proportion to the distance
General Rule: The responsibility of a common covered; and
carrier for the safety of passengers cannot be 2. Have the following reliefs:
dispensed with or lessened by stipulation by
the posting of notices, by statements on tickets, Cause of Relief
or otherwise [Art. 1757, Civil Code]. Interruption
Exception: When a passenger is carried An accidental cause Without right to
gratuitously, a stipulation limiting the common of force majeure recover for losses
carrier’s liability for negligence is valid [Art. and damages
1758, Civil Code].
By the captain With a right to
Exception to the exception: Even when a exclusively indemnity
passenger is carried gratuitously, a stipulation
limiting the common carrier’s liability for willful 1. Caused by the 1. He may not be
acts or gross negligence is invalid [Art. 1758, disability of the required to pay
Civil Code]. vessel and any increased
2. A passenger price of passage;
The reduction of fare does not justify any should agree to but
limitation of the common carrier’s liability [Art. await the repairs 2. His living
1758, Civil Code]. expenses during
the stay shall be
b. Duration of Liability for his own
account.
Page 237 of 494

In case of delay in the departure of the vessel, Manila Electric Company, G.R. No. L-
the passengers have: 29462 (1929)].
1. The right to remain on board
2. If the delay is not due to a The extraordinary responsibility of common
fortuitous event or force carriers commences:
majeure, the right to be a. With respect to carriage of passengers
furnished with food for the by trains: The moment the person who
account of the vessel; purchases the ticket from the carrier
3. If the delay should exceed ten presents himself at the proper place
days: and in a proper manner to be
4. Passengers requesting the transported with a bona fide intent to
same shall be entitled to the ride the coach [Aquino citing Vda. De
return of the fare; and Nueca, et . al. v. Manila Railroad
5. If it is due exclusively to the Company].
fault of the captain or ship b. With respect to carriage of passengers
agent, they may also demand by sea: As soon as the person with
indemnity for losses and bona fide intention of taking passage
damages. places himself in the care of the carrier
or its employees and is accepted as
A vessel exclusively devoted to the passenger [Aquino].
transportation of passengers must take them
directly to the port or ports of destination, no 2. Arrival at Destination
matter what the number of passengers may be,
making all the stops indicated in its itinerary. The relation of carrier and passenger does not
cease at the moment the passenger flights
1. Waiting for Carrier or Boarding of from the carrier’s vehicle at a place selected by
Carrier the carrier at the point of destination, but
continues until the passenger has had a
The duty that the carrier of passengers owes to reasonable time or a reasonable opportunity to
its patrons extends to persons boarding the leave the carrier’s premises.
cars as well as those alighting therefrom.
What is a reasonable time or a reasonable
It is the duty of common carriers of passengers delay within this rule is to be determined from
to stop their conveyances at a reasonable all the circumstances such as the kind of
length of time to afford passengers an common carrier, the nature of its business, the
opportunity to bard and enter: customs of the place, and so forth, and
a. Carriers are liable for injuries suffered therefore precludes a consideration of the time
by boarding passengers resulting from element per se without taking into account
the sudden starting up or jerking of their such other factors.
conveyances while they are doing so
[Dangwa Transportation v. CA, G.R. The primary factor to be considered is the
No. 95582 (1991)]. existence of a reasonable cause as will justify
b. However, a person boarding a moving the presence of the victim on or near the
car must be taken to assume the risk of petitioner’s vessel:
injury from boarding the car under the a. A person who, after alighting from a
conditions open to his view. train, walks along the station platform is
Nonetheless, he cannot fairly be held considered still a passenger;
to assume the risk that the motorman, b. A passenger, who has alighted at his
having the situation in view, will destination and is proceeding by the
increase the peril by accelerating the usual way to leave the company’s
speed of the car before he is planted premises, but before actually doing so
safely on the platform [Del Prado v. is halted by the report that his brother,
a fellow passenger, has been shot, and
Page 238 of 494

he in good faith, returns to relieve his of their employees [Art. 1759, Civil
brother, is deemed reasonably and Code];
necessarily delayed and thus b. By stipulation, by the posting of
continues to be a passenger entitled as notices, nor by statements on the
such to the protection of the railroad tickets eliminating or limiting said
and company and its agents [La liability [Art. 1760, Civil Code].
Mallorca v. CA, G.R. No. L-20761
(1996)]; Ratio: The servant is clothed with delegated
c. In the cases of a shipper, the authority and charged with the duty to execute
passengers of vessels are allotted a the carrier’s undertaking to carry the passenger
longer period of time to disembark from safely [Agbayani]. Also, the defense of
the ship than other common carriers diligence in the selection and supervision of
such as a passenger bus, since such employees does not obtain because the liability
vessels are capable of accommodating is not based on quasi-delict, but on culpa
a bigger volume of both passenger and contractual. However, there must be a
baggage as compared to the capacity reasonable connection between the act and
of a regular commuter bus. the contract of carriage.
Consequently, a ship passenger will
need at least an hour as is the usual Note: The employee must be on duty at the
practice, to disembark from the vessel time of the act. It is enough that the assault
and claim his baggage [Aboitiz happens within the course of the
Shipping v. CA, G.R. No. 84458 employee’s duty. It is no defense for the
(1989)]; carrier that the act was done in excess of
d. The carrier necessarily would still have authority or in disobedience of the carrier’s
to exercise extraordinary diligence in orders [Maranan v. Perez, G.R. No. L-22272
safeguarding the comfort, convenience (1967)].
and safety of its stranded passengers
until they have reached their final Exception: A common carrier is not
destination [PAL v. CA, G.R. No. L- responsible for acts falling under force
82619 (1993)]. majeure. When a party is unable to fulfill his
obligation because of force majeure, he cannot
Note: Despite the Court’s pronouncement in be held liable for damages for non-
PAL v. CA, note that common carriers are performance [Japan Airlines v. CA, G.R. No.
bound to observe extraordinary diligence in the 118664 (1998)].
‘safety’ of its passengers. The law does not
mention the words ‘comfort’ and ‘convenience.’ Note: In order to be exempted from liability due
to a fortuitous event, a common carrier must
c. Liability for Acts of Others still prove a complete exclusion of human
agency from the cause of injury or death.
1. Employees Hence, it was held that the explosions of the
new tire may not be considered a fortuitous
General Rule: Common carriers are liable for event as there are human factors involved in
the death of or injuries to passengers through the situation [Yobido v. CA, G.R. No. 113003
the negligence or willful acts of the former’s (1997)].
employees, although such employees may
have acted beyond the scope of their authority 2. Other Passengers and Strangers
or in violation of the orders of the common
carriers. General Rule: A common carrier is not liable
for injuries inflicted by strangers or co-
This liability does not cease: passengers.
a. Even upon proof that they exercised all
the diligence of a good father of a Exception: A common carrier is responsible
family in the selection and supervision for injuries suffered by a passenger on account
Page 239 of 494

of the willful acts or negligence of other It is negligence per se to protrude one’s arm
passengers or of strangers, if the common voluntarily or inadvertently, hand, elbow, or any
carrier’s employees, through the exercise of other part of his body through the window of a
the diligence of a good father of a family, could moving car beyond the outer edge of the
have prevented or stopped the act or omission window or outer surface of the car, so as to
[Art. 1763, Civil Code]. come in contact with objects or obstacles near
the track [Isaac v. A.L. Ammen, G.R. No. L-
Note: The law speaks of injuries suffered by the 9671 (1957)].
passenger but not death. However, there
appears to be no reason why the common d. Liability for Delay in Commencement
carrier should not be held liable under such of Voyage
circumstances. The word “injuries” should be
interpreted to include death [Agbayani]. A “delayed voyage” refers to a voyage
involving:
Under Art. 1763, a tort committed by a stranger 1. Late departure of the ship from its port
which causes injury to a passenger does not of origin; or
accord the latter a cause of action against the 2. Late arrival thereof to its port of
carrier. The negligence for which a common destination for a period of time not
carrier is held responsible is the negligent exceeding twenty-four (24) hours from
omission by the carrier’s employees to prevent the CPC-authorized time of departure
the tort from being committed when the same or arrival of the ship [Maritime Industry
could have been foreseen and prevented by Authority Circular No. 2018-27].
them through the exercise of the diligence of a
good father of a family [Pilapil v. CA, G.R. No. In case of delayed voyages, passengers shall
52159 (1989)]. have the following rights:
Common carriers should be given leeway in 1. Right to Information

assuming that the passengers they take in will Within thirty (30) minutes of knowledge that the
not bring anything that would prove dangerous voyage shall be delayed but not later than one
to himself, as well as his co-passengers, (1) hour before the CPC-authorized departure
unless there is something that will indicate that schedule, the operator shall inform the
a more stringent inspection should be made. passengers of:
[G.V. Florida Transport Inc., v. Heirs of a. The delay;
Battung, G.R. No. 208802 (2015)] b. The cause of the delay;
c. The new departure or expected arrival
Contributory Negligence time [Maritime Industry Authority
The passenger must observe the diligence of a Circular No. 2018-27].
good father of a family to avoid injury to himself
[Art. 1761, Civil Code]. 2. Right to Refund or Revalidation
Should the delay be for more than three (3)
The contributory negligence of the passenger hours, the passenger shall be offered the
does not bar recovery of damages for his death option to request a refund of the ticket price, or
or injuries, if the proximate cause thereof is the for the revalidation of the ticket [Maritime
negligence of the common carrier, but the Industry Authority Circular No. 2018-27].
amount of damages shall be equitably reduced
[Art. 1762, Civil Code]. 3. Right to Amenities
The operator shall provide, free of charge, the
However, when the negligence of the passengers with the following:
passenger was the proximate cause of the a. Snacks or refreshment, or meals
injury, the passenger is barred from recovery, during mealtime;
and the common carrier is exempted from b. Free access to first aid/ relief medicine,
liability. if necessary;
Page 240 of 494

c. Free access to communication facilities to answer for the flaws of its equipment and
or services, if necessary; mechanical defects if such flaws were at all
d. Free, decent, and clean discoverable.
accommodation located near or
accessible from the port; The manufacturer of the defective appliance is
e. Free transportation to and from the port considered in law, as the agent of the carrier,
and the place of accommodation, and the good repute of the manufacturer will
should the delay require a waiting time NOT relieve the carrier from liability.
of more than eight (8) but not
exceeding twenty-four (24) hours Ratio: The passenger has no privity with the
[Maritime Industry Authority Circular manufacturer of the defective equipment.
No. 2018-27]. Hence, he has no remedy against him, while
the carrier usually has [Necesito v. Paras, G.R.
4. Right to Compensation No. L-10605 (1958)].
As an alternative to providing accommodation
or whenever the same is not practicable, the f. Extent of Liability for Damages
operator may offer the passengers
corresponding compensation: Damages recoverable from common carriers,
a. In an amount equivalent to the both in cases of carriage of passengers and
prevailing market price of a decent and goods, shall be awarded in accordance with
clean accommodation in the immediate Title XVIII concerning Damages.
or adjacent locality of the ship’s point of
departure; Art. 2206, on liability, in case of death, for loss
b. Subject to the limitation of a maximum of earning capacity, support, and moral
of three (3) nights per passenger damages for mental anguish, shall also apply
[Maritime Industry Authority Circular to the death of a passenger caused by the
No. 2018-27]. breach of contract by a common carrier [Art.
1764, Civil Code].
5. Right to Remain on Board
In case the departure of the vessel is delayed Thus, the damages recoverable are:
the passengers have a right to remain on board 1. Actual or compensatory damages;
and to be furnished with food for the account of 2. Moral damages;
the vessel, unless the delay is due to an 3. Exemplary damages;
accidental cause or to force majeure [Art. 698, 4. Nominal, temperate, and liquidated
Code of Commerce]. damages;
5. Attorney’s fees
6. Right to Return
If the delay should exceed ten days, the 1. Actual or Compensatory Damages
passengers who request it shall be entitled to
the return of the passage [Art. 698, Code of Actual or compensatory damages refer to
Commerce]. adequate compensation for such pecuniary
loss suffered as duly proved [Art. 2199, Civil
7. Right to Damages Code].
If the delay were due exclusively to the captain
or agent, the passengers may furthermore Under Art. 2201, the liability for damages
demand indemnity for losses and damages Include:
[Art. 698, Code of Commerce]. In case the common carrier acted in good faith:
a. The natural and probable consequence
e. Liability for Defects in Equipment and of the breach of the obligation; and
Facilities b. Those which the parties have foreseen
or could have reasonably foreseen at
While a carrier is not an insurer of the safety of the time the obligation was constituted;
the passengers, it should nevertheless be held
Page 241 of 494

In case of fraud, bad faith, malice or wanton Inattention and lack of care on the part of the
attitude, all damages which may be reasonably carrier, resulting in the failure of the passenger
attributed to the nonperformance of the to be accommodated in the class contracted
obligation. for, amounts to bad faith or fraud which entitles
the passenger to the award of moral damages
In case of death, actual damages also include: in accordance with Art. 2220 [Ortigas v.
a. Loss of earning capacity, unless the Lufthansa, G.R. No. L-28773 (1975)].
deceased had no earning capacity at
the time of death; and Willful and deliberate overbooking on the part
b. Support for a period not exceeding five of the airline carrier constitutes bad faith. Under
years [Art. 2206, Civil Code]. Section 3, Economic Regulations No. 7 of the
Civil Aeronautics Board, overbooking, which
In the absence of a showing that common does not exceed ten percent, is not considered
carrier’s attention was called to the special as deliberate and therefore does not amount to
circumstances requiring prompt delivery of a bad faith [United Airlines v. CA, G.R. No.
passenger’s luggage, the common carrier 124110 (2001)].
cannot be held liable for the cancellation of
passenger’s contracts [for exhibition of films] 3. Exemplary Damages
as it could not have foreseen such an
eventuality when it accepted the luggage for In a contract of carriage, exemplary damages
transit [Pan-Am World Airways v. IAC, G.R. No. may be awarded if the common carrier acted in
70462 (1988)]. a wanton, fraudulent, reckless, oppressive, or
malevolent manner [Art. 2232, Civil Code].
Note: Only substantiated and proven expenses
or those that appear to have been genuinely Exemplary damages serve as an instrument to
incurred in connection with the death, wake, or serve the ends of law and public policy by
burial of the victim will be recognized [Victory reshaping socially deleterious behaviors,
Liner, Inc v. Gammad, G.R. No. 159636 specifically, in the case, to compel the common
(2004)]. carrier to control their employees, to tame their
reckless instincts, and to force them to take
2. Moral Damages adequate care of human beings and their
property [Mecenas v. CA, G.R. No. 88052
Moral damages, though incapable of pecuniary (1989)].
computation, if they are the proximate result of
the common carrier’s wrongful act or omission, 4. Nominal, Temperate, and Liquidated
may be recovered [Art. 2217, Civil Code]. Damages
In cases of breach of contract of carriage, Nominal damages are adjudicated in order

moral damages may be recovered where: that a right of the plaintiff, which has been
a. The common carrier acted fraudulently; violated by the defendant, may be vindicated,
b. The common carrier acted in bad faith or recognized, not for the purpose of
[Art. 2220, Civil Code]; indemnifying the plaintiff for any loss suffered
c. Death of a passenger resulted even in by him [Art. 2221, NCC]. It may be awarded in
the absence of bad faith or fraud [Art. case of breach of contract of carriage and in
2206, Civil Code]. every case where any property right has been
invaded [Art. 2222, Civil Code].
Bad faith contemplates a state of mind
affirmatively operating with furtive design or A violation of the passenger’s right to be
with some motive of self-interest or will or for treated with courtesy in accordance with the
ulterior purpose [Air France v. Carrascoso, degree of diligence required by law to be
G.R. No. L-21438 (1966)]. exercised by every common carrier entitles the
passenger to nominal damages [Saludo v. CA,
G.R. No. 95536 (1922)].
Page 242 of 494

Instances where nominal damages have been a. When exemplary damages are
awarded: awarded;
a. Misplacement of the passenger’s b. When the common carrier’s act or
baggage and failure to deliver at the omission has compelled the plaintiff to
time appointed [Alitalia v. IAC, G.R. No. litigate with third persons or to incur
71929 (1990)]. expenses to protect his interest;
b. Violation of the passenger’s right to be c. Where the common carrier acted in
traded with courtesy [Saludo v. CA, gross and evident bad faith in refusing
G.R. No. 95536 (1992)]. to satisfy the plaintiff’s valid, just and
c. Failure to make the necessary demandable claim;
arrangements to transport the d. In any other case where the court
passengers on the first commercial deems it just and equitable that
flight available after cancellation attorney’s fees and expenses of
[Japan Airlines v. CA, G.R. No. 118664 litigation should be recovered.
(1998)].
d. Rerouting the flight without the C. The Montreal Convention of
passenger’s consent and failure to
allege the necessity to justify the 1999
change [Savellano v. Northwest
Airlines, G.R. No. 151783 (2003)]. 1. Applicability
Temperate or moderate damages, which are The Montreal Convention applies to:
more than nominal but less than compensatory a. All international carriage of persons,
damages, may be recovered when some baggage, or cargo performed by
pecuniary loss has been suffered but its aircraft for reward;
amount cannot, from the nature of the case, be b. Gratuitous carriage by aircraft
proved with certainty [Art. 2224, Civil Code]. performed by an air transport
undertaking [Art. 1(1), Montreal
In the case of Philtranco v. Paras [G.R. No. Convention].
161909 (2012)], the Supreme Court upheld the
award of temperate damages by the CA. Paras International air carriage or international air
failed to show receipts of at least two surgeries transport means any carriage in which,
as well as rehabilitative therapy. Nonetheless, according to the agreement between the
the CA was convinced that Paras should not parties, the place of departure and the place of
suffer from the lack of definite proof of his destination, whether or not there be a break in
actual expenses for the surgeries and the carriage or a transshipment, are situated
rehabilitative therapy. Thus, the CA awarded to either:
him temperate damages of P50,000.00 in the a. Within the territories of two State
absence of definite proof of his actual Parties; or
expenses towards that end. b. Within the territory of a single State
Party if there is an agreed stopping
Liquidated damages are those damages place within the territory of another
agreed upon by the parties to a contract, to be State, even if that State is not a State
paid in case of breach thereof [Art. 2226, Civil Party [Art. 1(2), MC]
Code].
What is not an international carriage:
5. Attorney’s Fees Carriage between two points within the territory
of a single State Party without an agreed
Under Art. 2208, as applicable to a contract of stopping place within the territory of another
carriage, attorney’s fees and expenses of State is not international carriage for the
litigation may be recovered in the following purposes of this Convention. [Art. 1(2), MC]
cases: A carriage to be performed by several
successive air carriers is deemed, for the
purposes of the Convention, to be one
Page 243 of 494
undivided carriage, if it has been regarded by to, cargo upon condition only that the event
the parties as a single operation, whether it had which caused the damage so sustained took
been agreed upon under the form of a single place during the carriage by air. [Art. 18(1),
contract or of a series of contracts and it does MC]
not lose its international character merely
because one contract or a series of contracts Exceptions:
is to be performed entirely within the territory of 1. Inherent defect, quality or vice
the same State. [Art. 1(3), MC]. of that cargo;
2. Defective packing of that cargo
2. Extent of Liability of Air Carrier performed by a person other
than the carrier or his servants
a. Death or Injury of Passengers or agents;
3. An act of war or an armed
The carrier is liable for damage sustained in conflict;
case of death or bodily injury of a passenger 4. An act of public authority
upon condition only that the accident which carried out in connection with
caused the death or injury took place: the entry, exit or transit of the
a. on board the aircraft or cargo [Art. 18(2), MC].
b. in the course of any of the operations
Meaning of carriage by air:
of embarking or disembarking.
• The carriage by air comprises the
c. When there was delay [Arts. 17(1) and
19, MC] period during which the cargo is in
the charge of the carrier. [Art. 18,
MC]
b. Destruction, Loss, or Damage to any
• The period of the carriage by air
Checked Baggage does not extend to any carriage by
land, by sea or by inland waterway
The carrier is liable for damage sustained in performed outside an airport.
case of destruction or loss of, or of damage to,
• If, however, such carriage takes
checked baggage upon condition only that the
place in the performance of a
event which caused the destruction, loss or
contract for carriage by air, for the
damage took place on board the aircraft or
purpose of loading, delivery or
during any period within which the checked
transshipment, any damage is
baggage was in the charge of the carrier. [Art.
presumed, subject to proof to the
17(2), MC] contrary, to have been the result of
an event which took place during
Exception to Damage to Checked Baggage: the carriage by air.
The carrier is not liable when the damage • If a carrier, without the consent of
resulted from inherent defect, quality, or vice of the consignor, substitutes carriage
the baggage by another mode of transport for
the whole or part of a carriage
c. Destruction, Loss, or Damage to any intended by the agreement
Unchecked Baggage between the parties to be carriage
by air, such carriage by another
In the case of unchecked baggage, including mode of transport is deemed to be
personal items, the carrier is liable if the within the period of carriage by air.
damage resulted from its fault or that of its [Art. 18, MC]
servants or agents. [Art. 17(2), MC]
e. Delay
d. Damage to Cargo The carrier is liable for damage occasioned by
delay in the carriage by air of passengers,
The carrier is liable for damage sustained in the baggage or cargo. [Art. 19, MC]
event of the destruction or loss of, or damage
Page 244 of 494
Exception: Prescriptive Period for Claims
1. Nevertheless, the carrier shall not be
liable for damage occasioned by delay if it The right to damages shall be extinguished if
proves that it and its servants and agents an action is not brought within a period of two
took all measures that could reasonably be years, reckoned from the date of arrival at the
required to avoid the damage or that it was destination, or from the date on which the
impossible for it or them to take such aircraft ought to have arrived, or from the date
measures. [Art. 19, MC] on which the carriage stopped. [Art. 35, MC]
The Warsaw Convention does not provide for 2. Limitation of Liability

an exclusive enumeration of instances when
the carrier is liable. General Rule: Any provision tending to relieve
a. It does not provide an absolute limit of the carrier of liability or to fix a lower limit than
liability and it does not preclude the that which is laid down shall be null and void,
application of the Civil Code and other but the nullity of any such provision does not
pertinent local laws in the involve the nullity of the whole contract [Art.
determination of the extent of liability of 23(1), WC as amended by the Hague Protocol
the common carrier [Philippine Airlines (1955)].
v. CA, G.R. No. G.R. No. 119706
(1996)]. Exception: When the loss or damage resulted
b. Hence, a complaint for quasi-delict can from the inherent defect, quality or vice of the
still be filed even if the filing is beyond cargo carried [Art. 23(2), WC as amended by
the prescriptive period provided for the Hague Protocol (1955)].
under the Convention so long as it is
within the prescriptive period of four a. Liability to Passengers
years under the Civil Code
[Villanueva]. Liability Limit: Death/Injury
Notice of Claim 1. For damages not exceeding 100 000 Special

Drawing Rights for each passenger, the carrier
Notice of claim with the international carrier is shall not be able to exclude or limit its liability.
a mandatory or condition precedent under the
Montreal Convention. 2. The carrier shall not be liable for damages to
a. Baggage: within 7 days from receipt. the extent that they exceed for each passenger
b. Cargo: within 14 days from receipt 100 000 Special Drawing Rights if the carrier
proves that:
Note: In case of delay, within 21 days from the
date on which the baggage or cargo have been (a) such damage was not due to the
placed at his disposal [Art. 31, MC]. negligence or other wrongful act or
omission of the carrier or its servants or
If no complaint is made within the times agents; or
aforesaid, no action shall lie against the carrier,
save in the case of fraud on its part. [Art. 31, (b) such damage was solely due to the
MC] negligence or other wrongful act or
omission of a third party. [Art. 21, MC]
Receipt by the person entitled to delivery of
checked baggage or cargo without complaint is General Rule: In the carriage of passengers,
prima facie evidence that the same has been the liability of the carrier for each passenger is
delivered in good condition and in accordance limited to “100,000 Special Drawing Rights
with the document of carriage. [Art. 31, MC] for the aggregate of the claims” in respect of
damage suffered because of death or personal
injury to each passenger [Art. 22(1), WC as
amended by Additional Protocol No. 3 (1975)].
Page 245 of 494

Exception: By special contract, the carrier and delivery at destination. [Art. 22,
the passenger may agree to a higher limit [Art. MC]
22(1), WC].
● This exception has been repealed by General Rule: In the carriage of cargo, the
the amendment introduced by liability of the carrier is limited to a sum of 17
Additional Protocol No. 3(1975). Special Drawing Rights per kilogram [Art.
22(2)(a)].
Note: Special drawing rights are
supplementary foreign exchange reserve Exception: The limit does not apply when the
assets defined and maintained by the consignor has made, at the time when the
International Monetary Fund. package was handed over to the carrier, a
special declaration of the value at delivery and
In case of delay in the carriage of persons, the has paid a supplementary sum if the case so
liability is limited to 4,150 Special Drawing requires.
Rights [Art. 22(1)(b), WC as amended by
Additional Protocol No. 4 (1975)]. In that case, the carrier will be liable to pay a
sum not exceeding the declared sum, unless
When limitation unavailable to the carrier: he proves that that sum is greater than the [Art
1. Passenger embarks without a consignor’s actual interest in delivery at
passenger ticket, with the consent of destination [Art 22(2)(a), WC].
the carrier
2. If the ticket does not include a notice a c. Liability for Hand-Carried Baggage
notice to the effect that, if the
passenger's journey involves an As regards hand-carried baggage, the liability
ultimate destination or stop in a country of the carrier is limited to “332 Special
other than the country of departure, the Drawing Rights per passenger” [Art. 22(3)
Warsaw Convention may be applicable WC, as amended by Additional Protocol No. 2
and that the Convention governs and in (1975)].
most cases limits the liability of carriers
for death or personal injury and in The Guatemala Protocol of 1971 increased the
respect of loss of or damage to limit for passengers to $100,000 and for
baggage [Art. 3(2), WC as amended by baggage to $1,000. However, the Supreme
the Hague Protocol (1955)]. Court noted in Santos III v. Northwest Orient
Airlines [G.R. No. 101538(1992)], that the
b. Liability for Checked Baggage Guatemala Protocol is still ineffective
[Sundiang and Aquino].
Liability Limit: Checked Baggage
The Warsaw Convention should be deemed a
General Rule: In the carriage of baggage, the limit of liability only in those cases where:
liability of the carrier in the case of destruction, 1. The cause of death or injury to person,
loss, damage or delay is limited to 1 000 or destruction, loss or damage to
Special Drawing Rights for each passenger property or delay in its transport is not
attributable to or attended by:
Exception: Unless the passenger has made, a. Any willful misconduct, bad
at the time when the checked baggage was faith, recklessness; or
handed over to the carrier, a special b. Otherwise, improper conduct
declaration of interest in delivery at destination on the part of any official or
and has paid a supplementary sum if the case employee for which the carrier
so requires.
is responsible; and
• In that case the carrier will be liable
2. There is otherwise no special or
to pay a sum not exceeding the
extraordinary form of resulting injury
declared sum, unless it proves that
[Alitalia v. IAC, G.R. No. 71929 (1990)].
the sum is greater than the
passenger’s actual interest in
Page 246 of 494
Note: The Montreal Convention 1999 Note: Under the Warsaw Convention, if the
changed the limits of liability in relation to delay, carrier accepts a passenger without a ticket, or
baggage and cargo as follows: a luggage without luggage check, or goods
1. In the case of damage caused by delay without airway bill, the carrier shall not be
as specified in Article 19 in the carriage entitled to avail himself of those provisions of
of persons, the liability of the carrier for the Convention which exclude or limit his
each passenger is limited to 4,150 liability. This has been deleted by the
Special Drawing Rights; Montreal Convention in Art. 3(5).
2. In the carriage of baggage, the liability
of the carrier in the case of destruction,
loss, damage or delay is limited to
1,000 Special Drawing Rights for each
passenger x x x;
3. In the carriage of cargo, the liability of
the carrier in the case of destruction,
loss, damage or delay is limited to a
sum of 17 Special Drawing Rights per
kilogramme x x x [Art. 22, Montreal
Convention].
d. Liability for Cargo
General Rule: In the carriage of cargo, the

liability of the carrier in the case of destruction,
loss, damage or delay is limited to a sum of 17
Special Drawing Rights per kilogramme,
Exception: Unless the consignor has made, at

the time when the package was handed over to
the carrier, a special declaration of interest in
delivery at destination and has paid a
supplementary sum if the case so requires.
• In that case the carrier will be liable
to pay a sum not exceeding the
declared sum, unless it proves that
the sum is greater than the
consignor’s actual interest in
delivery at destination. [Art. 22,
MC]
e. Liability for Delay

In the case of damage caused by delay in the
carriage of persons, the liability of the carrier
for each passenger is limited to 4 150 Special
Drawing Rights.
3. Willful Misconduct
A common carrier may not avail of the limitation

in the following cases:
a. Willful misconduct;
b. Default amounting to willful misconduct
[Art. 25, WC];
Page 247 of 494

PUBLIC SERVICE ACT

COMMERCIAL LAWS
PUBLIC SERVICE ACT COMMERCIAL LAW
2. Foreign Nationals
PUBLIC SERVICE
Foreign nationals shall not be allowed
ACT to own more than fifty percent (50%) of
the capital of entities engaged in the
COMMONWEALTH operation and management of critical
infrastructure unless the country of
ACT NO. 146 AS such foreign national accords
AMENDED BY R.A. reciprocity to Philippine Nationals [Sec.
25, R.A. No. 11659]
NO. 11659
B. Foreign State-Owned
A. Critical Infrastructure Enterprise
Foreign State-owned Enterprise refers
Critical Infrastructure refers to any public to an entity in which a foreign State:
service which owns, uses, or operates (i) directly or indirectly owns more than
systems and assets, whether physical or fifty-percent (50%) of the capital
virtual, so vital to the Republic of the taking into account both the voting
Philippines that the incapacity or destruction rights and beneficial ownership;
of such systems or assets would have a (ii) control, through ownership
detrimental impact on national security, interests, the exercise of more than
including telecommunications and other such fifty percent (50%) of the voting
vital services as may be declared by the rights; or
President of the Philippines. [Sec. 2(e), R.A. (iii) holds the power to appoint a
No. 11659] majority of members of the board of
directors or any other equivalent
Limitations on the Ownership of management body. [Sec. 2(e), R.A.
Critical Infrastructures: No. 11659]
1. Foreign State-Owned Enterprises

C. Public Service as Public
For investments made after the
effectivity of R.A. No. 11659:
Utility
• An entity controlled by or acting Public Utility refers to a public service that
on behalf of the foreign operates, manages or controls for public use
government or foreign state- any of the following:
owned enterprises shall be 1. Distribution of Electricity;
prohibited from owning capital 2. Transmission of Electricity;
in any public service classified 3. Petroleum and Petroleum Products
as public utility or critical Pipeline Transmission Systems;
infrastructure. 4. Water Pipeline Distribution Systems and
Wastewater Pipeline Systems, including
For investments made prior to the sewerage pipeline systems;
effectivity of R.A. No. 11659: 5. Seaports; and
• Foreign state-owned 6. Public Utility Vehicles.
enterprises which own capital All concessionaires, joint ventures and other
prior to the effectivity of R.A. similar entities that wholly operate, manage or
No. 11659 are prohibited from control for public use the sectors above are
investing in additional capital public utilities.
upon the effectivity of this Act.
Page 249 of 494

No other person shall be deemed a public 4. Water Pipeline Distribution
utility unless otherwise subsequently Systems and Wastewater
provided by law. [Sec. 4, R.A. No. 11659] Pipeline Systems, including
NOTE: Previous definition of “public utility”
under C.A. No. 146, Sec. 13(b) is ejusdem
Sewerage Pipeline Systems
Water Pipeline Distribution Systems and
generis – meaning where general words or
phrases follow a number of specific words or Wastewater Pipeline Systems refer to the
operation and maintenance of water
phrases, the general words are specifically
construed as limited and apply only to persons pipeline distribution systems to ensure an
uninterrupted and adequate supply and
or things of the same kind or class as those
expressly mentioned. Previously, statutes distribution of potable water for domestic
and other purposes and the operation
carve out the exceptions.
Now, under R.A. No. 11659, the enumeration and maintenance of wastewater pipeline
systems to ensure public health and
is exclusive. No entity shall be considered as a
safety. [Sec. 2(o), R.A. No. 11659]
public utility unless included in the list
enumerated under Sec. 4 or unless provided EXCLUSIONS:
a. desludging companies and septic
by law.
tanks [Sec. 2(o), R.A. No. 11659]
Definition of Public Utilities:
5. Seaports
Seaport refers to a place where ships
1. Distribution of Electricity may anchor or tie up for the purpose of
Distribution of Electricity refers to the shelter, repair, loading or discharge of
conveyance of electric power by a passengers or cargo, or for other such
distribution utility through its distribution activities connected with water-borne
system [Sec. 2(f), R.A. No. 11659] commerce, and including all the land and
water areas and the structures,
2. Transmission of Electricity equipment and facilities related to these
Transmission of Electricity refers to the functions, as defined by the charters of
conveyance of electricity through the relevant authorities or agencies, such as
high voltage backbone system. [Sec. the Philippine Ports Authority, Subic Bay
2(n), R.A. No. 11659] Metropolitan Authority, PHIVIDEC
Industrial Estate Authority, Cebu Port
3. Petroleum and Petroleum Authority, local government units, and
Products Pipeline Transmission other similar agencies or government
System bodies; [Sec. 2(l), R.A. No. 11659]
Petroleum and petroleum Product
Pipeline Transmission Systems refer to 6. Public Utility Vehicles
the operation and maintenance of Public Utility Vehicles (PUVs) refer to
pipeline transmission systems to ensure internal combustion engine vehicles that
an uninterrupted and adequate supply carry passengers and/or domestic cargo
and transmission of petroleum and for a fee, offering services to the public,
petroleum products to the public; namely trucks-for-hire, UV express
EXCLUSIONS: service, public utility buses (PUBs),
a. petroleum pipeline systems public utility jeepneys (PUJs), tricycles,
operated exclusively for private or filcabs, and taxis.
own use, or incidental to the
operations of a distinct business NOTE: That transport vehicles
[Sec. 2(i), R.A. No. 11659] accredited with and operating through
transport network corporations shall not
be considered as public utility vehicles
[i.e. Grab, Angkas] [Sec. 2(k), R.A. No.
11659]
Page 250 of 494

NOTE: PUVs shall not include electric 2. Exclusivity
vehicles as the definition refers to
“internal combustion engine vehicles.” No franchise, certificate, or authorization shall
be exclusive in character.
Classification of a Public Service as
Public Utility 3. Fixed Term
Upon the recommendation of the National
Economic and Development Authority (NEDA), No franchise, certificate, or authorization shall
the President may recommend to Congress be for a longer period than fifty years. [Sec. 11,
the classification of a public service as a public Art. XII, Const.]
utility on the basis of the following criteria:
1. The person or juridical entity regularly A toll operation agreement with an original
supplies and transmits and distributes stipulation period of 30 years and which
to the public through a network a granted a maximum extension of 50 years was
commodity or service of public struck down by the court for being in violation
consequence; of Sec. 11, Art, II of the Constitution. The
2. The commodity or service is a natural agreement with the original stipulation period of
monopoly that needs to be regulated 30 years and the maximum extension of 50
when the common good so requires. years would allow a concession of 80 years.
For this purpose, natural monopoly This is a violation of the 50-year franchise
exists when the market demand for a threshold under the Constitution. (Francisco v.
commodity or service can be supplied Toll Regulatory Board, G.R. No. 166910
by a single entity at a lower cost that by (2010))
two or more entities;
3. The commodity or service is necessary 4. Subject to amendment
for the maintenance of life and
occupation of the public; and
Such franchise or right shall be subject to
4. The commodity or service is obligated
amendment, alteration, or repeal by the
to provide adequate service to the
Congress when the common good so requires.
public on demand. [Sec. 4, R.A. No.
[Sec. 11, Art. XII, Const.]
11659]
Limitations on the Ownership, 5. Public participation

Operation, Management, and Control
The State shall encourage equity participation
of Public Utilities in public utilities by the general public. [Sec. 11,
Art. XII, Const.]
1. Ownership
6. Foreign participation
No franchise, certificate, or any other form of
authorization for the operation of a public utility The participation of foreign investors in the
shall be granted except to citizens of the governing body of any public utility enterprise
Philippines or to corporations or associations shall be limited to their proportionate share in
organized under the laws of the Philippines, at its capital, and all the executive and managing
least sixty per centum of whose capital is officers of such corporation or association must
owned by such citizens . [Sec. 11, Art. XII, be citizens of the Philippines. [Sec. 11, Art. XII,
Const.] Const.]
The citizenship requirement is intended to 7. Take over

prevent aliens from assuming control of public
utilities, which may be inimical to the national
In times of national emergency, when the
interest.
public interest so requires, the State may,
during the emergency and under reasonable
Page 251 of 494
terms prescribed by it, temporarily take over or payment of just compensation,
direct the operation of any privately-owned transfer to public ownership utilities
public utility or business affected with public and other private enterprises to be
interest. [Sec. 17, Art. XII, Const.] operated by the Government. [Sec. 17,
Art. XII, Const.]
Section 17, Article XII must be understood as
an aspect of the emergency powers clause. D. Unlawful Acts
The taking over of private business affected
with public interest is just another facet of the
emergency powers generally reposed upon It shall be unlawful for any public service:
Congress. Thus, when Sec. 17 states that “the 1. To provide or maintain any service that
State, may during the emergency and under is unsafe, improper, or inadequate,
reasonable terms prescribed by it, temporarily or withhold or refuse any service
take over or direct the operation of any privately which can reasonably be demanded
owned public utility or business affected with and furnished
public interest,” it refers to Congress, not the 2. To make or give, directly or indirectly,
President. (David v. Arroyo, G.R. No. 171396 by itself or through its agents attorneys
(2006)) or brokers, or any of them, discounts or
rebates on authorized rates, or grant
credit for the payment of freight
8. Transfer to public ownership
charges, or any undue or
unreasonable preference or
The State may, in the interest of national advantage to any person or
welfare or defense, establish and operate vital corporation or to any locality or to any
industries and, upon payment of just particular description of traffic or
compensation, transfer to public ownership service, or subject any particular
utilities and other private enterprises to be person or corporation or locality or any
operated by the Government. [Sec. 18, Art. XII, particular description of traffic to any
Const.] prejudice or disadvantage in any
respect whatsoever; to adopt,
Public Service which is Not a Public maintain, or enforce any regulation,
Utility practice or measurement which shall
be found or determined by the
A public service which is not classified as a Commission to be unjust,
public utility under this Act shall be considered unreasonable, unduly preferential or
a business affected with public interest for unjustly discriminatory, in a final order
purposes of Sections 17 and 18 of Article XII of which shall be conclusive and shall
the Constitution. take effect in accordance with the
provisions of this Act, upon appeal or
Legal Implications for Business otherwise.
Affected with Public Interest 3. To refuse or neglect, when requested
by the Postmaster General or his
authorized representative, to carry
1. In times of national emergency, when
public mail on the regular trips of any
the public interest so requires, the
public land transportation service
State may, during the emergency and
maintained or operated by any such
under reasonable terms prescribed by
public service, upon such terms and
it, temporarily take over or direct the
conditions and for a consideration in
operation of any privately-owned public
such amounts as may be agreed upon
utility or business affected with public
between the Postmaster General and
interest. [Sec. 17, Art. XII, Const.]
the public service carrier or fixed by the
2. The State may, in the interest of
Commission in the absence of an
national welfare or defense, establish
agreement between the Postmaster
and operate vital industries and, upon
General and the carrier. In case the
Page 252 of 494
Postmaster General and the public F. Investments by an Entity
service carrier are unable to agree on
the amount of the compensation to be Controlled by or Acting on
paid for the carriage of the mail, the Behalf of the Foreign
Postmaster General shall forthwith Government, or Foreign State-
request the Commission to fix a just
and reasonable compensation for such owned Enterprises
carriage and the same shall be
promptly fixed by the Commission in Capital Ownership Prohibition on
accordance with section sixteen of this Public Utilities and Critical
Act. Infrastructure:
4. To refuse or neglect, when requested
by the Administrative Agency to For investments made after the effectivity of
urgently use, deliver or render the R.A. No. 11659:
public service for the purpose of
• An entity controlled by or acting on behalf
avoiding further loss on human,
of the foreign government or foreign
material, economic, or environment
state-owned enterprises shall be
during a state of calamity. [Sec. 19,
prohibited from owning capital in any
C.A. No. 146 as amended by Sec. 9,
public service classified as public
R.A No. 11659]
utility or critical infrastructure.
E. Powers of the President to For investments made prior to the effectivity of

Suspend or Prohibit Transaction R.A. No. 11659:
or Investment • Foreign state-owned enterprises which
own capital prior to the effectivity of R.A.
No. 11659 are prohibited from investing
In the interest of national security, the in additional capital upon the effectivity
President, after review, evaluation and of this Act.
recommendation of the relevant government
department or Administrative Agency, may,
EXCEPTION: The sovereign wealth funds and
within sixty (60) days from the receipt of such
independent pensions funds of each state may
recommendation, suspend or prohibit any
collectively own up to thirty percent (30%) of
proposed merger or acquisition transaction,
the capital of such public services.
or any investment in a public service that
In the interest of national security, an entity
effectively results in the grant of control,
controlled by or acting on behalf of the foreign
whether direct or indirect, to a foreigner or
government or foreign- owned enterprises shall
a foreign corporation. [Sec. 23, R.A No.
not make any date or information disclosure,
11659]
nor extend assistance, support or cooperation
to any foreign government, instrumentalities or
National Security refers to the requirements
agents. [Sec. 24, R.A. No. 11659]
and conditions necessary to ensure the
territorial integrity of the country and the safety,
security, and well-being of Filipino citizens. G. Reciprocity Clause
[Sec. 2(h), R.A. No. 11659]
Foreign Ownership Limitation for
Critical Infrastructures
General Rule: Foreign nationals shall not be

allowed to own more than fifty percent (50%) of
the capital of entities engaged in the operation
and management of critical infrastructure
Exception: The country of such foreign
national accords reciprocity to Philippine
Page 253 of 494
Nationals as may be provided by foreign law,
treaty or international agreement. Reciprocity
may be satisfied by according rights of similar
value in other economic sectors. The NEDA
shall promulgate rules and regulations for this
purpose.
Foreign Employment
General Rule: A public service shall employ a

foreign national only after the determination of
non-availability of a Philippine National who is
competent, able and willing to perform the
services for which the foreign national is
desired.
Exception: Unless otherwise provided by law,
or by any international agreement
Any foreign national seeking admission to the
Philippines for employment purposes and any
public service which desires to engage a
foreign national for employment in the
Philippines must obtain an employment
permit pursuant to the Labor Code of the
Philippines.
Public services employing foreign nationals

issued employment permits in industries to be
determined by the Department of Labor and
Employment (DOLE) shall implement an
understudy/skills development program to
ensure the transfer of technology/skills to
Filipinos, whether next-in-rank or otherwise,
with the potential of succeeding the foreign
national in the same establishment or its
subsidiary, within a specific period as may be
determined by the DOLE, upon consultation
with relevant government agencies and
industry experts. [Sec. 25, R.A. No. 11659]
Page 254 of 494

INTELLECTUAL PROPERTY CODE

COMMERCIAL LAW
INTELLECTUAL PROPERTY CODE COMMERCIAL LAW
step, and is industrially applicable [Sec.
21, RA 8293].
INTELLECTUAL f. Utility models – a technical solution,
essentially a device or useful object, in
PROPERTY CODE the mechanical field, that is new and
industrially applicable, and which may
relate to a product, process, or an
I. Intellectual Property Code improvement [Ching v. Salinas Jr.,
G.R. No. 161295 (2005)].
A. In General g. Layout designs (topographies) of
integrated circuits – the three-
dimensional disposition, however
1. Definition
expressed, of the elements, at least
one of which is an active element, and
Intangible property rights granted by law to of some or all of the interconnections of
owners of intellectual creations such as an integrated circuit, or such a three-
inventions, designs, signs, and names used in dimensional disposition prepared for
commerce, and literary and artistic Works. an integrated circuit intended for
manufacture [Sec 112.3, RA 8293].
2. Intellectual Property Rights under h. Protection of undisclosed
the Intellectual Property Code (RA information – refers to information
8293) which:
a. Is a secret in a sense that it is
not, as a body or in the precise
These include the following: configuration and assembly of
a. Copyright and related rights – components, generally known
confined to literary and artistic works among or readily accessible to
which are original creations in the persons within the circles that
literary or artistic domain [Ching v. normally deal with the kind of
Salinas Jr., G.R. No. 161295 (2005)]. information in question;
b. Trademarks and service marks – any b. Has commercial value because
visible sign capable of distinguishing it is a secret;
the goods or services of an enterprise c. Has been subject to
[Sec. 121.1, RA 8293]. reasonable steps under the
c. Geographic indications – identifies a circumstances, by the person
good originating in the territory of a d. lawfully in control of the
TRIPS member, or a region or locality information, to keep it secret
in that territory, where a given quality, [Art. 9, TRIPS].
reputation, or other characteristic of the
good is essentially attributable to its
3. Differences between copyright,
geographical origin [Art. 22, TRIPS].
d. Industrial designs – any composition trademarks, and patents
of lines or colors or any three-
dimensional form, whether or not Scope
associated with lines or colors; Patents Any technical solution of a
provided, that such composition or problem in any field of human
form gives a special appearance to and activity which is new,
can serve as pattern for an industrial involves an inventive step
product or handicraft [Sec. 112, RA and is industrially applicable
8293]. [Sec. 21, RA 8293; Kho v.
e. Patents – any technical solution of a Court of Appeals, 379 SCRA
problem in any field of human activity 410 (2002)].
which is new, involves an inventive Trademarks Any visible sign capable of
distinguishing the goods
Page 256 of 494
Scope ** “At any time during the subsistence of the
(trademark) or services copyright, the owner of the copyright or of any
(service mark) of an exclusive right in the work may, for the purpose
enterprise from that of of completing the records of the National
another and shall include a Library and the Supreme Court Library, register
stamped or marked and deposit with them… two (2) complete
container of goods [Sec. copies or reproductions of the work…
121.1, RA 8293]. Provided, That only works in the field of law
shall be deposited with the Supreme Court
In relation thereto, a trade Library. Such registration and deposit is not a
name means the name or condition of copyright protection." [Sec. 191,
designation identifying or RA 8293 as amended by RA 10372]
distinguishing an enterprise.
Copyrights Literary and artistic Works 4. Jurisdiction of the Intellectual
which are original intellectual Property Office
creations in the literary and
artistic domain protected The threshold in administrative complaints for
from the moment of their violations of laws involving intellectual property
creation [Sec. 172.1, RA rights is two hundred thousand pesos
8293]. (P200,000) or more in total damages claimed.
Where Registered
Patents Intellectual Property Office
Trademarks Intellectual Property Office B. Patents
Copyrights The National Library** [Sec.
191, RA 8293]; Bureau of A patent is an exclusive right granted for an
Copyright and Related invention, which is a product or a process that
Rights of the IPO provides, in general, a new way of doing
something, or offers a new technical solution to
When Protection Starts
a problem. To get a patent, technical
Patents Upon the issuance of the
information about the invention must be
letters of patent by the IPO
disclosed to the public in a patent application
Trademarks Upon issuance of the [World Intellectual Property Organization].
trademark certificate
Copyrights Upon creation 1. Patentable Inventions
Term of Protection
Patents 20 years from the date of A patentable invention is any technical
filing of the patent application solution of a problem in any field of human
Trademarks 10 years from the date of activity which is new, involves an inventive step
registration and is industrially applicable. It may be, or may
Copyrights Generally up to 50 years relate to, a product, or process, or an
after the death of the author improvement of any of the foregoing [Sec. 21,
Mode of Acquisition RA 8293].
Patents Through registration in
accordance with the law Standards or requirements for registrability
[Sec. 50, RA 8293]. 1. It must be novel;
Trademarks Through registration, 2. It must be inventive; and
although well-known marks 3. It must be industrially applicable
are protected even without
[Sec. 122, RA 8293]. a. Novelty
Copyrights Through mere creation [Sec.
172.2, RA 8293]. An invention shall not be considered new if it
forms part of a prior art [Sec. 23, RA 8293].
Page 257 of 494

Prior art shall consist of: new product that employs at least one
1. Everything which has been made new reactant [Sec. 26.2, RA 8293 as
available to the public anywhere in the amended by RA 9502].
world, before the filing date or the
priority date of the application claiming Test of Obviousness
the invention [Sec. 24.1, RA 8293]; If any person possessing ordinary skill in the art
2. The whole contents of an earlier was able to draw the inferences and he
published Philippine application or constructs that the supposed inventor drew
application with an earlier priority date from prior art, then the latter did not really
of a different inventor. [Sec. 24.2, RA invent it.
8293].
c. Industrial Applicability
General Rule: When a work has already been
made available to the public, it shall be non- An invention that can be produced and used in
patentable for absence of novelty. any industry shall be industrially applicable
[Sec. 27, RA 8293].
Exception: The disclosure of the information
contained in the application during the 12 This means an invention is not merely
months preceding the filing date or the priority theoretical, but it also has a practical purpose.
date of the application shall not prejudice the If the invention is a product, it should be able to
applicant on the ground of novelty if such produce a product. If the invention is a process,
disclosure was made by: it should be able to lay out a process [WIPO].
1. the inventor;
2. a patent office that should not have
disclosed the information, and the
2. Non-Patentable Inventions
information was found in another
application by the same inventor or a The following shall be excluded from patent
third party; or protection:
3. a third party who obtained the 1. Discoveries, scientific theories, and
information directly or indirectly from mathematical methods, and in the case
the inventor [Sec. 25, RA 8293]. of drugs and medicines, the mere
discovery of a new form or new
b. Inventive Step property of a known substance which
does not result in the enhancement of
the known efficacy of that substance,
An invention involves an inventive step if,
or the mere discovery of any new
having regard to prior art, it is not obvious to a
property or new use for a known
person skilled in the art at the time of the filing
substance, or the mere use of a known
date or priority date of the application claiming
process unless such known process
the invention [Sec. 26.1, RA 8293, as amended
results in a new product that employs
by RA 9502].
at least one new reactant. Salts, esters,
ethers, polymorphs, metabolites, pure
Cheaper Medicines Act
form, particle size, isomers, mixtures of
In case of drugs and medicines, there is no
isomers, complexes, combinations,
inventive step if the invention results from:
and other derivatives of a known
1. The mere discovery of a new form or
substance shall be considered to be
new property of a known substance
the same substance, unless they differ
which does not result in enhancement
significantly in properties with regard to
of the known efficacy of that substance;
efficacy [Sec. 22.1, RA 8293 as
2. The mere discovery of any new
amended by RA 9502];
property or new use for a known
2. Schemes, rules and methods of
substance; or
performing mental acts, playing games
3. The mere use of a known process
or doing business, and programs for
unless such known process results in a
computers [Sec. 22.2, RA 8293];
Page 258 of 494
3. Methods for treatment of the human or c. Inventions Created Pursuant to a
animal body by surgery or therapy and Commission
diagnostic methods practiced on the
human or animal body. This provision Exception: Inventions created pursuant to
shall not apply to products and employment or a commissioned work:
composition for use in any of these 1. The person who commissions the
methods [Sec. 22.3, RA 8293]; work shall own the patent. [Sec. 30.1,
4. Plant varieties or animal breeds or RA 8293]
essentially biological process for the 2. The employer has the right to the
production of plants or animals. This patent if the invention is the result of the
provision shall not apply to micro- performance of the employee’s
organisms and non-biological and regularly assigned duties. [Sec. 30.2,
microbiological processes [Sec. 22.4, RA 8293].
RA 8293];
5. Aesthetic creations [Sec. 22.5, RA
d. Right of Priority
8293];
6. Anything which is contrary to public
An application for patent filed by any person
order or morality [Sec. 22.6, RA 8293].
who has previously applied for the same
invention in another country which by treaty,
3. Ownership of a Patent convention, or law affords similar privileges to
Filipino citizens, shall be considered as filed as
a. Right to a Patent of the date of filing the foreign application:
Provided, That:
General Rule: The right to a patent belongs to 1. the local application expressly claims
the inventor, his heirs, or assigns. When two or priority;
more persons have jointly made an invention, 2. it is filed within twelve (12) months
the right to a patent shall belong to them jointly. from the date the earliest foreign
[Sec. 28, RA 8293]. application was filed; and
3. a certified copy of the foreign
b. First-to-File Rule application together with an English
translation is filed within six (6) months
RA 8293 changed the basis of ownership of a from the date of filing in the
patent from First-to-Invent to First-to-File. Philippines.
If two or more persons have made the invention 4. Grounds for Cancellation of a
separately and independently of each other, Patent
the right to the patent shall belong to the person
who filed an application for such invention, or Any interested person may petition to cancel
where two or more applications are filed for the the patent or any claim thereof, or parts of the
same invention, to the applicant who has the claim, on any of the following grounds:
earliest filing date or, the earliest priority date. a. That what is claimed as the invention is
[Sec. 29, RA 8293] not new or patentable;
b. That the patent does not disclose the
The filing date of a patent application shall be invention in a manner sufficiently clear
the date of receipt by the Office of at least the and complete for it to be carried out by
following elements: any person skilled in the art; or
1. An express or implicit indication that a c. That the patent is contrary to public
Philippine patent is sought; order or morality [Sec. 61.1, RA 8293].
2. Information identifying the applicant;
and Where the grounds for cancellation relate to
3. Description of the invention and one (1) some of the claims or parts of the claim,
or more claims in Filipino or English
[Sec. 40.1, RA 8293].
Page 259 of 494
cancellation may be effected to such extent Patent owners shall also have the right to
only [Sec. 61.2, RA 8293]. assign, or transfer by succession the patent,
and to conclude licensing contracts for the
5. Remedy of the True and Actual same [Sec. 71.2, RA 8293].
Inventor
7. Limitations of Patent Rights
If a person referred to in Sec. 29, other than the
applicant, is declared by final court order or The owner of a patent has no right to prevent
decision as having the right to the patent, such third parties from performing, without his
person may, within three (3) months after the authorization, the acts referred to in Section 71
decision has become final: (see above) in the following circumstances:
1. Prosecute the application as his own
application in place of the applicant; 1. Owner’s Consent:
2. File a new patent application in respect a. Domestic Exhaustion – using
of the same invention; a patented product which has
3. Request that the application be been put on the market in the
refused; or Philippines by the owner of the
4. Seek cancellation of the patent, if one product, or with his express
has already been issued. [Sec. 67, RA consent, insofar as such use is
8293] performed after that product
has been so put on the said
If a person, who was deprived of the patent market;
without his consent or through fraud, is b. International Exhaustion – a
declared by final court order or decision to be drug or medicine has been
the true and actual inventor, the court shall: introduced anywhere else in
1. Order for his substitution as patentee; the world by the patent owner,
or or by any party authorized to
2. At the option of the true inventor, use the invention [Sec. 72.1,
cancel the patent; and RA 8293 as amended by RA
3. Award actual damages in his favor if 9502].
warranted by the circumstances [Sec 2. Parallel Importation – the right to
68, RA 8293] import the drugs and medicines shall
be available to any government agency
6. Rights Conferred by a Patent or any private third party; [Sec. 72.1,
RA 8293 as amended by RA 9502]
3. Non-commercial – where the act is
Where the subject matter of a patent is a
done privately and on a non-
product
commercial scale or for a non-
The patentee shall have the exclusive rights to
commercial purpose: Provided, That it
restrain, prohibit, and prevent any
does not significantly prejudice the
unauthorized person or entity from making,
economic interests of the owner of the
using, offering for sale, selling or importing that
patent; [Sec. 72.2, RA 8293 as
product. [Sec. 71.1.a, RA 8293].
amended by RA 9502]
4. Experimental Use – where the act
Where the subject matter of a patent is a
consists of making or using exclusively
process
for experimental use of the invention
The patentee shall have the exclusive rights to
for scientific purposes or educational
restrain, prevent or prohibit any unauthorized
purposes and such other activities
person or entity from using the process, and
directly related to such scientific or
from manufacturing, dealing in, using, selling or
educational experimental use; [Sec.
offering for sale, or importing any product
72.3, RA 8293 as amended by RA
obtained directly or indirectly from such
9502]
process [Sec. 71.1.b, RA 8293].
Page 260 of 494

5. Bolar Exception – in the case of drugs b. Use by Government
and medicines, where the act includes
testing, using, making or selling the A government agency or third person
invention including any data related authorized by the government may exploit the
thereto, solely for purposes reasonably invention even without agreement of the patent
related to the development and owner where:
submission of information and 1. The public interest, in particular,
issuance of approvals by government national security, nutrition, health or the
regulatory agencies required under any development of other sectors, as
law of the Philippines or of another determined by the appropriate agency
country that regulates the manufacture, of the government, so requires; [Sec.
construction, use or sale of any product 74.1(a), RA 8293]
[Sec. 72.4, RA 8293]. 2. A judicial or administrative body has
6. Individual Preparation of Medicine – determined that the manner of
where the act consists of the exploitation, by the owner of the patent
preparation for individual cases, in a or his licensee, is anti-competitive;
pharmacy or by a medical professional, [Sec. 74.1(b), RA 8293]
of a medicine in accordance with a 3. In the case of drugs and medicines,
medical shall apply after a drug or there is a national emergency or other
medicine has been introduced in the circumstance of extreme urgency
Philippines or anywhere else in the requiring the use of the invention; [Sec.
world by the patent owner, or by any 74.1(c), RA 8293 as amended by RA
party authorized to use the invention: 9502]
Provided, further, That the right to 4. In the case of drugs and medicines,
import the drugs and medicines there is public non-commercial use of
contemplated in this section shall be the patent by the patentee, without
available to any government agency or satisfactory reason; [Sec. 74.1(d), RA
any private third party; [Sec. 72.5, RA 8293 as amended by RA 9502]
8293 as amended by RA 9502] 5. In the case of drugs and medicines, the
7. Usage in Vessels – where the demand for the patented article in the
invention is used in any ship, vessel, Philippines is not being met to an
aircraft, or land vehicle of any other adequate extent and on reasonable
country entering the territory of the terms, as determined by the Secretary
Philippines temporarily or accidentally: of the Department of Health. [Sec.
Provided, That such invention is used 74.1(e), RA 8293, as amended by RA
exclusively for the needs of the ship, 9502]
vessel, aircraft, or land vehicle and not
used for the manufacturing of anything c. Compulsory Licensing
to be sold within the Philippines. [Sec.
72.6, RA 8293 as amended by RA The Director General of the IPO may grant a
9502] compulsory license to exploit an invention even
without the agreement of the owner (see Letter
a. Prior User b on page 9).
Any prior user, who, in good faith was using the 8. Patent Infringement
invention or has undertaken serious
preparations to use the invention in his Patent infringement is the making, using,
enterprise or business, before the filing date or offering for sale, selling, or importing a
priority date of the application on which a patented product or a product obtained directly
patent is granted, shall have the right to or indirectly from a patented process, or the
continue the use thereof as envisaged in such use of a patented process without the
preparations within the territory where the authorization of the patentee [Sec 76.1, RA
patent produces its effect [Sec. 73.1, RA 8293]. 8293].
Page 261 of 494
Anyone who actively induces the infringement that all three components of such equivalency
of a patent or provides the infringer with a test are met [Smith Klein Beckman Corp. v. CA,
component of a patented product or of a G. R. No. 126627 (2003)].
product produced because of a patented
process knowing it to be especially adopted for b. Defenses in Action for Infringement
infringing the patented invention and not
suitable for substantial non-infringing use shall Invalidity of Patent
be liable as a contributory infringer and shall be The defendant may show the invalidity of the
jointly and severally liable with the infringer patent, or any claim thereof, on any of the
[Sec. 76.6, RA 8293]. grounds on which a petition of cancellation can
be brought under Section 61 (see Number 4 on
a. Tests in Patent Infringement page 4) [Sec. 81, RA 8293].
Literal Infringement Doctrine of File Wrapper Estoppel

In using literal infringement as a test, resort The patentee is precluded from claiming as
must be had in the first instance to the words of part of a patented product that which he had to
the claim. excise or modify in order to avoid patent office
rejection, and he may omit any additions he
To determine whether the particular item falls was compelled to add by patent office
within the literal meaning of the patent claims, regulations [Advance Transformer Co. v.
the court must juxtapose the claims of the Levinson, 837 F.2d 1081 (1988)].
patent and the accused product within the
overall context of the claims and specifications,
to determine whether there is exact identity of 9. Licensing
all material elements [Godinez v. CA, G.R. No.
L-97343 (1993)]. a. Voluntary
The grant by the patent owner to a third person
The test is satisfied if the following are met: of the right to exploit a patent invention.
1. Exactness Rule – the item being sold,
made, or used conforms exactly to the Voluntary licensing encourages the transfer
patent claim of another and dissemination of technology, prevent or
2. Addition Rule – one makes, uses, or control practices and conditions that may in
sells an item that has all the elements particular cases constitute an abuse of
of the patent claim of another plus other intellectual property rights having an adverse
elements effect on competition and trade [Sec 85, RA
8293].
Doctrine of Equivalents
Under the doctrine of equivalents, an To this end, all voluntary technology transfer
infringement occurs when a device: arrangements or licensing contract shall:
a. Appropriates a prior invention by 1. Not contain any of the prohibited
incorporating its innovative concept, clauses for voluntary license contracts
albeit with some modification and under Sec. 87.
change; 2. Contain all of the mandatory provisions
b. Performs substantially the same for voluntary license contracts under
function in substantially the same way; Sec. 88.
and 3. Be approved and registered with the
c. Achieves substantially the same result Documentation, Information and
[Godinez v. CA, G.R. No. L-97343 Technology Transfer Bureau of the
(1993)]. IPOPHL as an exceptional case under
Sec. 91, but only if the agreement fails
The doctrine of equivalents thus requires to comply with Sec. 87 and 88.
satisfaction of the function-means-and-result
test, the patentee having the burden to show
Page 262 of 494

Mandatory Provisions inventions or improvements that may
1. That the laws of the Philippines shall be obtained through the use of the
govern the interpretation of the same licensed technology;
and in the event of litigation, the venue 7. Those that require payment of royalties
shall be the proper court in the place to the owners of patents for patents
where the licensee has its principal which are not used;
office; 8. Those that prohibit the licensee to
2. Continued access to improvements in export the licensed product unless
techniques and processes related to justified for the protection of the
the technology shall be made available legitimate interest of the licensor such
during the period of the technology as exports to countries where exclusive
transfer arrangement. licenses to manufacture and/or
3. In the event the technology transfer distribute the licensed product(s) have
arrangement shall provide for already been granted;
arbitration, the Procedure of Arbitration 9. Those which restrict the use of the
of the Arbitration Law of the Philippines technology supplied after the expiration
or the Arbitration Rules of the United of the technology transfer
Nations Commission on International arrangement, except in cases of early
Trade Law (UNCITRAL) or the Rules of termination of the technology transfer
Conciliation and Arbitration of the arrangement due to reason(s)
International Chamber of Commerce attributable to the licensee;
(ICC) shall apply and the venue of 10. Those which require payments for
arbitration shall be the Philippines or patents and other industrial property
any neutral country; rights after their expiration, termination
4. The Philippine taxes on all payments arrangement;
relating to the technology transfer 11. Those which require that the
arrangement shall be borne by the technology recipient shall not contest
licensor [Sec. 88, RA 8293]. the validity of any of the patents of the
technology supplier;
Prohibited Clauses 12. Those which restrict the research and
1. Those which impose upon the licensee development activities of the licensee
the obligation to acquire from a specific designed to absorb and adapt the
source capital goods, intermediate transferred technology to local
products, raw materials, and other conditions or to initiate research and
technologies, or of permanently development programs in connection
employing personnel indicated by the with new products, processes or
licensor; equipment;
2. Those pursuant to which the licensor 13. Those which prevent the licensee from
reserves the right to fix the sale or adapting the imported technology to
resale prices of the products local conditions, or introducing
manufactured on the basis of the innovation to it, as long as it does not
license; impair the quality standards prescribed
3. Those that contain restrictions by the licensor;
regarding the volume and structure of 14. Those which exempt the licensor for
production; liability for non-fulfillment of his
4. Those that prohibit the use of responsibilities under the technology
competitive technologies in a non- transfer arrangement and/or liability
exclusive technology transfer arising from third party suits brought
agreement; about by the use of the licensed
5. Those that establish a full or partial product or the licensed technology;
purchase option in favor of the licensor; 15. Other clauses with equivalent effects
6. Those that obligate the licensee to [Sec. 87, RA 8293].
transfer for free to the licensor the
Page 263 of 494

Rights of Licensor of the Department of Health; [Sec.
1. Grant further licenses to third persons; 93.6, RA 8293 as amended by RA
2. Exploit the subject matter of the 9502]
technology transfer agreement [Sec. 7. When semi-conductor technology is for
89, RA 8293]. non-commercial use or to remedy anti-
competitive practices [Sec. 96, RA
Rights of Licensee 8293].
1. Exploit the subject matter of the 8. If the invention protected by a patent,
technology transfer agreement during hereafter referred to as the "second
the whole term of the agreement [Sec. patent," within the country cannot be
90, RA 8293]. worked without infringing another
patent, hereafter referred to as the "first
b. Compulsory patent," granted on a prior application
The Director General of the Intellectual or benefiting from an earlier priority, a
Property Office may grant a license to exploit a compulsory license may be granted to
patented invention, even without the the owner of the second patent to the
agreement of the patent owner, in favor of any extent necessary for the working of his
person who has shown his capability to exploit invention, subject to certain conditions;
the invention, under any of the following [Sec. 97, RA 8293]
circumstances: 9. Manufacture and export of drugs and
1. National emergency or other medicines to any country having
circumstances of extreme urgency; insufficient or no manufacturing
[Sec. 93.1, RA 8293 as amended by capacity in the pharmaceutical sector
RA 9502] to address public health problems:
2. Where the public interest, in particular, Provided, That, a compulsory license
national security, nutrition, health or the has been granted by such country or
development of other vital sectors of such country has, by notification or
the national economy as determined by otherwise, allowed importation into its
the appropriate agency of the jurisdiction of the patented drugs and
Government, so requires; [Sec. 93.2, medicines from the Philippines in
RA 8293 as amended by RA 9502] compliance with the TRIPS
3. Where a judicial or administrative body Agreement. [Sec. 93-A.2, RA 8293 as
has determined that the manner of amended by RA 9502]
exploitation by the owner of the patent
or his licensee is anti-competitive; Terms and Conditions of a Compulsory
[Sec. 93.3, RA 8293 as amended by License
RA 9502] 1. The basic terms and conditions
4. In case of public non-commercial use including the rate of royalties shall be
of the patent by the patentee, without fixed by the Director of Legal Affairs;
satisfactory reason; [Sec. 93.4, RA 2. The scope and duration of the license
8293 as amended by RA 9502] shall be limited to its purpose;
5. If the patented invention is not being 3. The license shall be non-exclusive;
worked in the Philippines on a 4. The license shall be non-assignable,
commercial scale, although capable of except with that part of the enterprise
being worked, without satisfactory or business with which the invention is
reason: Provided, That the importation being exploited;
of the patented article shall constitute 5. Use of the subject matter shall be
working or using the patent; [Sec. 93.5, devoted predominantly for the supply
RA 8293 as amended by RA 9502] of the Philippine market, but if the
6. Where the demand for patented drugs ground for approval was the anti-
and medicines is not being met to an competitive practice of the patentee,
adequate extent and on reasonable then this limitation shall not apply;
terms, as determined by the Secretary
Page 264 of 494

6. The license may be terminated upon a. Definitions
proper showing that the circumstances
that led to its grant ceased to exist and Marks
are unlikely to recur; Any visible sign capable of distinguishing the
7. The patentee shall be paid adequate goods (trademark) or services (service mark)
remuneration for the grant or of an enterprise and shall include a stamped or
authorization, but if his practices are marked container of goods [Sec. 121.1, RA
determined to be anti-competitive, then 8293].
the need to correct such will be taken
into account in fixing the amount [Sec. Trademark
100, RA 8293]. Any visible sign which is adopted and used to
identify the source or origin of goods; and
10. Assignment and Transmission of capable of distinguishing them from goods
Rights emanating from a competitor.
The following are the functions of a trademark:

Inventions and any right, title or interest in and
To point out distinctly the origin or ownership of
to patents and inventions covered thereby,
the goods and to which it is affixed;
may be assigned or transmitted by inheritance
To secure him, who has been instrumental in
or bequest or may be the subject of a license
bringing into the market a superior article of
contract [Sec. 103.2, RA 8293].
merchandise, the fruit of his industry and skill;
To assure the public that they are producing
An assignment may be of:
the genuine article;
1. The entire right, title, or interest in and
To prevent fraud and imposition; and
to the patent and the invention covered
To protect the manufacturer against
thereby, or
substitution and sale of an inferior and different
2. An undivided share of the entire patent
article as its product [Mirpuri v. CA, G.R. No.
and invention, in which event the
114508 (1999)].
parties become joint owners thereof.
Service Mark
An assignment may also be limited to a
Any visible sign capable of distinguishing the
specified territory [Sec. 104, RA 8293].
services of an enterprise from the service of
other enterprises.
Rights of Joint Owners
If two or more persons jointly own a patent and
Collective Marks
the invention covered thereby, each joint owner
Any visible sign designated as such in the
shall be entitled to personally make, use, sell,
application for registration and capable of
or import the invention for his own profit.
distinguishing the origin or any other common
characteristic, including the quality of goods or
However, neither of the joint owners shall be
services of different enterprises which use the
entitled to grant licenses or to assign his right,
sign under the control of the registered owner
title or interest or part thereof without the
of the collective mark [Sec. 121.2, RA 8293].
consent of the other owner or owners, or
without proportionally dividing the proceeds
Trade Name
with such other owner or owners. [Sec. 107, RA
The name or designation identifying or
8293]
distinguishing an enterprise [Sec. 121.3, RA
8293].
C. Trademarks
Any individual name or surname, firm name,
1. Marks vs. Collective Marks vs. device or word used by manufacturers,
Trade Names industrialists, merchants, and others to identify
their businesses, vocations or occupations
Page 265 of 494

[Converse Rubber Corp. v. Universal Rubber These must remain in the public domain and
Products, Inc., G.R. No. L-27906 (1987)]. can never be registered as a trademark.
Examples: “SUGAR” for refined sugar, “KAPE”
b. Trademark/Service Mark vs. Trade for instant coffee, “WATER” for bottled water.
Name (Under the IP Code)
Descriptive Marks
Consists exclusively of signs or of indications
Trademark or Trade Name that may serve in trade to designate the kind,
Service Mark quality, quantity, intended purpose, value,
geographical origin, time or production of the
Basis of Ownership goods or rendering of the services, or other
characteristics of the goods or services [Sec.
Registration Prior use in 123(j), RA 8293].
Philippine
commerce These are words that merely describe the
product or service or refer to their quality or
When Protected characteristic.
Upon registration A trade name may General Rule: Descriptive marks are not
be protected even if entitled to protection and are too weak to
unregistered function as a trademark.
Remedies
Exception: Doctrine of Secondary meaning.
A trademark or A trade name owner A word or phrase originally incapable of
service mark owner only has civil and exclusive appropriation with reference to an
can avail of administrative article on the market, because geographically
administrative, civil, remedies or otherwise descriptive, might nevertheless
and criminal have been used so long and so exclusively by
remedies one producer with reference to his article that,
in that trade and to that branch of the
Assignment purchasing public, the word or phrase has
come to mean that the article was his product
A trademark or A trade name can [Arce Sons v. Selecta Biscuits, G.R. No. L-
service mark can be only be assigned 14761 (1961)].
assigned with the business
independent of Example: “YELLOW PAGES” for telephone
business directory having yellow pages.
Suggestive Marks
c. Spectrum of Distinctiveness Marks that hint or suggest the nature or quality
of the good or service without directly
Generic Marks describing it. They are “subtly descriptive” and
Generic Marks are those which constitute the are entitled to protection despite lack of
common descriptive name of an article or distinctiveness.
substance, or comprise the genus of which the
particular product is a species, or are Example: “JAGUAR” for automobile.
commonly used as the name or description of
a kind of goods, or imply reference to every Arbitrary Marks
member of a genus and the exclusion of Common words used as marks but are
individuating characters, or refer to the basic unrelated to the good or service they represent.
nature of the wares or services provided rather They neither describe nor suggest the
than to the more idiosyncratic characteristics of characteristic of the goods or service, though
a particular product. [Societe Des Produits
Nestle v. CA, G.R. No. 112012, 2001].
Page 266 of 494
they are considered highly distinctive for owner shall be excused. However, non-use
purposes of registration. due to lack of funds shall not excuse non-use
of a mark [Sec. 152.1, RA 8293].
Example: “APPLE” for electronic products. The following shall not be grounds for
cancellation or removal of a mark:
Fanciful or “Coined” Marks 1. Use which does not alter its distinctive
These are invented or “coined” words that do character though the use is different from
not have any meaning and are made solely for the form in which it is registered [Sec.
the purpose of the mark. They are considered 152.2, RA 8293].
“strong” marks for purposes of registration and 2. Use of a mark in connection with one or
protection for being inherently distinctive. more of the goods/services belonging to
the class in which the mark is registered
Example: “KODAK” for camera. [Sec. 152.3, RA 8293].
3. Use of the mark by a company related
2. Acquisition of Ownership of Mark to the applicant or registrant [Sec. 152.4,
RA 8293].
a. Concept of actual use 4. Use of the mark by a person controlled
by the registrant [Sec. 152.4, RA 8293].
Actual use pertains to the actual use of the
mark in local (Philippine) commerce and trade Note: The use of a mark by a company related
[Philip Morris v. Fortune Tobacco, G.R. No. with or controlled by the registrant or applicant
158589 (2006)]. shall inure to the latter's benefit: Provided, that
such mark is not used in such manner as to
Prior Use of a Mark as a Requirement deceive the public [Sec.152.4, RA 8293].
While RA 8293 no longer requires prior use
before filing the application, it still requires use b. Effect of registration
of the mark after filing, registration and
renewal. General Rule: The owner of a registered mark
shall have the exclusive right to prevent all third
Before the IP Code parties not having the owner’s consent from
Under the old trademark law or R.A. 166, actual using in the course of trade identical or similar
commercial use of a trademark in the signs or containers for goods or services which
Philippines was required prior to its registration are identical or similar to those in respect of
[Sec. 2-A, RA 166]. which the trademark is registered where such
use would result in a likelihood of confusion.
Under the IP Code In case of the use of an identical sign for
RA 8293 no longer requires prior use before identical goods or services, a likelihood of
filing the application (i.e., it shifted to an intent confusion shall be presumed [Sec. 147.1, RA
to use system). However, the law still requires 8293].
use of the mark after filing.
Exception: In cases of importation of drugs and
To emphasize, following the ruling in Zuneca medicines allowed under Section 72.1 of this
Pharmaceutical v. Natrapharm [G.R. No. Act (see Number 7 on page 5) and of off-patent
211850 (2020)], for marks that are first used drugs and medicines, third parties can import
and/or registered after the effectivity of the IP the same even without the owner’s consent,
Code, ownership is no longer dependent on the provided that:
fact of prior use in light of the adoption of the 1. Said drugs and medicines bear the
first-to-file rule and the rule that ownership is registered marks
acquired through registration. 2. The registered marks have not been
tampered, unlawfully modified, or infringed
Non-Use of Mark; When Excused upon [Sec. 147.1, RA 8293 as amended by
Non-use caused by circumstances arising RA 9502].
independently of the will of the trademark
Page 267 of 494

Registration is a prerequisite before one can Section 3, and who previously duly filed an
file an action for trademark infringement [Sec. application for registration of the same mark in
147.1, RA 8293]. one of those countries, shall be considered as
filed as of the day the application was first filed
The exclusive right of the owner of a well- in the foreign country (Provided, the Philippine
known mark defined in Subsection 123.1(e) application is filed within 6 months from the
(see Letter c on page 17) which is registered in filing of the foreign application) [Sec. 131.1, RA
the Philippines, shall extend to goods and 8293].
services which are not similar to those in
respect of which the mark is registered: No registration of a mark in the Philippines by
Provided, That use of that mark in relation to a person described in this section shall be
those goods or services would indicate a granted until such mark has been registered in
connection between those goods or services the country of origin of the applicant [Sec.
and the owner of the registered mark: Provided 131.2, RA 8293].
further, That the interests of the owner of the
registered mark are likely to be damaged by Note: Any person who is a national or who is
such use [Sec. 147.2, RA 8293]. domiciled or has a real and effective industrial
establishment in a country which is a party to
c. Acquisition any convention, treaty or agreement relating to
intellectual property rights or the repression of
General Rule: To acquire rights in a mark, unfair competition, to which the Philippines is
registration is required [Sec. 122, RA 8293]. also a party, or extends reciprocal rights to
nationals of the Philippines by law, shall be
Exception: Well-known marks are protected entitled to benefits to the extent necessary to
even without registration. give effect to any provision of such convention,
treaty or reciprocal law, in addition to the rights
Note: However, when the well-known mark is to which any owner of an intellectual property
not registered, its protection is limited, as it only right is otherwise entitled by this Act [Sec. 3,
prevents the registration of confusingly similar RA 8293].
marks that are used for identical or similar
goods or services [Sec. 123.1(e), RA 8293]. Significance of Priority Right
A Philippine application filed by another
On Good Faith applicant after the priority date but earlier than
Being the first-to-file registrant in good faith the foreign applicant’s actual filing may be
allows the registrant to acquire all the rights in refused registration if it is identical to the mark
a mark. with a priority date [Agpalo, The Law on
Trademark, Infringement and Unfair
When there are no grounds for cancellation - Competition (2000)].
especially the registration being obtained in
bad faith or contrary to the provisions of the IP 3. Acquisition of Ownership of Trade
Code, which render the registration void - the Name
first-to-file registrant acquires all the rights in a
mark. The ownership of a trade name is acquired
through adoption and use.
In the same vein, prior users in good faith are
also protected in the sense that they will not be Such names shall be protected, even prior to
made liable for trademark infringement even if or without registration, against any unlawful act
they are using a mark that was subsequently committed by third parties [Sec. 165.2 (a), RA
registered by another person. 8293].
Priority Right Any subsequent use of the trade name by a

An application for registration of a mark filed in third party, whether as a trade name or a mark
the Philippines by a person referred to in or collective mark, or any such use of a similar
Page 268 of 494
trade name or mark, likely to mislead the identical or similar goods or services;
public, shall be deemed unlawful [Sec. 165.2 [Sec. 123.1(e), RA 8293]
(b), RA 8293]. f. Is identical with, or confusingly similar
A name or designation may not be used as a to, or constitutes a translation of a well-
trade name: known mark which is registered in the
1. If by its nature or the use to which such Philippines, and used for goods or
name or designation may be put, it is services which are not similar; [Sec.
contrary to public order or morals; and 123.1(f), RA 8293]
2. If, in particular, it is liable to deceive g. Likely to mislead the public, particularly
trade circles or the public as to the nature as to the nature, quality, characteristics
of the enterprise identified by that name or geographical origin of the goods or
[Sec. 165.1, RA 8293]. services; [Sec. 123.1(g), RA 8293]
h. Consists exclusively of signs that are
Any change in the ownership of a trade name generic for the goods or services that
shall be made with the transfer of the enterprise they seek to identify; [Sec. 123.1(h),
or part thereof identified by that name [Sec. RA 8293]
165.4, RA 8293]. i. Consists exclusively of signs or of
indications that have become
4. Non-Registrable Marks customary or usual to designate the
goods or services in everyday
A mark cannot be registered if it: language or in a bona fide and
a. Consists of immoral, deceptive or established trade practice; [Sec.
scandalous matter, or matter which 123.1(i), RA 8293]
may disparage or falsely suggest a j. Consists exclusively of signs or of
connection with persons, living or indications that may serve in trade to
dead, institutions, beliefs, or national designate the kind, quality, quantity,
symbols, or bring them into contempt intended purpose, value, geographical
or disrepute; [Sec. 123.1(a), RA 8293] origin, time or production of the goods
b. Consists of flags, coat of arms or other or rendering of the services, or other
insignia of the Philippines or any characteristics of the goods or
foreign country; [Sec. 123.1(b), RA services; [Sec. 123.1(j), RA 8293]
8293] k. Consists of shapes that may be
c. Consists of a name, portrait or necessitated by technical factors or by
signature identifying a particular living the nature of the goods themselves or
individual except by his written factors that affect their intrinsic value;
consent, or of a deceased President of [Sec. 123.1(k), RA 8293]
the Philippines, during the life of his l. Consists of color alone, unless defined
widow, except by written consent of the by a given form; [Sec. 123.1(l), RA
widow; [Sec. 123.1(c), RA 8293] 8293]
d. Is identical with a registered mark of m. Is contrary to public order or morality.
another or a mark with an earlier filing [Sec. 123.1(m), RA 8293]
or priority date, in respect of:
i. The same goods or services, or Other instances when a mark may be
ii. Closely related goods or registered:
services, or 1. When it is part of a composite mark,
iii. If it nearly resembles such a though there should be a disclaimer
mark as to be likely to deceive and the person who registers them will
or cause confusion; [Sec. not acquire ownership thereto;
123.1(d), RA 8293] 2. If they are contractions of or coined
e. Is identical with, or confusingly similar from generic and descriptive terms;
to, or constitutes a translation of a well- 3. If they are used in a fanciful or arbitrary
known mark, whether or not registered manner;
in the Philippines, and used for
Page 269 of 494

4. If the mark falls under the Doctrine of Although “sakura” refers to the Japanese
Secondary Meaning. flowering cherry and is, therefore, of a generic
nature, such mark did not identify Kensonic's
Doctrine of Secondary Meaning goods unlike the mark in Asia Brewery, Inc., v.
Secondary meaning is acquired when a Court of Appeals. Kensonic's DVD or VCD
descriptive mark or a mark that may serve in players and other products could not be
trade that consists of a shape or color becomes identified with cherry blossoms. Hence, the
distinctive because of its exclusive and mark can be appropriated. [Kensonic, Inc. v.
continuous use in Philippine commerce. Uni-Line Multi Resources, Inc., G.R. Nos.
211820-21 and 211834-35 (2018)]
A word or phrase originally incapable of
exclusive appropriation, might have been used 5. Test to Determine Confusing
so long and so exclusively by one producer Similarity Between Marks
with reference to his article that, in that trade
and to that branch of the purchasing public, the Dominancy Test
word or phrase has come to mean that the
The dominancy test considers the dominant
article was his product. [Ang v. Teodoro, G.R. features in the competing marks in determining
No. L-48226 (1942)]
whether they are confusingly similar.
Disclaimers
Under the dominancy test:
The Office may allow or require the applicant to
• Greater weight is given to the similarity
disclaim an unregistrable component of an
of the appearance of the product
otherwise registrable mark but such disclaimer
arising from the adoption of the
shall not prejudice or affect:
dominant features of the registered
a. The applicant’s or owner’s rights then
mark.
existing or thereafter arising in the
• Minor differences between the
disclaimed matter; nor
registered mark and the mark in
b. The applicant’s or owner’s right on
question are disregarded.
another application of later date if the
• The aural and visual impressions
disclaimed matter became distinctive
created by the marks in the public mind
of the applicant’s or owner’s goods,
are considered.
business or services. [Sec. 126]
• Little weight is given to factors like
prices, quality, sales outlets and
The basic purpose of disclaimers is to make of
market segments. [McDonald’s
record, that a significant element of a
Corporation v. L.C. Big Mak Burger,
composite mark is not being exclusively
Inc., et al., G.R. No. 143993 (2004)]
appropriated by itself apart from the composite.
[Rule 608, Rule on Trademarks]
It is now the controlling test, as the holistic test
has been abandoned since the case of Kolin
Disclaimed Words
Electronics Co., Inc. v. Kolin Philippines
Words in a mark that are not being claimed for
International, Inc. [G.R. No. 228165 (2021)].
exclusive use, including:
1. Generic terms;
The case of Emzee Foods, Inc. v. Elarfoods,
2. Descriptive words; and
Inc.
3. Those that do not function as part of the
Applying the dominancy test to the case at bar,
trademark. [Rule 608, Rule on
it is very obvious that the petitioner's marks
Trademarks].
"ELARZ LECHON" and "ELAR LECHON" bear
an indubitable likeness with respondent's
The case of Kensonic, Inc. v. Uni-Line Multi
"ELARS LECHON."
Resources, Inc.
Can the word “sakura,” a generic word for
As can easily be seen, both marks use the
cherry blossom flowers, be registered for
essential and dominant word "ELAR". The only
trademark for non-flowers? Yes.
difference between the petitioner's mark from
Page 270 of 494
that of respondent's are the last letters Z and 1. The duration, extent and geographical
S, respectively. area of any use of the mark;
However, the letters Z and S sound similar 2. The market share in the Philippines
when pronounced. Thus, both marks are not and other countries of the
only visually similar, but are phonetically and goods/services to which the mark
aurally similar as well. applies;
3. The degree of the inherent or acquired
To top it all off, both marks are used in selling distinction of the mark;
lechon products. Verily, there exists a high 4. The quality-image or reputation
likelihood that the consumers may conclude an acquired by the mark;
association or relation between the products. 5. The extent to which the mark has been
registered in the world;
Likewise, the uncanny resemblance between 6. The exclusivity of the registration
the marks may even lead purchasers to believe attained by the mark in the world;
that the petitioner and respondent are the 7. The extent of use of the mark in the
same entity. [Emzee Foods, Inc., v. Elarfoods, world;
Inc., G.R. No. 220558 (2021)] 8. The exclusivity of use in the world;
9. The commercial value attributed to the
6. Well-Known Marks mark in the world;
10. The record of successful protection of
A well-known mark is a mark which a the rights in the mark;
11. The outcome of litigations dealing with
competent authority of the Philippines has
designated to be well-known internationally the issue of whether the mar is well-
known; and
and in the Philippines, [Sec. 123.1(e), RA
8293]. 12. The presence or absence of identical
or similar test marks validly registered
"Competent authority" for purposes of or used on other similar goods or
services and owned by others [See
determining whether a mark is well-known,
means: Rule 103, Trademark Regulations of
2017].
a. The Court;
b. The Director General;
c. The Director of the Bureau of Legal Note: The determinants need not concur.
Affairs [Rule 101 (d), Trademark
Regulations of 2017]; b. Protection Extended to Well-Known
d. Any administrative agency or office Marks
vested with quasi-judicial or judicial
jurisdiction to hear and adjudicate any The owner of a well-known mark has the right
action to enforce the rights to a mark [Dy v. to be protected, whether or not the mark is
Koninklijke Philips Electronics, N.V. G.R. registered in the Philippines [Sec. 123.1(e), RA
No. 186088 (2017)]. 8293].
In determining whether a mark is well-known, c. Sec. 123.1 (e) vs. Sec. 123.1 (f)
account shall be taken of the knowledge of the
relevant sector of the public, rather than the If the well-known mark is registered or not
public at large, including knowledge in the registered in the Philippines, a mark cannot be
Philippines which has been obtained as a registered if it is identical with, or confusingly
result of the promotion of the mark [Sec. similar to, or constitutes a translation of an
123.1(e), RA 8293]. internationally well-known mark if used for
identical or similar goods or services [Sec.
a. Determinants 123.1(e), RA 8293].
Factors to determine whether a mark is well- If the well-known mark is registered in the
known: Philippines, a mark cannot be registered if it is
Page 271 of 494
identical with, or confusingly similar to, or a. When Such Rights Are Conferred
constitutes a translation of an internationally
well-known mark even if it is used for goods or The rights of the owner are conferred upon
services which are NOT similar to those with registration of the mark, and a mark is deemed
respect to which registration is applied [Sec. registered on the 31st day from the publication
123.1(f), RA 8293]. for purposes of opposition, provided no
opposition is filed:
Other persons or entities cannot use the 1. On the 31st day from the publication for
registered well-known mark even for unrelated purposes of opposition (if no opposition
goods, provided that: is filed)
1. The use of the mark in relation to those 2. On the date the decision or final order
goods or services would indicate a giving due course to the application
connection between those goods or becomes final and executory (if
services, and the owner of the opposition is filed) [See Rule 703,
registered mark; and Trademarks Regulations of 2017].
2. That the interests of the owner of the
registered mark are likely to be Certificate of Registration
damaged by such use [Sec. 123.1(f), A certificate of registration of a mark shall be
RA 8293]. prima facie evidence of:
1. The validity of the registration,
7. Rights Conferred by Registration 2. The registrant's ownership of the mark,
and
The owner of a registered mark shall have the 3. The registrant's exclusive right to use
exclusive right to prevent all third parties not the same in connection with the goods
having the owner's consent from using in the or services and those that are related
course of trade: thereto specified in the certificate [Sec.
a. Identical or similar signs or containers, 138, RA 8293].
b. For goods or services which are
identical or similar to those in respect Duration
of which the trademark is registered, A certificate of registration shall remain in force
c. Where such use would result in a for 10 years from registration and may be
likelihood of confusion. renewed for periods of 10 years at its expiration
upon payment of the prescribed fee and upon
Note: In case of the use of an identical sign for filing of a request [Sec. 145-146, RA 8293].
identical goods or services, a likelihood of
confusion shall be presumed [Sec. 147.1, RA b. Limitations on Such Right
8293 as amended by RA 9502].
Duration
Exception: In cases of importation of drugs and Except that, inasmuch as the registration of a
medicines allowed under Section 72.1 of this trademark could be renewed every 10 years,
Act (see Number 7 on page 5) and of off-patent provided a Declaration of Actual Use is timely
drugs and medicines, third parties can import submitted, a trademark could conceivably
the same even without the owner’s consent, remain registered forever.
provided that:
a. Said drugs and medicines bear the Territorial
registered marks While under the territoriality principle a mark
b. The registered marks have not been must be used in commerce in the Philippines to
tampered, unlawfully modified, or be entitled to protection, internationally well-
infringed upon [Sec. 147.1, RA 8293 as known marks are the exceptions to this rule
amended by RA 9502]. [Fredco Manufacturing Corporation v.
President and Fellows of Harvard College,
G.R. No. 185917 (2011)].
Fair Use
Page 272 of 494
The registration of the mark shall not confer on 1. becomes the generic name for
the registered owner the right to preclude third the goods or services, or
parties from using bona fide their names, 2. has been abandoned, or
addresses, pseudonyms, a geographical 3. has its registration obtained
name, or exact indications concerning the kind, fraudulently or contrary to the
quality, quantity, destination, value, place of provisions of RA 8293, or
origin, or time of production or of supply, of their 4. is being used by, or with the
goods or services; Provided That: permission of, the registrant so
Such use is confined to the purposes of mere as to misrepresent the source
identification or information; and of the goods or services on or
Such use cannot mislead the public as to the in connection with which the
source of the goods or services [Sec. 148, RA mark is used [Sec. 151.1 (b),
8293]. RA 8293].
c. At any time, by virtue of non-use
Prior User without legitimate reason for an
A registered mark shall have no effect against uninterrupted period of three (3) years
any person who, in good faith, before the filing or longer [Sec. 151.1 (c), RA 8293].
date or the priority date, was using the mark for
the purposes of his business or enterprise 9. Trademark Infringement
[Sec. 159.1, RA 8293].
The following shall be liable in a civil action for
Section 159.1, RA 8293, clearly contemplates infringement:
that a prior user in good faith may continue to a. Any person who shall, without the
use its mark even after the registration of the consent of the owner of the registered
mark by the first-to-file registrant in good faith, mark, use in commerce any
subject to the condition that any transfer or reproduction, counterfeit, copy, or
assignment of the mark by the prior user in colorable imitation of a registered mark
good faith should be made together with the or the same container or a dominant
enterprise or business or with that part of his feature thereof:
enterprise or business in which the mark is 1. In connection with the sale,
used. The mark cannot be transferred offering for sale, distribution,
independently of the enterprise and business advertising of any goods or
using it. [Zuneca Pharmaceutical v. services, including other
Natrapharm, G.R. No. 211850 (2020)] preparatory steps necessary to
carry out the sale of any goods
Non-Use or services on; or
Failure to file declaration of actual use 2. In connection with which such
automatically results in the denial of the use is likely to cause confusion,
registration or the cancellation of the or to cause mistake, or to
registration by operation of law [Sec. 124.2, RA deceive [Sec. 155.1, RA 8293].
8293]. b. Any person who shall, without the
consent of the owner of the registered
8. Cancellation of Registration mark:
1. Reproduce, counterfeit, copy
A petition to cancel a registration of a mark may or colorably imitate a registered
be filed with the Bureau of Legal Affairs by any mark or a dominant feature
person who believes that he is or will be thereof; and
damaged by the registration of a mark [Sec. 2. Apply such reproduction,
151.1, RA 8293]: counterfeit, copy or colorable
a. Within five (5) years from the date of imitation to labels, signs, prints,
the registration of the mark [Sec. 151.1 packages, wrappers,
(a), RA 8293]. receptacles, or
b. At any time, if the registered mark:
Page 273 of 494
advertisements, intended to be upon or in connection with such goods,
used in commerce: business or services;
a. In connection with the 4. The use or application of the infringing
sale, offering for sale, mark or trade name is likely to cause
distribution, or confusion or mistake or to deceive
advertising of goods or purchasers or others as to the goods or
services on; or services themselves or as to the
b. In connection with source or origin of such goods or
which such use is likely services or the identity of such
to cause confusion, or business;
to cause mistake, or to 5. It is without the consent of the
deceive [Sec. 155.2, trademark or trade name owner or the
RA 8293]. assignee thereof [Prosource
International, Inc. v. Horphag Research
Note: The infringement takes place at the Management S.A., G.R. No. 180073
moment any of the acts stated in Subsections (2009)].
155.1 or 155.2 are committed, regardless of
whether there is actual sale of goods or Of these, it is the element of likelihood of
services using the infringing material. confusion that is the gravamen of trademark
infringement [McDonald’s Corporation v. L.C.
A mere distributor, and not the owner, cannot Big Mak Burger, Inc., et al., G.R. No. 143993
assert any protection from trademark (2004)].
infringement as it had no right in the first place
to the registration of the disputed trademarks Whether a trademark causes confusion and is
[Superior Commercial Enterprises v. Kunnan likely to deceive the public hinges on
Enterprises, G.R. No. 169974 (2010)]. “colorable imitation” which has been defined
as "such similarity in form, content, words,
Under Sec. 159.1, RA 8293, only the manner sound, meaning, special arrangement or
of use by the prior user in good faith — that is, general appearance of the trademark or trade
the use of its mark tied to its current enterprise name in their overall presentation or in their
or business — is categorically mentioned as an essential and substantive and distinctive parts
exception to an action for infringement by the as would likely mislead or confuse persons in
trademark owner. [Zuneca Pharmaceutical v. the ordinary course of purchasing the genuine
Natrapharm, G.R. No. 211850 (2020)] article" [Mighty Corporation v. E. & J. Gallo
Winery, G.R. No. 154342 (2004)].
a. Elements of Trademark Infringement
Two types of confusion arise from the use of
1. The trademark being infringed is similar or colorable imitation marks, namely –
registered in the Intellectual Property 1. Confusion of goods (product
Office; however in infringement of trade confusion) and
name, the same need not be 2. Confusion of business (source or origin
registered; confusion).
2. The trademark or trade name is
reproduced, counterfeited, copied, or While there is confusion of goods when the
colorably imitated by the infringer; products are competing, confusion of business
3. The infringing mark or trade name is exists when the products are non-competing
used in connection with the sale, but related enough to produce confusion or
offering for sale, or advertising of any affiliation [McDonald’s Corporation v. L.C. Big
goods, business or services; or the Mak Burger, Inc., et al., G.R. No. 143993
infringing mark or trade name is (2004)].
applied to labels, signs, prints,
packages, wrappers, receptacles or Likelihood of confusion is admittedly a relative
advertisements intended to be used term, to be determined rigidly according to the
Page 274 of 494

particular (and sometimes peculiar) the acts have been committed with knowledge
circumstances of each case. In determining that such imitation is likely to cause confusion,
likelihood of confusion, the court must or to cause mistake, or to deceive.
consider:
1. The resemblance between the Such knowledge is presumed if:
trademarks; 1. The registrant gives notice that his
2. The similarity of the goods to which the mark is registered by displaying with
trademarks are attached; the mark the words “Registered Mark”
3. The likely effect on the purchaser; and or the letter R within a circle; or
4. The registrant’s express or implied 2. The defendant had otherwise actual
consent and other fair and equitable notice of the registration [Sec. 158, RA
considerations [Mighty Corporation v. 8293].
E. & J. Gallo Winery, G.R. No. 154342
(2004)]. d. Penalties
b. Doctrine of Natural Expansion of Independent of the civil and administrative

Business sanctions imposed by law, a criminal penalty of
imprisonment from two (2) years to five (5)
The protection to which the owner of a years and a fine ranging from Fifty thousand
trademark is entitled extends to cases in which pesos (P50,000) to Two hundred thousand
the use of by a junior appropriator of a pesos (P200,000), shall be imposed on any
trademark of trade name is likely to lead to a person who is found guilty of committing any of
confusion of source. the acts mentioned in:
• Section 155 (see Number 9 on page
As where prospective purchasers would be 16)
misled into thinking that the complaining party • Section 168 (see Number 10 on page
has extended his business into the field or is in 18); and
any way connected with the activities of the • Subsection 169.1 (on False
infringer; or when it forestalls the normal Designations of Origin; False
potential expansion of the business Description or Representation) [Arts.
[Dermaline v. Myra Pharmaceuticals, Inc., G.R. 188 and 189, Revised Penal Code;
No. 190065 (2010)]. Sec. 170, RA 8293].
It is the fact that the underlying goods and 10. Unfair Competition
services of both marks deal with inasal and
inasal-flavored products which ultimately fixes The following shall be guilty of unfair
the relations between such goods and competition, and shall be subject to an action
services. It is not unlikely that the average therefor:
buyer would be led into the assumption that the a. Any person who shall employ
curls are of petitioner and that the latter has deception or any other means contrary
ventured into snack manufacturing or, if not, to good faith, by which he shall pass off
that the petitioner has supplied the flavorings the goods manufactured by him or in
for respondent's product. Either way, the which he deals, or his business, or
reputation of petitioner would be taken services for those of the one having
advantage of and placed at the mercy of established such goodwill; or
respondent [Mang Inasal Philippines v. IFP b. Any person who shall commit any acts
Manufacturing Corporation, G.R. No. 221717 calculated to produce said result [Sec.
(2017)]. 168.2, RA 8293].
c. Requirement of Notice
The owner of the registered mark shall not be

entitled to recover profits or damages unless
Page 275 of 494
a. Particular Acts of Unfair Competition confusion of goods or business is a relative
concept, to be determined only according to
1. Selling one’s goods and giving them peculiar circumstances of each case. The
the general appearance of goods of element of intent to deceive and to defraud may
another manufacturer or dealer, either: be inferred from the similarity of the
a. As to the goods themselves or appearance of the goods as offered for sale to
in the wrapping of the the public. [also from McDonald’s Corporation
packages in which they are v. L.G. Big Mak Burger, Inc., et al., G.R. No.
contained, or the devices or 143993 (2004)]
words thereon; or
b. In any other feature of their Here, petitioners' product which is a medicated
appearance, which would be facial cream sold to the public is contained in
likely to influence purchasers to the same pink oval-shaped container which
believe that the goods offered had the mark "Chin Chun Su," as that of
are those of a manufacturer or respondent. While petitioners indicated in their
dealer, other than the actual product the manufacturer's name, the same
manufacturer or dealer [Sec. does not change the fact that it is confusingly
168.3(a), RA 8293]. similar to respondent's product in the eyes of
2. Clothing one’s goods with such the public.
appearance as shall deceive the public
and defraud another of his legitimate As aptly found by the appellate court, an
trade, or any subsequent vendor of ordinary purchaser would not normally inquire
such goods or any agent of any vendor about the manufacturer of the product.
engaged in selling such goods with a Petitioners' product and that solely distributed
like purpose [Sec. 168.3(a), RA 8293]. by respondent are similar in the following
3. Using any artifice, or device, or respects "1. both are medicated facial creams;
employing any other means calculated 2. both are contained in pink, oval-shaped
to induce the false belief that such containers; and 3. both contain the trademark
person is offering the services of "Chin Chun Su" x x x The similarities far
another who has identified such outweigh the differences. The general
services in the mind of the public [Sec. appearance of (petitioners') product is
168.3(b), RA 8293]. confusingly similar to (respondent)."
4. Making any false statement in the
course of trade or committing any other Verily, the acts complained of against
act contrary to good faith of a nature petitioners constituted the offense of Unfair
calculated to discredit the goods, Competition and probable cause exists to hold
business or services of another [Sec. them for trial, contrary to the findings of RTC
168.3(c), RA 8293]. Branch 46. [Elidad Kho and Violeta Kho v.
Summerville General Merchandising & Co.,
b. Elements of an Action for Unfair Inc., G.R. No. 213400 (2021)]
Competition
c. Who May File an Action for Unfair
1. Confusing similarity in the general Competition?
appearance of the goods, and
2. Intent to deceive the public and defraud A person who has identified in the mind of the
a competitor. public the goods, business, or services he
manufactures or deals in, whether or not a
The case of Kho v. Summerville General registered mark is employed
Merchandising & Co., Inc.
The confusing similarity may or may not result Ratio: Such person has a property right in the
from similarity in the marks, but may result from goodwill of the said goods, business or
other external factors in the packaging or services so identified, and said right shall be
presentation of the goods. Likelihood of
Page 276 of 494
protected in the same manner as other which refers to every literary, scientific and
property rights [Sec. 168.1, RA 8293]. artistic production [IPOPHL].
d. Trademark Infringement vs. Unfair Note: Sec. 173, RA 8293: Works are protected
Competition as new works: Provided however, that such
new work shall not:
The “true test”, therefore, of unfair competition ● affect the force of any subsisting
has thus been “whether the acts of the copyright upon the original works
defendant have the intent of deceiving or are employed or any part thereof; or
calculated to deceive the ordinary buyer ● be construed to imply any right to such
making his purchases under the ordinary use of the original works, or to secure
conditions of the particular trade to which the or extend copyright in such original
controversy relates” [San Miguel Pure Foods works.
Company, Inc., v. Foodsphere, G.R. No.
217781 (2018)]. Copyright refers to the right granted by a
statute to the proprietor of an intellectual
Trademark Unfair Competition production to its exclusive use and enjoyment
Infringement to the extent specified in the statute [Olaño v.
Unauthorized use of Passing off of one’s Lim Eng Co, G.R. 195835 (2016)].
a trademark or trade goods as those of
name another 1. Basic Principles
Fraudulent intent is Fraudulent intent is
unnecessary essential a. Works are protected by the sole fact
Prior registration of Registration is not of their creation.
the trademark is a necessary
prerequisite to the Principle of Automatic Protection
action Copyright is vested from the very moment of
[In and Out Burger v. Sehwani, G.R. No. creation irrespective of their mode or form of
179127 (2008); Prosource International, Inc. v. expression, as well as of their content, quality,
Horphag Research Management S.A., G.R. and purpose [Sec. 171.1-172.2, RA 8293].
No. 180073 (2009)].
The enjoyment and exercise of copyright,
The law on unfair competition is broader and including moral rights, shall not be the subject
more inclusive than the law on trademark of any formality; such enjoyment and such
infringement. exercise shall be independent of the existence
● The latter is more limited but it of protection in the country of origin of the work
recognizes a more exclusive right [Article 5(2), Berne Convention for the
derived from the trademark adoption Protection of Literary and Artistic Works].
and registration by the person whose
goods or business is first associated b. Protection extends only to the
with it. expression of an idea, not the idea
● Hence, even if one fails to establish his itself.
exclusive property right to a trademark,
he may still obtain relief on the ground No protection shall extend, under this law, to
of his competitor’s unfairness or fraud any idea, procedure, system method or
[Mighty Corporation v. E. & J. Gallo operation, concept, principle, discovery, or
Winery, G.R. No. 154342 (2004)]. mere data as such, even if they are expressed,
explained, illustrated or embodied in a work
D. Copyrights [Sec. 175, RA 8293].
Copyright is the legal protection extended to

the owner of the rights in an “original work”,
Page 277 of 494

c. The copyright is distinct from the 6. Musical compositions, with or without
property in the material object subject words;
to it. 7. Works of drawing, painting,
architecture, sculpture, engraving,
The copyright is distinct from the property in the lithography or other works of art;
material object subject to it. models or designs for works of art;
8. Original ornamental designs or models
Consequently: for articles of manufacture, whether or
1. The transfer or assignment of the not registrable as an industrial design,
copyright shall NOT itself constitute a and other works of applied art;
transfer of the material object 9. Illustrations, maps, plans, sketches,
2. The transfer or assignment of the sole charts and three-dimensional works
copy or of one or several copies of the relative to geography, topography,
work shall NOT imply transfer or architecture or science;
assignment of the copyright [Sec. 181, 10. Drawings or plastic works of a scientific
RA 8293]. or technical character;
11. Photographic works including works
d. Copyright, like other intellectual produced by a process analogous to
photography; lantern slides;
property rights, is a statutory right.
12. Audiovisual works and
cinematographic works and works
Copyright, in the strict sense of the term is
produced by a process analogous to
purely a statutory right.
cinematography or any process for
The rights are limited to what the statute
making audio-visual recordings;
confers.
13. Pictorial illustrations and
It may be obtained and enjoyed only with
advertisements;
respect to the subjects and by the
14. Computer programs; and
persons, and on terms and conditions
15. Other literary, scholarly, scientific and
specified in the statute.
artistic works [Sec. 172.1, RA 8293].
It can cover only the works falling within the
statutory enumeration or description
When a Work is Considered Original
[Pearl and Dean v. Shoemart, G.R. No.
The work is original when:
148222 (2003)].
It is an independent creation of the author; and
It must not be copied from the work of another.
2. Copyrightable works
A person must be the original creator of the
a. Original Works work to be entitled to a copyright. He must
have created it by his own skill, labor, and
Literary and artistic works, hereinafter referred judgment without directly copying or evasively
to as "works", are original intellectual creations imitating the work of another [Ching Kian
in the literary and artistic domain protected Chuan v. CA, G.R. No. 130360 (2001)].
from the moment of their creation and shall
include in particular: Originality is not determined by novelty,
1. Books, pamphlets, articles and other aesthetic merit, or ingenuity but that it is an
writings; independent creation [IPOPHL].
2. Periodicals and newspapers;
3. Lectures, sermons, addresses, Works are protected irrespective of their mode
dissertations prepared for oral delivery, or form of expression [Sec. 172.2, RA 8293].
whether or not reduced in writing or
other material form; b. Derivative Works
4. Letters;
5. Dramatic or dramatico-musical The following derivative works shall also be
compositions; choreographic works or protected by copyright:
entertainment in dumb shows;
Page 278 of 494
1. Dramatizations, translations, The format or mechanics of a TV show is
adaptations, abridgments, not copyrightable as copyright does not
arrangements, and other alterations of extend to ideas, procedures, processes,
literary or artistic works; and systems, methods of operation, concepts,
2. Collections of literary, scholarly, or principles or discoveries regardless of the form
artistic works, and compilations of data in which they are described, explained,
and other materials which are original illustrated or embodied [Joaquin Jr. et al v.
by reason of the selection or Drilon, et al, G.R. No. 108946 (1999)].
coordination or arrangement of their
contents [Sec. 173.1, RA 8293]. No one may claim originality as to facts as
these do not owe their origin to an act of
Derivative works are protected as new works, authorship. The first person to find and report a
provided they shall not: particular fact has not created the same; he has
1. Affect the force of any subsisting merely discovered its existence [Feist
copyright upon the original works Publication v. Rural Telephone Services, 499
employed or any part thereof; or U.S. 340 (1991)].
2. Be construed to imply any right to such
use of the original works, or to secure A compilation is not copyrightable per se,
or extend copyright in such original but it is copyrightable only if its facts have been
works [Sec. 173.2, RA 8293]. selected, coordinated, or arranged in such a
way that the resulting work as a whole
3. Non-Copyrightable works constitutes an original work of authorship.
Otherwise known as the Sweat of the Brow or
a. Unprotected Subject Matter Industrious Collection Test [Feist Publication
v. Rural Telephone Services, 499 U.S. 340
1. Any idea, procedure, system method or (1991)].
operation, concept, principle, discovery
or mere data as such, even if they are b. Works of the Government of the
expressed, explained, illustrated or Philippines
embodied in a work;
2. News of the day and other A work created by an officer or employee of the
miscellaneous facts having the Philippine Government or any of its
character of mere items of press subdivisions and instrumentalities, including
information; government-owned or controlled corporations
3. Any official text of a legislative, as a part of his regularly prescribed official
administrative or legal nature, as well duties [Sec. 171.11, RA 8293].
as any official translation thereof;
4. Pleadings; General Rule: No copyright shall subsist in any
5. Original decisions of courts and work of the Government.
tribunals (Note: This pertains to the
“original decisions” not the SCRA Exceptions:
published volumes since these are 1. When copyright is transferred by
protected under derivative works under assignment or bequest in favor of the
Sec. 173.1) [Sec. 175, RA 8293]. government [Sec. 176.3];
2. Author of speeches, lectures, sermons,
News footages are subject to copyright. addresses and dissertations shall have
Although news or the events themselves are exclusive right of making a collection of
not copyrightable, expression of the news his work. However, prior approval of
particularly when it underwent a creative the government agency or the office
process is entitled to copyright protection wherein the work is created shall be
[ABS-CBN Corp. v. Gozon, G.R. No. 195956 necessary for the exploitation of such
(2015)]. work for profit [Sec. 176.1].
Page 279 of 494

However, prior approval of the government incorporates a design element that is physically
agency or the office wherein the work is or conceptually separable from the underlying
created shall be necessary for the exploitation product [Olaño v. Lim Eng Co, G.R. No.
of such work for profit [Sec. 176.1, RA 8293]. 195835 (2016)].
Publication or republication by the Government Useful Article Doctrine

in a public document of any work in which Works whose sole purpose is utilitarian, and
copyright is subsisting shall not be taken: have no separate artistic value are
noncopyrightable works.
1. To cause any abridgment or annulment
of the copyright; or In contrast, a work of applied art, which has
2. To authorize any use or appropriation utilitarian functions, but has an identifiable
of such work without the consent of the artistic work or creation incorporated thereto,
copyright owner [Sec. 176.3, RA 8293]. can be the subject of a copyright to the extent
that the design features:
Works made by an officer or employee of Can be identified separately from, and
the Government as part of his regularly Are capable of existing independently of the
prescribed duty do NOT enjoy copyright. utilitarian aspects of the article [Brandir Int’l v.
Works made by an employee of the Cascade Pacific, 834 F. 2nd 1142 (2nd Cir.)
government which is not as a part of his (1987)].
regularly prescribed official duties (i.e. not
considered a “Work of the Government”) may Denicola Test: Conceptual Separability
enjoy copyright. (Aesthetics vs. Functionality)
The work cannot be copyrighted if its design
c. Works of the Public Domain elements reflect a merger of aesthetic and
functional considerations, and the artistic
Works of the public domain are aspects of the work cannot be conceptually
noncopyrightable. separable from the utilitarian aspects.
Conceptual separability exists where design
To this class of works belong: elements can be identified as reflecting the
1. Works, whose term of copyright has designer's artistic judgment, exercised
expired; independently of functional influences
2. Works wherein the copyright over them The relevant question should be whether the
are waived by the owner in favor of the design of a useful article, however intertwined
public; and with the article’s utilitarian aspects, causes an
3. Works which did not enjoy copyright ordinary reasonable observer to perceive an
protection in the first place, as in the aesthetic concept not related to the article’s
case of unregistered works made use [Brandir Int’l v. Cascade Pacific, 834 F. 2nd
under previous laws that required the 1142 (2nd Cir.) (1987)].
registration of copyright [See: Santos v.
McCullough Printing Company, G.R. 4. Rights conferred by copyright
No. L-19439 (1964)].
Economic rights vs. moral rights
d. Useful Articles Copyright confers both economic and moral
rights. Economic rights allow right owners to
A “useful article” is defined as an article “having derive financial reward from the use of their
intrinsic utilitarian function that is not merely to works by others. On the other hand, moral
portray the appearance of the article or to rights allow authors and creators to take certain
convey information” is excluded from copyright actions to preserve and protect their link with
eligibility. their work. [Understanding Copyright and
Related Rights, World Intellectual Property
The only instance when a useful article may be Organization (2016)].
the subject of copyright protection is when it
Page 280 of 494

Works are protected by the sole fact of their of the work;
creation, irrespective of their mode or form of 6. Public performance of the work; and
expression, as well as of their content, quality 7. Other communication to the public of
and purpose [Sec. 172.2, RA 8293]. the work [Sec. 177, RA 8293].
Certificate of Registration and Deposit
The issuance of the certificates of registration Publisher’s Copyright
and deposit as provided by Sec. 2, Rule 7 of In addition to the right to publish granted by the
the Copyright Safeguards and Regulations, are author, his heirs, or assigns, the publisher shall
purely for recording the date of registration and have a copyright consisting merely of the right
deposit of the work, and are not conclusive as of reproduction of the typographical
to copyright ownership (nor does it determine arrangement of the published edition of the
the time when copyright vests) [Manly work [Sec.174, RA 8293].
Sportwear v. Dadodette Enterprises, G.R. No.
165306 (2005)]. Copyright in a Work of Architecture
The copyright in any such work shall include
Purpose of Registration and Deposit the right to control the erection of any building
Completing the records of the National Library which reproduces the whole or a substantial
and the Supreme Court Library; provided, that part of the work either in its original form or in
only works in the field of law shall be deposited any form recognizably derived from the original
with the Supreme Court Library [Sec. 191, RA
8293 as amended by RA 10372]. However, it shall not include the right to control
the reconstruction or rehabilitation in the same
Note: The National Library has deputized the style as the original of a building to which that
IPOPHL to receive deposited works on its copyright relates [Sec. 186, RA 8293].
behalf.
Communication to the Public of
a. Economic Rights Copyrighted Works
This includes point-to-point transmission of a
Copyright or economic rights shall consist of work, including:
the exclusive right to carry out, authorize or Video on demand, and
prevent the following acts: Providing access to an electronic retrieval
1. Reproduction of the work or substantial system
portion of the work; Such as computer databases, servers, or
2. Dramatization, translation, adaptation, similar electronic storage devices.
abridgment, arrangement or other
transformation of the work; Broadcasting, rebroadcasting, retransmission
3. The first public distribution of the by cable, and broadcast and retransmission by
original and each copy of the work by satellite are all acts of “communication to the
sale or other forms of transfer of public” within the meaning of the IPC [Rule 11,
ownership; Copyright Safeguards and Regulations].
4. Rental of the original or a copy of:
a. An audiovisual or First Public Distribution of Work
cinematographic work, An exclusive right of first distribution of work
b. A work embodied in a sound includes all acts involving distribution,
recording, specifically including the first importation of an
c. A computer program, original and each copy of the work into the
d. A compilation of data and other jurisdiction of the Republic of the Philippines
materials or a musical work in [Rule 12, Copyright Safeguards and
graphic form Regulations].
e. Irrespective of the ownership of
the original or the copy which is b. Moral Rights
the subject of the rental;
5. Public display of the original or a copy The author of a work shall, independently of the
Page 281 of 494

economic rights in Section 177 (see Letter a on Use of the name of the author, title of his work,
page 26) or the grant of an assignment or or his reputation with respect to any version or
license with respect to such right, have the adaptation of his work, which because of
right: alterations substantially tends to injure the
1. To require that the authorship of the literary or artistic reputation of another author
works be attributed to him, in particular, [Sec. 195.1, RA 8293];
the right that his name, as far as It uses the name of the author in a work that he
practicable, be indicated in a prominent did not create [Sec. 195.1, RA 8293].
way on the copies, and in connection
with the public use of his work [Sec. The right of attribution is waived by contribution
193.1, RA 8293]; to a collective work unless such is expressly
2. To make any alterations of his work reserved [Sec. 196, RA 8293].
prior to, or to withhold it from
publication [Sec. 193.2, RA 8293]; c. Right to Transfer, Assign or License
3. To object to any distortion, mutilation or
other modification of, or other The author has the right to assign or license the
derogatory action in relation to, his copyright and/or the material object in whole or
work which would be prejudicial to his in part, and they allow the owner to derive
honor or reputation [Sec. 193.3, RA financial reward from the use of his works by
8293]; others [Sec. 180.1, RA 8293 as amended by
4. To restrain the use of his name with RA 10372].
respect to any work not of his own
creation or in a distorted version of his Rights of Assignee or Licensee
work [Sec. 193.4, RA 8293]. The assignee or licensee is entitled to all the
rights and remedies which the assignor or
In addition to the right to publish granted by the licensor had with respect to the copyright,
author, his heirs, or assigns, the publisher shall within the scope of the assignment or license
have a copyright consisting merely of the right [Sec. 180.1, RA 8293].
of reproduction of the typographical
arrangement of the published edition of the The copyright is not deemed assigned or
work [Sec.174, RA 8293]. licensed inter vivos, in whole or in part, unless
there is a written indication of such intention
The author of speeches, lectures, sermons, [Sec. 180.2, RA 8293].
addresses, and dissertations mentioned in the
preceding paragraphs shall have the exclusive The submission of a literary, photographic or
right of making a collection of his works [Sec. artistic work to a newspaper, magazine or
176.2, RA 8293]. periodical for publication shall constitute only a
license to make a single publication unless a
Assignment or License of Moral Rights greater right is expressly granted. If two (2) or
Moral rights cannot be assigned or licensed more persons jointly own a copyright or any
[Sec. 198, RA 8293]. part thereof, neither of the owners shall be
entitled to grant licenses without the prior
Waiver of Moral Rights written consent of the other owner or owners
While Moral Rights cannot be assigned or [Sec. 180.3, RA 8293].
licensed, it can be waived [Sec. 198, RA 8293].
Any exclusivity in the economic rights in a work
General Rule: Moral rights can be waived in may be exclusively licensed. Within the scope
writing, expressly stating such waiver [Sec. of the exclusive license, the licensee is entitled
195, RA 8293]. to all the rights and remedies which the licensor
had with respect to the copyright [Sec. 180.4,
Exceptions: Even if made in writing, waiver is RA 8293].
still not valid if:
Page 282 of 494

The copyright owner has the right to regular sound recordings, or audiovisual works or
statements of accounts from the assignee or fixations in any manner or form [Sec. 203.2, RA
the licensee with regard to assigned or 8293, as amended by RA 10372];
licensed work [Sec. 180.5, RA 8293 as The right of authorizing the first public
amended by RA 10372]. distribution of the original and copies of their
performance fixed in the sound recording or
Filing of Assignment or License audiovisual works or fixations through sale or
An assignment or exclusive license may be rental or other forms of transfer of ownership
filed in duplicate with the National Library upon [Sec. 203.3, RA 8293, as amended by RA
payment of the prescribed fee for registration in 10372];
books and records kept for the purpose [Sec. Subject to the provisions of Section 206 (see
182, RA 8293]. Number 7 on page 25)
The right of authorizing the commercial rental
d. Rights to Proceed on Subsequent to the public of the original and copies of their
Transfers (Droit de Suite or Follow Up performances fixed in sound recordings or
Rights) audiovisual works or fixations, even after
distribution of them by, or pursuant to the
In every sale or lease of an original work of authorization by the performer [Sec. 203.4, RA
painting or sculpture or of the original 8293, as amended by RA 10372];
manuscript of a writer or composer, The right of authorizing the making available to
subsequent to the first disposition thereof by the public of their performances fixed in sound
the author, the author or his heirs shall have: recordings or audiovisual works or fixations, by
● an inalienable right to participate in the wire or wireless means, in such a way that
gross proceeds of the sale or lease to members of the public may access them from
the extent of five percent (5%) [Sec. a place and time individually chosen by them
200, RA 8293]. [Sec. 203.5, RA 8293, as amended by RA
10372];
Duration of Right The right to claim to be identified as the
This right shall exist during the lifetime of the performer of his performances, and to object to
author and for 50 years after his death [Sec. any distortion, mutilation or other modification
200, RA 8293]. of his performances that would be prejudicial to
his reputation, as regards his live aural
Works not covered performances or performances fixed in sound
Prints, etchings, engravings, works of applied recordings or audiovisual works or fixations;
art, or works of similar kind wherein the author Exception: Where the omission is dictated by
primarily derives gain from the proceeds of the manner of the use of the performance [Sec.
reproductions [Sec. 201, RA 8293]. 204.1, RA 8293, as amended by RA 10372].
The right to an additional remuneration
e. Related Rights (Neighboring Rights) equivalent to at least five percent (5%) of the
original compensation he or she received for
Rights of Performers the first communication or broadcast, in every
As regards their performances, the right of communication to the public or broadcast of a
authorizing: performance subsequent to the first
The broadcasting and other communication to communication or broadcast thereof by the
the public of their performance; and broadcasting organization [Sec. 206, RA
The fixation of their unfixed performance [Sec. 8293].
203.1, RA 8293]; Unless otherwise provided in the contract.
Such right shall be maintained and exercised
50 years after his death, by his heirs, and in Rights of Producers of Sound Recordings
default of heirs, the government, where The right to authorize the direct or indirect
protection is claimed [Sec. 204.2, RA 8293]; reproduction of their sound recordings, in any
The right of authorizing the direct or indirect manner or form; the placing of these
reproduction of their performances fixed in
Page 283 of 494
reproductions in the market and the right of 5. Ownership of a copyright
rental or lending [Sec. 208.1, RA 8293];
The right to authorize the first public distribution
of the original and copies of their sound Work Ownership
recordings through sale or rental or other forms
Single Creator Belongs to the author of
of transferring ownership [Sec. 208.2, RA
of an Original the work [Sec. 178.1, RA
8293];
Work 8293].
The right to authorize the commercial rental to
the public of the original and copies of their Works of Joint Belongs of the co-
sound recordings, even after distribution by Authorship authors; in the absence
them by or pursuant to authorization by the of agreement, their rights
producer [Sec. 208.3, RA 8293]. shall be governed by the
rules on co-ownership.
Single Equitable Remuneration However, if the work
The right to be paid a single equitable consists of parts that can
remuneration by the user to be shared with the be used separately and
performers equally, in the absence of any identified, the author of
agreement, when a sound recording published each part owns the
for commercial purposes, or a reproduction of copyright of the part he
such sound recording, is: has created [Sec. 178.2,
Used directly for broadcasting or RA 8293].
Used for other communication to the public; or
Publicly performed with the intention of making Work created Belongs to the employee
and enhancing profit [Sec. 209, RA 8293]. during the if the creation is not a part
course of of his regular duties,
Rights of Broadcasting Organizations employment even if he used the time,
The rebroadcasting of their broadcasts [Sec. facilities and materials of
211.1, RA 8293]; the employer. However,
The recording in any manner, including the copyright belongs to the
making of films or the use of video tape, of their employer if the work is in
broadcasts for the purpose of communication the performance of the
to the public of television broadcasts of the employee’s regular
same; [Sec. 211.2, RA 8293]; duties unless there is an
The use of such records for fresh agreement to the
transmissions or for fresh recording [Sec. contrary [Sec. 178.3, RA
211.3, RA 8293]. 8293].
Must-Carry Rule Work The person who

This rule prevents cable television companies commissioned commissioned the work
from excluding broadcasting organization by a person and pays for it holds
especially in those places not reached by other than the ownership of the work
signal. employer per se, but copyright
remains with the creator
Also, the rule prevents cable television unless there was a
companies from depriving viewers in far-flung stipulation to the contrary
areas the enjoyment of programs available to [Sec. 178.4, RA 8293].
city viewers [ABS-CBN Broadcasting v.
Philippine Multi-Media System, G.R. Nos. Audio visual Belongs to the producer,
175769-70 (2009)]. works author of the scenario,
composer of the music,
film director, and author
of the adapted work.
However, subject to
Page 284 of 494

This presumption however is rebuttable and
Work Ownership
cannot be sustained where other evidence in
stipulations, the the record casts doubt on the question of
producers shall exercise ownership [Olaño v. Lim Eng Co, G.R. 195835
the copyright as may be (2016)].
required for the exhibition
of the work, except for Valid copyright ownership denotes
the right to collect license originality of the copyrighted material.
fees for the performance Originality means that the material was not
of musical compositions copied, evidences at least minimum creativity
in the work [Sec. 178.5, and was independently created by the author
RA 8293]. [Olaño v. Lim Eng Co, G.R. 195835 (2016)].
Letters Belongs to the writer, but a. Presumption of Ownership

the court may authorize
their publication or General Rule: The natural person whose name
dissemination of the is indicated on a work in the usual manner as
public good or interest of the author shall, in the absence of proof to the
justice requires, pursuant contrary, be presumed to be the author of the
to Art. 723, New Civil work.
Code [Sec. 178.6, RA
8293]. The person or body corporate, whose name
appears on an audio-visual work in the usual
Anonymous Publishers are deemed manner, shall, in the absence of proof to the
and to represent the authors, contrary, be presumed to be the maker of said
pseudonymous unless the contrary work [Sec. 219, RA 8293].
works appears, the
pseudonyms or adopted Use of Pseudonym
names leave no doubt as This provision shall be applicable even if the
to the author’s identity or name is a pseudonym, where the pseudonym
if the author discloses his leaves no doubt as to the identity of the author
identity [Sec. 179, RA [Sec. 219, RA 8293].
8293].
b. Transfer or Assignment of Copyright
Collective A contributor is deemed
works to have waived his right The copyright may be assigned or licensed in
unless he expressly whole or in part [Sec. 180.1, RA 8293].
reserves it [Sec. 196, RA 1. The copyright is not deemed assigned
8293]. or licensed inter vivos in whole or in
part unless there is a written indication
A person to be entitled to copyright must be of such intention [Sec. 180.2, RA 8293
the original creator of the work. He must as amended by RA 10372];
have created it by his own skill, labor and 2. If two or more persons jointly own a
judgment without directly copying or evasively copyright or any part thereof, neither of
imitating the work of another [Wilson Ong the owners shall be entitled to grant
Ching Kian Chuan v. CA, G.R. 130360 (2001)]. licenses without the prior written
consent of the other owner or owners
Ownership of copyrighted material is [Sec. 180.3, RA 8293].
shown by proof of originality and
copyrightability. While it is true that where the Submitted Work
complainant presents a copyright certificate in General Rule: The submission of a literary,
support of the claim of infringement, the validity photographic, or artistic work to a newspaper,
and ownership of the copyright is presumed. magazine or periodical for publication shall
Page 285 of 494

constitute only a license to make a single 6. Distribution of the abovementioned
publication. collections to the rights holders
[IPOPHL Office Order 13-173 s.2013].
Unless a greater right is expressly granted
[Sec. 180.3, RA 8293]. Filipino Society of Composers, Authors and
Publishers, Inc. (FILSCAP)
c. Collective Management Organizations FILSCAP is a non-profit society of composer,
(CMO) authors, and publishers that owns public
performance rights over the copyrighted
CMOs are entities composed of artists, writers, musical works of its members.
composers and other creators, or
copyright/related rights holders that manage It also owns the right to license public
the bundle of copyrights that their members performances in the Philippines of copyrighted
own by providing the legal platform to efficiently foreign musical works of its members and
enforce their intellectual property rights. affiliate performing rights societies abroad.
The owners of copyright and related rights or It is deputized to enforce and protect the
their heirs may designate a society of artists, copyrighted works of its members or affiliates
writers, composers, and other right-holders to by issuing licenses and collecting royalties
collectively manage their economic or moral and/or license fees from anyone who publicly
rights on their behalf. exhibits or performs music belonging to
FILSCAP’s worldwide repertoire. FILSCAP has
For the said societies to enforce the rights of a legal standing to sue for copyright
their members, they shall first secure the infringement.
necessary accreditation from the Intellectual
Property Office [Sec. 183, RA 8293 as It has the authority to collect royalties and/or
amended by RA 10372]. license fees and sue for copyright infringement.
As an assignee of copyright, it is entitled to all
The primary purpose of a CMO is to collectively the rights and remedies which the assignor had
manage copyright and/or related rights, with respect to the copyright [FILSCAP v.
including any or all of the following activities: Anrey, Inc., G.R. No. 233918 (2022)].
1. Negotiation with and grant of licenses
to users of protected literary, scholarly, 6. Limitations on copyright
scientific and artistic works, derivative
works, performances, sound a. Fair Use
recordings, audiovisual works and
broadcasts; Doctrine of Fair Use
2. Collection of royalties and other forms The fair use of copyrighted work for criticism,
of remuneration for the use of news reporting, teaching (including multiple
protected literary, scholarly, scientific copies for classroom use), research and similar
and artistic works, derivative works, purposes is not an infringement of copyright
performances, sound recordings, [Sec. 185.1, RA 8293].
audiovisual works and broadcasts;
3. Collection of proceeds in subsequent A privilege, in persons other than the owner of
transfers of the originals of paintings, the copyright, to use the copyrighted material
sculptures and manuscripts; in a reasonable manner without his consent,
4. Collection of additional remuneration notwithstanding the monopoly granted to the
for subsequent communication or owner by the copyright. It is meant to balance
broadcast of a performance; the monopolies enjoyed by the copyright owner
5. Collection of single equitable with the interests of the public and of society.
remuneration for the broadcast, other
communication to the public or public
performance of a sound recording; and
Page 286 of 494

Decompilation current events;
Refers to the reproduction of the code and 3. Use solely for the purpose of teaching
translation of the forms of the computer or for scientific research; and
program to achieve the inter-operability of an 4. Fair use of the broadcast subject to
independently created computer program with certain conditions [Sec. 212, RA 8293].
other programs. This may also constitute fair
use [Sec. 185.1, RA 8293]. c. Term of Protection
Factors to consider in determining Fair Use Duration of Copyright

The purpose and character of the use,
Works Term
including whether such use is of a commercial
nature or is for non-profit educational
Original Literary and Lifetime of author
purposes;
Artistic Works and for 50 years
The nature of the copyrighted work;
including after his death
The amount and substantiality of the portion
Posthumous Works [Sec. 213.1, RA
used in relation to the copyrighted work as a
8293]
whole; and
The effect of the use upon the potential market Derivative Works Lifetime of author
for or value of the copyrighted work [Sec. including and for 50 years
185.1, RA 8293 as amended by RA 10372; Posthumous Works after his death
Harper & Row v. Nation Enterprise, 471 US [Sec. 213.1, RA
539 (1985)]. 8293]
The fact that a work is unpublished shall not Joint Authorship Lifetime of the last
by itself bar a finding of fair use if such surviving author
finding is made upon consideration of all the and for 50 years
above factors [Sec. 185.2, RA 8293]. after his death
[Sec. 213.2, RA
Commercial use of the copyrighted work can 8293]
be weighed against fair use [ABS–CBN Corp.
v. Gozon, G.R. No. 195956 (2015)]. Anonymous or 50 years from date
Pseudonymous of first lawful
Parody, like other comment and criticism, Works publication [Sec.
may claim fair use. The more transformative 213.3, RA 8293]
the new work, the less will be the significance
of other factors, like commercialism. The heart Applied Art 25 years from date
of any parodist's claim to quote from existing of making [Sec.
material is the use of some elements of a prior 213.4, RA 8293]
author's composition to create a new one that,
at least in part, comments on that author's work Published 50 years from
[Campbell v. Acuff-Rose Music Inc., 510 U.S. Photographic Works publication [Sec.
569 (1994)]. 213.5, RA 8293]
b. Limitations on Protection of Unpublished 50 years from the

Photographic Works making [Sec.
Neighboring Rights
213.5, RA 8293]
Sections 203, 208 and 209 (see Letter e on Published 50 years from
page 28) shall not apply where the acts Audiovisual Works publication [Sec.
referred to in those Sections are related to: 213.6, RA 8293]
1. The use by a natural person
exclusively for his own personal Unpublished 50 years from the
purposes; Audiovisual Works making [Sec.
2. Using short excerpts for reporting 213.6, RA 8293]
Page 287 of 494
The term of protection subsequent to the A person infringes a right protected under this
death of the author shall run from the date Act when one:
of his death or of publication, but such terms a. Directly commits an infringement;
shall always be deemed to begin on the first b. Benefits from the infringing activity of
day of January of the year following the event another person who commits an
which gave rise to them [Sec. 214, RA 8293]. infringement if the person benefiting:
1. Has been given notice of the
Term of Protection of Moral Rights infringing activity; and
2. Has the right and ability to
Moral Right Term
control the activities of the
Right of Attribution or Lifetime of author other person;
Right of Paternity and in perpetuity c. With knowledge of infringing activity,
(Sec. 193.1) after his death [Sec. induces, causes or materially
198.1, RA 8293 as contributes to the infringing conduct of
amended by RA another [Sec. 216, RA 8293 as
10372]. amended by RA 10372].
Other Moral Rights Coterminous with the It also includes the act of any person who at the
[Sec. 193.2- 193.4] economic rights time when copyright subsists in a work has in
[Sec. 198, RA 8293 his possession an article which he known, or
as amended by RA ought to know, to be an infringing copy of the
10372]. work for the purpose of:
a. Selling, letting for hire, or by way of
trade offering or exposing for sale, or
Term of Protection of Neighboring Rights hire, the article
Works Term b. Distributing the article for purpose of
trade, or for any other purpose to an
For performances 50 years from the extent that will prejudice the rights of
not incorporated in end of the year in the copyright owner in the work; or
recordings which the c. Trade exhibit of the article in public
performance took [Sec. 217.3, RA 8293].
place [Sec. 215.1(a),
RA 8293]. a. What Constitutes Infringement
For sound or image 50 years from the Infringement consists in the doing by any
and sound end of the year in person, without the consent of the owner of the
recordings and for which the recording copyright, of anything the sole right to do which
performances took place [Sec. is conferred by statute on the owner of the
incorporated 215.1(b), RA 8293]. copyright.
therein
It can cover a whole range of acts from
Broadcasts 20 years from the copying, assembling, packaging to marketing,
date the broadcast including the mere offering for sale of
took place [Sec. counterfeit goods [Habana et al v. Robles et al.,
215.2, RA 8293] G.R. No. 131522 (1999)].
7. Copyright infringement Copyright infringement is thus committed by

any person who shall use original literary or
The IP Code was amended to expand artistic works, or derivative works, without the
infringement not only to cover direct copyright owner’s consent in such a manner as
infringement but also third-party infringement. to violate the foregoing copy and economic
rights.
Page 288 of 494

For a claim of copyright to prevail, the In cases of infringement, copying alone is
evidence on record must demonstrate: not what is prohibited. The copying must
a. ownership of a validly copyrighted produce an “injurious effect” [Habana et al v.
material by the complainant; and Robles et al., G.R. No. 131522 (1999)].
b. infringement of the copyright by the
respondent. c. Knowledge not an Element of
Infringement
[W]hat was copyrighted were their
sketches/drawings only, and not the actual Knowledge of infringement is material only
hatch doors themselves. To constitute when a person is charged of aiding and
infringement, the usurper must have copied or abetting a copyright infringement. The
appropriated the original work of an author or liability for copyright infringement is in the
copyright proprietor, absent copying, there can nature of strict liability. It does not require mens
be no infringement of copyright. Absent rea or culpa [ABS–CBN Corp v. Gozon, G.R.
originality and copyrightability as elements of a No. 195956 (2015)].
valid copyright ownership, no infringement can
subsist [Olaño v. Lim Eng Co, G.R. 195835 d. What Does NOT Constitute
(2016)]. Infringement
The free use by commercial establishments of The following shall NOT constitute
radio broadcasts is beyond the normal infringement of copyright:
exploitation of the copyright holder’s creative 1. Recitation or performance of a work
work. This gravely affect the copyright holder’s once it has been made accessible to
market where instead of paying royalties, they the public if
use free radio reception. a. privately done AND free of
charge OR
A radio reception creates a performance b. strictly for a charitable or
separate from the broadcast, which is religious institution [Sec.
otherwise known as the doctrine of multiple 184.1(a), RA 8293];
performances which provides that a radio (or 2. Making of quotations from a published
television) transmission or broadcast can work:
create multiple performances at once. Thus, on a. compatible with fair use,
whether the reception of a broadcast may be b. extent is justified by the
publicly performed, it is immaterial if the purpose,
broadcasting station has been licensed by the c. source and name of the author,
copyright owner because the reception appearing on work, must be
becomes a new public performance requiring mentioned [Sec. 184.1(b), RA
separate protection. 8293];
3. Reproduction or communication to the
Radio reception transmitted through public by mass media of articles on
loudspeakers to enhance profit does not current political, social, economic,
constitute, and is not analogous to, fair use scientific, or religious topic, lectures,
[FILSCAP v. Anrey, Inc., G.R. No. 233918 addresses and other works, delivered
(2022)]. in public:
a. for information purposes,
b. Substantial Reproduction b. not expressly reserved, and
c. source is already indicated
It is not necessarily required that the entire [Sec. 184.1(c), RA 8293];
copyrighted work, or even a large portion of 4. Reproduction and communication to
it, be copied. If so much is taken that the value the public of literary, scientific or artistic
of the original work is substantially diminished, works as part of reports of current
there is an infringement of copyright and to an events by means of photography,
injurious extent, the work is appropriated. cinematography or broadcasting to the
Page 289 of 494
extent necessary for the purpose [Sec. published articles or materials in a
184.1(d), RA 8293]; specialized format exclusively for the
5. Inclusion of a work in a publication, use of the blind, visually- and reading-
broadcast or other communication to impaired persons: Provided, That such
the public, sound recording or film if copies and distribution shall be made
made by way of illustration for teaching on a nonprofit basis and shall indicate
purposes compatible with fair use and the copyright owner and the date of the
the source and the name of the author original publication [Sec. 184.1(l), RA
appearing on work, must be mentioned 8293 as amended by RA 10372].
[Sec. 184.1(e), RA 8293];
6. Recording made in schools, e. Reproduction of Published Work
universities, or educational institutions
of a work included in a broadcast for General Rule: The private reproduction of a
the use of schools, universities or published work in a single copy, where the
educational institutions. Such reproduction is made by a natural person
recording must be deleted within a exclusively for research and private study, shall
reasonable period; such recording may be permitted, without the authorization of the
not be made from audio-visual works owner of copyright in the work [Sec. 187.1, RA
which are part of the general cinema, 8293].
repertoire of feature films except of
brief excerpts of the work [Sec. Exceptions: Such permission shall not extend
184.1(f), RA 8293]; to:
7. Making of ephemeral recordings; 1. A work of architecture in the form of
a. by a broadcasting organization, building or other construction;
b. by means of its work or 2. An entire book, or a substantial part
facilities, thereof, or of a musical work in graphic
c. for use in its own broadcast form by reprographic means;
[Sec. 184.1(g), RA 8293]; 3. A compilation of data and other
8. Use made of a work by or under the materials;
direction or control of the government 4. A computer program except as
for public interest compatible with fair provided in Section 189 (see Letter g
use [Sec. 184.1(h), RA 8293]; on page 36); and
9. Public performance or the 5. Any work in cases where reproduction
communication to the public of a work would unreasonably conflict with a
in a place where no admission fee is normal exploitation of the work or
charged by a club on institution for would otherwise unreasonably
charitable or educational purpose only prejudice the legitimate interests of the
and the aim is not profitmaking [Sec. author [187.2, RA 8293].
184.1(i), RA 8293];
10. Public display of the original or a copy f. Reprographic Reproduction by
of the work not made by means of a Libraries
film, slide, television, image or
otherwise on screen or by means of Any library or archive whose activities are not
any other device or process either the for profit may, without the authorization of the
work has been published, sold, given author of copyright owner, make a single copy
away, or transferred to another person of the work by reprographic reproduction:
by the author or his successor in title 1. Where the work by reason of its fragile
[Sec. 184.1(j), RA 8293]; character or rarity cannot be lent to
11. Use made of a work for the purpose of user in its original form;
any judicial proceedings or for the 2. Where the works are isolated articles
giving of professional advice by a legal contained in composite works or brief
practitioner [Sec. 184.1(k), RA 8293]. portions of other published works and
12. The reproduction or distribution of the reproduction is necessary to supply
Page 290 of 494
them, when this is considered h. Importation for Personal Purposes
expedient, to persons requesting their Sec. 190.2 of RA 8293 that limited the
loan for purposes of research or study importation of books was repealed by RA
instead of lending the volumes or 10372.
booklets which contain them; and
3. Where the making of such a copy is in RA 10372 expressly limited the prohibition to
order to preserve and, if necessary in import or export only to counterfeit goods.
the event that it is lost, destroyed or
rendered unusable, replace a copy, or i. Remedies for Infringement
to replace, in the permanent collection
of another similar library or archive, a a. An injunction restraining such
copy which has been lost, destroyed or infringement [Sec. 216.1(a), RA 8293];
rendered unusable and copies are not b. Actual damages, including legal costs
available with the publisher [Sec. and other expenses, as he may have
188.1, RA 8293 as amended by RA incurred due to the infringement, as
10372]. well as the profits the infringer may
have made due to such infringement;
It shall not be permissible to produce a volume c. In proving profits: The plaintiff shall be
of a work published in several volumes or to required to prove sales only, and the
produce missing tomes or pages of magazines defendant shall be required to prove
or similar works, unless the volume, tome or every element of cost which he claims
part is out of stock: [Sec. 216.1(b), RA 8293];
● Provided, That every library which, by d. Such damages which to the court shall
law, is entitled to receive copies of a appear to be just and shall not be
printed work, shall be entitled, when regarded as penalty, in lieu of actual
special reasons so require, to damages and profits [Sec. 216.1(b),
reproduce a copy of a published work RA 8293];
which is considered necessary for the e. Impounding during the pendency of the
collection of the library but which is out action, upon such terms and conditions
of stock [Sec. 188.2, RA 8293]. as the court may prescribe, sales
invoices and other documents
g. Reproduction of Computer Program evidencing sales, all articles and their
packaging alleged to infringe a
The reproduction in one back-up copy or copyright and implements for making
adaptation of a computer program shall be them [Sec. 216.1(c), RA 8293];
permitted, without the authorization of the f. Deliver under oath for destruction
author of, or other owner of copyright in, a without any compensation all infringing
computer program, by the lawful owner of that copies or devices, as well as all plates,
computer program: Provided, That the copy or molds, or other means for making such
adaptation is necessary for: infringing copies as the court may order
1. The use of the computer program in [Sec. 216.1(d), RA 8293];
conjunction with a computer for the g. Such other terms and conditions,
purpose, and to the extent, for which including the payment of moral and
the computer program has been exemplary damages, which the court
obtained; and may deem proper, wise and equitable
2. Archival purposes, and, for the and the destruction of infringing copies
replacement of the lawfully owned copy of the work even in the event of
of the computer program in the event acquittal in a criminal case [Sec.
that the lawfully obtained copy of the 216.1(e), RA 8293];
computer program is lost, destroyed or h. Criminal liability
rendered unusable [Sec. 189.1, RA
8293]. The copyright owner may elect, at any time
before final judgment is rendered, to recover
Page 291 of 494

instead of actual damages and profits, an 226, RA 8293].
award of statutory damages for all
infringements involved in an action in a sum Criminal Penalties for Infringement
equivalent to the filing fee of the infringement Any person infringing any right secured by
action but not less than Php50,000.00. In provisions of Part IV of this Act or aiding or
awarding statutory damages, the court may abetting such infringement shall be guilty of a
consider the following factors: crime punishable by:
5. The nature and purpose of the a. Imprisonment of one (1) year to three
infringing act; (3) years plus a fine ranging from Fifty
6. The flagrancy of the infringement; thousand pesos (P50,000) to One
7. Whether the defendant acted in bad hundred fifty thousand pesos
faith; (P150,000) for the first offense.
8. The need for deterrence; b. Imprisonment of three (3) years and
9. Any loss that the plaintiff has suffered one (1) day to six (6) years plus a fine
or is likely to suffer by reason of the ranging from One hundred fifty
infringement; and thousand pesos (P150,000) to Five
10. Any benefit shown to have accrued to hundred thousand pesos (P500,000)
the defendant by reason of the for the second offense.
infringement. c. Imprisonment of six (6) years and one
(1) day to nine (9) years plus a fine
In case the infringer was not aware and had no ranging from Five hundred thousand
reason to believe that his acts constitute an pesos (P500,000) to One million five
infringement of copyright, the court in its hundred thousand pesos (P1,500,000)
discretion may reduce the award of statutory for the third and subsequent offenses.
damages to a sum of not more than Ten d. In all cases, subsidiary imprisonment in
thousand pesos (Php10,000.00) [Sec. 216.1, cases of insolvency [Sec. 217.1, RA
RA 8293]. 8293 as amended by RA 10372].
The amount of damages to be awarded shall Determination of Penalty

be doubled against any person who: In determining the number of years of
1. Circumvents effective technological imprisonment and the amount of fine, the court
measures; or shall consider:
2. Having reasonable grounds to know a. The value of the infringing materials
that it will induce, enable, facilitate or that the defendant has produced or
conceal the infringement: manufactured; and
a. Remove or alter any electronic b. The damage that the copyright owner
rights management information has suffered by reason of the
from a copy of a work, sound infringement [Sec. 217.2, RA 8293 as
recording, or fixation of a amended by RA 10372].
performance; or
b. Distribute, import for The respective maximum penalty stated in
distribution, broadcast, or Section 217.1 (see Criminal Penalties on
communicate to the public pages 33-34) for the first, second, third and
works or copies of works subsequent offense, shall be imposed when
without authority, knowing that the infringement is committed by:
electronic rights management 1. The circumvention of effective
information has been removed technological measures;
or altered without authority 2. The removal or alteration of any
[Sec. 216.1(b), RA 8293]. electronic rights management
information from a copy of a work,
However, no damages may be recovered sound recording, or fixation of a
under this Act after the lapse of four (4) years performance, by a person, knowingly
from the time the cause of action arose [Sec. and without authority; or
Page 292 of 494

3. The distribution, importation for
distribution, broadcast, or
communication to the public of works
or copies of works, by a person without
authority, knowing that electronic rights
management information has been
removed or altered without authority
[Sec. 217.2, RA 8293 as amended by
RA 10372].
Page 293 of 494

ELECTRONIC COMMERCE ACT

COMMERCIAL LAW
ELECTRONIC COMMERCE ACT COMMERCIAL LAW
global information networks, with the
necessary and appropriate legal,
II. ELECTRONIC financial, diplomatic and technical
framework, systems and facilities.
COMMERCE ACT [Sec. 2]
The section numbers hereinafter generally The objective of the law is to facilitate domestic
pertain to RA 8792 or the Electronic Commerce and international dealings, transactions,
Act of 2000, unless otherwise indicated. arrangements agreements, contracts and
exchanges and storage of information through
the utilization of electronic, optical and similar
I. Policy of the Law medium, mode, instrumentality and technology
to recognize the authenticity and reliability of
The Electronic Commerce Act shall apply to electronic documents related to such activities
any kind of data message and electronic and to promote the universal use of electronic
document used in the context of commercial transaction in the government and general
and non-commercial activities to include public [Sec. 3].
domestic and international dealings,
transactions, arrangements, agreements
contracts and exchanges and storage of II. Definition of terms
information [Sec. 4].
Electronic Data Messages
The State recognizes: It refers to information generated, sent,
1. The vital role of information and received or stored by electronic, optical or
communications technology (ICT) in similar means [Sec. 5].
nation- building
2. The need to create an information- Electronic Document
friendly environment which supports It refers to information or the representation of
and ensures the availability, diversity information, data, figures, symbols or other
and affordability of ICT products and modes of written expression, described or
services however represented, by which a right is
3. The primary responsibility of the private established or an obligation extinguished, or by
sector in contributing investments and which a fact may be prove and affirmed, which
services in telecommunications and is receive, recorded, transmitted, stored,
information technology; processed, retrieved or produced electronically
4. The need to develop, with appropriate [Sec. 5].
training programs and institutional
policy changes, human resources for Electronic Signature
the information technology age, a labor It refers to any distinctive mark, characteristic
force skilled in the use of ICT and a and/or sound in electronic form, representing
population capable of operating and the identity of a person and attached to or
utilizing electronic appliances and logically associated with the electronic data
computers; message or electronic document or any
5. Its obligation to facilitate the transfer methodology or procedures employed or
and promotion of technology; to ensure adopted by a person and executed or adopted
network security, connectivity and by such person with the intention of
neutrality of technology for the national authenticating or approving an electronic data
benefit; and message or electronic document [Sec. 5].
6. The need to marshal, organize and
deploy national information
infrastructures, comprising in both
telecommunications network and
strategic information services,
including their interconnection to the
Page 295 of 494
b. That document is capable of being
III. Legal Recognition of displayed to the person to whom it is to
Electronic Data Messages, be presented: Provided, that no
provision of this Act shall apply to vary
Documents, and Signatures any and all requirements of existing
laws on formalities required in the
Legal Recognition of Electronic Data execution of documents for their
Messages [Sec. 6] validity.
Information shall not be denied legal effect,
validity or enforceability solely on the grounds For evidentiary purposes, an electronic
that it is in the data message purporting to give document shall be the functional equivalent of
rise to such legal effect, or that it is merely a written document under existing laws.
referred to in that electronic data message.
This Act does not modify any statutory rule
Legal Recognition of Electronic Documents relating to the admissibility of electronic data
[Sec. 7] messages or electronic documents, except the
rules relating to authentication and best
Electronic documents shall have the legal evidence.
effect, validity or enforceability as any other
document or legal writing. Legal Recognition of Electronic Signatures
[Sec. 8]
Where the law (1) requires a document to be in
writing; (2) requires a form of an obligation; (3) An electronic signature on the electronic
provides consequences for the document not document shall be equivalent to the signature
being presented or retained in its original from, of a person on a written document if that
that requirement is met if the electronic signature is proved by showing that a
document maintains its integrity and reliability prescribed procedure, not alterable by the
and can be authenticated so as to be usable for parties interested in the electronic document,
subsequent reference, in that: existed under which:
a. The electronic document has a. A method is used to identify the party

remained complete and unaltered sought to be bound and to indicate said
party's access to the electronic
Apart from: Any endorsement and any document necessary for his consent or
authorized change, or any change approval through the electronic
which arises in the normal course of signature;
communication, storage
and display. b. Said method is reliable and
appropriate for the purpose for which
b. The electronic document is reliable the electronic document was
in the light of the purpose for which it generated or communicated, in the
was generated and in the light of all light of all circumstances, including any
relevant circumstances [Sec. 7]. relevant agreement;
Where the law requires that a document be c. It is necessary for the party sought to
presented or retained in its original form, that be bound, in or order to proceed further
requirement is met by an electronic document with the transaction, to have executed
if: or provided the electronic signature;
and
a. There exists a reliable assurance as
to the integrity of the document from d. The other party is authorized and
the time when it was first generated in enabled to verify the electronic
its final form; and signature and to make the decision to
Page 296 of 494

proceed with the transaction Before any private electronic document offered
authenticated by the same. as authentic is received in evidence, its
authenticity must be proved by any of the
The Court recognized the broadness of what following means:
may be considered an electronic signature. 1. By evidence that it had been digitally
Thus, a machine signature of a Precinct Count signed by the person purported to have
Optical Scan (PCOS) machine may be signed the same;
considered the functional equivalent of a digital 2. By evidence that other appropriate
signature as it represents the identity of the security procedures or devices as may
individual, such digital signature naturally being be authorized by the Supreme Court or
created specifically for the person himself or by law for authentication of electronic
herself inputting the details. [Bagumbayan- documents were applied to the
VNP Movement, Inc. v. COMELEC, (2019)] document; or
3. By other evidence showing its integrity
Original Documents [Sec. 10] and reliability to the satisfaction of the
Where the law (1) requires a document to be in judge. [Sec. 2, Rules on Electronic
writing; (2) requires a form of an obligation; (3) Evidence]
provides consequences for the document not
being presented or retained in its original from, Note: The terms electronic data message
that requirement is met by an electronic data and electronic document, as defined under
message or electronic document if: the Electronic Commerce Act of 2000, do
not include a facsimile transmission.
1. The integrity of the information from the Accordingly, a facsimile transmission cannot
time when it was first generated in its be considered as electronic evidence. It is not
final form, as an electronic data message the functional equivalent of an original under
or electronic document is shown by the Best Evidence Rule and is not admissible
evidence aliunde or otherwise; and as electronic evidence. Since a facsimile
a. Criteria for assessing integrity - transmission is not an electronic data message
whether the information has or an electronic document, and cannot be
remained complete and considered as electronic evidence by the
unaltered, apart from the Court, with greater reason is a photocopy of
addition of any endorsement such a fax transmission not electronic
and any change which arises in evidence. In the present case, therefore, Pro
the normal course of Forma Invoice Nos. ST2-POSTS0401-1 and
communication, storage and ST2-POSTS0401-2, which are mere
display photocopies of the original fax transmittals, are
b. Standard of reliability - not electronic evidence [MCC Industrial Sales
assessed in the light of Corporation v Ssangyong Corporation, G.R.
purposed for which the No. 170633 (2007)].
information was generated and
in the light of all the relevant
circumstances.
IV. Presumption Relating to
Electronic Signatures
Where it is required that information be
resented, that the information is capable of Presumption Relating to Electronic
being displayed to the person to whom it is to Signatures [Sec. 9]
be presented.
In any proceeding involving an electronic
Authentication of Electronic Data signature, it shall be presumed that:
Messages and Electronic Documents 1. The electronic signature is the signature
of the person to whom it correlates; and
Now governed by: A.M. No. 01-7-10-SC –
RULES ON ELECTRONIC EVIDENCE
Page 297 of 494
2. The electronic signature was affixed by
that person with the intention of signing
VI. Obligation of
or approving the electronic document. Confidentiality
Except: When the person relying on the Except for the purposes authorized under this
electronically signed electronic document Act, any person who obtained access to any
knows or has notice of defects in or unreliability electronic key, electronic data message, or
of the signature or reliance on the electronic electronic document, book, register,
signature is not reasonable under the correspondence, information, or other material
circumstances. pursuant to any powers conferred under this
Act, shall not convey to or share the same with
V. Admissibility and any other person [Sec. 32].
Evidential Weight of VII. Punishable Acts &

Electronic Data Message or Penalties
Electronic Document
Hacking or cracking [Sec. 33(a)]
Admissibility Unauthorized access into or interference in a
In any legal proceeding, nothing in the computer system/server or information and
application of the rules on evidence shall deny communication system; or any access in order
the admissibility of an electronic data message to corrupt, alter, steal, or destroy using a
or electronic document in evidence: computer or other similar information and
a. On the sole ground that it is in communication devices, without the knowledge
electronic form; or and consent of the owner of the computer or
b. On the ground that it is not in the information and communication system,
standard written form, and the including the introduction of computer viruses
electronic data message or electronic and the like, resulting in the corruption,
document meeting, and complying with destruction, alteration, theft or loss of electronic
the requirements (under Sections 6 or data messages or electronic documents
7) shall be the best evidence of the
agreement and transaction contained Piracy [Sec. 33(b)]
therein [Sec. 12]. Unauthorized copying, reproduction,
dissemination, distribution, importation, use,
Note: This Act does not modify any statutory removal, alteration, substitution, modification,
rule relating to admissibility of electronic data storage, uploading, downloading,
massages or electronic documents, except the communication, making available to the public,
rules relating to authentication and best or broadcasting of protected material,
evidence [Sec. 7]. electronic signature or copyrighted works
including legally protected sound recordings or
Evidential weight phonograms or information material on
The following shall be given due regard In protected works, through the use of
assessing the evidential weight of an electronic telecommunication networks, such as, but not
data message or electronic document: limited to, the internet, in a manner that
a. the reliability of the manner in which it infringes intellectual property rights
was generated, stored or
communicated, Violations of the RA No. 7394 or the
b. the reliability of the manner in which its Consumer Act [Sec. 33(c)]
originator was identified, and In relation to transactions covered by or using
c. other relevant factors. [Sec. 12] electronic data messages or electronic
documents
Page 298 of 494

Other violations of the provisions of
the Electronic Commerce Act [Sec.
33(d)]
Page 299 of 494

FOREIGN INVESTMENTS
ACT
COMMERCIAL LAW
FOREIGN INVESTMENTS ACT COMMERCIAL LAW
c. Foreign investments shall be
conducted based on the principles of
FOREIGN transparency, reciprocity, equity, and
economic cooperation.
INVESTMENTS ACT
As a general rule, there are no
(R.A. No. 7042, as restrictions on extent of foreign
ownership of export enterprises.
amended by R.A. No.
11647) In domestic market enterprises,
foreigners can invest as much as one
hundred percent (100%) equity except
I. Declaration of Policy [Sec. in areas included in the negative list.
Foreign owned firms catering mainly to
2] the domestic market shall be
encouraged to undertake measures
a. To attract, promote and welcome that will gradually increase Filipino
productive investments from foreign participation in their businesses by
individuals, partnerships, corporations, taking in Filipino partners, electing
and governments, including their Filipinos to the board of directors,
political subdivisions, in activities which implementing transfer of technology to
significantly contribute to sustainable, Filipinos, generating more employment
inclusive, resilient, and innovative for the economy and enhancing skills
economic growth, productivity, global of Filipino workers.
competitiveness, employment
creation, technological advancement,
and countrywide development to the
II. Definitions [Sec. 3]
extent that foreign investment is
allowed in such activity by the 1. Foreign Investment [Sec. 3(c)]
Constitution and relevant laws, and
consistent with the protection of Equity investment made by a non-
national security. Philippine national in the form of
Foreign investments shall be foreign exchange and/or other assets
encouraged in enterprises that actually transferred to the Philippines
significantly expand livelihood and and duly registered with the Bangko
employment opportunities for Filipinos; Sentral ng Pilipinas;
enhance economic value of agricultural
products; promote the welfare of
2. “Doing business” [Sec. 3(d)]
Filipino consumers; expand the scope,
quality and volume of exports and their
access to foreign markets; and/or Includes:
transfer relevant technologies in • Soliciting orders, service contracts,
agriculture, industry and support opening offices, whether called
services. Foreign investments shall be "liaison" offices or branches;
welcome as a supplement to Filipino • Appointing representatives or
capital and technology in those distributors domiciled in the
enterprises serving mainly the Philippines or who in any calendar
domestic market. year stay in the country for a period
or periods totaling 180 days or
b. The State shall promote accountability more
and integrity in public office, as well as • Participating in the management,
the promotion and administration of supervision or control of any
efficient public service to entice foreign domestic business, firm, entity or
investments. corporation in the Philippines; and
Page 301 of 494
• Any other act or acts that imply a It should be kept in mind that the
continuity of commercial dealings determination of whether a foreign
or arrangements, and contemplate corporation is doing business in the
to that extent the performance of Philippines must be judged in light of
acts or works, or the exercise of the attendant circumstances
some of the functions normally [Steelcase, Inc. v. Design International
incident to, and in progressive Selections, Inc., G.R. No. 171995, 18
prosecution of, commercial gain or April 2012]
of the purpose and object of the
business organization. Factors used by the Supreme Court to
determine whether a foreign
Does not include: corporation is doing business in the
• Mere investment as a shareholder Philippines:
by a foreign entity in domestic a. Should be active and continuous;
corporations duly registered to do isolated business transactions or
business, and/or the exercise of occasional, incidental and casual
rights as such investor; transactions are not within the
• Having a nominee director or context of doing business (Antam
officer to represent its interests in Consolidated, Inc. v. CA, G.R. No.
such corporation; and L-61523 (1986)]
• Appointing a representative or b. Intention of an entity to continue the
distributor domiciled in the body of its business in the country;
Philippines which transacts number and quantity are merely
business in its own name and for its evidence of such intention [Eriks
own account. Pte. Ltd. v. CA, G.R. No. 118843
(2007)]
The IRR of RA No. 7042 also states the c. Single act may be considered as
following as not to be deemed “doing business” doing business if it implies a
in the Philippines: continuity of commercial dealings
• Publication of a general and contemplates the performance
advertisement through any print or of acts or the exercise of functions
broadcast media normally incidental to and in the
• Maintaining a stock of goods in the progessive pursuit of its purpose
Philippines solely for the purpose [Magna Ready Mix Concrete
of having the same processed by Corporation v. Andersen Bjornstad
another entity in the Philippines Kane Jacobs, Inc., G.R. No.
• Consignment by a foreign entity of 196158, (2021)]
equipment with a local company to
be used in the processing of Two general tests to determine whether or
products for export not a foreign corporation can be considered
• Collecting information in the as “doing business” in the Philippines:
Philippines 1. Substance Test – whether the
• Performing services auxiliary to an foreign corporation is continuing
existing isolated contract of sale the body of the business or
which are not on a continuing enterprise for which it was
basis, such as installing in the organized or whether it has
Philippines machinery it has substantially retired from it and
manufactured or exported to the turned it over to another
Philippines, servicing the same, 2. Continuity Test – implies
training domestic workers to continuity of commercial dealings
operate it, and similar incidental and arrangements, and
services. contemplates, to that extent, the
performance of acts or works or the
Page 302 of 494

exercise of some of the functions 4. One (1) representative from the
normally incident to, and in the DTI-Philippine Economic Zone
progressive prosecution of, the Authority (PEZA);
purpose and object of its 5. One (1) representative from the
organization [Agilent Technologies Department of Foreign Affairs
v. Integrated Silicon, G.R. No. (DFA),Office of the
156416 (2004)] Undersecretary for Multilateral
Affairs and International Economic
3. Export enterprise [Sec. 3(e)] Relations (OUMAIER);
6. One (1) representative from the
National Economic and
An enterprise wherein a manufacture,
processor or service (including Development Authority (NEDA);
tourism) enterprise exports sixty per
Department of Information and
cent (60%) or more of its output, or
wherein a trader purchases products Communications Technology
(DICT);
domestically and exports sixty per cent
(60%) or more of such purchases. 8. One (1) representative from the
Commission on Higher Education
(CHED);
4. Domestic market enterprise [Sec. Technical Education and Skills
3(f)] Development Authority (TESDA);
and
An enterprise which produces goods 10. Four (4) representatives
for sale, or renders services to the composed of one (1)
domestic market entirely or if exporting representative each from the
a portion of its output fails to National Capital Region, Luzon,
consistently export at least sixty Visayas and Mindanao, to be
percent (60%) thereof. chosen from a list of nominees
prepared and submitted by
5. Negative List [Sec. 3(g)] nationally recognized leading
industry or business chambers,
who shall be of known
List of areas of economic activity
whose foreign ownership is limited to a competence, probity, integrity and
expertise in any of the fields of
maximum of forty percent (40%) of the
equity capital of the enterprises investment, advertising, banking,
finance management and law, with
engaged therein.
at least ten (10) years of
outstanding management or
III. Inter-Agency Investment leadership experience.
Promotion Coordination Powers and Functions of the IIPCC:

Committee (IIPCC) [Sec. 4]
1. To establish both a medium- and
long-term Foreign Investment
The IPCC shall be composed of the: Promotion and Marketing Plan
(FIPMP),coordinating all existing
1. Secretary of the DTI, to preside as investment development plans and
Chairperson; programs under the BOI, PEZA,
2. Secretary/Undersecretary of the and various investment promotion
Department of Finance (DOF) as agencies (IPAs),LGUs, and other
Vice-Chairperson; agencies, as delineated in Section
3. One (1) representative from the 4-B of this Act;
DTI-Board of Investments (BOI);
Page 303 of 494
2. To design a comprehensive
marketing strategy and campaign, Exception: unless participation of non-
promoting the country as a Philippine nationals in the enterprise is
desirable investment area; prohibited or limited to a smaller percentage by
3. To support inbound and outbound existing law and/or under the provisions of this
foreign direct and trade missions Act
for new international markets to
explore the country as a possible The SEC or the DTI, as the case may be, shall
location to do business; not impose any limitations on the extent of
4. To encourage and support foreign ownership in an enterprise additional to
research and development in those provided in this Act: Provided,
priority areas indicated by the however,That any enterprise seeking to avail of
FIPMP; incentives under the Omnibus Investments
5. To monitor actual performance Code of 1987 must apply for registration with
against measurable and time the BOI, which shall process such application
bound targets in the FIPMP, to for registration in accordance with the criteria
include job generation; for evaluation prescribed in said Code.
6. To submit annual evaluation and
reports to the President of the A non-Philippine national intending to engage
Philippines and the Congress in the same line of business as an existing joint
regarding the activities of the venture, in which he or his majority shareholder
IIPCC; is a substantial partner, must disclose the fact
7. To establish and regularly update and the names and addresses of the partners
an online database including a in the existing joint venture in his application for
directory of ready local partners registration with SEC. During the transitory
from priority sectors under the period as provided in Section 15 hereof, SEC
FIPMP, as a tool for promoting shall disallow registration of the applying non-
investments and business Philippine national if the existing joint venture
matching in local supply chains; enterprise, particularly the Filipino partners
and therein, can reasonably prove they are capable
8. To support local government to make the investment needed for the
efforts to promote foreign direct domestic market activities to be undertaken by
investments, expedite compliance the competing applicant. Upon effectivity of this
with national requirements and Act, SEC shall effect registration of any
address other safeguards and enterprise applying under this Act within fifteen
services requested by foreign (15) days upon submission of completed
investors in their different localities requirements."
involved with said foreign
investments. cf. Registration Process Of Philippine
Nationals
IV. Registration of Who are Philippine nationals?

Investments of Non- a. Citizen of the Philippines
b. Domestic partnership or association wholly
Philippine Nationals [Sec. 5] owned by citizens of the Philippines
c. Corporation organized under the laws of the
General Rule: Without prior approval, a non- Philippines of which at least 60% of the capital
Philippine national may do business as defined stock outstanding and entitled to vote is owned
in Sec. 3(d) or invest in a domestic enterprise and held by citizens of the Philippines
up to one hundred percent (100%) of its capital: d. Corporation organized abroad and
• Upon registration with SEC, or registered as doing business in the Philippines
• With the the DTI for single under the Corporation Code of which 100% of
proprietorships
Page 304 of 494
the capital stock outstanding and entitled to "Export enterprises shall register and comply
vote is wholly owned by Filipinos with the export requirements in accordance
e. A trustee of funds for pension or other with Title XIII of the National Internal Revenue
employee retirement, where the trustee is a Code (NIRC),as amended, for purposes of
Philippine national and at least 60% of the fund availing any tax incentive or benefit.
will accrue to the benefit of Philippine nationals
Where a corporation and its non-Filipino VI. Foreign Investments in

stockholders own stocks in a Securities and Domestic Enterprises [Sec.
Exchange Commission (SEC) registered
enterprise, the corporation is a Filipino national 7]
under the following conditions:
a. At least sixty percent (60%) of the capital Non-Philippine nationals may own up to one
stock outstanding and entitled to vote of each hundred percent (100%) of domestic market
of both corporations must be owned and held enterprises unless foreign ownership therein is
by citizens of the Philippines; prohibited or limited by the Constitution and
b. At least sixty percent (60%) of the members existing law or the Foreign Investment
of the Board of Directors of each of both Negative List under Section 8 hereof."
corporations must be citizens of the
Philippines.
VII. Foreign Investment
The control test shall be applied for this
purpose.
Negative List [Sec. 8]
The Foreign Investment Negative List shall
V. Foreign Investments in have two (2) component lists: A and B:
Export Enterprises [Sec. 6] a) List A shall enumerate the areas of
activities reserved to Philippine nationals
by mandate of the Constitution and specific
Foreign investment in export enterprises laws.
whose products and services do not fall within b) List B shall contain the areas of activities
Lists A and B of the Foreign Investment and enterprises regulated pursuant to law:
Negative List provided under Section 8 hereof a. which are defense-related
is allowed up to one hundred percent (100%) activities, requiring prior clearance
ownership. and authorization from Department
of National Defense (DND) to
Export enterprises which are non-Philippine engage in such activity, such as the
nationals shall register with BOI and submit the manufacture, repair, storage
reports that may be required to ensure and/or distribution of firearms,
continuing compliance of the export enterprise ammunition, lethal weapons,
with its export requirement. BOI shall advise military ordnance, explosives,
SEC or DTI, as the case may be, of any export pyrotechnics and similar materials,
enterprise that fails to meet the export ratio unless such manufacturing or
requirement. The SEC or DTI shall thereupon repair activity is specifically
order the non-complying export enterprise to authorized by the Secretary of
reduce its sales to the domestic market to not National Defense; or
more than forty percent (40%) of its total b. which have implications on public
production; failure to comply with such SEC or health and morals, such as the
DTI order, without justifiable reason, shall manufacture and distribution of
subject the enterprise to cancellation of SEC or dangerous drugs, all forms of
DTI registration, and/or the penalties provided gambling, nightclubs, bars, beer
in Section 14 hereof. houses, dance halls, sauna and
steam bathhouses and massage
clinics.
Page 305 of 494
General Rule: Small and medium-sized than once every two (2) years: Provided, That
domestic market enterprises with paid-in equity the NEDA, in consultation and cooperation with
capital less than the equivalent of Two hundred the BOI, DTI, SEC, DICT, IPAs and other
thousand US dollars (US$200,000.00), are pertinent government agencies, shall, every
reserved to Philippine nationals two (2) years, (i) review the Foreign Investment
Negative List, and (ii) submit to Congress an
Exceptions: analysis of foreign investment performance
1. Otherwise provided under RA No. 8762, economic activities of the industries under the
otherwise known as the Retail Trade Foreign Investment Negative List and the
Liberalization Act of 2000 and other reasons for the recommended amendments, if
relevant laws any: Provided, further,That NEDA shall
2. A minimum paid-in capital of One hundred recommend to Congress investment-related
thousand dollars (US$100,000.00) if they matters requiring necessary legislation."
prove:
a. they involve advanced technology as THE TWELFTH REGULAR FOREIGN
determined by the Department of INVESTMENT NEGATIVE LIST
Science and Technology, or EO No. 175, promulgated on June 27,
b. they are endorsed as startup or startup 2022
enablers by the lead host agencies Nationality Industry
pursuant to RA No. 11337, or Requireme
c. a majority of their direct employees are nt
Filipinos, but in no case shall the LIST A: Foreign Ownership is Limited
number of Filipino employees be less by Mandate of the Constitution and
than fifteen (15)
Specific Laws
No Foreign 1. Mass media, except
Registered foreign enterprises employing
Equity recording
foreign nationals and enjoying fiscal incentives
shall implement an understudy or skills
2. Practice of professions,
development program to ensure the transfer of
except in cases specifically
technology or skills to Filipinos. Compliance
allowed by law following the
with this requirement shall be regularly
prescribed conditions stated
monitored by the DOLE.
therein. The Annex on
Professions attached
Nothing in this Act shall operate as a cause for
herewith and forming an
termination of employees hired prior to the
integral part of this
effectivity of this Act. In all cases, the provisions
document, indicates:
of Presidential Decree No. 442, otherwise
a. professions where
known as the "Labor Code of the Philippines"
foreigners are not allowed to
and other applicable laws, rules and
practice in the Philippines,
regulations issued by DOLE shall prevail.
except if subject to
reciprocity as provided in
Who may recommend amendments to List
pertinent laws; and
B:
b. corporate practice of
1. Secretary of National Defense, or
professions with foreign
2. the Secretary of Health, endorsed
equity restrictions under
by the NEDA, or
pertinent laws.
3. upon recommendation motu
proprio, of NEDA, approved by the
3. Retail trade enterprises
President, and promulgated by a
with paid-up capital of less
Presidential Proclamation
than PhP25,000,000.00
Amendments to the Foreign Investment
4. Cooperatives, except
Negative List shall not be made more often
investments of former
Page 306 of 494
THE TWELFTH REGULAR FOREIGN THE TWELFTH REGULAR FOREIGN
INVESTMENT NEGATIVE LIST INVESTMENT NEGATIVE LIST
EO No. 175, promulgated on June 27, EO No. 175, promulgated on June 27,
2022 2022
Nationality Industry Nationality Industry
Requireme Requireme
nt nt
natural born citizens of the Up to 40% 15. Procurement of
Philippines foreign infrastructure projects
equity pursuant to Sec. 23.4.2.1 (b),
5. Organization and (c), and (e) of IRR of RA No.
operation of private 9184
detective, watchmen or
security guards agencies 16. Exploration,
development and utilization
6. Small-scale mining of natural resources
7. Utilization of marine 17. Ownership of private

resources in archipelagic lands except a natural born
waters, territorial sea and citizen who has lost his
exclusive economic zone, as Philippine citizenship and
well as small-scale utilization who has the legal capacity to
of natural resources in rivers, enter into a contract under
lakes, bays and lagoons Philippine laws
8. Ownership, operation and 18. Operation of public

management of cockpits utilities
9. Manufacture, repair, 19. Educational institutions

stockpiling and/or other than those established
distribution of nuclear by religious groups and
weapons mission boards, for foreign
diplomatic personnel and
10. Manufacture, repair, their dependents, and other
stockpiling and/or foreign temporary, or for
distribution of biological, short-term high-level skills
chemical and radiological development that do not
weapons and anti-personnel form part of the formal
mines education system as defined
in Section 20 of Batas
11. Manufacture of Pambansa No. 232
firecrackers and other
pyrotechnic devices 20. Culture, production,
Up to 25% 12. Private recruitment, milling, processing, trading
foreign whether for local or overseas except retailing, of rice and
equity employment corn and acquiring, by
barter, purchase or
13. Contracts for the otherwise, rice and corn and
construction of defense- the by-products thereof ,
related structures subject to period of
Up to 30% 14. Advertising divestment
foreign
equity
Page 307 of 494
THE TWELFTH REGULAR FOREIGN THE TWELFTH REGULAR FOREIGN
INVESTMENT NEGATIVE LIST INVESTMENT NEGATIVE LIST
EO No. 175, promulgated on June 27, EO No. 175, promulgated on June 27,
2022 2022
Nationality Industry Nationality Industry
Requireme Requireme
nt nt
21. Contracts for the supply lead (11), calcium and
of materials, goods and cuprite;
commodities to government- iii. Nitric acid;
owned or -controlled iv. Nitrocellulose;
corporations (GOCCs), v. Perchlorates of
company, agency or ammonium,
municipal corporation potassium and
sodium;
22. Operation of deep sea vi. Dinitrocellulose;
commercial fishing vessels vii. Glycerol;
viii.
23. Ownership of Amorphousphosphoru
condominium units s;
ix. Hydrogen
24. Private radio peroxide;
communications network x. Strontium nitrate
LIST B: Foreign Ownership is Limited powder;
for Reasons of Security, Defense, Risk xi. Toluene; and
to Health and Morals and Protection of f. Telescopic sights, sniper
Small and Medium Scale Enterprises scope and other similar
Up to 40% 1. Manufacture, repair, devices.
foreign storage, and/or distribution However, the manufacture or
equity of products and/or repair of these items may be
ingredients requiring authorized by the Chief of
Philippine National Police the PNP to non-Philippine
(PNP) clearance: nationals; Provided that a
a. Firearms (handguns to substantial percentage of
shotguns), parts of firearms output, as determined by the
and ammunition therefore, said agency, is exported.
instruments or implements Provided further that the
used or intended to be used extent of foreign equity
in the manufacture of ownership allowed shall be
firearms; specified in the said
b. Gunpowder; authority/clearance.
c. Dynamite;
d. Blasting supplies; 2. Manufacture and
e. Ingredients used in distribution of dangerous
making explosives: drugs
i. Chlorates of
potassium and 3. Sauna and steam
sodium; bathhouses, massage clinics
ii. Nitrates of and other like activities
ammonium, regulated by law because of
potassium, sodium risks posed to public health
barium, copper (11), and morals, except wellness
centers
Page 308 of 494
THE TWELFTH REGULAR FOREIGN
INVESTMENT NEGATIVE LIST
EO No. 175, promulgated on June 27,
2022
Nationality Industry
Requireme
nt
4. All forms of gambling

except those covered by
investment agreements with
PAGCOR
5. Micro and small domestic

market enterprises with paid
in equity capital of less than
the equivalent of
US$200,000
6. Micro and small domestic

market enterprises: (i) that
involve advance technology
as determined by the
Department of Science and
Technology (DOST); or (ii)
are endorsed as startup or
startup enablers by the lead
host agencies, namely the
Department of Trade and
Industry, Department of
Information and
Communications
Technology or DOST,
pursuant to RA No. 11337,
otherwise known as the
"Innovative Startup Act"; or
(iii) with a majority of their
direct employees as
Filipinos, but in no case shall
the number of Filipino
employees be less than
fifteen (15), with paid-in
equity capital of less than the
equivalent of US$100,000
Page 309 of 494

TAXATION 1
TAXATION LAW
TAXATION 1 TAXATION LAW

The distinction is important when the one
exercising it is the LGU (mere delegated
I. GENERAL PRINCIPLES authority).
OF TAXATION
Since Congress has the power to exercise the
State inherent powers of Police Power,
A. POWER OF TAXATION AS Eminent Domain and Taxation, the distinction
DISTINGUISHED FROM POLICE between police power and the power to tax xxx
POWER AND EMINENT DOMAI would not be of any moment when Congress
itself exercises the power. [NTC v. CA, G.R.
No. 127937 (1999)]
When the distinction of exercise of
powers is relevant
Taxation Eminent Domain Police Power

May be exercised by:
the government; May be exercised only by:
Authority (who May be exercised only by:
its political subdivisions; the government; or
exercises the the government; or
or may be granted to public its political subdivisions.
Power) its political subdivisions.
service companies or public
utilities.
The use of the property is
“regulated” for the purpose of
promoting the general
The property (generally in the
welfare; it is not
form of money) is taken for
compensable.
the support of the
government. To facilitate the taking of
If the primary purpose is the
Purpose private property for public
regulation of some particular
If the primary purpose is to use.
occupation, calling, or
raise revenue, it represents
activity, it is an exercise of
an exercise of taxing power.
police power even if it
[71 Am. Jur. 2d 395–396]
incidentally produces
revenue. [71 Am. Jur. 2d
395–396]
Operates upon: Operates on: Operates upon:
Persons
a community; an individual as the owner of a community;
Affected
or class of individuals. a particular property. or a class of individuals.
The money contributed There is no transfer of title. At
There is a transfer of the right
Effect becomes part of the public most, there is restraint on the
to property.
funds. injurious use of property.
Protection and benefits he
Market value of the Indirect benefits
receives.
property
The enjoyment of the
The person affected receives
Benefits privileges of living in an
He receives the market value indirect benefits as may arise
Received organized society,
of the property taken from from the maintenance of a
established and safeguarded
him. healthy economic standard of
by the devotion of taxes to
society.
public purpose.
Amount imposed should just
No amount imposed but
Generally, there is no limit on be commensurate to cover
Amount of rather the owner is paid the
the amount of tax that may be the cost of regulation,
Imposition market value of property
imposed. issuance of a license or
taken.
surveillance
Subject to constitutional Inferior to the impairment Relatively free from
Relationship to limitations, including the prohibition; government constitutional limitations and
the Constitution prohibition against cannot expropriate private is superior to the impairment
impairment of the obligation property, which under a of contract provision.
Page 311 of 494


Taxation Eminent Domain Police Power
of contracts. contract had previously
bound itself to purchase from
the other contracting party.
[MAMALATEO, Reviewer on Taxation 2nd Edition (2008), pp. 11-1
B. INHERENT AND character of the tax law, not the number of

persons benefited. [Dimaampao, Tax
CONSTITUTIONAL Principles and Remedies (2015)]
LIMITATIONS OF TAXATION
Tests in Determining Public Purpose:
a. Duty Test – Whether the thing to be
1. Inherent Limitations furthered by the appropriation of public
revenue is something which is the duty of
The following are the inherent limitations of the State as a government to provide.
taxation: b. Promotion of General Welfare Test –
a. Public Purpose Whether the proceeds of the tax will directly
b. Inherently Legislative promote the welfare of the community in
c. Territorial equal measure.
d. International Comity c. Character of the Direct Object of the
e. Exemption of Government Entities, Expenditure – It is the essential character
Agencies, and Instrumentalities of the direct object of the expenditure which
must determine its validity as justifying a
a. Public Purpose tax and not the magnitude of the interests
to be affected nor the degree to which the
The proceeds of the tax must be used: general advantage of the community, and
i. for the support of the State; or thus the public welfare, may be ultimately
ii. for some recognized objects of benefited by their promotion. [Pascual v.
government or directly to promote the Sec. of Public Works, supra]
welfare of the community.
b. Inherently Legislative
Test: Whether the statute is designed to
promote the public interest, as opposed to the General Rule: Delegata potestas non potest
furtherance of the advantage of individuals, delegari. (No delegated powers can be further
although each advantage to individuals might delegated.)
incidentally serve the public. [Pascual v. Sec.
of Public Works, G.R. No. L-10405 (1960)] The power to tax is exclusively vested in the
legislative body and it may not be re-delegated.
The public purpose of a tax may legally exist Judge Cooley enunciates the doctrine in the
even if the motive which impelled the following oft-quoted language: "One of the
legislature to impose the tax was to favor one settled maxims in constitutional law is that the
industry over another. [Tio v. Videogram, G.R. power conferred upon the legislature to make
No. L-75697 (1987)] laws cannot be delegated by that department
to any other body or authority.” [People v. Vera,
Public use is no longer confined to the G.R. No. L-45685 (1937)]
traditional notion of use by the public but held
synonymous with public interest, public benefit, Stated in another way, taxation may
public welfare, and public convenience. exceptionally be delegated, subject to such
(Commissioner of Internal Revenue v. Central well-settled limitations as:
Luzon Drug Corporation, G.R. No. 159647 a. The delegation shall not contravene any
(2005)] constitutional provision or the inherent
limitations of taxation;
It is the purpose which determines the public b. The delegation is effected either by:
Page 312 of 494

§ the Constitution; or b. Delegation to the President
§ by validly enacted legislative 1. Tariff powers by Congress under the
measures or statute; and Flexible Tariff Clause
c. The delegated levy power, except when the
delegation is by an express provision of the The Congress may, by law, authorize
Constitution itself, should only be in favor the President to fix within specified
of the local legislative body of the local or limits, and subject to such limitations
municipal government concerned. [VITUG and restrictions as it may impose, tariff
and ACOSTA] rates, import and export quotas,
tonnage and wharfage dues, and other
For a valid delegation of power, it is essential duties or imposts within the framework
that the law delegating the power must be: of the national development program of
(1) complete in itself, that is, it must set forth the Government. [Sec. 28(2), Art. VI,
the policy to be executed by the delegate 1987 Constitution]
and,
(2) it must fix a standard — limits of which are 2. Emergency Powers [Sec. 23(2), Art. VI,
sufficiently determinate or determinable — 1987 Constitution.
to which the delegate must conform. 3. To enter into Executive agreements;
[Osmeña v. Orbos, G.R. No. 99886 (1993)] and
4. To ratify treaties which grant tax
Legislature has the power to determine the: exemption subject to Senate
a. Nature (kind), concurrence.
b. Object (purpose),
c. Extent (rate), c. Delegation to administrative agencies
d. Coverage (subjects) and Limited to the administrative
e. Situs (place) of taxation. implementation that calls for some degree
of discretionary powers under sufficient
Exceptions standards expressed by law or implied
a. Delegation to local governments from the policy and purposes of the Act.
This exception is in line with the general
principle that the power to create municipal There are certain aspects of the taxing
corporations for purposes of local self- process that are not legislative and they
government carries with it, by necessary may, therefore, be vested in an
implication, the power to confer the power administrative body. The powers which are
to tax on such local governments. (1 not legislative include:
Cooley 190). This is logical for after all, 1. The power to value property for
municipal corporations are merely purposes of taxation pursuant to fixed
instrumentalities of the state for the better rules;
administration of the government in respect 2. The power to assess and collect the
to matters of local concern. [Pepsi-Cola taxes; and
Bottling Co. of the Phil. Inc. v. Mun. of 3. The power to perform any of the
Tanauan, G.R. No. L-31156 (1976)]. innumerable details of computation,
appraisement, and adjustment, and the
Under the new Constitution, however, delegation of such details.
LGUs are now expressly given the power
to create its own sources of revenue and to The exercise of the above powers is really
levy taxes, fees and charges, subject to not an exception to the rule as no
such guidelines and limitations as the delegation of the strictly legislative power
Congress may provide which must be to tax is involved.
consistent with the basic policy of local
autonomy. [Sec 5, Art. X, 1987 The powers which cannot be delegated
Constitution] include:
Page 313 of 494

● The determination of the subjects to be Thus, the property or income of a foreign state
taxed; or government may not be the subject of
● The purpose of the tax, the amount or taxation by another state.
rate of the tax;
● The manner, means, and agencies of Reasons:
collection; and a. In par in parem non habet imperium. As
● The prescribing of the necessary rules between equals there is no sovereign
with respect thereto. (Doctrine of Sovereign Equality among
states under international law). One state
c. Territorial cannot exercise its sovereign powers over
another. All states, including the smallest
Rule: A state may not tax property lying outside and least influential, are also entitled to
its borders or lay an excise or privilege tax upon their dignity and the protection of their
the exercise or enjoyment of a right or privilege honor and reputation. [Dimaampao, Tax
derived from the laws of another state and Principles and Remedies (2015)]
therein exercise and enjoyed. [51 Am.Jur. 87- b. In international law, a foreign government
88]. may not be sued without its consent.
Therefore, it is useless to impose a tax
Reasons: which could not be collected.
a. Tax laws do not operate beyond a c. Usage among states that when a foreign
country’s territorial limits. sovereign enters the territorial jurisdiction
b. Property which is wholly and exclusively of another, there is an implied
within the jurisdiction of another state understanding that the former does not
receives none of the protection for which a intend to degrade its dignity by placing
tax is supposed to be a compensation. itself under the jurisdiction of the other.
Note: Where privity of relationship exists. It e. Exemption of Government Entities,

does not mean, however, that a person outside Agencies, and Instrumentalities
of state is no longer subject to its taxing
powers. The fundamental basis of the right to If the taxing authority is the National
tax is the capacity of the government to provide Government:
benefits and protection to the object of the tax.
A person may be taxed where there is between General Rule: Agencies and instrumentalities
him and the taxing state, a privity of the of the government are exempt from tax. Their
relationship justifying the levy. In these cases, exemption rests on the State's sovereign
the State can exercise its taxing powers over immunity from taxation. The State cannot be
the taxpayer even outside its territorial taxed without its consent and such consent,
jurisdiction, such as the taxation of resident being in derogation of its sovereignty, is to be
citizens for income from sources worldwide. strictly construed. [Gomez v. Palomar, GR No.
The basis of the power to tax is not dependent L-23645, 29 October 1968]
on the source of the income nor upon the
location of the property nor upon the residence Note: Unless otherwise provided by law, the
of the taxpayer but upon his relation as a citizen exemption applies only to government entities
to the state. As such a citizen, he is entitled, through which the government immediately
wherever he may be, inside or outside of his and directly exercises its sovereign powers.
country, to the protection of his With respect to government-owned or
government. controlled corporations performing proprietary
(not governmental) functions, they are
d. International Comity generally subject to tax unless exempted under
Section 27(C) of the Tax Code or, in certain
Comity – respect accorded by nations to each cases, if there is a tax exemption provisions in
other because they are sovereign equals. their charters or the law creating them in line
Page 314 of 494

with the rule that a specific law overrides a There is no constitutional prohibition against
general law. the government taxing itself. [Coll. v. Bisaya
Land Transportation, 105 Phil. 338 (1959)].
If the taxing authority is a local government
unit: RA 7160 expressly prohibits LGUs from 2. Constitutional Limitations
levying tax on the National Government, its
agencies and instrumentalities and other The following are the constitutional limitations
LGUs. [Sec. 133 (o), LGC] of taxation:
Reasons for the exemption: 1. Provisions directly affecting taxation:

a. To levy a tax upon public property would 1. Prohibition against imprisonment for
render necessary new taxes on other non-payment of poll tax;
public property for the payment of the tax 2. Uniformity and equality of taxation;
so laid and thus, the government would be 3. Grant by Congress of authority to the
taxing itself to raise money to pay over for President to impose tariff rates;
itself. 4. Prohibition against taxation of religious,
b. This immunity also rests upon fundamental charitable entities, and educational
principles of government, being necessary entities;
in order that the functions of government 5. Prohibition against taxation of non-
shall not be unduly impeded. [1 Cooley stock, non-profit educational
263.] institutions;
c. The practical effect of an exemption 6. Majority vote of Congress for grant of
running to the benefit of the government is tax exemption;
merely to reduce the amount of money that 7. Prohibition on use of tax levied for
has to be handled by the government in the special purpose;
course of its operations: For these 8. President’s veto power on appropriation,
reasons, provisions granting revenue, tariff bills;
exemptions to government agencies 9. Tax bills should originate exclusively in
may be construed liberally in favor of the House of the Representatives;
non-tax liability of such agencies. 10. Concurrence of at least 2/3 of the
[Maceda v. Macaraig, Jr., G.R. No. 88291 Senate with tax treaties
(1991)]. 11. Non-impairment of jurisdiction of the
Supreme Court;
Exception: Government-owned or controlled 12. Grant of power to the local government
corporations (GOCCs) perform proprietary units to create its own sources of
functions hence, they are subject to taxation. revenue;
[Dimaampao, Tax Principles and Remedies 13. Flexible tariff clause;
(2015)] 14. Exemption from real property taxes;
and
Exception to the Exception: The following 15. No appropriation or use of public
GOCCs are considered tax exempt as money for religious purposes;
provided under Sec. 27(c) of the NIRC, as
amended:
1. Government Service Insurance System 2. Provisions indirectly affecting taxation:
(GSIS) (Sec. 39, RA 8291) 1. Due process
2. Social Security System (SSS) (Sec. 16, RA 2. Equal protection;
8282) 3. Religious freedom;
3. Home Development Mutual Fund 4. Non-impairment of obligations of
(HDMF) (Sec. 19, RA 9679) contracts;
4. Philippine Health Insurance Corporation 5. Freedom of speech and expression;
(PHIC) 6. Presidential power to grant reprieves,
5. Local Water Districts communications, and pardons, and
Page 315 of 494

remit fines and forfeitures after ii. Equality in burden –
conviction by final judgement; and Uniformity implies equality in
7. No taking of private property for public burden, not equality in amount
use without just compensation or equality in its strict and literal
meaning. The reason is simple
a. Provisions directly affecting Taxation enough. If legislation imposes
a single tax upon all persons,
1. Prohibition against imprisonment for properties, or transactions, an
non-payment of poll tax inequality would obviously
result considering that not all
No person shall be imprisoned for debt or persons, properties, and
non-payment of a poll tax. [Sec. 20, Art. III, transactions are identical or
1987 Constitution] similarly situated. Neither does
uniformity demand that taxes
Capitation or poll taxes are taxes of a shall be proportional to the
fixed amount upon all persons, or upon all relative value or amount of the
the persons of a certain class, resident subject thereof. Taxes may be
within a specified territory, without regard progressive.
to their property or the occupations in b. Equity
which they may be engaged. Taxes of a
specified amount upon each person i. Uniformity in taxation is
performing a certain act or engaging in a effected through the
certain business or profession are not, apportionment of the tax
however, poll taxes. [51 Am. Jur. 66-67] burden among the taxpayers
which under the Constitution
2. Uniformity and equality of taxation must be equitable. “Equitable”
means fair, just, reasonable
The rule of taxation shall be uniform and and proportionate to the
equitable. Congress shall evolve a taxpayer’s ability to pay.
progressive system of taxation. [Sec. Taxation may be uniform but
28(1), Art. VI, 1987 Constitution] inequitable where the amount
of the tax imposed is excessive
a. Uniformity – All taxable articles or or unreasonable.
properties of the same class shall be
taxed at the same rate. [City of Baguio ii. The constitutional requirement
v. De Leon, G.R. No. L-24756 (1968)] of equity in taxation also
implies an approach which
i. Uniformity of operation employs a reasonable
throughout tax unit – The rule classification of the entities or
requires the uniform individuals who are to be
application and operation, affected by a tax. Where the
without discrimination, of the “tax differentiation is not based
tax in every place where the on material or substantial
subject of it is found. This differences,” the guarantee of
means, for example, that a tax equal protection of the laws
for a national purpose must be and the uniformity rule will
uniform and equal throughout likewise be infringed.
the country and a tax for a
province, city, municipality, or Taxation does not require identity or
barangay must be uniform and equality under all circumstances, or negate
equal throughout the province, the authority to classify the objects of
city, municipality or barangay. taxation.
Page 316 of 494

Equality and Uniformity distinguished: 3. Grant by Congress of authority to the
President to impose tariff rates
Equality in taxation is accomplished when the
burden of the tax falls equally and impartially Delegation of Tariff powers to the President
upon all the persons and property subject to it. under the flexible tariff clause [Sec. 28(2), Art.
VI, 1987 Constitution], which authorizes the
Uniformity has been defined as that principle President to modify import duties. [Sec. 1608,
by which all taxable articles or kinds of property Customs Modernization and Tariff Act]
of the same class shall be taxed at the same
rate. A tax is uniform when it operates with the 4. Prohibition against taxation of religious,
same force and effect in every place where the charitable entities, and educational
subject of it is found. It does not signify an entities
intrinsic but simply a geographical uniformity
[Churchill v Concepcion, GR No. 11572, 22 Sec. 28(3), Art. VI, 1987 Constitution:
September 1916] a. Charitable institutions, churches and
personages or convents appurtenant
Test of Valid Classification: Classification, to thereto, mosques, non-profit cemeteries,
be valid, must be reasonable and this and all lands, buildings, and improvements,
requirement is not deemed satisfied unless: b. Actually, directly, and exclusively used for
a. It is based upon substantial distinctions religious, charitable, or educational
which make real differences; purposes shall be exempt from taxation.
b. These are germane to the purpose of the c. The tax exemption under this constitutional
legislation or ordinance; provision covers property taxes only and
c. The classification applies not only to not other taxes [Lladoc v. Commissioner,
present conditions but also to future G.R. No. L-19201 (1965)].
conditions substantially identical to those of d. In general, special assessments are not
the present; and covered by the exemption because by
d. The classification applies equally to all nature they are not classified as taxes.
those who belong to the same class. [Apostolic Prefect v. City Treasurer of
[Pepsi-Cola v. Butuan City, G.R. No. L- Baguio, G.R. No. L-47252 (1941)]
22814 (1968)]
To be entitled to the exemption, the
The progressive system of taxation would petitioner must prove that:
place stress on direct rather than indirect taxes, a. It is a charitable institution
on non-essentiality rather than essentiality to b. Its real properties are actually, directly and
the taxpayer of the object of taxation, or on the exclusively used for charitable purposes.
taxpayer’s ability to pay. Example is that
individual income tax system that imposes Revenue or income from trade, business or
rates progressing upwards as the tax base other activity, the conduct of which is not
(taxpayer’s taxable income) increases. A related to the exercise or performance of
progressive tax, however, must not be religious, educational and charitable purposes
confused with a progressive system of or functions shall be subject to internal revenue
taxation. taxes when the same is not actually, directly or
exclusively used for the intended purposes.
While equal protection refers more to like [BIR Ruling 046-2000]
treatment of persons in like circumstances,
uniformity and equity refer to the proper relative
treatment for tax purposes of persons in unlike
circumstances.
Page 317 of 494


“Exclusive" – possessed and enjoyed to the
Test of Use of the property, and not
exclusion of others; debarred from participation
Exemption the ownership [Abra Valley
or enjoyment;
College v. Aquino, G.R. No.
L-39086 (1988)]
"Exclusively" - “in a manner to exclude; as
Nature of Actual, direct and exclusive enjoying a privilege exclusively.”
Use use for religious, charitable
or educational purposes. If real property is used for one or more
[Lladoc v. CIR, supra] commercial purposes, it is not exclusively used
for the exempted purposes but is subject to
Scope of Real property taxes on taxation. The words "dominant use" or
Exemption facilities which are actual, "principal use" cannot be substituted for the
incidental to, or reasonably words "used exclusively" without doing
necessary for the violence to the Constitution and the law. Solely
accomplishment of said is synonymous with exclusively. [Lung Center
purposes such as in the case of the Philippines v. Quezon City, G.R. No.
of hospitals, a school for 144104 (2004)]
training nurses, a nurses’
home, property to provide Note: Lung Center did not necessarily overturn
housing facilities for interns, the case of Abra Valley College v. Aquino, G.R.
resident doctors and other No. L-39086 (1988). Lung Center just provided
members of the hospital a stricter interpretation. In Abra Valley, the
staff, and recreational Court held: The primary use of the school lot
facilities for student nurses, and building is the basic and controlling guide,
interns and residents, such norm and standard to determine tax
as athletic fields. [Abra exemption, and not the mere incidental use
Valley College v. Aquino, thereof. Under the 1935 Constitution, the trial
supra] court correctly held that the school building as
well as the lot where it is built, should be taxed,
not because the second floor of the same is
TEST: Whether an enterprise is charitable or
being used by the Director and his family for
not:
residential purposes (incidental to its
• Whether it exists to carry out a purpose
educational purpose), but because the first
recognized in law as charitable; or
floor thereof is being used for commercial
• Whether it is maintained for gain, profit, or purposes. However, since only a portion is
private advantage. used for purposes of commerce, it is only fair
that half of the assessed tax be returned to the
A charitable institution does not lose its school involved.
character as such and its exemption from taxes
simply because it derives income from paying 5. Prohibition against taxation of non-
patients, whether out-patient, or confined in the
stock, non-profit educational
hospital, or receives subsidies from the institutions
government, so long as the money received is
devoted or used altogether to the charitable Sec. 4, Art. XIV, 1987 Constitution.
object which it is intended to achieve; and no All revenues and assets of non-stock, non-profit
money inures to the private benefit of the educational institutions used actually, directly, and
persons managing or operating the institution exclusively for educational purposes shall be
(including honoraria to members of the board exempt from taxes and duties.
of trustees; BIR Ruling No. 558-18, among
Proprietary educational institutions, including those
others). cooperatively owned, may likewise be entitled to
such exemptions subject to the limitations provided
by law, including restrictions on dividends and
provisions for reinvestment.
Page 318 of 494
Subject to conditions prescribed by law, all grants,

Sec. 28, par. 3, Sec. 4, par. 3,
endowments, donations, or contributions used Art. VI Art. XIV
actually, directly, and exclusively for educational
purposes shall be exempt from tax. Charitable Non-stock, non-profit
institutions, churches educational
This provision covers only non-stock, non- and parsonages or institutions.
profit educational institutions. convents
appurtenant thereto,
The exemption covers income, property, and mosques, non-profit
donor’s taxes, custom duties, and other taxes cemeteries, and all
imposed by either or both the national lands, buildings, and
government or political subdivisions on all improvements,
revenues, assets, property or donations, used actually, directly, and
actually, directly and exclusively for exclusively used for
educational purposes. (In the case of religious religious, charitable,
and charitable entities and non-profit or educational
cemeteries, the exemption is limited to property purposes.
tax.)
Property taxes Income, property,
The exemption does not cover revenues and donor’s taxes
derived from, or assets used in, unrelated and custom duties.
activities or enterprise.
6. Majority vote of Congress for grant of
Revenues derived from assets used in the tax exemption
operation of cafeterias, canteens, and
bookstores are also exempt if they are owned
and operated by the educational institution as Sec. 28, Art. VI, 1987 Constitution.
No law granting any tax exemption shall be passed
ancillary activities and the same are located
without the concurrence of a majority of all the
within the school premises [RMC No. 76-2003] Members of the Congress.
Similar tax exemptions may be extended to

proprietary (for profit) educational Basis: The inherent power of the state to
institutions by law subject to such impose taxes carries with it the power to grant
limitations as it may provide, including tax exemptions.
restrictions on dividends and provisions for
reinvestment. The restrictions are designed to Exemptions may be created by:
ensure that the tax-exemption benefits are a. The Constitution, or
used for educational purposes. b. Statutes, subject to constitutional
limitations
Lands, buildings, and improvements
actually, directly and exclusively used for Vote required for the grant of exemption:
educational purposes are exempt from Absolute majority of the members of Congress
property tax [Sec. 28(3), Art. VI, 1987 (at least ½ + 1 of ALL the members voting
Constitution], whether the educational SEPARATELY)
institution is proprietary or non-profit.
Vote required for withdrawal of such grant
of exemption: Relative majority is sufficient
(MAJORITY of the QUORUM).
The provision guaranteeing equal protection of

the laws and that mandating the rule of taxation
shall be uniform and equitable likewise limit,
Page 319 of 494

although not expressly, the legislative power to Sec. 2, Art. VIII, 1987 Constitution.
grant tax exemption. The Congress shall have the power to define,
prescribe, and apportion the jurisdiction of the
Grants in the nature of tax exemptions: various courts but may not deprive the Supreme
a. Tax amnesties Court of its jurisdiction over cases enumerated in
Section 5 hereof.
b. Tax condonations
c. Tax refunds
Sec. 5(2(b)), Art. VIII, 1987 Constitution. The
Note: Supreme Court shall have the following powers: xxx
a. Local government units may, through (2) Review, revise, modify or affirm on appeal or
ordinances duly approved, grant tax certiorari, as the laws or the Rules of Court may
exemptions, incentives or reliefs under provide, final judgments and orders of lower courts
such terms and conditions as they may in xxx
deem necessary. [Sec. 192, LGC]
(b) all cases involving the legality of any tax, impost,
b. The President of the Philippines may, when assessment or toll or any penalty imposed in relation
public interest so requires, condone or thereto.
reduce the real property tax and interest for
any year in any province or city or a
municipality within the Metropolitan Manila Even the legislative body cannot deprive the
Area. [Sec. 277, LGC] SC of its appellate jurisdiction over all cases
coming from inferior courts where the
7. Prohibition on use of tax levied for constitutionality or validity of an ordinance or
special purpose the legality of any tax, impost, assessment, or
toll is in question. [San Miguel Corp v. Avelino,
All money collected on any tax levied for a G.R. No. L-39699 (1979)]
special purpose shall be treated as a special
fund and paid out for such purpose only. Sec. 30, Art. VI, 1987 Constitution.
No law shall be passed increasing the appellate
If the purpose for which a special fund was jurisdiction of the Supreme Court without its advice
and concurrence.
created has been fulfilled or abandoned, the
balance, if any, shall be transferred to the
general funds of the Government. [Gaston v. Scope of Judicial Review in taxation: limited
Republic Planters Bank, G.R. No. L-77194 only to the interpretation and application of tax
(1988)]. laws. Its power does not include inquiry into the
policy of legislation. Neither can it legitimately
8. President’s veto power on question or refuse to sanction the provisions of
appropriation, revenue, tariff bills any law consistent with the Constitution. [Coll.
v. Bisaya Land Transportation, 105 Phil. 338
Sec. 27(2), Art. VI, 1987 Constitution. (1959)].
The President shall have the power to veto any
particular item or items in an appropriation, 10. Grant of power to the local government
revenue, or tariff bill, but the veto shall not affect the units to create its own sources of
item or times to which he does not object.
revenue
9. Non-impairment of jurisdiction of the LGUs have power to create its own sources of
Supreme Court revenue and to levy taxes, fees and charges,
subject to such guidelines and limitations as
the Congress may provide which must be
consistent with the basic policy of local
autonomy. [Sec. 5, Art. X, 1987 Constitution]
Page 320 of 494


11. Flexible tariff clause methods or procedure prescribed by law.
Delegation of tariff powers to the President Due Process in Taxation requirements:

under the flexible tariff clause [Sec. 28(2), Art. (a) Public purpose
VI, 1987 Constitution] (b) Imposed within taxing authority’s territorial
jurisdiction
Flexible tariff clause: the authority given to the (c) Assessment or collection is not arbitrary or
President, upon the recommendation of NEDA, oppressive
to adjust the tariff rates under Sec. 1608 of the
CMTA in the interest of national economy, The due process clause may be invoked where
general welfare and/or national security. a taxing statute is so arbitrary that it finds no
support in the Constitution, as where it can be
12. Exemption from real property taxes shown to amount to the confiscation of
property. [Sison v. Ancheta, G.R. No. L-
Sec. 28(3), Art. VI, 1987 Constitution. 59431(1984)]
Charitable institutions, churches and personages or
convents appurtenant thereto, mosques, non-profit Due process is usually violated where:
cemeteries, and all lands, buildings, and ● The tax imposed is for private, as
improvements, actually, directly, and exclusively distinguished from, public purposes
used for religious, charitable, or educational
● A tax is imposed on property outside the
purposes shall be exempt from taxation.
State, i.e., extra-territorial taxation; or
● Arbitrary or oppressive methods are used
13. No appropriation or use of public in assessing and collecting taxes.
money for religious purposes
But, a tax does not violate the due process
Sec. 29, Art. VI, 1987 Constitution clause, as applied to a particular taxpayer,
No public money or property shall be appropriated, although the purpose of the tax will result in an
applied, paid, or employed, directly or indirectly, for injury rather than a benefit to such taxpayer.
the use, benefit, or support of any sect, church,
denomination, sectarian institution, or system of Due process does not require that the property
religion, or of any priest, preacher, minister, other
subject to the tax or the amount to be raised
religious teacher, or dignitary as such, except when
such priest, preacher, minister, or dignitary is should be determined by judicial inquiry, and a
assigned to the armed forces, or to any penal notice and hearing as to the amount of the tax
institution, or government orphanage or leprosarium. and the manner in which it shall be apportioned
are generally not necessary to due process of
law. [Pepsi-Cola Bottling Co. of the Philippines,
b. Provisions Indirectly Affecting Inc. v. Municipality of Tanauan, G.R. No. L-
Taxation 31156 (1976)]
1. Due process Instances of violations of the due process
clause:
Sec. 1, Art. III, 1987 Constitution. • If the tax amounts to confiscation of
No person shall be deprived of life, liberty, or property;
property without due process of law, nor shall any • If the subject of confiscation is outside the
person be denied the equal protection of the laws.
jurisdiction of the taxing authority;
• If the tax is imposed for a purpose other
Substantive Due Process – An act is done than a public purpose;
under the authority of a valid law or the • If the law which is applied retroactively
Constitution itself. imposes just and oppressive taxes.
• If the law violates the inherent limitations
Procedural Due Process – An act is done on taxation.
after compliance with fair and reasonable
Page 321 of 494

2. Equal protection • This is different from a tax in the income of
one who engages in religious activities or a
Sec. 1, Art. III, 1987 Constitution. tax on property used or employed in
No person shall be deprived of life, liberty, or connection with those activities.
property without due process of law, nor shall any • It is one thing to impose a tax on the
person be denied the equal protection of the laws. income or property of a preacher. It is quite
another thing to exact a tax for the privilege
What the Constitution prohibits is class of delivering a sermon.
legislation which discriminates against some
and favors others. As long as there are rational The Constitution, however, does not prohibit
or reasonable grounds for so doing, Congress imposing a generally applicable tax on the sale
may, therefore, group the persons or properties of religious materials by a religious
to be taxed and it is sufficient “if all of the same organization. [Tolentino v. Secretary of
class are subject to the same rate and the tax Finance, G.R. No. 115455 (1994)]
is administered impartially upon them.” [1
Cooley 608]. 4. Non-impairment of obligations of
contracts
The equal protection clause is subject to
reasonable classification [See requisites for Sec. 10, Art. III, 1987 Constitution.
valid classification, supra]. No law impairing the obligation of contracts shall be
passed.
3. Religious freedom
The Contract Clause has never been thought
Sec. 5, Art. III, 1987 Constitution. as a limitation on the exercise of the State's
No law shall be made respecting an establishment power of taxation save only where a tax
of religion, or prohibiting the free exercise thereof. exemption has been granted for a valid
(Non-establishment clause)
consideration. [Tolentino v. Secretary of
The free exercise and enjoyment of religious Finance, supra]
profession and worship, without discrimination or
preference, shall forever be allowed. (Free exercise REQUISITES OF A VALID TAX
clause) 1. It must be for a public purpose;
2. Rule of taxation should be uniform;
No religious test shall be required for the exercise of 3. The person or property taxed is within the
civil and political rights.
jurisdiction of the taxing authority;
4. Assessment and collection is in
The free exercise clause is the basis of tax consonance with the due process clause;
exemptions. AND
5. The tax must not infringe on the inherent
The imposition of license fees on the and constitutional limitations of the
distribution and sale of bibles and other power of taxation.
religious literature by a non-stock, non-profit
missionary organization not for purposes of TAX AS DISTINGUISED FROM OTHER
profit amounts to a condition or permit for the FORMS OF EXACTIONS
exercise of their right, thus violating the
constitutional guarantee of the free exercise Tariff
and enjoyment of religious profession and Taxes Tariff
worship which carries with it the right to All embracing term A kind of tax
disseminate religious beliefs and information. to include various imposed on articles
[American Bible Society v. City of Manila, G.R. kinds of enforced which are traded
No. L-9637 (1957)] contributions upon internationally
• It is actually in the nature of a condition or persons for the
permit for the exercise of the right.
Page 322 of 494

Taxes Tariff License and
Taxes
attainment of public Regulatory Fee
purposes exceed the
expenses of issuing
Tariff may be used in one of three (3) senses: the license and of
1. A book of rates drawn usually in supervision.
alphabetical order containing the names of Imposed on persons, Imposed only on the
several kinds of merchandise with the property and the right to exercise a
corresponding duties to be paid for the right to exercise a privilege
same; or privilege.
2. The duties payable on goods imported or Failure to pay does Failure to pay makes
exported; or not necessarily the act or business
3. The system or principle of imposing duties make the act or illegal.
on the importation (or exportation of goods) business illegal.
Toll Penalty for non-

Taxes Toll payment:
Paid for the support Paid for the use of Surcharges; or
of the government another’s property. Imprisonment
Demand of Demand of (except poll tax).
sovereignty proprietorship
Generally, no limit on Amount paid License or permit fee is a charge imposed
the amount collected depends upon the under the police power for purposes of
as long as it is not cost of construction regulation.
excessive, or maintenance of
unreasonable or the public License is in the nature of a special privilege,
confiscatory improvement used. of a permission or authority to do what is within
Imposed only by the Imposed by the its terms. It makes lawful an act which would
government government or by otherwise be unlawful. A license granted by the
private individuals or State is always revocable. [Gonzalo Sy Trading
entities. v. Central Bank of the Phil., G.R. No. L-41480
(1976)]
A toll is a sum of money for the use of
something, generally applied to the Importance of the distinctions
consideration which is paid for the use of a 1. It is necessary to determine whether a
road, bridge or the like, of a public nature. [1 particular imposition is a tax or a license fee
Cooley 77] because some limitations apply only to one
and not to the other, and for the reason that
License fee exemption from taxes may not include
License and exemption from license fee.
Taxes 2. The power to regulate as an exercise of
Regulatory Fee
Imposed under the Levied under the police power does not include the power to
taxing power of the police power of the impose fees for revenue purposes.
state for purposes of state. [Progressive Development Corp. v.
revenue. Quezon City, G.R. No. L-36081 (1989)]
Forced contributions Exacted primarily to 3. An exaction, however, may be considered
for the purpose of regulate certain both a tax and a license fee. This is true in
maintaining businesses or the case of car registration fees which may
government occupations. be regarded as taxes even as they also
functions. serve as an instrument of regulation. If the
Generally unlimited Should not purpose is primarily revenue, or if revenue
as to amount unreasonably is, at least, one of the real and substantial
Page 323 of 494

purposes, then the exaction is properly A charge imposed only on property owners
called a tax. [Phil. Airlines, Inc. v. Edu, G.R. benefited is a special assessment rather than
No. L- 41383 (1988)] a tax notwithstanding that the statute calls it a
4. But it is possible that a tax may only have tax. The rule is that an exemption from taxation
a regulatory purpose. The general rule, does not include exemption from special
however, is that the imposition is a tax if its assessment. But the power to tax carries with
primary purpose is to generate revenue, it the power to levy a special assessment.
and regulation is merely incidental; but if
regulation is the primary purpose, the fact Note: The term "special levy" is the name used
that incidentally revenue is also obtained in the present Local Government Code (RA.
does not make the imposition a tax. No. 7160). A province, city, or municipality, or
[Progressive Development Corp. v. the National Government, may impose a
Quezon City, supra] special levy on lands especially benefited by
public works or improvements financed by it.
Primary purpose test (as seen in Progressive [Sec. 240, RA 7160]
Development Corp v. QC, supra):
1. Imposition must relate to an occupation or Debt
activity that so engages the public interest Taxes Debt
in health, morals, safety and development Based on laws Generally based on
as to require regulation for the protection contract, express or
and promotion of such public interest; implied.
2. Imposition must bear a reasonable relation Generally cannot be Assignable
to the probable expenses of regulation, assigned
taking into account not only the costs of Generally paid in May be paid in kind
direct regulation but also its incidental money
consequences as well. Cannot be a subject Can be a subject of
of set off or set off or
Note: Taxes may also be imposed for compensation compensation (see
regulatory purposes. It is called regulatory tax. Art. 1279, Civil
Code)
Special assessment Imprisonment is a A person cannot be
Taxes Special sanction for non- imprisoned for non-
Assessment payment of tax, payment of debt
Levied not only on Levied only on land except poll tax (except when it
land arises from a crime)
Imposed regardless Imposed because of Governed by the Governed by the
of public an increase in value special prescriptive ordinary periods of
improvements of land benefited by periods provided for prescription
public improvement in the NIRC
Contribution of a Contribution of a Does not draw Draws interest when
taxpayer for the person for the interest except only it is so stipulated or
support of the construction of a when delinquent where there is
government public improvement default
It has general Exceptional both as Imposed only by Can be imposed by
application both as to time and locality public authority private individual
to time and place
A tax is not a debt in the ordinary sense of the
A special assessment is not a personal liability word.
of the person assessed, i.e., his liability is
limited only to the land involved. It is based
wholly on benefits (not necessity).
Page 324 of 494


Penalty in performing the act or engaging in the
Taxes Penalty activity which is subject to the excise. The
Violation of tax laws Any sanction term “excise tax” is synonymous with
may give rise to imposed as a “privilege tax” and the two are often used
imposition of penalty punishment for interchangeably (e.g., income tax, value
violation of law or added tax, estate tax, donor’s tax).
acts deemed
injurious 2. As to burden or incidence
Primarily intended to Designed to regulate
raise revenue conduct a. Direct Taxes – taxes which are
May be imposed May be imposed by demanded from persons who also
only by the the government or shoulder them; taxes for which the
government private individuals or taxpayer is directly or primarily liable, or
entities which he cannot shift to another. The
Cannot be a subject Can be a subject of liability for the payment of the tax
of set off or set off or (incidence) and the burden (impact) of the
compensation compensation (see tax falls on the same person. (e.g., income
Art. 1279, Civil tax, estate tax, donor’s tax, community tax)
Code)
b. Indirect Taxes – taxes which are
C. KINDS OF TAXES demanded from one person in the
expectation and intention that he shall
indemnify himself at the expense of
1. As to object another, falling finally upon the ultimate
purchaser or consumer; taxes levied upon
a. Personal, Poll or Capitation Tax – tax of
transactions or activities before the articles
a fixed amount imposed on persons
subject matter thereof, reach the
residing within a specified territory, whether
consumers who ultimately pay for them not
citizens or not, without regard to their
as taxes but as part of the purchase price.
property or the occupation or business in
which they may be engaged (e.g.
Thus, the person who absorbs or bears the
community (formerly residence) tax).
burden of the tax is other than the one on whom
it is imposed and required by law to pay the tax.
b. Property Tax – tax imposed on property,
Practically all business taxes are indirect (e.g.,
real or personal, in proportion to its value
VAT, percentage tax, excise taxes on specified
or in accordance with some other
goods, customs duties).
reasonable method of apportionment (e.g.,
real estate tax). The obligation to pay the
3. As to tax rates
tax is absolute and unavoidable and is not
based upon the voluntary action of the
a. Specific Tax – a tax of a fixed amount
person assessed.
imposed by the head or number or by some
other standard of weight or measurement.
c. Privilege/Excise Tax – it is said that an
It requires no assessment (valuation) other
excise tax is a charge imposed upon:
than the listing or classification of the
i. the performance of an act,
objects to be taxed (e.g., taxes on distilled
ii. the enjoyment of a privilege, or
spirits, wines, and fermented liquors; cigars
iii. the engagement in an
and cigarettes)
occupation, profession, or
business.
b. Ad Valorem Tax – a tax of a fixed
proportion of the value of the property with
The obligation to pay excise tax is based
respect to which the tax is assessed. It
on the voluntary action of the person taxed
requires the intervention of assessors or
Page 325 of 494

appraisers to estimate the value of such 6. As to graduation
property before the amount due from each
taxpayer can be determined. The phrase a. Progressive – The rate of tax increases as
“ad valorem” means literally, “according to the tax base or bracket increases, e.g.,
value.” (e.g., real estate tax, excise tax on income tax on individuals
automobiles, non-essential goods such as
jewelry and perfumes, customs duties. b. Regressive – The rate of tax decreases as
the tax base or bracket increases. There is
c. Mixed – a tax that has both the no regressive tax in the Philippines.
characteristics of specific tax and ad
valorem tax c. Proportionate – The rate of tax is based
on a fixed percentage of the amount of the
4. As to purpose property, receipts or other basis to be
taxed, e.g., real estate tax, VAT, and other
a. General or Fiscal Tax – levied for the percentage taxes.
general or ordinary purposes of the
Government, i.e., to raise revenue for d. Digressive – A fixed rate is imposed on a
governmental needs (e.g., income tax, certain amount and diminishes gradually
VAT, and almost all taxes). on sums below it. The tax rate in this case
is arbitrary because the increase in tax rate
b. Special/Regulatory/Sumptuary Tax – is not proportionate to the increase of tax
levied for special purposes, i.e., to achieve base.
some social or economic ends irrespective
of whether revenue is actually raised or not Regressive/Progressive system of taxation
(e.g., protective tariffs or customs duties on A regressive tax must not be confused with the
imported goods to enable similar products regressive system of taxation.
manufactured locally to compete with such
imports in the domestic market). In a society where the majority of the people
have low incomes, a regressive taxation
Tariff duties intended mainly as a source of system exists when there are more indirect
revenue are relatively low so as not to taxes imposed than direct taxes. Since the low-
discourage imports. income sector of the population as a whole
buys more consumption goods on which the
5. As to scope (or authority imposing indirect taxes are collected, the burden of
the tax) indirect taxes rests more on them than on the
more affluent groups.
a. National – taxes imposed by the national
government, through Congress and A progressive tax is, therefore, also different
administered by the Bureau of Internal from a progressive system of taxation.
Revenue (BIR) or the Bureau of Customs
(BOC) (e.g., national internal revenue Regressivity is not a negative standard for
taxes, customs duties, and national taxes courts to enforce. What Congress is required
imposed by laws). by the Constitution to do is to "evolve a
progressive system of taxation." These
b. Municipal or Local – taxes imposed by provisions are put in the Constitution as moral
local governments, through their respective incentives to legislation, not as judicially
Sanggunians, and administered by the enforceable rights. [Tolentino v. Secretary of
local executive through the local treasurer Finance, GR No. 115455, 25 August 1994]
(e.g., business taxes that may be imposed
under the Local Government Code,
professional tax).
Page 326 of 494


D. DOCTRINES IN TAXATION Tax statutes offering rewards are liberally
construed in favor of informers. [Penid v.
Virata, G.R. No. L-44004 (1983)].
1. Construction and Interpretation of
Tax Laws, Rules, and Regulations Exceptions:
a. The rule of strict construction as against the
General Rules on the Construction of Tax government is not applicable where the
Laws language of the statute is plain and there is
a. Public purpose is always presumed no doubt as to the legislative intent [see 51
b. If the law is clear, apply the law in Am. Jur. 368]. E.g. Word “individual” was
accordance to its plain and simple changed by the law to “person”. This clearly
tenor indicates that the tax applies to both natural
c. A statute will not be construed as and juridical persons, unless otherwise
imposing a tax unless it does so clearly, expressly provided.
expressly and unambiguously b. The rule does not apply where the
· In case of doubt, it is construed taxpayer claims exemption from the tax.
most strongly against the
Government and liberally in favor Tax statutes are to receive a reasonable
of the taxpayer since it is an construction or interpretation with a view to
imposition of a burden (Lifeblood carrying out their purpose and intent. They
Theory). should not be construed as to permit the
d. Tax laws may not be extended by taxpayer easily to evade the payment of tax.
implication beyond the clear import of [Carbon Steel Co. v. Lewellyn, 251 U.S. 201].
their language, nor their operation Thus, the good faith of the taxpayer is not a
enlarged so as to embrace matters not sufficient justification for exemption from the
specifically provided payment of surcharges imposed by the law for
e. Tax laws operate prospectively unless failing to pay tax within the period required by
the purpose of the legislature to give law.
retroactive effect is expressly declared
or may be implied from the language b. Tax Exemption and Exclusion
used
f. Tax laws are special laws and prevail Tax exemptions must be shown to exist clearly
over a general law and categorically, and supported by clear
legal provisions. [NPC v. Albay, G.R. No.
a. Tax Laws 87479 (1990)]
General Rule: Tax laws are construed strictly General Rule:

against the government and liberally in favor of In the construction of tax statutes, exemptions
the taxpayer. [Manila Railroad Co. v. Coll. Of are not favored and are construed strictissimi
Customs, G.R. No. L-30264 (1929)]. juris against the taxpayer. [Republic Flour Mills
v. Comm. & CTA, G.R. No. L-25602 (1970)]
No person or property is subject to taxation a. NPC v. Albay [supra]: Tax exemptions
unless within the terms or plain import of a must be shown to exist clearly and
taxing statute. [see 72 Am. Jur. 2d 44] Taxes, categorically, and supported by clear
being burdens, are not to be presumed beyond legal provisions.
what the statute expressly and clearly b. Floro Cement v. Gorospe [supra]: Claims
declares. [Coll. V. La Tondena, G.R. No. L- for an exemption must be able to point out
10431 (1962)]. some provision of law creating the right,
and cannot be allowed to exist upon a
Thus, a tax payable by “individuals” does not mere vague implication or inference.
apply to “corporations.” c. RCPI v Provincial Assessor of South
Cotabato [G.R. No. 144486 (2005)]:
Page 327 of 494

Exemptions are strictly construed against of legality [Gonzales v. Land Bank, G.R. No.
the taxpayer and liberally in favor of the 76759 (1990)]
taxing authority—it is the taxpayer’s duty to
justify the exemption by words too plain to It is of course axiomatic that a rule or regulation
be mistaken and too categorical to be must bear upon, and be consistent with, the
misinterpreted. provisions of the enabling statute if such rule or
d. CIR v. CA [supra]: Refunds are in the regulation is to be valid. In case of conflict
nature of exemption and must be between a statute and an administrative order,
construed strictly against the the former must prevail. [Fort Bonifacio
grantee/taxpayer. Development Corp v. CIR, GR 175707 (2014)]
e. Quezon City v. ABS-CBN Broadcasting
Corporation [G.R. No. 166408 (2008)]: Requisites for validity and effectivity of
Since taxation is the rule and exemption regulations
the exception, the intention to make an a. Reasonable;
exemption ought to be expressed in clear b. Within the authority conferred;
and unambiguous terms c. Not contrary to law and the Constitution
[Art. 7, NCC]; and
Exceptions: d. Must be published.
a. When the law itself expressly provides for
a liberal construction, that is, in case of Tax regulations whose purpose is to enforce or
doubt, it shall be resolved in favor of implement existing law must comply with the
exemption; following requisites to be effective [RP v.
b. When the exemption is in favor of the Pilipinas Shell Petroleum Corp., G.R. No.
government itself or its agencies, or of 173918 (2008)]:
religious, charitable, and educational a. Be published in a newspaper of general
institutions because the general rule is that circulation [Art. 2, NCC]; AND
they are exempt from tax. b. Filed with the UP Law Center Office of the
c. When the exemption is granted under National Administrative Register (ONAR)
special circumstances to special classes of [Ch 2, Book VII, EO 292]
persons.
d. If there is an express mention or if the Note: Administrative rules and regulations
taxpayer falls within the purview of the must always be in harmony with the provisions
exemption by clear legislative intent, the of the law. In case of conflict with the law or
rule on strict construction does not apply. the Constitution, the administrative rules and
[Comm. V. Arnoldus Carpentry Shop, Inc., regulations are null and void. As a matter of
G.R. No. 71122 (1988)]. policy, however, courts will declare a regulation
or provision thereof invalid only when the
c. Tax Rules and Regulations conflict with the law is clear and unequivocal.
General Rule: Administrative interpretations and opinions

The Secretary of Finance, upon The power to interpret the provisions of the Tax
recommendation of the CIR, shall promulgate Code and other tax laws is under the exclusive
all needful rules and regulations for the and original jurisdiction of the Commissioner of
effective enforcement of the provisions of the Internal Revenue subject to review by the
NIRC. [Sec. 244, NIRC] Secretary of Finance [Sec. 4, par.1, NIRC].
It is an elementary rule in administrative law Revenue regulations are the formal

that administrative regulations and policies interpretation of the provisions of the NIRC and
enacted by administrative bodies to interpret other laws by the Secretary of Finance upon
the law which they are entrusted to enforce the recommendation of the Commissioner of
have the force of law and are entitled to great Internal Revenue.
respect. They have in their favor a presumption
Page 328 of 494

General rule: The Commissioner has the sole 2. Prospectivity of Tax Laws
authority to issue rulings but he also has the
power to delegate said authority to his General rule:
subordinates with the rank equivalent to a Tax laws are prospective in operation.
division chief or higher.
Reason: Nature and amount of the tax under
Exceptions: The Commissioner may not tax laws enacted after the transaction could not
delegate the following: have been foreseen and understood by the
a. The power to recommend the promulgation taxpayer at the time of the transaction.
of rules and regulations by the Secretary of
Finance; Exception:
b. The power to issue rulings of first Tax laws may be applied retroactively provided
impression or to reverse, revoke, or modify it is expressly declared or it is clearly the
any existing ruling of the Bureau; and legislative intent (e.g., increase taxes on
c. The power to compromise or abate any tax income already earned) except when
liability as provided by Sec. 204 and 205 of retroactive application would be so harsh
the NIRC and oppressive. [Republic v. Fernandez, G.R.
No. L-9141 (1956)]
Exception to the exception: BUT
assessments issued by RDOs involving (a) Statutes are prospective and not retroactive in
Php500,000 or less, and (b) minor criminal their operation, laws being the formulation of
violations as determined by the Secretary of rules for the future, not the past. [Curata v.
Finance as recommended by the Philippine Ports Authority, G.R. Nos. 154211-
Commissioner, may be compromised by a 12 (2009)]
Regional Evaluation Board [Sec. 7, NIRC].
The language of the statute must clearly
Decisions of the Supreme Court applying or demand or press that it shall have a retroactive
interpreting existing tax laws are binding on all effect. [Lorenzo v. Posadas, supra]
subordinate courts and have the force and
effect of law. As provided for in Article 8 of the Exception to the exception:
Civil Code, they “form part of the law of the Collection of interest in tax cases is not penal
land.” in nature; it is but a just compensation to the
State. Thus, the constitutional prohibition
d. Penal Provisions of Tax Laws against ex post facto laws is not applicable to
the collection of interest on back taxes. [Central
Penal provisions of tax laws must be strictly Azucarera v. CTA, G.R. No. L-23236 (1967)]
construed. It is not legitimate to stretch the
language of a rule, however beneficent its Non-retroactivity of rulings [Sec. 246, NIRC]
intention, beyond the fair and ordinary meaning General rule:
of its language. Rulings do not have retroactive application if
the revocation, modification, or reversal will be
A penal statute should be construed strictly prejudicial to the taxpayer.
against the State and in favor of the accused.
The reason for this principle is the tenderness Exceptions:
of the law for the rights of individuals and the a. Taxpayer’s deliberate misstatement or
object is to establish a certain rule by omission of facts
conformity to which mankind would be safe, b. BIR’s gathered facts is materially
and the discretion of the court limited. [People different from the facts from which the
v. Purisima, G.R. No. L-42050-66 (1978)] ruling was based on
c. Taxpayer acted in bad faith
Note: The rule on non-retroactivity of rulings

Page 329 of 494

may be applied only if the parties in the ruling
5 YEARS Prescription of collection of tax
involve the taxpayer himself/itself. The
if:
taxpayer cannot invoke the rulings granted in
(1) assessed within the 3-year
favor of the other taxpayers.
and 10-year prescriptive
periods;
3. Imprescriptibility of Taxes (2) assessed within the
extended period agreed upon by
The law on prescription, being a remedial the Commissioner and taxpayer
measure, should be liberally construed in order (waiver of the prescriptive
to afford such protection. As a corollary, the period); and
exceptions to the law on prescription should (3) Collected by distraint, levy,
perforce be strictly construed. [Commissioner or by a proceeding in court.
v. Standard Chartered Bank, G.R. No. 192173 [Sec. 222, NIRC]
(2015)]
Note: The prescriptive period from final
a. Prescriptions found in statutes liquidation (i.e., the ascertainment of the duties
that have to be paid on imported goods) is
(1) National Internal Revenue Code – three (3) years, except in cases of:
statute of limitations in the assessment 1. Tentative liquidation;
and collection of taxes therein 2. Payment under protest;
imposed. 3. Fraud; and
4. Compliance audit.
Summary of prescription on assessment
and collection: (2) Customs Modernization and Tariffs Act
(CMTA)
3 YEARS Prescription of assessment AND
collection from: Under Sec. 430, it provides that “[i]n the
(a) the prescribed last day of absence of fraud and when the goods have
filing of returns (even if the been finally assessed and released, the
return was filed earlier than the assessment shall be conclusive upon all
deadline); OR parties three (3) years from the date of final
(b) the day when the return was payment or duties, or upon completion of the
actually filed if filed later than the post-clearance audit.”
last day of filing [Sec. 203,
NIRC], whichever comes later. (3) Local Government Code
10 Prescription of assessment in The LGC prescribes the following prescriptive
YEARS cases of: periods for the assessment and collection of
(a) false or fraudulent return with local taxes, fees, or charges [Sec. 194, LGC]:
intent to evade tax; OR a. Taxes, fees, and charges shall be
(b) failure or omission to file a assessed five (5) years from the date
return [Sec. 222, NIRC] they become due;
b. Taxes, fees, and charges must be
Counted from the discovery of collected five (5) years from the date of
the fraud, falsity, or omission. assessment by administrative or
judicial action;
c. The prescriptive period for assessment
and collection shall be three (3) years
if the tax accrued before the effectivity
of the Local Government Code [Sec.
194 and 270, LGC].
d. In case of fraud or intent to evade the
Page 330 of 494


payment of taxes, fees, or charges, the imposed by two different states.
same may be assessed within ten (10)
years from the discovery of the fraud or Double taxation, standing alone and not being
intent to evade payment. forbidden by our fundamental law, is not a valid
defense against the legality of a tax measure
The prescriptive period is tolled when: [Pepsi Cola v. Mun. of Tanauan, G.R. No. L-
a. The treasurer is legally prevented from 31156 (1976)].
making the assessment or collection;
b. The taxpayer requests for a Constitutionality of double taxation
reinvestigation and executes a waiver There is no constitutional prohibition
in writing before expiration of the period against double taxation in the Philippines. It is
within which to assess or collect; and something not favored, but is permissible,
c. The taxpayer is out of the country or provided some other constitutional requirement
otherwise cannot be located. is not thereby violated. [Villanueva v. City of
Iloilo, G.R. No. L-26521 (1968)]
4. Double Taxation
If the tax law follows the constitutional rule on
Double taxation means taxing the same uniformity, there can be no valid objection to
property twice when it should be taxed only taxing the same income, business or property
once; that is, “taxing the same person twice by twice. [China Banking Corp. v. CA, G.R. No.
the same jurisdiction for the same thing.” 146749 (2003)]
[Swedish Match Phils., Inc. v. Treasurer, G.R.
No. 181277 (2013)] Double taxation in its narrow sense is
undoubtedly unconstitutional but in the broader
a. Strict sense (Direct Duplicate sense is not necessarily so. [DE LEON, citing
Taxation) 26 R.C.L 264-265]. Where double taxation (in
its narrow sense) occurs, the taxpayer may
The same property must be taxed twice when seek relief under the uniformity rule or the
it should be taxed once. The requisites are: equal protection guarantee. [DE LEON, citing
1. Both taxes must be imposed on the same 84 C.J.S.138].
property or subject matter;
2. For the same purpose; International Double Taxation
3. By the same State, Government, or Double taxation usually takes place when a
taxing authority; person is resident of a contracting state and
4. Within the same territory, jurisdiction or derives income from, or owns capital in, the
taxing district; other contracting state and both states impose
5. During the same taxing period; and tax on that income or capital. In order to
6. Of the same kind or character of tax. eliminate double taxation, a tax treaty resorts
[Swedish Match Phils., Inc. v. Treasurer, to several methods.
supra]
The purpose of these international agreements
b. Broad sense (Indirect Duplicate is to reconcile the national fiscal legislations of
the contracting parties in order to help the
Taxation)
taxpayer avoid simultaneous taxation in two
different jurisdictions. More precisely, the tax
There is double taxation in the broad sense or
conventions are drafted with a view towards
indirect duplicate taxation if any of the
the elimination of international juridical
elements for direct duplicate taxation is
double taxation, which is defined as the
absent.
imposition of comparable taxes in two or more
states on the same taxpayer in respect of the
It extends to all cases in which there is a
same subject matter and for identical periods.
burden of two or more pecuniary impositions.
For example, a tax upon the same property
Page 331 of 494

The apparent rationale for doing away with 3. Onward shifting - When the tax is shifted
double taxation is to encourage the free flow two or more times either forward or
of goods and services and the movement of backward.
capital, technology and persons between
countries, conditions deemed vital in creating Factors determining tax shifting
robust and dynamic economies. [CIR v. SC
Johnson & Sons, Inc., G.R. No. 127105 (1999)] 1. Elasticity of demand and supply - The
more the elasticity, the lower the incidence
Modes of eliminating double taxation on the sales and the higher the incidence
a. Allowing reciprocal exemption either by law on supply.
or by treaty;
b. Allowance of tax credit for foreign taxes 2. Nature of markets – In an oligopolistic
paid; market (i.e. few sellers and many buyers)
c. Allowance of deductions such as for tax shifting to buyers is high since few
foreign taxes paid, and vanishing sellers can team up to determine the
deductions in estate tax; or market price. In a situation where there are
d. Reduction of Philippine tax rate. many buyers and sellers, a large portion of
tax will be borne by sellers. For a
5. Escape from Taxation monopolistic market, the entire tax burden
falls on the shoulders of the buyer.
a. Shifting of Tax Burden 3. Government policy on pricing – In the
case of government price control, the
Shifting supplier cannot increase prices, hence
The act of transferring the burden of a tax from cannot shift tax burden to buyers and vice
the original payer or the one on whom the tax versa.
was assessed or imposed to someone else.
What is transferred is not the payment of the 4. Geographical location – If taxes are
tax but the burden of the tax. imposed on certain regions, it is hard to
shift them to consumers because
All indirect taxes may be shifted; direct taxes consumers will move to regions with low
cannot be shifted. taxes.
Ways of shifting the tax burden 5. Nature of tax (Direct or Indirect tax) –
Direct tax e.g. PAYE (pay-as-you-earn)
1. Forward shifting - When the burden of the cannot be shifted whatsoever while indirect
tax is transferred from a factor of taxes can be shifted through increase in
production through the factors of prices.
distribution until it finally settles on the
ultimate purchaser or consumer. 6. Rate of tax – If the rate is too high, shifting
● Examples: VAT, percentage tax. can occur backwards or forwards; if the
rate is too low, it may be absorbed by the
2. Backward shifting - When the burden of manufacturer.
the tax is transferred from the consumer or
purchaser through the factors of 7. Time available for adjustment – The
distribution to the factor of production. person who can adjust faster (buyer or
● Example: Consumer or purchaser seller) will be able to shift the tax e.g. if the
may shift tax imposed on him to buyer can shift to substitute goods, the
retailer by purchasing only after the seller will bear the tax burden.
price is reduced, and from the latter
to the wholesaler, and finally to the 8. The tax point
manufacturer or producer.
Page 332 of 494


Taxes that can be shifted government. But, the producers may succeed
1. Value-added Tax in collecting it from the consumers by raising
2. Percentage Tax the price of soap by the amount of tax. In that
3. Excise Tax case, consumers eventually pay the tax and so
the incidence falls upon them.
Meaning of Impact and Incidence of
Taxation Relationship between Impact, Shifting, and
Incidence of a Tax
Impact of taxation is the point where the tax Impact Shifting Incidence
is originally imposed or the one on whom the
tax is formally assessed. [Ingles, Tax Made Initial Intermediate Result
Less Taxing (2018)] In so far as the law is phenomenon process
concerned, the taxpayer, the subject of tax, is
the person who must pay the tax to the Imposition of Transfer of Setting or
government. the tax the tax coming to
rest of the
Incidence of taxation is the point on whom the tax
tax burden finally rests. [INGLES] It takes place
when shifting has been effected from the
Example: Impact in VAT is on the producer who
statutory taxpayer to another.
shifts the burden to the customer who finally
bears the incidence of the tax
Impact Distinguished from Incidence
Impact Incidence b. Tax Avoidance (Tax Minimization)
Initial burden of tax Ultimate burden of
the tax The exploitation by the taxpayer of legally
permissible alternative tax rates or methods of
At the point of At the point of assessing taxable property or income in order
imposition settlement to avoid or reduce tax liability. It is politely
called “tax minimization” and is NOT
Falls upon the Rests on the person punishable by law.
person from whom who pays it
the tax is collected eventually Example: A person refrains from engaging in
some activity or enjoying some privilege in
May be shifted Cannot be shifted order to avoid the incidental taxation or to lower
his tax bracket for a taxable year.
Incidence is the end
of the shifting
process. Sometimes,
c. Tax Evasion (Tax Dodging)
however, when no
shifting is possible, Tax Evasion - is the use by the taxpayer of
as in the case of illegal or fraudulent means to defeat or
income tax or such lessen the payment of a tax. It is also known as
other direct taxes, “tax dodging.” It is punishable by law.
the impact coincides
with incidence on the Example: Deliberate failure to report a taxable
same person. income or property; deliberate reduction of
income that has been received; overstatement
of expenses.
Application: Elements of Tax Evasion
Suppose a tax — excise duty — is imposed on a. The end to be achieved. Example: the
soap. Its impact is on the producers, in the first payment of less than that known by the
instance, as they are liable to pay it to the taxpayer to be legally due, or in paying no
Page 333 of 494

tax when such is due; Tax Avoidance v. Tax Evasion
b. An accompanying state of mind described
Tax Tax
as being “evil,” “in bad faith,” “willful,” or
Avoidance Evasion
“deliberate and not accidental”; and
c. A course of action (or failure of action) Also called Tax Tax
which is unlawful. [CIR v. Estate of Toda, as Minimization Dodging
G.R. No. 147188 (2004)]
Since fraud is a state of mind, it need not be Means Legal Illegal

proved by direct evidence but may be inferred
from the circumstances of the case. Thus:
● The failure of the taxpayer to declare for Outcome of Outcome of
taxation purposes his true and actual tax planning tax fraud
income derived from his business for
two consecutive years has been held as
an indication of his fraudulent intent to Punishable? No Yes
cheat the government of its due taxes.
[Republic v. Gonzales, G.R. No. L-17962
(1965)] Purpose Merely Entirely
● The substantial underdeclaration of minimize escape
income in the income tax returns of the payment of payment of
taxpayer for four (4) consecutive years taxes (tax taxes
coupled with his intentional savings)
overstatement of deductions justifies the
finding of fraud. [Perez v. CTA and d. Transformation
Collector, G.R. No. L-10507 (1958)].
Method of escape in taxation whereby the
Mere understatement of a tax is not itself proof
manufacturer or producer upon whom the tax
of fraud for the purpose of tax evasion. The
has been imposed pays the tax and endeavors
burden of proof is on the prosecution to prove
to recoup himself by improving his process of
beyond reasonable doubt that the accused
production thereby turning out his units of
willfully failed to supply correct and accurate
products at a lower cost. The taxpayer escapes
information. [People v. Judy Ann Santos, CTA
by a transformation of the tax into a gain
Crim. Case No. 0-012 (2013)]
through the medium of production.
The Willful Blindness doctrine states that a
taxpayer can no longer raise the defense that 1. Exemption from Taxation
the errors on their tax returns are not their
responsibility or that it is the fault of the Meaning of exemption from taxation
accountants they hired. Intent to defraud need The grant of immunity to particular persons or
not be shown for a conviction of tax evasion. corporations or to persons or corporations of a
The only thing that needs to be proven is that particular class from a tax which persons and
the taxpayer was aware of his obligation to file corporations generally within the same state or
the tax return but he nevertheless voluntarily, taxing district are obliged to pay. It is an
knowingly, and intentionally failed to file the immunity or privilege; it is freedom from a
required returns. [INGLES citing People v. financial charge or burden to which others are
Kintanar, C.T.A. E.B. No. 006 (2010)] subjected. It is strictly construed against the
taxpayer.
It is a waiver of the government's right to collect

the amounts that would have been collectible
under our tax laws. Thus, when the law speaks
Page 334 of 494

of a tax exemption, it should be understood as of equity. [Davao Gulf Lumber Corp. v. CIR,
freedom from the imposition and payment of a G.R. No. 117359 (1998)]
particular tax. [Secretary of Finance v. Lazatin,
G.R. No. 210588 (2016)] Nature of tax exemption
a. Mere personal privilege – cannot be
Taxation is the rule; exemption is the assigned or transferred without the consent
exception. He who claims exemption must be of the legislature. The legislative consent to
able to justify his claim or right thereto, by a the transfer may be given either in the
grant expressed in terms “too plain to be original act granting the exemption or in a
mistaken and too categorical to be subsequent law.
misinterpreted.” If not expressly mentioned in
the law, it must at least be within its purview by b. General rule: Revocable by the
clear legislative intent. [Jaka Investments Corp. government.
v. CIR, G.R. No. 147629 (2010)] Exception: If founded on a contract which
is protected from impairment. But the
He who claims an exemption must be able to contract must contain the essential
point to some positive provision of law creating elements of other contracts. An exemption
the right; it cannot be allowed to exist upon a provided for in a franchise, however, may
mere vague implication or inference. The right be repealed or amended pursuant to the
of taxation will not be held to have been Constitution [Sec. 11, Art. XII, 1987
surrendered unless the intention to surrender Constitution]. A legislative franchise is a
is manifested by words too plain to be mere privilege.
mistaken, for the state cannot strip itself of the
most essential power of taxation by doubtful c. Implies a waiver on the part of the
words; it cannot, by ambiguous language, be government of its right to collect taxes due
deprived of this highest attribute of sovereignty. to it, and, in this sense, is prejudicial
[Manila Electric Corporation v. Vera, G.R. No. thereto. Hence, it exists only by virtue of an
L-29987 (1975)] express grant and must be strictly
construed.
If there is nothing in a law that points that the
word “exemption” refers to taxes, the d. Not necessarily discriminatory, provided
implication would be that the term would be an it has a reasonable foundation or rational
exemption of something else, such as basis. Where, however, no valid distinction
regulatory or reporting requirements. [Ingles exists, the exemption may be challenged
citing PLDT v. City of Davao, G.R. No. L-29987 as violative of the equal protection
(1975)] guarantee or the uniformity rule.
Grounds for Tax Exemption Kinds of Tax Exemption

a. It may be based on a contract. a. Express or Affirmative - either entirely or
b. It may be based on some ground of public in part, may be made by provisions of the
policy. Constitution, statutes, treaties, ordinances,
c. It may be created in a treaty on grounds of franchises, or contracts.
reciprocity or to lessen the rigors of
international or multiple taxation. b. Implied or Exemption by Omission -
when a tax is levied on certain classes
But equity is NOT a ground for tax exemption. without mentioning the other classes.
While equity cannot be used as a basis or Every tax statute, in a very real sense,
justification for tax exemption, a law may validly makes exemptions since all those not
authorize the condonation of taxes on mentioned are deemed exempted. The
equitable considerations. omission may be either accidental or
intentional.
There is no tax exemption solely on the ground
Page 335 of 494

Exemptions are not presumed, but when against the taxpayer [Luzon Stevedoring
public property is involved, exemption is Co. v. CTA, G.R. No. L-30232 (1988)]
the rule, and taxation is the exception. c. Tax exemptions are strictly construed
against the taxpayer, they being highly
c. Contractual - The legislature of a State disfavored and may almost be said “to be
may, in the absence of special restrictions odious to the law.” [Manila Electric
in its constitution, make a valid contract Company v. Vera, supra]
with a corporation in respect to taxation,
and that such contract can be enforced Revocation of Tax Exemption
against the State at the instance of the General Rule: Revocable by the government.
corporation. [Casanovas v. Hord, G.R. No.
3473 (1907)] Exception: Contractual tax exemptions may
not be unilaterally so revoked by the taxing
In the real sense of the term and where the authority without thereby violating the non-
non-impairment clause of the Constitution impairment clause of the Constitution.
can rightly be invoked, this includes those
agreed to by the taxing authority in 2. Equitable Recoupment
contracts, such as those contained in
government bonds or debentures, lawfully The doctrine of equitable recoupment means
entered into by them under enabling laws that when a refund of a tax illegally or
in which the government, acting in its erroneously collected or overpaid by a
private capacity, sheds its cloak of taxpayer is barred by the statute of limitations
authority and waives its governmental and a tax is being presently assessed against
immunity. said taxpayer, said present tax may be
recouped or set-off against the tax, the refund
These contractual tax exemptions, of which has been barred. [CIR v. University of
however, are not to be confused with tax Santo Tomas, G.R. No. 11274, 104 Phil. 1062,
exemptions granted under franchises. A (1958)]
franchise partakes the nature of a grant
which is beyond the purview of the non- In other words, the doctrine of equitable
impairment clause of the Constitution. recoupment allows a taxpayer whose claim for
[Manila Electric Company v. Province of refund has been barred by prescription to offset
Laguna, G.R. No. 131359 (1999)] such claims against a current assessment.
Rationale of Tax Exemption The doctrine also allows the government to
Such exemption will benefit the body of the offset taxes that have not been collected from
people and not particular individuals or private the taxpayer against a current claim for refund,
interest and that the public benefit is sufficient although the government is time-barred from
to offset the monetary loss entailed in the grant collecting the previous taxes.
of the exemption.
The doctrine finds NO application in this
Principles of Tax Exemption: jurisdiction. [CIR v. University of Santo
a. As the power of taxation is a high Tomas, supra]
prerogative of sovereignty, the
relinquishment is never presumed and 3. Prohibition on Compensation and
any reduction or diminution thereof with
Set-Off
respect to its mode or its rate, must be
strictly construed, and the same must be
General rule: Taxes cannot be subject to
couched in clear and unmistakable terms in
compensation [South African Airways v. CIR,
order that it may be applied. [Floro Cement
G.R. No. 180356 (2010)]
v. Gorospe, G.R. No. L-46787 (1991)
b. When granted, they are strictly construed
Page 336 of 494

Reasons: it, and in this sense, prejudicial thereto,
a. This would adversely affect the particularly to give tax evaders, who wish to
government revenue system [Philex Mining relent and are willing to reform a chance to do
v. CA, G.R. No. 125704 (1998)]. so and become a part of the new society with a
b. The government and the taxpayer are not clean slate. [Republic v. IAC, G.R. No. L-69344
creditors and debtors of each other. There (1991)]
is a material distinction between a tax and
debt. Debts are due to the Government in A tax amnesty, much like a tax exemption, is
its corporate capacity, while taxes are due never favored nor presumed in law. If granted,
to the Government in its sovereign the terms of the amnesty, like that of a tax
capacity. We find no cogent reason to exemption, must be construed strictly
deviate from the aforementioned against the taxpayer and liberally in favor of
distinction. [South African Airways v. CIR, the taxing authority.
supra]
He who claims an exemption (or an amnesty)
Exception: If the claims against the from the common burden must justify his claim
government have been recognized and an by the clearest grant of organic or state law. It
amount has already been appropriated for that cannot be allowed to exist upon a vague
purpose. Where both claims have already implication. If a doubt arises as to the intent of
become: the legislature, that doubt must be resolved in
a. Due, favor of the state. [CIR v. Marubeni Corp., G.R.
b. Demandable, and No. 137377 (2001)].
c. Fully liquidated,
compensation takes place by operation of law Amnesty distinguished from tax exemption
under Art. 1200 in relation to Articles 1279 and
1290 of the NCC, and both debts are Tax amnesty is immunity from all criminal and
extinguished to the concurrent amount. civil obligations arising from non-payment of
[Domingo v. Garlitos, G.R. No. L-18994 (1963)] taxes. It is a general pardon given to all
taxpayers. It applies to past tax periods, hence
4. Compromise and Tax Amnesty of retroactive application. [People v.
Castañeda, G.R. No. L-46881 (1988)]
Definition of Compromise
A contract whereby the parties, by making Tax exemption is immunity from all civil
reciprocal concessions, avoid litigation or put liability only. It is an immunity or privilege, a
an end to one already commenced [Art. 2028, freedom from a charge or burden of which
Civil Code]. It involves a reduction of the others are subjected. [Greenfield v. Meer, C.A.
taxpayer’s liability. No. 156 (1946)]. It is generally prospective in
application [Dimaampao, 2005, p. 111].
Requisites of a tax compromise:
a. The taxpayer must have a tax liability. Tax Amnesty v. Tax Exemption
b. There must be an offer (by the taxpayer or Tax Tax
Commissioner) of an amount to be paid by Amnesty Exemption
the taxpayer.
c. There must be acceptance (by the Benefit Immunity Immunity
Commissioner or the taxpayer, as the case from civil, from civil
may be) of the offer in settlement of the criminal, liability
original claim. administrati (relief from
ve liability paying
Definition of Tax Amnesty arising from taxes)
A tax amnesty partakes of an absolute non-
forgiveness or waiver by the Government of payment of
its right to collect what otherwise would be due
Page 337 of 494

of such ruling, seek its review by the Secretary
Tax Tax
of Finance. The Secretary of Finance may also
Amnesty Exemption
review the rulings motu proprio. [DOF Order
taxes No. 007-02, 7 May 2002]
Coverage Past tax Future tax Taxpayers acting in good faith should not be
liability liability made to suffer for adhering to general
interpretative rules of the Commissioner
Actual Yes None interpreting tax laws, should such interpretation
Revenue Loss later turn out to be erroneous and be reversed
by the Commissioner or this Court. Indeed,
Section 246 of the Tax Code expressly
II. NATIONAL TAXATION provides that a reversal of a BIR regulation or
ruling cannot adversely prejudice a taxpayer
who in good faith relied on the BIR regulation
A. TAXING AUTHORITY or ruling prior to its reversal. [CIR v. San
Roque, G.R. No. 187485 (2013)]
1. Jurisdiction, Power and Functions
of the Commissioner of Internal Power to Decide Tax Cases
Revenue The power to decide (1) disputed
assessments, (2) refunds of internal revenue
a. Powers and Duties of the Bureau of taxes, fees, charges and penalties, or (3) other
Internal Revenue [Sec. 2, NIRC] matters arising under the NIRC or other laws
administered by the BIR is vested in the CIR,
1. To assess and collect all national internal subject to the exclusive appellate jurisdiction of
revenue taxes, fees, and charges; the CTA. [Sec. 4, NIRC]
2. To enforce all forfeitures, penalties and
fines connected therewith; c. Non-retroactivity of rulings (Sec. 246,
3. To execute judgment in all cases decided NIRC)
in its favor by the CTA and the ordinary
courts; and General Rule: Any revocation, modification or
4. To give effect to and administer the reversal of (1) rules and regulations
supervisory and police powers conferred promulgated in accordance with the NIRC, or
upon it by the Tax Code or other special (2) any rulings or circulars promulgated by the
laws. CIR shall not be given retroactive
application if the revocation, modification, or
b. Interpreting Tax Laws and Deciding reversal is prejudicial to the taxpayers.
Tax Cases
Exceptions:
Power to Interpret 1. Where the taxpayer deliberately misstates
The power to interpret provisions of the NIRC or omits material facts from his return or
and other tax laws shall be under the exclusive any document required of him by the BIR;
and original jurisdiction of the CIR, subject to 2. Where the facts subsequently gathered by
review by the Secretary of Finance. [Sec. 4, the BIR are materially different from the
NIRC] facts on which the ruling is based; or
3. Where the taxpayer acted in bad faith.
A ruling by the CIR that interprets provisions of
the NIRC and other tax laws shall be presumed Under Sec. 246, taxpayers may rely upon a
valid unless modified, reversed or superseded rule or ruling issued by the CIR from the time
by the Secretary of Finance. A taxpayer who the rule or ruling is issued up to its reversal by
receives an adverse ruling from the CIR may, the CIR or this Court. The reversal is not given
within thirty (30) days from the date of receipt retroactive effect. There must, however, be a
Page 338 of 494

rule or ruling issued by the Commissioner that Provided, however, that notwithstanding the
is relied upon by the taxpayer in good faith. A other provisions of this Code prescribing the
mere administrative practice, not formalized place of filing of returns and payment of taxes,
into a rule or ruling, will not suffice because the CIR may, by rules and regulations require
such a mere administrative practice may not be that the tax returns, papers and statements and
uniformly and consistently applied. [CIR v. San taxes of large taxpayers be filed and paid,
Roque, supra]. respectively, through collection officers or
through duly authorized agent banks:
2. Rule-Making Authority of the
Secretary of Finance Provided, further, That the CIR can exercise
this power within six (6) years from the
a. Authority of the Secretary of Finance to approval of R.A. 7646 (An Act Authorizing the
Promulgate Rules and Regulations [Sec. CIR to Prescribe the Place for Payment of
244, NIRC] Internal Revenue Taxes by Large Taxpayers)
or the completion of its comprehensive
The Secretary of Finance, upon computerization program, whichever comes
recommendation of the CIR, shall promulgate earlier. For the purpose of this Section, 'large
all needful rules and regulations for effective taxpayer' means a taxpayer who satisfies any
enforcement of the provisions of the Code. of the following criteria:
a. Value-Added Tax (VAT) – Business
b. Specific Provisions to be Contained in establishment with VAT paid or payable of
Rules and Regulations [Sec. 245, NIRC] at least P100,000 for any quarter of the
preceding taxable year;
1. The manner in which revenue shall be b. Excise tax – Business establishment with
collected and paid, the instrument, document excise tax paid or payable of at least
or object to which revenue stamps shall be P1,000,000 for the preceding taxable year;
affixed, the mode of cancellation of the same, c. Corporate Income Tax - Business
the manner in which the proper books, records, establishment with annual income tax paid
invoices and other papers shall be kept and or payable of at least P1,000,000 for the
entries therein made by the person subject to preceding taxable year; and
the tax, as well as the manner in which licenses d. Withholding tax - Business establishment
and stamps shall be gathered up and returned with withholding tax payment or remittance
after serving their purposes; of at least P1,000,000 for the preceding
taxable year.
2. The manner in which tax returns, information
and reports shall be prepared and reported and Provided, however, That the Secretary of
the tax collected and paid, as well as the Finance, upon recommendation of the CIR,
conditions under which evidence of payment may modify or add to the above criteria for
shall be furnished the taxpayer, and the determining a large taxpayer after considering
preparation and publication of tax statistics; such factors as inflation, volume of business,
wage and employment levels, and similar
3. The manner in which internal revenue taxes, economic factors.
such as income tax, including withholding tax,
estate and donor's taxes, value-added tax, The penalties prescribed under Sec. 248 shall
other percentage taxes, excise taxes and be imposed on any violation of the rules and
documentary stamp taxes shall be paid regulations issued by the Secretary of Finance,
through the collection officers of the BIR or upon recommendation of the CIR, prescribing
through duly authorized agent banks which are the place of filing of returns and payments of
hereby deputized to receive payments of such taxes by large taxpayers.
taxes and the returns, papers and statements
that may be filed by the taxpayers in connection
with the payment of the tax:
Page 339 of 494

B. Income Tax Philippines.
1. Definition, Nature and General a. Criteria in Imposing Philippine

Principles Income Tax
Definition Citizenship
A citizen of the Philippines is subject to

Income Tax is defined as a tax on all yearly
profits arising from property, professions, Philippine income tax:
trades, or offices, or as a tax on the person’s
income, emoluments, profits and the like. It a. On his worldwide income, if he resides in
the Philippines; or
may be succinctly defined as a tax on income,
whether gross or net, realized in one taxable b. Only on his income from sources within the
Philippines, if he qualifies as a non-resident
year. [DE LEON citing CJS and AmJur]
citizen. [MAMALATEO]
Nature
Income tax is generally classified as an excise Residence
tax. It is not levied upon persons, property,
funds or profits but upon the right of a person A resident alien is liable to pay Philippine
income tax only on his income from sources
to receive income or profits. [DE LEON]
within the Philippines but is exempt from tax on
his income from sources outside the
General Principles [Sec. 23, NIRC]
Philippines. [MAMALATEO]
1. A resident citizen of the Philippines is
Source
taxable on all income derived from sources
within and without the Philippines;
An alien is subject to Philippine income tax
2. A nonresident citizen is taxable only on
income derived from sources within the because he derives income from sources
within the Philippines. Thus, a non-resident
Philippines
3. An individual citizen of the Philippines alien or non-resident foreign corporation is
liable to pay Philippine income tax on income
who is working and deriving income
from abroad as an overseas contract from sources within the Philippines, such as
dividend, interest, rent, or royalty, despite the
worker is taxable only on income derived
from sources within the Philippines: fact that he has not set foot in the Philippines.
[MAMALATEO]
Provided, That a seaman shall be treated
as an overseas contract worker if he (1) is
a citizen of the Philippines, and (2) receives b. Types of Philippine Income Tax
compensation for services rendered
abroad as a member of the complement of There are several types of income tax under
a vessel engaged exclusively in the NIRC, namely: [MAMALATEO]
international trade; i. Graduated income tax and fixed tax on
4. An alien individual, whether a resident gross sales or receipts for individuals;
or not of the Philippines, is taxable only ii. Normal corporate income tax on
on income derived from sources within the corporations;
Philippines; iii. Minimum corporate income tax on
5. A domestic corporation is taxable on all corporations;
income derived from sources within and iv. Special income tax on certain
without the Philippines; and corporations;
6. A foreign corporation, whether engaged v. Capital gains tax on sale or exchange
or not in trade or business in the of unlisted shares of stock of a
Philippines, is taxable only on income domestic corporation classified as
derived from sources within the capital assets;
Page 340 of 494

vi. Capital gains tax on sale or exchange Rosario, Jr., G.R. No. 109289 (1994)]
of real property located in the
Philippines classified as a capital ii. Schedular
asset;
vii. Final withholding tax on certain passive Under a schedular tax system, different types
investment income paid to residents; of income are subject to different sets of
viii. Final withholding tax on income graduated or flat income tax rates. The
payments made to non-residents; applicable tax rate(s) will depend on the
ix. Fringe benefits tax on fringe benefits of classification of the taxable income and the
supervisory or managerial employees; basis could be gross income or net income.
x. Branch profit remittance tax; Separate income tax returns (or other types of
return applicable) are filed by the recipient of
Income Tax can also be simplified into three (3) income for the particular types of income
kinds: received. [MAMALATEO]
A schedular approach in taxation is one where
1. Net Income Tax – certain deductions the income tax treatment varies and is made to
and/or exemptions are deducted from depend on the kind or category of taxable
the gross income and the tax is income of the taxpayer. [Tan v. Del Rosario,
computed based on the resulting net Jr., supra]
income or taxable income,
2. Gross Income Tax – no deductions Global System Schedular System
and/or exemptions are allowed to be A personal tax based
A tax on income-
deducted, hence, the tax is computed on the income of the
producing activities.
based on the gross or the aggregate taxpayer.
amount earned. Emphasizes
3. Final Income Tax – no deductions Emphasizes the
revenue and
and/or exemptions are allowed to be burden allocation
administrative
deducted. Hence the tax is computed aspects.
aspects.
based on the gross or passive income Because of its
but as a distinction, it is subject to the Most equitable
multiple rates, the
withholding or final tax as provided system yet
tax burden of a
under Section 57(A) of the Code developed for
person does not
[CHAVEZ, 2022]. distributing tax
correspond to his
burden. The burden
income but rather
c. Income Tax Systems of an individual is
falls fortuitously on
closely related to his
the type of his
resources and his
i. Global income. It is fixed
ability to pay.
and final.
Under a global tax system, it does not matter It serves as a means This function is alien
whether the income received by the taxpayer is for redistributing to schedular system
classified as compensation income, business income and wealth. where in times of
or professional income, passive investment Big income earners plenty or in times of
income, capital gain, or other income. All items are subject to higher need, people pay the
of gross income, deductions, and personal and taxes than small same fixed tax on
additional exemptions, if any, are reported in income earners. their income.
one income tax return, and one set of tax rates Administration is not
are applied on the tax base. The administration is
quite as easy as
simple, being
schedular because
A global tax system is one where the tax confined to each
one has to consider
treatment views indifferently the tax base and transaction or
all income from
generally treats in common all categories of activity.
whatever source.
taxable income of the taxpayer. [Tan v. Del
Page 341 of 494

iii. Semi-schedular or Semi-global Tax 3. Taxable Period
System
"Taxable year" means the calendar year, or
All compensation income, business or the fiscal year ending during such calendar
professional income, capital gain and passive year, upon the basis of which the net income is
income that are not subject to final tax, and computed. Taxable year includes, in the case
other income are added together to arrive at of return made for a fractional part of a year
the gross income, and after deducting the sum under the provisions of Title II (Tax on Income),
of allowable deductions, the taxable income is the period for which such return is made [Sec.
subjected to one set of graduated tax rates or 22 (P), NIRC].
normal corporate income tax. With respect to
such income the computation is global. a. Calendar Year – An accounting period of
For those other income not mentioned above, 12 months ending on the last day of
they remain subject to different sets of tax rates December.
and covered by different returns. [Mamalateo] b. Fiscal Year – An accounting period of 12
months ending on the last day of any month
Note: The Philippines, under the NIRC, follows other than December [Sec. 22(Q), NIRC].
a semi-schedular and semi-global tax system. c. Short Period – An accounting period
which starts after the first month of the tax
2. Features of the Philippine Income year or ends before the last month of the
Tax Law tax year (less than 12 months). Instances
whereby short accounting period arises:
1. Direct Tax – The tax burden is borne i. When a corporation is newly
by the income recipient upon whom the organized.
tax is imposed. ii. When a corporation is dissolved.
2. Progressive – The tax rate increases [Sec. 52(c), NIRC]
as the tax base increases. It is founded iii. When a corporation changes its
on the ability to pay principle and is accounting period. [Sec 46, NIRC]
consistent with Sec. 28, Art. VI, 1987 iv. When the taxpayer dies.
Constitution.
3. Comprehensive – The Philippines has General rule: Taxable income shall be
adopted the most comprehensive computed based on the taxpayer’s annual
system of imposing income tax by accounting period, which may be fiscal year or
adopting the citizenship principle, the calendar year
residence principle, and the source
principle. Any of the three principles is Exception: Taxable income shall be computed
enough to justify the imposition of based on the basis of calendar year only:
income tax on the income of a resident a. If the taxpayer's annual accounting period
citizen and a domestic corporation that is other than a fiscal year;
are taxed on a worldwide income. b. If the taxpayer has no annual accounting
4. Semi-Schedular or Semi-Global Tax period;
System – The Philippines follows the c. If the taxpayer does not keep books of
semi-schedular or semi-global system accounts; or
of income taxation, although certain d. If the taxpayer is an individual [Sec. 43,
passive investment incomes and NIRC].
capital gains from sale of certain capital
assets (namely: (a) shares of stock of 4. Kinds of Taxpayers
domestic corporations, and (b) real
property) are subject to final taxes at Taxpayer – any person subject to tax imposed
preferential tax rates [MAMALATEO]. by Title II of the Tax Code. [Sec. 22(N), NIRC]
Person – means an individual, a trust, estate

Page 342 of 494

or corporation. [Sec. 22(A), NIRC] satisfaction of the CIR the fact of his
physical presence abroad with a
For income tax purposes, taxpayers are definite intention to reside therein.
classified generally as follows: 2. PH citizen who leaves the Philippines
a. Individuals during the taxable year to reside
b. Corporations abroad, either as an immigrant or for
c. Estates and Trusts employment on a permanent basis.
d. Partnerships (General Partnership and 3. PH citizen who works and derives
General Professional Partnerships) income from abroad and whose
employment thereat requires him to be
Primary physically present abroad most of the
Sub-Classification(s)
Classification time during the taxable year. To be
Citizens Resident citizens considered physically present abroad
of the
Philippi Non-resident citizens
most of the time during the taxable
nes year, a contract worker must have
Residents been outside the PH for not less than
Engaged in 183 days during such taxable year.
Trade or [BIR R.R. 1-79, Sec. 2]
Business in 4. PH citizen previously considered as a
the
non-resident citizen and who arrives
Non- Philippines
Aliens during the taxable year to reside
Individuals residen Not
ts Engaged in permanently in the PH - Treated as
Trade or NRC with respect to his income derived
Business in from sources abroad until his arrival in
the the PH
Philippines
Special
Classes
Note: The term ‘residence’ is to be understood
of Minimum Wage Earner not in its common acceptation as referring to
Individu ‘dwelling’ or ‘habitation,’ but rather to ‘domicile’
als or legal residence, that is, ‘the place where a
Domestic Corporations party actually or constructively has his
Resident permanent home, where he, no matter where
Corporation
he may be found at any given time, eventually
s
Corporations Foreign intends to return and remain (animus
Non-
Corporations manendi). [Japzon v. COMELEC, G.R. No.
resident
Corporation 180088 (2009)]
s
Estates and c. Overseas Contract Worker (OCW) – an
Trusts individual citizen of the PH who is working
General Partnership
Partnerships and deriving income from abroad as an
General Professional Partnership
overseas contract worker is taxable only on
income derived from sources within the PH
i. Individual Taxpayers
Provided, that a seaman who is a citizen of
the PH and who receives compensation for
CITIZENS
services rendered abroad as a member of
the complement of a vessel engaged
a. Resident Citizens (RC)
exclusively in international trade shall be
A citizen of the PH residing therein is
treated as an overseas contract worker [
taxable on all income derived from sourced
Sec 23(C)]
with and without the Philippine [Sec 23 (A)].
b. Non-resident Citizens (NRC) [Sec. 22 (E),
NIRC]
1. PH citizen who establishes to the
Page 343 of 494

ALIENS projects or (2) engaging in petroleum, coal,
geothermal and other energy operations
1. Resident Alien – An alien actually present pursuant to an operating or consortium
in the Philippines who is not a mere agreement under a service contract with the
transient or sojourner is a resident for government. [Sec. 22 (B), NIRC]
income tax purposes.
a. No/Indefinite Intention = RESIDENT: Law of Incorporation Test
If he lives in the Philippines and has no
definite intention as to his stay, he is a To determine the residence of a corporation,
resident. A mere floating intention the Philippines adopted the Law of
indefinite as to time, to return to Incorporation test under which a corporation is
another country is not sufficient to considered domestic if it is organized or
constitute him a transient. created in accordance with or under the laws of
b. Definite Intention = TRANSIENT: the Philippines and foreign if it is organized or
One who comes to the Philippines for a created in accordance with or under the laws of
definite purpose, which in its nature a foreign country. [MAMALATEO]
may be promptly accomplished, is a
transient. Domestic corporations
Exception: Definite Intention but such cannot A corporation created and organized in the
be promptly accomplished; If his purpose is of Philippines or under its laws. [Sec. 22 (C),
such nature that an extended stay may be NIRC]
necessary for its accomplishment, and thus the
alien makes his home temporarily in the Foreign corporations
Philippines, then he becomes a resident.
A corporation which is not domestic. [Sec. 22
2. Non-resident Alien (D), NIRC]
a. Engaged in trade or business within 1. Resident foreign corporations – Foreign

the Philippines - If the aggregate corporation engaged in trade or business
period of his stay in the Philippines is within the Philippines. [Sec. 22 (H), NIRC]
more than 180 days during any 2. Non-resident foreign corporations –
calendar year. [Sec. 25(A)(1), NIRC] Foreign corporation not engaged in trade
b. Not engaged in trade or business or business within the Philippines. [Sec. 22
within the Philippines - If the (I), NIRC]
aggregate period of his stay in the
Philippines does not exceed 180 days. DOING BUSINESS – implies a continuity of
commercial dealings and arrangements, and
ii. Corporations contemplates, to that extent, the performance
of acts or works or the exercise of some of the
Includes all types of corporations (even one functions normally incident to, and in
person corporations), partnerships (no matter progressive prosecution of commercial gain or
how created or organized), joint stock for the purpose and object of the business
companies, joint accounts (cuentas en organization. [CIR v. BOAC, G.R. No. L-65773
participacion), associations, or insurance (1987)]
companies, whether or not registered with the
SEC. [MAMALATEO] Includes:
1. soliciting orders, service contracts

Excludes general professional partnerships 2. opening offices, whether called "liaison"
(GPP); joint ventures or consortiums formed for offices or branches
the purpose of (1) undertaking construction 3. appointing representatives or distributors
Page 344 of 494

domiciled in the Philippines or who in any c. Income received by estates of
calendar year stay in the country for a deceased persons during the
period totaling 180 days or more period of administration or
4. participating in the management, settlement of the estate
supervision or control of any domestic d. Income, which in the discretion of
business, firm, entity or corporation in the the fiduciary, may either be
Philippines. distributed to the beneficiaries or
accumulated.
Excludes:
Exceptions: (1) Employee’s trust [Sec. 60,
1. mere investment as a shareholder in NIRC]; (2) Revocable trusts [Sec. 63, NIRC];
domestic corporations, and/or the exercise (3) Income for Benefit of Grantor [Sec. 64,
of rights as such investor NIRC]
2. having a nominee director or officer to
represent its interests in such corporation Taxable income of the estate or trust is
3. appointing a representative or distributor computed in the same manner as an individual,
domiciled in the Philippines which subject to certain special rules [Sec 61, NIRC]
transacts business in its own name and for
its own account. [RA 7042, Foreign Estate
Investments Act]
Refers to all the property, rights and obligations
Taxability of income: of a person which are not extinguished by his
death and those which have accrued thereto
Taxpayer Within Without since the opening of the succession. [DE
Resident Citizen √ √ LEON citing Arts. 776 and 781 NCC]
Non-resident Citizen
√ X Trust
and OCW
Resident Alien √ X
Non-resident Alien √ X An arrangement created by will or an
Domestic Corporation √ √ agreement under which legal title to property is
Foreign Corporation √ X passed to another for conservation or
investment with the income therefrom and
iii. Estates and Trusts ultimately the corpus (principal) to be
distributed in accordance with the directions of
the creator as expressed in the governing
Income tax imposed on individuals shall apply
instrument. [DE LEON]
to income of estates or of any kind of property
held in trust. [Sec. 60 (A), NIRC]
iv. Partnerships, Joint Ventures, Co-
In Sec 60 of the Tax Code, it provides that the
ownership
tax imposed upon individuals shall apply to the
income of estates or of any kind of property
General Partnerships
held in trust, including:
A partnership which is not a general
a. Income accumulated in trust for the
professional partnership. Treated as a
benefit of unborn or unascertained
corporation.
person or persons with contingent
interests, and income accumulated
General Professional Partnerships (GPP)
or held for future distribution under
the terms of the will or trust.
A partnership formed by persons for the sole
b. Income which is distributed
purpose of exercising their common
currently by a guardian of an infant
profession, no part of the income of which is
which is to be held of distributed as
derived from engaging in any trade or
the court may direct
Page 345 of 494

business. [Sec. 22 (B), NIRC] Income is a gain derived from labor or capital,
or both labor and capital; and includes the gain
The partners themselves, not the partnership, derived from the sale or exchange of capital
shall be liable for income tax in their separate assets. [DE LEON]
and individual capacities. Each partner shall
report as gross income his distributive share, Income includes earnings, lawfully or
actually or constructively received, in the net unlawfully acquired, without consensual
income of the partnership. [Sec. 26, NIRC] recognition, express or implied, of an obligation
to repay and without restriction as their
Joint venture and consortium disposition. [James v. US, 366 US 213 (1961)]
Income may be received in the form of cash,
Essential factors of a joint venture or property, service, or a combination of the three.
consortium:
1. Each party must make a contribution, not Income v. Capital
necessarily of capital but by way of
services, skill, knowledge, material or "The essential difference between capital and
money; income is that capital is a fund; income is a
2. Profits must be shared among the parties; flow. A fund of property existing at an instant of
3. There must be a joint proprietary interest time is called capital. A flow of services
and right of mutual control over the subject rendered by that capital by the payment of
matter of the enterprise; money from it or any other benefit rendered by
4. There is a single business transaction. a fund of capital in relation to such fund through
a period of time is called income." [Madrigal v.
A joint venture or consortium is treated as a Rafferty, G.R. No. 12287 (1918)]
corporation, except those formed for the
purpose of: Unless otherwise specified, it means cash or its
1. Undertaking construction projects, or equivalent. Income can also be thought of as a
2. engaging in petroleum, coal, geothermal flow of the fruits of one[s] labor.” [Association
and other energy operations pursuant to an of Non-Profit Clubs v BIR, G.R. No. 228539,
operating consortium agreement under a 26 June 2019].
service contract with the Government.
Income Capital
Co-ownership Denotes a flow of
Fund or property
wealth during a
existing at one
There is co-ownership whenever the definite period of
distinct point in time.
ownership of an undivided thing or right time.
belongs to different persons. [Art. 484, NCC] Service of wealth Wealth itself
Return of capital is
Co-ownerships are not subject to tax as a Subject to tax
not subject to tax
corporation if the activities of the co-owners are Fruit Tree
limited to the preservation of the property and
the collection of the income therefrom, in which Classification of Income
case each co-owner is taxed individually on his
distributive share in the income of the co- 1. Compensation Income
ownership. [DE LEON citing Sec. 210 Regs] Means all remuneration for services
performed by an employee for his
5. Income employer under an employer-employee
relationship, unless explicitly excluded by
a. Definition the Tax Code of special law.
[MAMALATEO]
Income means all wealth which flows to the
taxpayer other than a mere return of capital.
Page 346 of 494

2. Profession or Business Income the form of actual receipt of cash or may occur
The value derived from an exercise of as a constructive receipt of income. [Valencia
profession, business or utilization of capital and Roxas]
including profit and gain derived from sale
or conversion of assets. Examples are net Mere increase in the value of property without
income from business and gain from the actual realization, either through sale or other
sale of assets used in trade or business. disposition, is not taxable. [De Leon]
3. Passive Income Stock Dividends are Not Income Until

An income in which the taxpayer merely Realized
waits for the amount to come in. Examples
are royalty, interest, prizes, and winnings. Income in tax law is an amount of money
coming to a person within a specified time,
4. Capital Gain whether as payment for services, interest or
An income derived from sale of assets not profit from investment.” It means cash or its
used in trade or business. Examples are equivalent. It is gain derived and severed from
sale of family home and other capital capital, from labor or from both combined, so
assets. [VALENCIA AND ROXAS] that to tax a stock dividend would be to tax a
capital increase rather than the income.
b. When Income is Taxable
In a loose sense, stock dividends issued by the
In Section 31 of the NIRC, as amended by corporation are considered unrealized gain,
TRAIN, taxable income means the pertinent and cannot be subjected to income tax until
items of gross income specified in this Code, that gain has been realized.
less the deductions, if any, authorized for such
types of income by this Code, or other special Before the realization, stock dividends are
laws [CHAVEZ, 2022]. nothing but a representation of an interest in
the corporate properties.
Existence of Income
As capital, it is not yet subject to income tax.
Requisites for income to be taxable [DE
LEON] Increase in the Value of Shares Not an
1. There is INCOME, gain or profit Income
2. RECEIVED or REALIZED during the
taxable year Since a mere advance in the value of the
3. NOT EXEMPT from income tax by law or property of a person or corporation is no sense
treaty constitute the income specified in the revenue
law, it has been held in the early case of Fisher
Certainly, an income tax is arbitrary and v Trinidad [43 Phi. 973, 981(1922)] that it
confiscatory if it taxes capital because capital constitutes and can be treated merely as an
is not income. In other words, it is income, not increase of capital. Hence, there was no factual
capital, which is subject to income tax. and legal basis in assessing income tax on the
[Chamber of Real Estate and Builders’ increase in the value until the same is actually
Associations, Inc. v The Hon. Executive sold at a profit [CIR v Filinvest Development
Secretary Alberto Romulo, G.R. No. 160756, Corporation, G.R. No. 163653, 19 July 2011]
09 March 2010.
Campaign Contributions
Realization of Income
In the course of an election period, various
Income is realized when there is a gain or profit contributions are given the candidates, “for the
derived from a closed and completed purpose of influencing the result of the
transaction. The realization of gain may take elections.” The final paragraph of Section 13 of
Page 347 of 494

RA7166 provides that such campaign Examples of Constructive receipt:
contributions in cash or in kind to any
candidate, duly reported to COMELEC are 1. Interest credited on savings bank deposit;
exempt from Donor’s Tax. 2. Matured interest coupons not yet collected
by the taxpayer;
However in instances when these campaign 3. Dividends applied by the corporation
are not fully utilized by a candidate for against the indebtedness of a stockholder;
campaign purposes, there is a need to clarify 4. Share in the profit of a partner in a general
the treatment of these excess campaign funds, professional partnership, although not yet
for tax purposes. distributed, is regarded as constructively
received; or
GR: not taxable since they are not for the 5. Intended payment deposited in court
personal expenditure of the candidate (consignation).
The doctrine of constructive receipt is designed
EX: unutilized/excess campaign funds to prevent the taxpayer using the cash basis
(contributions net of the campaign from deferring or postponing the actual receipt
expenditures) are subject to income tax. of taxable income. Without the rule, the
taxpayer can conveniently select the year in
Plus: Any candidate, winning or losing, who which he will report the income. [DIMAAMPAO]
fails to file with the COMELEC the appropriate
Statement of expenditures will be precluded Recognition of Income
from claiming expenditures as deductions. The
entire amount becomes directly subject to Income realized pertains to the accrual basis of
income tax [Excerpts accounting.
from RR 7-2011]
Recognition of income in the books is when it
Ordinary Income is realized and expenses are recognized when
incurred. It is the right to receive and not the
In Section 22(Z) of the NIRC, the term ordinary actual receipt that determines the inclusion of
income includes any gain from the sale or the amount in gross income
exchange of property which is not a capital
asset or property described in Section 39(A) Examples:
(1). Any gain from the sale or exchange of i. Interest or rent income earned but not
property which is treated or considered, under yet received
other provisions of this Title, as ordinary ii. Rent expense accrued but not yet paid
income, shall be treated as gain from the sale iii. Wages due to workers but remaining
or exchange of property which is not a capital unpaid
asset as defined in Section 39(A)(A).
[CHAVEZ, 2022] c. Tests in Determining Whether Income
is Earned for Tax Purposes
Actual v. Constructive receipt
1. Realization Test
4 Actual receipt – Income is actually
reduced to possession. The realization of No taxable income until there is a separation
gain may take the form of actual receipt of from capital of something of exchangeable
cash. value, thereby supplying the realization or
5 Constructive receipt – An income is transmutation which would result in the receipt
considered constructively received when it of income [Eisner v. Macomber, 252 U.S. 189,
is credited to the account of, or segregated 190 (1920)]. Thus, stock dividends are not
in favor of, a person. income subject to income tax on the part of the
stockholder when he merely holds more shares
representing the same equity interest in the
Page 348 of 494

corporation that declared stock dividends Hence, the increase in value of an asset is not
[Fisher v. Trinidad, supra]. income as it has not yet been exchanged or
transferred for something else. Once the asset
Income is recognized when both of the is exchanged, then a severance of the gain
following conditions are met: (a) the earning is from its original value takes place, resulting into
complete or virtually complete; and (b) an taxable income. [Ingles]
exchange has taken place. [INGLES]
d. Tax-Free Exchanges
2. Claim of Right Doctrine Tax-free exchanges refer to those instances
enumerated in Section 40(C)(2) of the NIRC of
a.k.a. Doctrine of Ownership, command, or 1997, as amended, that are not subject to
control Income Tax, Capital Gains Tax, Documentary
Stamp Tax and/or Value-added Tax, as the
In the claim-of-right doctrine, if a taxpayer case may be.
receives money or other property and treats it
as its own under the claim of right that the In general, there are two kinds of tax-free
payments are made absolutely and not exchange: (1) reorganization; and (2) transfer
contingently, such amounts are included in the to a controlled corporation.
taxpayer's income, even though the right to the
income has not been perfected at that time. It Reorganization
does not matter that the taxpayer's title to the No gain or loss shall be recognized on a
property is in dispute and that the property may corporation or on its stock or securities if such
later be recovered from the taxpayer. [CIR v. corporation is a party to a reorganization and
Meralco, C.T.A. EB No. 773 (2012)] exchanges property in pursuance of a plan of
reorganization solely for stock or securities in
3. Economic Benefit Test, Doctrine of another corporation that is a party to the
Proprietary Interest reorganization.
A reorganization is defined as:

Any economic benefit to the employee that
(a) A corporation, which is a party to a merger
increases his net worth, whatever may have
or consolidation, exchanges property solely for
been the mode by which it is effected, is
stock in a corporation, which is a party to the
taxable. Thus, in stock options, the difference
merger or consolidation; or
between the fair market value of the shares at
(b) The acquisition by one corporation, in
the time the option is exercised and the option exchange solely for all or a part of its voting
price constitutes additional compensation stock, or in exchange solely for all or part of the
income to the employee at the time of exercise voting stock of a corporation which is in
(not upon the grant or vesting of the right). control of the acquiring corporation, of stock of
another corporation if, immediately after the
Anything that benefits a person materially or acquisition, the acquiring corporation has
economically in whatever way is taxable. control of such other corporation whether or
However, note that a mere increase in the not such acquiring corporation had control
value of property without actual realization is immediately before the acquisition; or
not taxable. [INGLES] (c) The acquisition by one corporation, in
exchange solely for all or a part of its voting
4. Severance Test stock or in exchange solely for all or part of the
voting stock of a corporation which is in
Under the severance test of income, in order control of the acquiring corporation, of
that income may exist, it is necessary that there substantially all of the properties of another
be a separation from capital of something of corporation. In determining whether the
exchangeable value. The income requires a exchange is solely for stock, the assumption by
realization of gain. the acquiring corporation of a liability of the
others shall be disregarded; or
Page 349 of 494

(d) A recapitalization, which shall mean an are not deducted until paid. [DE LEON]
arrangement whereby the stock and bonds of
a corporation are readjusted as to amount, N.B. “received” here includes actual
income, or priority or an agreement of all and constructive receipt.
stockholders and creditors to change and
increase or decrease the capitalization or • Accrual method – income, profits and
debts of the corporation or both; or gains are included in gross income
(e) A reincorporation, which shall mean the when earned, whether received or not,
formation of the same corporate business with and expenses are allowed as
the same assets and the same stockholders deductions when incurred, although
surviving under a new charter. not yet paid. It is the right to receive and
not the actual receipt that determines
Transfer to a controlled corporation the inclusion of the amount in gross
no gain or loss shall be recognized if property income. [DE LEON]
is transferred to a corporation by a person,
alone or together with others, not exceeding
• Hybrid method – income and
four (4) persons, in exchange for stock or unit
expenses are reported by employing
of participation in such a corporation of which
the combination of cash and accrual
as a result of such exchange the transferor or
method. Example: where a taxpayer is
transferors, collectively, gains or maintains
control of said corporation. engaged in more than one trade or
business, he may use a different
LEGAL REFERENCE method of accounting for each trade or
Section 40(C)(2) to 40(C)(6) of the NIRC of business. [DE LEON]
1997, as amended.
b. SPECIAL METHODS:
TAX TREATMENT OF EXCHANGES OF
PROPERTIES MADE PURSUANT TO SECTION 1. Installment Basis [Sec. 49, NIRC]
40(C)(2) OF THE NIRC, AS AMENDED Taxpayer reports as income only a part of
The transfers of properties in exchange for the gross profit to be realized from the sale
shares of stocks made pursuant to Section on the instalment plan equivalent to that
40(C)(2) of the NIRC, as amended, shall be proportion of the instalments received
exempt from the following taxes: every year which the gross profit realized
1. Capital Gains Tax (CGT); or to be realized when payment is
2. Creditable Withholding Tax (CWT); completed bears to the contract price.
3. Income Tax (IT); Gross
Income to be
4. Donor’s Tax (DT); Instalment Profit
reported for = ×
5. Value-Added Tax (VAT); and Received Contract
the year
6. Documentary Stamp Tax (DST) on Price
conveyances of real properties and shares
of stocks Installment basis is available to:
7. Dealers in personal property [Sec 49
However, the original issuance of shares in (A), NIRC]; Casual Sellers of personal
exchange for the properties transferred shall property [Sec 49 (B), NIRC]; and
be subject to the DST under Section 174 of the Sellers of real property [Sec 49 (B) &
same Code. (C), NIRC]
Methods of Accounting Personal Property Real Property

a. Principal Methods: Dealer
● Installment ● Installment
• Cash method – income, profits and method method if initial
gains earned are not included in gross ● Person who payments do
income until received, and expenses regularly not exceed
Page 350 of 494

Personal Property Real Property year of sale is the difference between
sells/disposes of 25% of the the selling or contract price and the
personal gross selling cost of the property, even though the
property on price entire purchase price has not been
instalment plan ● Deferred actually received in the year of sale.
● Held as ordinary payment c. The obligations of the purchaser
asset method if initial received by the vendor are considered
● Regardless of payments as equivalent of cash.
amount of exceed 25% of
percentage of the gross 3. Percentage of completion [Sec. 48,
initial payments selling price NIRC]
● Held as Income from long-term contracts is
inventory reported for tax purposes on the basis of
Casual Sale percentage of completion. “Long-term
● Installment contracts” means building, installation or
method if :(1) construction contracts covering a period in
Selling price excess of 1 year.
exceeds P1k
and (2) Initial Gross income already earned though not
payments do not yet received, based on estimates of
exceed 25% of architects or engineers duly certified by
selling price them, is reported in a taxable year; and all
● Deferred deductions relating to such gross income
payment for the taxable year, even if not yet paid are
method if taken into account. [DE LEON]
neither of the 2
conditions are Completed contract method – No longer
met allowed since January 1, 1998 as per RA
● Personal 8424. Cost of the contract is accumulated
property not during the years of construction and
considered deducted from the income of the contract in
inventory the year it is completed.
Sale by Individuals
● Installment e. Situs of Income
method
provided; initial Income Situs
payments do not Interest Residence of the debtor
exceed 25% of Dividends • From DC
selling price Income within
● Held as capital • From Foreign
asset Corporation
1) Income within if 50%
Initial payments mean the payments received or more of the gross
in cash or property (other than evidence of income of the FC for
indebtedness of the purchaser) by the seller the preceding 3
during the taxable year of the disposition of the years prior to the
real property. [Sec 49(B), NIRC] declaration of
dividend was derived
2. Deferred Payment Sales from sources within
a. Applicable when the initial payments the Philippines [ but
exceed 25% of the selling price only to the amount
b. The income to be reported during the
Page 351 of 494

Income Situs profession;
that bears with the • Gains derived from dealings in property;
percentage.] interests; rents; royalties; dividends;
2) Income without if less annuities; prizes and winnings; pensions;
than 50% subject to and partner's distributive share from the net
the same condition. income of the general professional
[Use also in other partnership.
unallocated
income/expenses] The list here is NOT exclusive.
The definition of gross income is broad enough

Services Place of performance to include all passive income subject to specific
Rentals Location of the property rates or final taxes. However, since these
Royalties Place of use or exercise passive incomes are already subject to
Sale of Real Location of realty in the different rates and taxed finally at source, they
Property Philippines are no longer included in the computation of
Sale of ● Tangible gross income which determines taxable
Personal ▪ Manufactured w/in income. [CIR v. PAL, GR 160628 (2006)]
Property and sold w/o: Partly
w/in and partly w/o Two Kinds of Gross Income Mentioned in
the PH the Tax code
▪ Manufactured w/o
and sold w/in: Partly 1) Gross income for MCIT purposes under
w/in and partly w/o Sec 27(E)(4) of the NIRC.
the PH
▪ Purchased w/in but “Gross Income” shall mean gross sales less
sold w/o: Place of sales returns, discounts, and allowances and
Sale cost of goods sold.
▪ Purchased w/o but
sold w/in: Place of “Cost of Goods Sold” shall include all business
sale expenses directly incurred to produce the
● Intangible merchandise to bring them to their present
▪ General rule: Place location and use.
of Sale
Exception: Shares of stock of 2) Gross receipts for VAT purposes under
domestic corporations: Place Sec 108(A) of the NIRC.
of incorporation-Philippines
6. Gross Income “Gross receipts” means the total amount of
money or its equivalent representing the
a. Definition contract price, compensation, service fee,
rental or royalty, including the amount charged
Gross Income [Sec. 32(A)] for materials supplied with the services and
deposits and advance payment actually or
Gross Income means all income derived from constructively received during the taxable
whatever source, including (but not limited to) quarter for the services performed or to be
the following items: performed for another person, excluding VAT.
• Compensation for services in whatever
form paid, including, but not limited to fees, b. Concept of Income from Whatever
salaries, wages, commissions, and similar Source Derived
items;
• Gross income derived from the conduct of While it has been held that the phrase “from
trade or business or the exercise of a whatever source derived” indicated a
Page 352 of 494

legislative policy to include all income not 9. Pensions, retirement benefits, or
expressly exempted within the class of taxable separation pay.
income under our laws, the term income has 10. Income from any source
been variously interpreted to mean “cash
received or its equivalent,” the amount of 1. Compensation Income
money coming to a person within a specific
time,” or “something distinct from principal or All remunerations for services performed by an
capital.” employee for his employer under an employer-
employee (ER-EE) relationship, unless
Otherwise stated, there must be a proof of the excepted under the provisions of the NIRC are
actual, or, at the very least, probable receipt or considered as compensation income. [RR No.
realization by the controlled taxpayer of the 02-98, Sec 2.78.1]
item of gross income sought to be distributed.
[ICR Filinvest Development Corporation, GR. It includes, but is not limited to, salaries and
163653, 19 July 2011] wages, honoraria and emoluments, allowances
(e.g., transportation, representation,
c. Gross Income vs. Net Income vs. entertainment), commissions, fees (including
Taxable Income directors’ fees, if the director is, at the same
time, an employee of the payor-corporation),
Gross income – The total income of a tips, taxable bonuses, fringe benefits except
taxpayer subject to tax. It includes the gains, those subject to Fringe Benefit Tax (FBT)
profits, and income derived from whatever under Section 33 of the Tax Code, and taxable
source, whether legal or illegal. [Sec. 32(A), pensions and retirement pay (e.g., retirement
NIRC] It does not include income excluded by benefits earned without meeting the conditions
law, or which are exempt from income tax. for exemption thereof, such as retirement of
[Sec. 32(B), NIRC] less than 50 years of age.)
Net income – Means gross income less The term wages does NOT include
statutory deductions and exemptions. [Sec. 31, remuneration paid:
NIRC ] a. For agricultural labor paid entirely in
products of the farm where the labor is
Taxable income – means the pertinent items performed
of gross income specified in the Tax Code, less b. For domestic service in a private home
the deductions and/or personal and additional c. For casual labor not in the course of the
exemptions, if any, authorized for such types of employer's trade or business
income by the Tax Code or other special laws d. For services by a citizen or resident of the
[Sec. 31, NIRC ]. It is synonymous to the term Philippines for a foreign government or an
“net income.” [VALENCIA and ROXAS] int’l organization. [Sec. 78(A), NIRC]
d. Sources of Income Subject to Tax The term “remuneration for domestic

services” refers to remuneration paid for
The following sources of income subject to tax services of a household nature performed by
are the following. an employee in or about the private home of
1. Compensation income; the person whom he is employed. The services
2. Fringe benefits; of household personnel furnished to an
3. Professional income; employee (except rank and file employees) by
4. Income from business; an employer shall be subject to the fringe
5. Income from dealings in property; benefits tax pursuant to Sec. 33 of the Tax
6. Passive investment income; Code.
7. Annuities, proceeds from life insurance or
other types of insurance; The term “casual labor” includes labor which
8. Prizes and awards; is occasional, incidental or regular. “Not in the
Page 353 of 494

course of the employer’s trade or business” kind, in addition to basic salaries, to an
includes labor that does not promote or individual employee, except a rank and file
advance the trade or business of the employer. employee [RR No. 03-98, Sec 2.23b]
General Rule: Compensation income Fringe benefit means includes but not limited to
including overtime pay, holiday pay, night shift the following:
differential pay, and hazard pay, earned by • Housing
MINIMUM WAGE EARNERS (MWE) who has • Expense Account
no other returnable income are NOT taxable • Vehicle of any kind
and not subject to withholding tax on wages • Household personnel, such as maid, driver
[RA 9504]; and others
• Interest on loan at less than market rate to
Exception: If he receives/earns additional the extent of the difference between the
compensation such as commissions, market rate and actual rate granted.
honoraria, fringe benefits, benefits in excess of • Membership fees, dues and other
the allowable statutory amount of P90,000 expenses borne by the employer for the
[RA 10963], taxable allowance, and other employee in social and athletic clubs and
taxable income other than the statutory similar organizations
minimum wage (SMW), holiday pay, overtime • Expenses for foreign travel
pay, hazard pay and night shift differential pay. • Holiday and vacation expenses
• Educational assistance to the employee or
FORMS OF COMPENSATION AND HOW his dependents; and
THEY ARE ASSESSED • Life or health insurance and other non-life
insurance premiums or similar amounts on
Cash – If compensation is paid in cash, the full excess of what the law allows. [Sec. 33(B)]
amount received is the measure of the income
subject to tax. Tax Rate and Tax Base
Medium other than money – If services are Tax base is based on the grossed-up
paid for in a medium other than money (e.g., monetary value (GMV) of fringe benefits.
shares of stock, bonds, and other forms of
property), the fair market value (FMV) of the Rate is generally 35%, since this is the
thing taken in payment is the amount to be headline or the highest tax rate for individual
included as compensation subject to tax. If the income taxpayers.
services are rendered at a stipulated price, in
the absence of evidence to the contrary, such FBT is calculated using the GMV multiply by
price will be presumed to be the FMV of the the 35%. [Sec. 33 (A), NIRC]
remuneration received.
GMV represents
If meals, living quarters, and other facilities and i. the whole amount of income realized by
privileges are furnished to an employee for the the employee which includes the net
convenience of the employer, and incidental to amount of money or net monetary value of
the requirement of the employee’s work or property that has been received; and
position, the value of that privilege need not be ii. the amount of fringe benefit tax due from
included as compensation [Henderson v. the employee which has been withheld
Collector, G.R. No. L-12954 (1961)] and paid by the employer for and in behalf
of his employee.
2. Fringe Benefits
How GMV is determined
Definition
Fringe benefit means any goods, services, or GMV is determined by dividing the actual
other benefit furnished or granted in cash or in monetary value of the fringe benefit by 65%
Page 354 of 494

[100% - tax rate of 35%]. insurance and hospitalization benefit
plans;
For example, the actual monetary value of the c. Benefits given to the rank-and-file
fringe benefit is P1,000. The GMV is equal to employees, whether granted under a
P1,538.46 [P1,000 / 0.65]. The fringe benefit collective bargaining agreement or not;
tax, therefore, is P538.46 [P1538.46 x 35%]. and
d. Fringe benefits granted for the
Special Cases: convenience of the employer;
e. De minimis benefits
For fringe benefits received by non-resident
alien not engaged in trade of business in the If the Fringe Benefit is exempted from the FBT,
Philippines (NRANETB), the tax rate is 25% of the same may, however, still form of the
the GMV. The GMV is determined by dividing employee’s gross compensation income which
the actual monetary value of the fringe benefit is subject to income tax; hence, likewise
by 75% [100% - 25%]. subject to withholding tax on compensation
income payment.
What is the tax implication if the employer
gives ‘fringe benefits’ to rank-and-file De Minimis Benefits
employees?
De Minimis Benefits are facilities and privileges
Fringe benefits given to a rank-and-file furnished or offered by an employer to his
employee are treated as part of his employees that are relatively small value and
compensation income subject to normal tax are offered or furnished by the employer
rate and withholding tax on compensation merely as means of promoting health, goodwill,
income, except de minimis benefits and contentment, and efficiency of his employees
benefits provided for the convenience of the [RR No. 3-98, Sec 2.23c]
employer.
The following De Minimis Benefits are exempt
Payor of Fringe Benefit Tax (FBT): The from income tax and withholding tax on
employer withholds and pays the FBT but the compensation income of BOTH managerial
law allows him to deduct such tax from his and rank and file EEs [as provided by R.R. No.
gross income. 11-2018/ R.R. No. 5-2011 / R.R. No. 8-2012/
R.R. No. 1-2015 and RR No. 11-2018]
Taxable and non-taxable fringe benefits 1. Monetized unused vacation leave credits of
PRIVATE employees not exceeding ten
Fringe Benefits NOT subject to Tax (10) days during the year. Note that the
monetization of unused VL credits in
Fringe benefits not considered as gross excess of 10 days and monetization of SL
income – if it is required or necessary to the even if not exceeding 10 days are subject
business of employer; if it is for the to tax; [RR No. 5-2011]
convenience or advantage of employer 2. Monetized value of vacation and sick leave
credits paid to GOVERNMENT officials
Fringe Benefit that is not taxable under Sec. 32 and employees. Note that there is no limit
(B) – Exclusions from Gross Income as to the number of credits; [RR No. 5-
2011]
Fringe benefits not subject to Fringe Benefit 3. Medical cash allowance to dependents of
Tax: employees, not exceeding P1,500 per
a. Fringe Benefits which are authorized and employee per semester or P250 per
exempted from income tax under the Code month; [RR No. 11-2018]
or under special laws; 4. Rice subsidy of P2,000 or one (1) sack of
b. Contributions of the employer for the 50 kg. rice per month amounting to not
benefit of the employee for retirement, more than P2,000; [RR No. 11-2018]
Page 355 of 494

5. Uniform and Clothing allowance not Fringe Benefit
exceeding P6,000 per annum; [RR No. 11- Tax Base
Housing Privilege
2018] (Monetary
6. Actual medical assistance, e.g. medical Value)
allowance to cover medical and healthcare residential use of where MV =
needs, annual medical/executive check- employees monetary value
up, maternity assistance, and routine of the FB
consultations, not exceeding P10,000.00 Assignment of MV= [5% (FMV
per annum; [RR No. 5-2011] residential property or ZV, whichever
7. Laundry allowance not exceeding P300 per owned by employer for is higher) x 50%]
month; [RR No. 5-2011] use of employees
8. Employees achievement awards, e.g., for Purchase of residential MV= 5% x
length of service or safety achievement, property in installment acquisition cost
which must be in the form of a tangible basis for the use of the exclusive of
personal property other than cash or gift employee interest x 50%
certificate, with an annual monetary value Purchase of residential MV= FMV or ZV,
not exceeding P10,000 received by the property and ownership whichever is
employee under an established written is transferred in the higher
plan which does not discriminate in favor of name of the employee
highly paid employees; [RR No. 5-2011] ZV = Zonal Value = value of the land or
9. Gifts given during Christmas and major improvement, as declared in the Real Property
anniversary celebrations not exceeding Declaration Form
P5,000 per employee per annum; [RR No.
5-2011] FMV = Fair Market Value = FMV as determined
10. Daily meal allowance for overtime work by the Commissioner of Internal Revenue
and night/graveyard shift not exceeding
twenty-five percent (25%) of the basic Non-taxable housing fringe benefit:
minimum wage on a per region basis; [RR a. Housing privilege of the Armed Forces of
No. 3-98] the Philippines (AFP) officials – i.e. those of
11. Benefits received by an employee by virtue the Philippine Army, Philippine Navy, or
of a collective bargaining agreement (CBA) Philippine Air Force
and productivity incentive schemes b. A housing unit, which is situated inside or
provided that the total monetary value adjacent to the premises of a business or
received from both CBA and productivity factory – maximum of 50 meters from
incentive schemes combined do not perimeter of the business premises
exceed P10,000.00 per employee per c. Temporary housing for an employee who
taxable year. [RR No 1-2015] stays in housing unit for three months or
less
All other benefits given by employers which are
not included in the above enumeration shall Motor Vehicle
NOT be considered as "de minimis" benefits
and hence, shall be subject to withholding tax Fringe Benefit
on compensation (rank and file employees) Tax Base
and FBT (managerial/supervisory employees). Motor Vehicle
(Monetary
Value)
Housing Purchased in the name MV = acquisition
Fringe Benefit of the employee cost
Tax Base Cash given to employee MV = cash
Housing Privilege
(Monetary to purchase in his own received by
Value) name employee
LEASE of residential MV= 50% of
property for the lease payments,
Page 356 of 494

Fringe Benefit the practice of his profession, provided that
Tax Base there is NO employer-employee relationship
Motor Vehicle
(Monetary between him and his clients.
Value)
Purchase on MV = acquisition It includes the fees derived from engaging in an
installment, in the name cost exclusive of endeavor requiring special training as
of employee interest professional as means of livelihood, which
Employee shoulders includes, but is not limited to, the fees of CPAs,
MV = amount doctors, lawyers, engineers, and the like [RR
part of the purchase
shouldered by No. 2-98].
price, ownership in the
employer
name of employee
Employer owns and The existence of employee-employer
maintains a fleet of relationship is the distinguishing factor
MV = (AC/5) x between compensation income versus
motor vehicles for use
50% professional income.
of the business and of
employees
Employer leases and 4. Income from Business
maintains a fleet for the MV = 50% of
use of the business and rental payment Any income derived from doing business.
of employees
Doing business: The term implies a continuity
Pure Compensation Earner of commercial dealings and arrangements, and
(Minimum Wage Earner, Rank & File, contemplates, to that extent, the performance
Executive) of acts or works or the exercise of some of the
Minimum functions normally incident to, and in
Managerial or progressive prosecution of, the purpose and
Wage Rank and File
Supervisory
Earner object of its organization.
Basic Compensation
Taxable Taxable 5. Income from Dealings in Property
Exempt
Compensation Compensation
Holiday Pay, OT, Nightshift Pay, Hazard Dealings in property such as sales or
Pay exchanges may result in gain or loss. The kind
Taxable Taxable of property involved (i.e., whether the property
Exempt
Compensation Compensation is a capital asset or an ordinary asset)
13th Month Pay up to P90,000 determines the tax implication and income tax
Exempt Exempt Exempt treatment, as follows:
Other Benefit in Excess of P90,000
N/A (with Taxable Taxable Net Capital
caveat) Compensation Compensation Taxable Ordinary Gains (other
Fringe Benefit Net Net than those
Subject to = +
Taxable Income Income subject to
Fringe Benefit final CGT)
Compensation
Tax
N/A Tax
Tax
shouldered by
shouldered by
employee Ordinary Asset Capital Asset
employer
De Minimis Benefit
Gain from sale, exchange or other
Exempt Exempt Exempt disposition
Ordinary Gain (part
Capital Gain
3. Professional Income of Gross Income)
Loss from sale, exchange, or other
Refers to fees received by a professional from disposition
Page 357 of 494


Ordinary Asset Capital Asset whether a property is an ordinary asset or a
Ordinary Loss (part capital asset. [BIR Ruling No. DA 212-07, April
of Allowable 3, 2007]
Capital Loss
Deductions from
Gross Income) b. Types of Gains
Excess of Gains over Losses
Part of Gross Income Net Capital Gain ORDINARY INCOME VIS-À-VIS CAPITAL
Excess of Losses over Gains GAIN.
Part of Allowable
Deductions from Net Capital Loss a. If the asset involved is classified as
Gross Income ordinary, the entire amount of the gain
from the transaction shall be included in
a. Capital v. Ordinary Asset the computation of gross income [Sec
32(A)], and the entire amount of the loss
shall be deductible from gross income.
Ordinary Assets Capital Assets
[Sec 34(D)]. (See Allowable Deductions
1. Stock in trade of Property held by the
from Gross Income – Losses
the taxpayer/ taxpayer, whether
other property of or not connected
b. If the asset involved is a capital asset, the
a kind which with his trade or
rules on capital gains and losses apply in
would properly business which is
the determination of the amount to be
be included in not an ordinary
included in gross income. (See Capital
the inventory of asset.
Gains and Losses).
the taxpayer if on
hand at the close
These rules do not apply to:
of the taxable
a. real property with a capital gains tax (final
year.
tax), or
2. Property held by
b. shares of stock of a domestic corporation
the taxpayer
with a capital gains tax (final tax).
primarily for sale
to customers in
ACTUAL GAIN VIS-À-VIS PRESUMED GAIN
the ordinary
course of his
Presumed Gain: In the sale of real property
trade or
located in the Philippines, classified as capital
business.
asset, the tax base is the gross selling price or
3. Property used in
fair market value, whichever is higher. The law
the trade or
presumes that the seller makes a gain from
business of a
such sale.
character which
is subject to the
Thus, whether or not the seller makes a profit
allowance for
from the sale of real property, he has to pay 6%
depreciation, or
capital gains tax.
4. Real property
used in the trade
Actual Gain: The tax base in the sale of real
or business of
property classified as an ordinary asset is the
the taxpayer,
actual gain.
including
property held for
rent.
Note in ordinary assets, that the list is

EXCLUSIVE. The actual use determines
Page 358 of 494

Computation of the amount of gain or loss any bond, debenture, note, certificate or other
evidence of indebtedness issued by any
Amount realized from sale or other corporation (including one issued by a
disposition of property government or political subdivision thereof)
Less: Basis or Adjusted Basis with interest coupons or in registered form, any
______________________________ loss resulting from such sale shall not be
NET GAIN (LOSS) subject to the foregoing limitation and shall not
be included in determining the applicability of
c. Special rules pertaining to income or such limitation to other losses [Sec. 39(C),
loss from dealings in property classified NIRC].
as capital asset
Net loss carry-over rule (applicable only to
Long Term Capital Gain Vis-À-Vis Short individuals)
Term Capital Gain If an individual sustains in any taxable year a
net capital loss, such loss (in an amount not in
Long-term capital gain: Capital asset is held excess of the net income for the year) shall be
for more than twelve months before it is sold. treated in the succeeding taxable year as a loss
Only 50% of the gain is recognized. from the sale or exchange of a capital asset
held for not more than 12 months [Sec. 39(D),
Short-term capital gain: Capital asset is held NIRC].
for 12 months or less, 100% of the gain is
subject to tax. d. Tax free exchanges [Sec. 40 (c)(2)]
Note: If the taxpayer is a corporation, 100% of Merger or Consolidation

the gain is recognized regardless of the holding No gain or loss shall be recognized if in
period. pursuance of a plan of merger or consolidation
a. A corporation, which is a party to a merger
Net Capital Gain Vis-À-Vis Net Capital Loss or consolidation, exchanges property
solely for stock in a corporation, which is a
Net Capital Gain: Excess of the gains over the party to the merger or consolidation; or
losses on sales or exchange of capital assets b. A shareholder exchanges stock in a
during the taxable year. corporation, which is a party to the merger
or consolidation, solely for the stock of
Net Capital Loss: Excess of the losses over another corporation also a party to the
the gains on sales or exchanges of capital merger or consolidation; or
assets during the taxable year. [Sec. 39 (A), c. A security holder of a corporation, which is
NIRC] a party to the merger or consolidation,
exchanges his securities in such
Income Tax Treatment of Capital Loss corporation, solely for stock or securities in
such corporation, a party to the merger or
Capital loss limitation rule (applicable to both consolidation.
corporations and individuals)
Both corporations in the aforementioned cases
General Rule: Losses from sales or must be parties to a merger or consolidation.
exchanges of capital assets shall be allowed
only to the extent of the gains from such sales Merger occurs when one corporation acquires
or exchanges [Sec. 39(C), NIRC]. all or substantially all the properties of another
corporation. Consolidation occurs when two or
Exception for Banks and Trust Companies: more corporations merge to form one
If a bank or trust company incorporated under corporation.
the laws of the Philippines, a substantial part of
whose business is the receipt of deposits, sells Substantially all the properties of another
Page 359 of 494

corporation means the acquisition of at least Roxas]
80% of the assets, including cash, of another
corporation which has the element of If one is a domestic and resident corporation
permanence and not merely momentary with principal offices in Manila, the residence of
holding [Banggawan citing BIR Gen.Circ. V- the obligor who pays the interest rather than
253 (1957)] the physical location of the securities, bonds,
or notes or the place of payment, is the
Initial Acquisition of Control determining factor of the source of interest
No gain or loss shall also be recognized if income. Nothing in the law speaks of the act or
property is transferred to a corporation by a activity of non-resident corporations in the
person in exchange for stock or unit of Philippines, or place where the contract is
participation in such a corporation of which as signed [National Development Cooperation v
a result of such exchange said person, alone CIR, G.R. No. 53961, 30 June 1987).
or together with others, not exceeding four (4)
persons, gains control of said corporation: Dividend Income
Provided, That stocks issued for services shall A form of earnings derived from the distribution
not be considered as issued in return for made by a corporation out of its earnings or
property. profits and payable to its stockholders, whether
in money or in property.
6. Passive Investment Income
The following are the classification of
Under Sec 24(B) of the Tax Code, a final tax is dividends:
imposed upon gross passive income of citizen 1. Cash dividends
and resident aliens. An income is considered 2. Stock dividends
passive if the taxpayer merely waits for it to be 3. Property dividends; and
realized. 4. Liquidating dividends.
Sources Cash dividends

Dividends are subject to final tax under the
The following are the sources of passive NIRC. However, dividends received by a
income subject to final tax domestic corporation from another domestic
a. Interest income; corporation, and dividends received by a
b. Dividend Income; resident foreign corporation from a domestic
c. Royalty Income; and corporation are exempt from income tax.
d. Rental Income.
Stock dividends
Note that these sources of income are NOT Stock dividend is generally exempt from
added to other income in the determination of income tax, EXCEPT:
ordinary income tax liability. a. If a corporation cancels or redeems stock
issued as a dividend xxx the amount so
Passive income is only subject to final tax if the distributed in redemption or cancellation of
source is within the Philippines. the stock shall be considered as taxable
income to the extent that it represents a
It is not the signing of the contract, the distribution of earnings or profits [Sec.
construction on the vessels, the payment of the 73(B), NIRC]; or
stipulated price and their delivery to the obligor b. Where there is an option that some
even if done abroad that determines the source stockholders could take cash or property
of income. dividends instead of stock dividends; some
stockholders exercised the option to take
Interest Income cash of property dividends; and the exercise
An earning derived from depositing or lending of option resulted in a change of the
of money, goods or credits [Valencia and stockholders’ proportionate share in the
Page 360 of 494

outstanding share of the corporation. Leasehold improvements by lessee
Property dividends Rent Income from leasehold improvements:

Property dividends are subject to tax at the 1. Outright method- lessor shall report as
preferential rate under the NIRC. income FMV of the buildings or
improvements subject to the lease in the
Liquidating dividends year of completion.
Represents distribution of all the property or 2. Spread-out method- lessor shall spread
assets of a corporation in complete liquidation over the remaining term of the lease the
or dissolution. It is strictly not dividend income, estimated depreciated (book) value of
but rather is treated in effect, a return of capital such buildings or improvements at the
to the extent of the shareholder’s investment. termination of the lease, and reports as
income for each remaining term of the
The difference between the cost or other basis lease an aliquot part thereof.
of the stock and the amount received in
liquidation of the stock is a capital gain or a Estimated BV at the end of the lease contract/
capital loss. Where property is distributed in remaining lease term = Income per year
liquidation, the amount received is the FMV of
such property. The income is subject to 7. Annuities, Proceeds from Life
ordinary income tax rates. It is subject neither insurance or Other Types of Insurance
to the FWT on dividends nor to the CGT on sale
of shares. It refers to periodic installment payments of
income or pension by insurance companies
Royalty Income during the life of a person or for a guaranteed
Where a person pays royalty to another for the fixed period of time, whichever is longer, in
use of its intellectual property, such royalty is consideration of capital paid by him. It is paid
generally a passive income of the owner annually, monthly, or periodically, computed
thereof subject to withholding tax. upon the amount paid yearly, but necessarily
for life. [Peralta v. Auditor General, G.R. No. L-
Rental Income 8480 (1957)]
Refers to earnings derived from leasing real
estate as well as personal property. Aside from The annuity payments represent a part that is
the regular amount of payment for using the taxable and not taxable. If part of annuity
property, it also includes all other obligations payment represents interest, then it is a taxable
assumed to be paid by the lessee to the third income. If the annuity is a return of premium, it
party in behalf of the lessor (e.g., interest, is not taxable.
taxes, loans, insurance premiums, etc.) [RR
19-86] 8. Prizes and Awards
Lease of personal property A prize is a reward for a contest or a

Rental income on the lease of personal competition. Such payment constitutes gain
property located in the Philippines and paid to derived from labor.
a non-resident taxpayer shall be taxed as
follows: The EXCEPTIONS are as follows:
1. Prizes and awards made primarily in
NRA- recognition of religious, charitable,
NRFC
NETB scientific, educational, artistic, literary or
Vessel 4.5% 25% civic achievements are EXCLUSIONS
Aircraft, 7.5% 25% from gross income if:
machineries and 2. The recipient was selected without any
other Equipment action on his part to enter a contest or
Other assets 30% 25% proceedings; and
Page 361 of 494

3. The recipient is not required to render a. Recovery of Accounts Previously
substantial future services as a condition Written-off
to receiving the prize or award.
4. Prizes and awards granted to athletes in Bad debts claimed as a deduction in the
local and international sports competitions preceding year(s) but subsequently recovered
and tournaments held in the Philippines shall be included as part of the taxpayer’s gross
and abroad and sanctioned by their income in the year of such recovery to the
national associations shall be EXEMPT extent of the income tax benefit of said
from income tax. deduction. There is an income tax benefit when
the deduction of the bad debt in the prior year
9. Pensions, Retirement Benefit, or resulted in lesser income and hence tax
Separation Pay savings for the company. [Sec. 4, RR 5-99]
A stated allowance paid regularly to a person Illustration:

on his retirement or to his dependents on his Case A Case B Case C
death, in consideration of past services, Year 1
meritorious work, age, loss or injury. Gross
[VALENCIA] 500,000 400,000 500,000
Income
Less:
10. Income from Any Source Allowable
Deduction
Inclusion of all income not expressly exempted s (before
(200,00 (480,00 (495,00
within the class of taxable income under the write-off of
0) 0) 0)
laws irrespective of the voluntary or involuntary Uncollecti
action of the taxpayer in producing the gains, ble
and whether derived from legal or illegal Accounts/
sources Debts)
Taxable
Condonation of Indebtedness Income
(Net Loss)
The cancellation of indebtedness may have 300,000 (60,000) 5,000
before
any of three possible consequences: write-off
1. It may amount to payment of income. If, for Deduction
example, an individual performs services for
to or for a creditor, who, in consideration Accounts
thereof, cancels the debt, income in that Receivabl (2,000) (2,000) (6,000)
amount is realized by the debtor as e written
compensation for personal services. off
2. It may amount to a gift. If a creditor wishes Taxable
merely to benefit the debtor, and without Income
any consideration therefore, cancels the (Net Loss) 298,000 (62,000) (1,000)
debt, the amount of the debt is a gift to the after write-
debtor and need not be included in the off
latter’s report of income. Year 2
3. It may amount to a capital transaction. If a Recovery
corporation to which a stockholder is of
indebted forgives the debt, the transaction 2,000 2,000 6,000
Amounts
has the effect of a payment of dividend. Written Off
Taxable
Income on
2,000 - 5,000
the
Recovery
Page 362 of 494

In Case A, the entire amount recovered enumeration of tax payments that are not
(P2,000) is included in the computation of deductible from gross income.
gross income in Year 2 because the taxpayer If a tax is not an allowable deduction from gross
benefited by the same extent. Prior to the write- income when paid (no reduction of taxable
off, the taxable income was P300,000; after the income, hence no tax benefit), the refund is not
write-off, the taxable income was reduced to taxable.
P298,000.
e. Exclusions
In Case B, none of the P2,000 recovered would
be recognized as gross income in Year 2. Note Exclusions from gross income refer to income
that even without the write-off, the taxpayer received or earned but is not taxable as income
would not have paid any income tax anyway. because it is exempted by law or by treaty.
The “taxable income” before the write-off was
actually a net loss. Such tax-free income is not to be included in
the income tax return unless information
In Case C, only P5,000 of the P6,000 regarding it is specifically called for. Receipts
recovered would be recognized as gross which are not in fact income are, of course,
income in Year 2. It was only to this extent that excluded from gross income.
the taxpayer benefited from the write-off. The
taxpayer did not benefit from the extra P1,000 The exclusion of income should not be
because at this point, the P1,000 was already confused with the reduction of gross income by
a net loss. the application of allowable deductions. While
exclusions are simply not taken into account in
b. Receipt of tax refunds or credit determining gross income, deductions are
subtracted from gross income to arrive at net
General rule: A refund of a tax related to the income. [DE LEON]
business or the practice of profession, is
taxable income (e.g., refund of fringe benefit Exclusions v Exemptions
tax) in the year of receipt to the extent of the
income tax benefit of said deduction. Both in their nature and in their effect, there is
no difference between tax exemption and tax
Exceptions: However, the following tax exclusion. Exemption is immunity or privilege;
refunds are not to be included in the it is freedom from a charge of burden to which
computation of gross income: others are subjected.
1. Philippine income tax, except the fringe
benefit tax Exclusion is the removal of otherwise taxable
2. Income tax imposed by authority of any items from the reach of taxation, e.g.
foreign country, if the taxpayer claimed a exclusions from gross income and allowable
credit for such tax in the year it was paid or deductions. It is also therefore an immunity or
incurred. privilege which frees a taxpayer from a charge
3. Estate and donor’s taxes to which others are subjected.
4. Taxes assessed against local benefits of a
kind tending to increase the value of the Consequently the rule that tax exemption
property assessed (Special assessments) should be applied strictly against the taxpayer
5. Value Added Tax and liberally in favor of the government, equally
6. Fines and penalties due to late payment of applies to tax exclusions [PLDT v Province of
tax Laguna, 467 SCRA 93(2005)].
7. Final taxes
8. Capital Gains Tax Items of Exclusions representing return of
capital
Note: The enumeration of tax refunds that are
not taxable (income) is derived from an Amount of capital is generally recovered
Page 363 of 494

through deduction of the cost or adjusted basis Exclusion Taxpayer
of the property sold from the gross selling price All taxpayers unless
Already subject to
or consideration, or through the deduction from provided that income
internal revenue tax
gross income of depreciation relating to the is to be included.
property used in trade or business before it is As expressly
sold. Express exclusion
provided.
It may also relate to indemnities, such as 2. Exclusions Distinguished from

proceeds of life insurance paid to the insured’s Deductions and Tax Credit
beneficiaries and return of premiums paid by
the insurance company to the insured under a Exclusions from gross income refer to flow of
life insurance, endowment or annuity contract. wealth to the taxpayer which are not treated as
part of gross income for purposes of computing
Damages, in certain instances, may also be the taxpayer’s taxable income, due to the
exempt because they represent return of following reasons: (1) it is exempted by the
capital. Constitution or a statute; or (2) it does not come
within the definition of income.
Items of Exclusion because it is subject to
another internal revenue tax Deductions, on the other hand, are the
amounts which the law allows to be subtracted
The value of property acquired by gift, bequest, from gross income in order to arrive at net
devise or descent is exempt from income tax income.
on the part of the recipient because the receipt
of such property is already subject to transfer Exclusions pertain to the computation of gross
taxes (estate tax or donor’s tax). income, while deductions pertain to the
computation of net income.
Items of Exclusions because they are
expressly exempt from income tax Exclusions are something received or earned
a. Under the Constitution by the taxpayer which do not form part of gross
b. Under a tax treaty income while deductions are something spent
c. Under special laws or paid in earning gross income.
Rationale Tax Credit refers to amounts subtracted from

the computed tax in order to arrive at taxes
The term “exclusions” refers to items that are payable.
not included in the determination of gross
income because: 3. Exclusions Under the Constitution
a. They represent return of capital or are not
income, gain or profit; Income derived by the government or its
b. They are subject to another kind of internal political subdivisions from the exercise of any
revenue tax; essential governmental function
c. They are income, gain or profit expressly
exempt from income tax under the Also, all assets and revenues of a non-stock,
Constitution, tax treaty, Tax Code, or a non-profit private educational institution used
general or special law. [MAMALATEO] directly, actually and exclusively for private
educational purposes shall be exempt from
1. Taxpayers Who May Avail taxation.
Exclusion Taxpayer 4. Exclusions Under the Tax Code [Sec.

All taxpayers since 32(b), NIRC]
Return of capital
there is no income.
Page 364 of 494


Proceeds of life insurance policies assignment or otherwise, of a life insurance,
endowment, or annuity contract, or any interest
The proceeds of life insurance policies paid to therein, only the actual value of such
his estate or to any beneficiary (but not a consideration and the amount of the premiums
transferee for a valuable consideration), and other sums subsequently paid by the
directly or in trust, upon the death of the transferee are exempt from taxation.
insured, are excluded from the gross income of
the beneficiary. Value of property acquired by gift, bequest,
devise or descent
However, if such amounts are held by the
insurer under an agreement to pay interest Gifts, bequests and devises (which are subject
thereon, the interest payments received by the to estate or gift taxes) are excluded from gross
insured shall be included in gross income. The income, BUT not the income from such
interest income shall be taxed at the graduated property. If the amount received is on account
income tax rates. of services rendered, whether constituting a
demandable debt or not, or the use or
Return of premium paid opportunity to use of capital, the receipt is
income [Pirovano v. Commissioner, G.R. No.
General rule: The amount received by the L-19865, July 31, 1965]
insured as a return of premiums paid by him
under life insurance, endowment, or annuity Amount received through accident or
contracts, either during the term or at the health insurance (Compensation for
maturity of the term mentioned in the contract damages)
or upon surrender of the contract is a return of
capital and not income. As a rule, amounts received through accident
or health insurance or under workmen’s
This refers to the cash surrender value of the compensation acts, as compensation for
contract. personal injuries or sickness, plus the amount
of any damages received, whether by suit or
Exception: If the amounts received by the agreement, on account of such injuries or
insured (when added to the amounts already sickness are excluded from gross income.
received before the taxable year under such
contract) exceed the aggregate premiums or Examples of non-taxable and taxable
considerations paid (whether or not paid during damages recoveries are:
the taxable year), then the excess shall be Non-taxable – Taxable –
included in gross income. compensation for compensation for
damages on damages on
Amounts received under life insurance, account of account of
endowment or annuity contracts Actual damages for
Personal (physical)
loss of anticipated
injuries or sickness
Amounts received (other than amounts paid by profits
reason of the death of the insured and interest Any other damages Moral and exemplary
payments on such amounts) under a life recovered on damages awarded
insurance, endowment or annuity contracts are account of personal as a result of break
excluded from gross income, but if such injuries or sickness of contract
amounts (when added to amounts already Exemplary and
received before the taxable year under such moral damages for Interest for non-
contract) exceed the aggregate premiums of out-of-court taxable damages
considerations paid (whether or not paid during settlement, including above
the taxable year), then the excess shall be attorney’s fees
included in gross income. However, in the case
of a transfer for valuable consideration, by
Page 365 of 494

Non-taxable – Taxable – RA 7641 RPBP
compensation for compensation for more than 65 years old at the time of
damages on damages on of age at the time of retirement
account of account of retirement
Alienation of Any damages as Retiring employee
affection, or breach compensation for shall not have
Availed of only once,
of promise to marry unrealized income previously availed of
and only when there
Any amount the privilege under a
is no RPBP
received as a return retirement benefit
of capital or plan of the same or
reimbursement of another employer
expenses Plan must be
reasonable. Its
Income exempt under tax treaty implementation must
be fair and equitable
Income of any kind, to the extent required by for the benefit of all
any treaty obligation binding upon the employees (e.g.
Government of the Philippines. from president to
laborer)
Retirement benefits, pensions, gratuities, Plan must be
etc. approved by BIR
These are: A 'reasonable private benefit plan' means a

• Retirement benefits under RA 7641, RA pension, gratuity, stock bonus or profit-sharing
4917, and Section 60(B) of the NIRC plan maintained by an employer for the benefit
• Terminal pay of some or all of his employees wherein
• Retirement Benefits from foreign contributions are made by such employer, or
government agencies employees, or both for the purpose of
• Veterans benefits distributing to such employees the earnings
• Benefits under the Social Security Act and principal of the fund thus accumulated by
• GSIS benefits the trust in accordance with such plan (trust
fund)
Retirement benefits received under RA
7641(The Retirement Pay Law) and those Further, it should be provided in the plan that at
received by officials and employees of private no time prior to the satisfaction of all liabilities
firms under a reasonable private benefit plan with respect to employees under any trust,
(RPBP) maintained by the employer under RA shall any part of the corpus or income of the
4917 (now Section 32(B)(6)(a) of NIRC) are fund be used for, or be diverted to, any purpose
excluded from gross income subject to income other than for the exclusive benefit of his
tax. employees.
RA 7641 RPBP Terminal pay/Separation pay

Retiring employee Any amount received by an employee or by his
Retiring official or heirs from the employer as a consequence of
must be in the
employee must have separation of such official or employee from the
service of same
been in the service of service of the employer because of death,
employer
the same employer sickness, other physical disability or for any
CONTINUOUSLY
for at least ten (10) cause beyond the control of the employee. The
for at least five (5)
years. phrase “for any cause beyond the control of the
years
Retiring employee Retiring official or said official or employee” means that the
must be at least sixty employee must be at separation of the employee must be
(60) years old but not least fifty (50) years involuntary and not initiated by him.
Page 366 of 494

The separation must not be of his own making. sports associations shall not be included in
gross income and shall be tax exempt. [Sec. 32
Notes: B7d, NIRC]
a. Sickness must be life-threatening or one
which renders the employee incapable of Prizes and awards made primarily in
working recognition of charitable, literary, educational,
b. Retrenchment of the employee due to artistic, religious, scientific, or civic
unfavorable business conditions or achievement are not taxable, provided
financial reverses is considered as recipient was selected without any action on
involuntary. his part to enter the contest or proceeding; and
c. BIR Ruling 143-98: The “terminal leave recipient is not required to render substantial
pay” (amount paid for the commutation of future services as a condition to receiving the
leave credits) of retiring government prize or award
employees is considered not part of the
gross salary, and is exempt from taxes. 7. Deductions from Gross Income
[Commissioner v. CA and Castaneda,
G.R. 96016 (1991)]. Deductions are items or amounts authorized by
law to be subtracted from the pertinent items of
Retirement BENEFITS from foreign gross income to arrive at taxable income.
government agencies – The social security
benefits, retirement gratuities, pensions and Deductions from income tax purposes partake
other similar benefits received by resident or of the nature of tax exemptions; hence, if tax
non-resident citizens or aliens who come to exemptions are to be strictly construed, then it
reside permanently in the Philippines from follows that deductions must also strictly
foreign government agencies and other construed. [CIR v. Isabela Cultural Co., G.R.
institutions, private or public; No. 172231 (2007)]
Payments of VETERANS benefits under However, if there is an express mention in the

U.S. Veterans Administration – Payments of law or if the taxpayer falls within the purview of
benefits due or to become due to any person the exemption by clear legislative intent, the
residing in the Philippines under the laws of the rule on strict construction will not apply.
United States administered by the United [Commissioner v. Anoldus Carpentry Shop,
States Veterans Administration G.R. No. 71122 (1988)]
Social Security Act benefits – Payments of Types of Deductions

benefits received under the Social Security Act
of 1954 [RA 8282], as amended, e.g., Maternity There are four (4) types of deductions from
Benefits gross income:
1. itemized deductions in Section 34(A) to (J)
GSIS benefits – Benefits received from GSIS and (M) available to all kinds of taxpayers
under the GSIS Act of 1937, as amended, and engaged in trade or business or practice of
the retirement gratuity received by government profession in the Philippines;
officials and employees are not taxable. [Sec. 2. optional standard deduction in Section
32B6., NIRC; Sec. B1, RR 2-98] 34(L) available only to individual taxpayers
deriving business, professional, capital
h. Winnings, prizes and award, including gains and passive income not subject to
those in sports competitions final tax, or other income; and
3. optional standard deduction available to
All prizes and awards granted to athletes in corporations under Section 34(L) of the
local and international sports competitions and Tax Code (introduced by RA No. 9504)
tournaments whether held in the Philippines or 4. the special deductions in Sections 37 and
abroad, AND sanctioned by their national 38 of the NIRC, and in special laws like the
Page 367 of 494

BOI law (E.O. 226). Costs of goods purchased for resale, with
proper adjustment for opening and closing
General Rules inventories, are deducted from gross sales in
computing gross income [Sec. 65, Rev. Reg. 2]
1. Deductions must be paid or incurred in
connection with the taxpayer’s trade, Sale of inventory of goods by manufacturers
business or profession and dealers of properties: In sales of goods
2. They must be paid or incurred during the representing inventory, the amount received by
taxable year the seller consists of return of capital and gain
3. The tax required to be withheld has been from sale of goods or properties. That portion
deducted and paid of the receipt representing return of capital is
4. Deductions must be supported by not subject to income tax. Accordingly, cost of
adequate receipts or invoices (except goods manufactured and sold (in the case of
standard deduction) manufacturers) and cost of sales (in the case
5. Has direct connection or relation to the of dealers) is deducted from gross sales and is
development, management, operation, reflected above the gross income line in a profit
and/or conduct of the trade, business, or and loss statement.
profession of the taxpayer or in the pursuit
of trade or business. Sale of stock in trade by a real estate dealer
6. The expense incurred must not be contrary and dealer in securities: Real estate dealers
to law, morals, public policy, or public order and dealers in securities are ordinarily not
7. The amount must be reasonable allowed to compute the amount representing
8. The taxpayer must be duly registered return of capital through cost of sales. Rather
before the BIR. they are required to deduct the total cost
specifically identifiable to the real property or
The requisite that it must have been paid or shares of stock sold or exchanged.
incurred during the taxable year is further
qualified by Section 45 of the NIRC, which Sale of services: Their entire gross receipts are
provides, “the deductions provided for in this treated as part of gross income.
Title shall be taken for the taxable year in which
paid or accrued or paid or incurred dependent b. Distinguish: Itemized Deductions
upon the method of accounting upon the basis and Optional Standard Deductions
of which the net income is computed.
Itemized Deductions
Revenue Audit Memorandum Order No. 1- • Expenses
2000, provides that under the accrual method • Interest
of accounting, expenses not being claimed as • Taxes
deductions by a taxpayer in the current year • Losses
when they are incurred cannot be claimed as • Bad debts
deduction from income for the succeeding • Depreciation
year. Thus, a taxpayer who is authorized to • Depletion of oil and gas wells and mines
deduct certain expenses and other allowable • Charitable and other contributions
deductions for the current year, but failed to do
• Research and development
so cannot deduct the same for the next year.
• Pension trusts
a. Concept of Return of Capital Timing of Claiming Deductions
A taxpayer has the right to deduct all
Income tax is levied by law only on income; authorized allowances for the taxable year. As
hence, the amount representing return of a rule, if he does not within any year deduct
capital should be deducted from proceeds from certain of his expenses, losses, interest, taxes
sales of assets and should not be subject to or other charges, he cannot deduct them from
income tax. the income of the next of any succeeding year
Page 368 of 494

[Sec. 76, Income Tax Regulations] Substantiation requirement –
Expenses Sec. 34(A)(1)(b), NIRC: No deduction from

Business expenses deductible from gross gross income shall be allowed unless the
income include the ordinary and necessary taxpayer shall substantiate with sufficient
expenditures directly connected with or evidence, such as official receipts or other
pertaining to the taxpayer’s trade or business. adequate records: (1) the AMOUNT of the
The cost of goods purchased for resale, with expense being deducted, and (2) the DIRECT
proper adjustment for opening and closing CONNECTION or relation of the expense
inventories, is deducted from gross sales in being deducted to the development,
computing gross income. management, operation and/or conduct of the
trade, business or profession of the taxpayer.
Requisites for deductibility
a. Ordinary AND necessary Possible Kinds of Business Expenses
(deductible and not deductible)
ORDINARY - normal and usual in relation to
the taxpayer's business and surrounding a. Salaries, wages and other forms of
circumstances; need not be recurring compensation for personal services
actually rendered, including the grossed-
NECESSARY - appropriate and helpful in up monetary value of the fringe benefit
the development of taxpayer's business or subjected to fringe benefit tax which tax
are proper for the purpose of realizing a should have been paid
profit or minimizing a loss b. Travelling expenses
c. Cost of materials
b. Paid or incurred during the taxable year; d. Rentals and/or other payments for use or
c. Paid or incurred in carrying on or which are possession of property
directly attributable to the development, e. Repairs and maintenance
management, operation and/or conduct of f. Expenses under lease agreements
the trade, business or exercise of g. Expenses for professionals
profession; h. Entertainment expenses
d. Substantiated by adequate proof – i. Training expenses
documented by official receipts or adequate j. Others
records, which reflect the amount of
expense deducted and the connection or Salaries, Wages, and Other Compensation
relation of the expense to the Forms
business/trade of the taxpayer);
e. Legitimately paid (not a BRIBE, kickback, or a. To be deductible, salaries, wages and other
otherwise contrary to law, morals, public forms of compensation for personal services
policy); actually rendered, including the grossed-up
f. If subject to withholding tax, the tax required monetary value of the fringe benefit subjected
to be withheld on the expense paid or to fringe benefit tax which tax should have been
payable is shown to have been properly paid
withheld and remitted to the BIR on time;
g. Amount must be reasonable. Given for personal services must be actually
rendered and reasonable.
Note: The expenses allowable to a non-
resident alien or a foreign corporation consist For income payment to be allowed as
of only such expenses as are incurred in deduction, the withholding tax must have been
carrying on any business or trade conducted paid [RR No. 12-2013].
within the Philippines exclusively. [Sec. 77 RR
2]
Bonuses are deductible when:
Page 369 of 494

1. made in good faith deductible when it is incurred and paid.
2. given as additional compensation for [VALENCIA and ROXAS]
personal services actually rendered
3. such payments, when added to the Repairs and maintenance
stipulated salaries, do not exceed a Incidental or ordinary repairs are deductible.
reasonable compensation for the Repairs which neither materially add to the
services rendered value of the property nor appreciably prolong
its life, but keep it in an ordinarily efficient
Traveling expenses working condition, may be deducted as
This include transportation expenses and expenses, provided the plant or property
meals and lodging [Secs. 65 and 66, Rev. Reg. account is not increased by the amount of such
No. 2] expenditure. [Visayan Transportation Co. v.
CTA, CTA Case No. 1119, (1964)]
Expenses must be reasonable and necessary.
Extraordinary repairs are not deductible – they
Must be incurred or paid “while away from are capital expenditures
home;” tax home is the principal place of
business, when referring to “away from home” Repairs which add material value to the
property or appreciably prolong its life
Incurred or paid in the conduct of trade or Repairs in the nature of replacement, to the
business. extent that they arrest deterioration and
appreciably prolong the life of the property,
Note: However, necessary transportation should be charged against the depreciation
expenses of the taxpayer in its “tax home” are reserves if such account is kept. [Sec. 68, Rev.
deductible. Thus, a taxpayer operating its Regs. 2]
business in Manila is allowed transportation
expenses from its office to its customers’ place All maintenance expenses on account of non-
of business and back. But the transportation depreciable vehicles for taxation purposes are
expenses of an employee from his residence to disallowed in its entirely. [RR No. 12-2012]
its office and back are not deductible as they
are considered personal expenses. Expenses under lease agreements
Since the rentals are considered as income of
Cost of materials the lessor (owner of the property), such lessor
Deductible only to the amount that they are may deduct all ordinary and necessary
actually consumed and used in operation expenses paid or incurred during the taxable
during the year for which the return is made, year to the earning of the income (Sec. 2.01,
provided that their cost has not been deducted RR No. 19-86). Among such deductions may
in determining the net income for any previous be cost of repairs and maintenance, salaries
year. and wages of employees attendant to such
lease, interest payment, property taxes, and
Rentals and/or other payments for use or more others.
possession of property
a. Required as a condition for continued use Expenses for professionals
or possession of property. Deductible in the year the professional services
b. For purposes of trade business or are rendered, not in the year they are billed,
profession. provided that the “all events” is present.
c. Taxpayer has not taken or is not taking title
to the property or has no equity other than “All events test” requires:
that of lessee, user, or possessor. 1. Fixing a right to income or liability to pay;
d. On the accrual basis, rent is deductible as and
expense when liability is incurred during 2. The availability of reasonably accurate
the period of use. On cash basis, rent is determination of such income or liability.
Page 370 of 494

The “all-events test” does not demand that the the industry, trade, business, or
amount of income or liability be known profession of the taxpayer.
absolutely; it only requires that a taxpayer has
at its disposal the information necessary to Exclusions from EAR expenses:
compute the amount with reasonable 1. Expenses which are treated as
accuracy, which implies something less than compensation or fringe benefits for
an exact or completely accurate amount. services rendered under an employer-
[Commissioner v. Isabela Cultural Corporation, employee relationship
G.R. No. 172231 (2007)] 2. Expenses for charitable or fund raising
events
A professional may claim as deductions the 3. Expenses for bona fide business
cost of supplies used by him in the practice of meeting of stockholders, partners or
his profession, expenses paid in the operation directors
and repair of transportation equipment used in 4. Expenses for attending or sponsoring an
making professional calls, dues to professional employee to a business league or
societies and subscriptions to professional professional organization meeting
journals. [MAMALATEO] 5. Expenses for events organized for
promotion marketing and advertising,
Entertainment/Representation expenses including concerts, conferences,
These are entertainment, amusement and seminars, workshops, conventions and
recreation (EAR) expenses incurred or paid other similar events; and
during the year that are directly connected to 6. Other expenses of a similar nature.
the development, management and operation
of the trade, business or profession of the Political campaign expenses
taxpayer. Amount expended for political campaign
purposes or payments to campaign funds are
Requisites for deductibility: NOT deductible either as business expenses
1. Reasonable in amount. or as contribution [CTA Case No. 695, April 30,
2. Paid or incurred during the taxable 1969, citing Mertens]
period.
3. Directly connected to the development, Training expenses
management, and operation of the trade, Organization and pre-operating expenses of a
business or profession of the taxpayer, corporation (including training expenses) are
or that are directly related to or in considered as capital expenditures and are
furtherance of the conduct thereof. therefore, not deductible in the year they are
4. Not to exceed 0.50% of net sales for paid or incurred.
sellers of goods or properties or 1% of
net revenues for sellers of services, But taxpayers who incur these expenses and
including taxpayers engaged in the subsequently enter the trade or business to
exercise of profession and use or lease which the expenditures relate can elect to
of properties) amortize these expenditures over a period not
5. Not incurred for purposes contrary to less than sixty (60) months. [BIR Ruling 102-
law, morals, public policy or public order. 97, Sept. 29, 1997]
6. Must be substantiated with sufficient
evidence such as receipts and/or This rule, however, does not apply to a
adequate records. situation where an existing corporation incurs
7. Not exceed such ceiling as the Secretary these same expenditures for the purpose of
of Finance may, by rules and regulations expanding its business in a new line of trade,
prescribe, upon recommendation of the venture or activity.
Commissioner, taking into account the
needs as well as the special
circumstances, nature and character of
Page 371 of 494

OTHERS exercise of profession, the same was not
treated as a capital expenditure,
Expenses Allowable to Private Educational
Institutions Non-deductible interest expense
Interest paid in advance by the taxpayer who
In addition to the expenses allowable as reports income on cash basis shall only be
deductions under the NIRC, a private allowed as deduction in the year the
proprietary educational institution may at its indebtedness is paid.
OPTION, elect either:
a. To deduct expenditures otherwise If the indebtedness is payable in periodic
considered as capital outlays or amortizations, only the amount of interest
depreciable assets incurred during the which corresponds to the amount of the
taxable year for the expansion of school principal amortized or paid during the year shall
facilities, OR be allowed as deduction in such taxable year.
b. To deduct allowances for depreciation
thereof. Interest payments made between related
taxpayers.
Thus, where the expansion expense has been
claimed as a deduction, no further claims for Interest on indebtedness incurred to finance
yearly depreciation of the school facilities are petroleum exploration.
allowed.
Related Taxpayers
Advertising Expenses a. Between members of the family, i.e.
The media advertising expenses which were brothers and sisters (whether by the whole
found to be inordinately large and thus, not or half-blood), spouse, ancestor, and lineal
ordinary, and which were incurred in order to descendants; or
protect the taxpayer’s brand franchise which is • Except in case of distributions in
analogous to the maintenance of goodwill or liquidation, between an individual and a
title to one’s property, are not ordinary and corporation, where the individual owns
necessary expenses but are capital directly or indirectly more than 50% of
expenditures, which should be spread out over the outstanding stock of the
a reasonable period of time. [CIR v. General corporation
Foods Phils. Inc, G.R. No. 143672 (2003)] • Except in the case of distributions in
liquidation, between two corporations
Interest where:
Requisites for deductibility i. Either one is a personal holding
1. There is a valid and existing indebtedness. company of a foreign personal
2. The indebtedness is that of the taxpayer holding company with respect to the
3. The indebtedness is connected with the taxable year preceding the date of
taxpayer‘s trade, profession, or business. the sale of exchange; and
4. The interest must be legally due. ii. More than 50% of the outstanding
5. The interest must be stipulated in writing. stock of each is owned, directly or
6. The taxpayer is LIABLE to pay interest on indirectly, by or for the same
the indebtedness. individual; or
7. The indebtedness must have been paid or b. Between parties to a trust – Grantor and
accrued during the taxable year. Fiduciary; or
8. The interest payment arrangement must c. Fiduciary of a trust and fiduciary of another
not be between related taxpayers trust if the same person is a grantor with
9. The interest must not be incurred to finance respect to each trust; or
petroleum operations. d. Fiduciary and Beneficiary
10. In case of interest incurred to acquire
property used in trade, business or
Page 372 of 494

INTEREST SUBJECT TO SPECIAL RULES Optional Treatment of Interest Expense
At the option of the taxpayer, interest incurred
Interest paid in advance to acquire property used in trade, business or
No deduction shall be allowed if within the exercise of profession may be allowed as a
taxable year an individual taxpayer reporting deduction or treated as capital expenditure.
income on cash basis incurs an indebtedness
on which an interest is paid in advance through Taxes
discount or otherwise. Taxes Proper: Refers to national and local
taxes
But the deduction shall be allowed in the year
the indebtedness is paid. Requisites for deductibility
a. Paid or incurred within the taxable year;
Interest periodically amortized b. Paid or incurred in connection with the
If the indebtedness is payable in periodic taxpayer‘s trade, profession or business;
amortizations, the amount of interest which c. Imposed directly on the taxpayer;
corresponds to the amount of the principal d. Not specifically excluded by law from
amortized or paid during the year shall be being deducted from the taxpayer‘s gross
allowed as deduction in such taxable year. income.
Interest expense incurred to acquire The following taxes are deductible:

property for use in a. Import duties;
trade/business/profession b. Business tax;
At the option of the taxpayer, interest expense c. Professional/occupation tax;
on a capital expenditure may be allowed as d. Privilege and excise tax;
a. A deduction in full in the year when e. DST;
incurred; f. Motor vehicle registration fees;
b. A capital expenditure for which the g. Real property tax;
taxpayer may claim only as a deduction h. Electric energy consumption tax; and
the periodic amortization of such i. Interest on delinquent taxes.
expenditure.
Non-deductible taxes
Should the taxpayer elect to deduct the interest a. Philippine income tax, except Fringe
payments against its gross income, the Benefit Taxes;
taxpayer cannot at the same time capitalize the b. Income tax imposed by authority of any
interest payments. In other words, the taxpayer foreign country, if taxpayer avails of the
is not entitled to both the deduction from gross Foreign Tax Credit (FTC)
income and the adjusted (increased) basis for
determining gain or loss and the allowable However, when the taxpayer does NOT signify
depreciation charge. [Paper Industries Corp. v. his desire to avail of the tax credit for taxes of
Commissioner, G.R. Nos. 106949-50 (1995)] foreign countries, the amount may be allowed
as a deduction from gross income of citizens
Reduction of interest expense/interest and domestic corporations subject to the
arbitrage limitations set forth by law.
The taxpayer's allowable deduction for interest
expense shall be reduced by an amount equal Treatments of surcharges/interests/fines
to the percentages of the interest income for delinquency
subjected to final tax, twenty percent (20%) of The amount of deductible taxes is limited to the
interest income subjected to final tax effective basic tax and shall not include the amount for
1 July 2020. This is known as the Tax Arbitrage any surcharge or penalty on delinquent taxes.
Rule. However, interest on delinquent taxes,
although not deductible as tax, can be
deducted as interest expense at its full amount.
Page 373 of 494

[CIR v. Palanca, G.R. No. L-16626 (1966)] Foreign Tax Credit Tax Deduction
against Philippine
Treatment of special assessment income tax.
Special assessments and other taxes
assessed against local benefits of a kind The following may claim foreign tax credits:
tending to increase the value of the property a. Resident citizens
assessed are non-deductible from gross b. Domestic corporations, which include all
income. partnerships except general professional
partnerships
Tax credit vis-à-vis deduction c. Members of general professional
partnerships
A tax credit reduces the tax due, including d. Beneficiaries of estates or trusts
whenever applicable, the income tax that is
determined after applying the corresponding The following may NOT claim foreign tax
tax rates to taxable income. credits:
a. Non-resident citizens
A tax deduction, on the other, reduces the b. Aliens, whether resident or non-resident
income that is subject to tax in order to arrive c. Foreign corporations, whether resident on
at taxable income. A tax credit is used only non-resident
after the tax has been computed; a tax Note: Tax credits for foreign taxes are allowed
deduction, before. only for income derived from sources outside
the Philippines. The above taxpayers are not
Since a tax credit is used to reduce directly the entitled to tax credit; they are taxable only on
tax that is due, there ought to be a tax liability income derived from Philippine sources.
before the tax credit can be applied.
Otherwise, the application is useless If a net loss is reported by, and no other taxes
[CHAVEZ, 2020]. are currently due from a business
establishment, there will obviously be no tax
Foreign Tax credit – amount allowed by law liability against which any tax credit can be
to reduce the Philippine income tax due, applied. [CIR v Central Luzon Drug Corp., GR.
subject to limitations, on account of taxes paid No. 159647, 15 April 2005]
or accrued to a foreign country
Limitations on Tax Credit.
Foreign tax credits are confined to resident and
domestic corporations. Meanwhile, the Per Country Limit
withholding creditable tax at source under The amount of tax credit shall not exceed the
Section 57(B) may be availed of by resident same proportion of the tax against which such
taxpayers. credit is taken, which the taxpayer's taxable
income from sources within such country bears
Foreign Tax Credit Tax Deduction to his entire taxable income for the same
Taxes are Taxes are deductible taxable year; and
deductible from the from gross income in
Phil. Income tax computing the Worldwide Limit
itself taxable income The total amount of the credit shall not exceed
Effect: Reduces the same proportion of the tax against which
Effect: Reduces
taxable income upon such credit is taken, which the taxpayer's
Philippine income
which the tax liability taxable income from sources without the
tax liability
is calculated Philippines taxable bears to his entire taxable
Sources: Only income for the same taxable year.
Sources: Deductible
foreign income
taxes (e.g. business
taxes may be
tax, excise tax)
claimed as credits
Page 374 of 494

Formula: transaction;
Limit #1 Per Country Limit f. Not compensated for by insurance or other
Taxable form of indemnity;
Income Per g. Not claimed as a deduction for estate tax
Foreign purposes;
Country Phil. Limit on h. In case of casualty loss, filing of notice of
x Income = amount of loss with the BIR within 45 days from the
Worldwide Tax tax credit date of the event that gave rise to the
Taxable casualty; and
Income i. The taxpayer must prove the elements of
the loss claimed, such as the actual nature
and occurrence of the event and amount
Limit #2 World Limit of the loss.
Limit #2 World Limit
Taxable In case a non-depreciable vehicle is sold at a
Income Per loss, the loss incurred from the sale of non-
Foreign Limit on
depreciable vehicle is not allowed as a
Country Phil. deduction. [RR No. 2-2013]
amount
x Income =
of tax
Worldwide Tax No loss is recognized in the following:
credit
Taxable a. Merger, consolidation, or control securities
Income (where no gains are recognized either);
b. Exchanges not solely in kind;
c. Related taxpayers (see above – (c)
Note: Computation of FTC: Limit #2 applies Interest expense incurred to acquire
where taxes are paid to two or more foreign property for use in
countries. Allowable tax credit is the lower trade/business/profession)
between the tax credit computed under Limit d. Wash sales;
#1 and that computed under Limit#2. e. Illegal transactions
FTC Limitations – the lowest FTC among OTHER TYPES OF LOSSES

the three shall be applied: a. Capital losses
1. Actual FTC b. Incurred in the sale or exchange of capital
2. For taxes paid to one foreign country assets (allowable only to the extent of
3. For taxes paid to 2 or more foreign capital gains, except for banks and trust
countries companies under conditions in Sec. 39 of
NIRC where loss from such sale is not
Losses subject to the foregoing limitation)
c. Resulting from securities becoming
Requisites for deductibility worthless and which are capital assets
a. Loss must be that of the taxpayer (e.g., (considered loss from sale or exchange)
losses of the parent corp. cannot be on last day of the taxable year
deducted by its subsidiary); d. Losses from short sales of property;
b. Actually sustained and charged off within e. Losses due to failure to exercise privileges
the taxable year; or options to buy or sell property.
c. Incurred in trade, business or profession;
d. Of property connected with the trade, Securities becoming worthless
business, or profession, if the loss arises Loss in shrinkage in value of stock through
from fires, storms, shipwreck or other fluctuation in the market is not deductible from
casualties, or from robbery, theft, or gross income. (To be deductible, the loss must
embezzlement; be actually suffered when the stock is disposed
e. Sustained in a closed and completed of.)
Page 375 of 494

Exception: If the stock of the corporation of incentives provided for under EO No. 226
becomes worthless, the cost or other basis (Omnibus Investments Code) incurred in any of
may be deducted by its owner in the taxable the first ten (10) years of operation may be
year in which the stock became worthless, carried over as a deduction from taxable
provided a satisfactory showing of its income for the next five (5) years immediately
worthlessness be made, as in the case of bad following the year of such loss.
debts.
Requisites for NOLCO
Losses on wash sales of stocks or securities a) The taxpayer was not exempt from income
tax the year the loss was incurred;
Wash Sale - a sale or other disposition of stock b) There has been no substantial change in
or securities where substantially identical the ownership of the business or enterprise
securities (substantially the same as those wherein:
disposed of) are acquired or purchased (or a. AT LEAST 75% of nominal value of
there was an option to acquire, and the outstanding issued shares is held
acquisition or option should be by purchase or by or on behalf of the same
exchange upon which gain or loss is persons; or
recognized under the income tax law) within a b. AT LEAST 75% of the paid up
61-day period, beginning 30 days before the capital of the corporation is held by
sale and ending 30 days after the sale or on behalf of the same persons.
General rule: Not deductible from gross Taxpayers Entitled to NOLCO

income Individuals engaged in trade or business or in
the exercise of his profession (including
Exception: If by a dealer in securities in the estates and trusts);
course of ordinary business, it is deductible.
Note: An individual who avails of 40% OSD
Wagering losses shall not simultaneously claim deduction of
Losses from wagering (gambling) are NOLCO. However, the three-year
deductible only to the extent of gains from such reglementary period shall continue to run
transactions. A wager is made when the during such period notwithstanding the fact that
outcome depends upon CHANCE. the aforesaid taxpayer availed of OSD during
the said period.
Net Operating Loss Carry Over (NOLCO)
Net operating loss (NOL) is the excess of Domestic and resident foreign corporations
allowable deductions over gross income for subject to the normal income tax or preferential
any taxable year immediately preceding the tax rates under the Code (e.g., private
current taxable year. educational institutions, hospitals, and regional
operating headquarters) or under special laws
NOLCO: The NOL of the business or (e.g., PEZA-registered companies)
enterprise which had not been previously offset
as deduction from gross income shall be Note: Domestic and resident foreign
carried over as a deduction from gross income corporations taxed during the taxable year with
for the next three (3) consecutive taxable years Minimum Corporate Income Tax cannot enjoy
immediately following the year of such loss, the benefit of NOLCO. However, the three-year
provided however, that any net loss incurred in period for the expiry of the NOLCO is not
a taxable year during which the taxpayer was interrupted by the fact that the corporation is
exempt from income tax shall not be allowed subject to MCIT during such three-year period.
as a deduction. [Sec. 34(3)(D), NIRC]
Exception: Mines other than oil and gas wells,

where a net operating loss without the benefit
Page 376 of 494

NOLCO Incurred During COVID-19 likelihood of recovery at any time in the future.
Under RMC 138-2020, issued on 22 December Requisites for deductibility

2020, RR 25-2020 issued on 30 September a. Valid and legally demandable debt due to
2020 implementing Sec. 4 (bbbb) of RA No. the taxpayer
11494 or the Bayanihan Act to Recover as One b. Debt is connected with the taxpayer's
Act relative to the NOLCO, incurred by trade, business or practice of profession;
businesses for taxable years 2020 and 2021, c. Debt was not sustained in a transaction
provided that unless otherwise disqualified entered into between related parties;
from claiming the deduction, the business or d. Actually ascertained to be worthless and
enterprise which incurred net operating loss for uncollectible as of the end of the taxable
the two years shall be allowed to carry over the year (taxpayer had determined with
same as deduction from its gross income for reasonably degree of certainty that the
the next five (5) consecutive taxable years claim could not be collected despite the
immediately following the year of such loss. fact that the creditor took reasonable steps
to collect); and
The regulation also provides that net operating e. Actually charged off the books of accounts
loss for said taxable years may be carried over of the taxpayer as of the end of the taxable
as a deduction even after the expiration of RA year
11494, provided the same are claimed within
the next five (5) consecutive taxable years General rule: Taxpayer must ascertain and
immediately following the year of such loss. demonstrate with reasonable certainty the
uncollectibility of debt
Losses sustained by NRA and Foreign
Corporation Exceptions:
a. Banks as creditors – BSP Monetary Board
In the case of a non-resident alien individual or shall ascertain the worthlessness and
foreign corporation, the losses deductible shall uncollectibility of the debt and shall
be those: approve the writing off
• Actually sustained during the year b. Receivables from an insurance or surety
incurred in business, trade, exercise of company (as debtor) may be written off as
profession conducted within the bad debts only when such company is
Philippines declared closed due to insolvency or
• Such losses are not compensated for similar reason
by insurance or other forms of
indemnity The taxpayer must show that the debt is indeed
• Submit a declaration of loss sustained uncollectible even in the future. He must prove
from casualty or from robbery, theft or that he exerted diligent efforts to collect:
embezzlement furing the taxable year a. Sending of statement of accounts
not be less than 30 days nor more than b. Collection letters
90 days from the discovery. c. Giving the account to a lawyer for
collection
Bad debts d. Filing the case in court [Phil. Refining
Debts resulting from the worthlessness or Corp. v. CA, G.R. No. 118794 (1996)]
uncollectibility, in whole or in part, of amounts
due the taxpayer actually ascertained to be Rev. Reg. No. 5-1999
worthless and the corresponding receivable “Actually ascertained to be worthless” –
should have been written off or charged off Determination of worthlessness must depend
within the taxable year. upon the particular facts and circumstances of
the case. A taxpayer may not postpone a bad
A debt is worthless when after taking debt deduction on the basis of a mere hope of
reasonable steps to collect it, there is no ultimate collection or because of a continuance
Page 377 of 494

of attempts to collect, where there is no helicopters, airplanes and/or aircrafts, and land
showing that the surrounding circumstances vehicles which exceed the threshold amount of
differ from those relating to other notes which P2,400,000, unless the taxpayer’s main line of
were charged off in a prior year. business is transport operations or lease of
transportation equipment and the vehicles
Accounts receivable may be written off as bad purchased are used in the operations. [RR No.
debts even without conclusive evidence that 12-2012]
they had definitely become worthless when:
a. the amount is insignificant; and Methods of computing depreciation
b. collection through court action may be allowance
more costly to the taxpayer. (cost- salvage
Straight-line value) ÷
“Actually charged off from the taxpayer’s book estimated life
of accounts” – Receivable which has actually Cost x Rate of
become worthless at the end of the taxable Depreciation*
year has been cancelled and written off. Mere
recording in the books of account of estimated *rate = (1÷
uncollectible accounts does not constitute a estimated life) x
write-off. multiplier
applicable
EFFECT OF RECOVERY OF BAD DEBTS ex. Double
Declining balance
declining balance
Tax Benefit Rule on Bad Debts multiplier is 200%
Bad debts claimed as deduction in the
preceding year(s) but subsequently recovered Note: depreciation
shall be included as part of the taxpayer‘s gross allowance should
income in the year of such recovery the extent not cause the asset
of the income tax benefit of said deduction. to be valued below
Also called the equitable doctrine of tax benefit. its salvage value
(remaining life ÷
Depreciation Sum-of-the-year- SYD) x (cost-
An annual reasonable allowance to reduce the digit (SYD) salvage value)
wasteful value of the tangible fixed assets
resulting from wear and tear and normal
obsolescence Charitable and other contributions
For intangible assets, the annual allowance to Requisites for deductibility

reduce their useful value is called amortization. a) Actually PAID or made to the ENTITIES or
institutions specified by law;
Requisites for Deductibility b) Made within the TAXABLE year.
a. It must be reasonable. c) It must be EVIDENCED by adequate
b. It must be charged off during the year. receipts or records.
c. The asset must be used in profession, d) For Contributions Other than Money: The
trade or business. amount shall be BASED on the acquisition
d. The asset must have a limited useful life. cost of the property (i.e., not the fair market
value at the time of the contribution).
The depreciable asset must be located in the e) For Contributions subject to the statutory
Philippines if the taxpayer is a nonresident limitation: It must NOT EXCEED 10%
alien or a foreign corporation. [VALENCIA and (individual) or 5% (corporation) of the
ROXAS] taxpayer‘s taxable income before
charitable contributions
No depreciation shall be allowed for yachts,
Page 378 of 494

Amount that May Be Deducted must not exceed 30% of total expenses for the
taxable year
Kinds of Contributions:
a. Contributions deductible in full; Contributions subject to the Statutory
b. Contributions subject to the statutory limit. Limit:
These contributions are not deductible in full as
Contributions Deductible in Full: specified by the law or such deduction has not
1. Donations to the Government of the met the requirements to be deducted in full.
Philippines, or to any of its agencies, or
political subdivisions, including fully Those made to:
owned government corporations a. Government or any of its agencies or
2. Exclusively to finance, provide for, or to be political subdivisions exclusively for public
used in undertaking priority activities in purposes (contributions for non-priority
3. Education activities)
4. Health b. Accredited domestic corporation or
5. Youth and sports development associations organized exclusively for
6. Human settlements c. Religious
7. Science and culture, and d. Charitable
8. Economic development e. Scientific
9. in accordance with a National Priority Plan f. youth and sports development
determined by NEDA (otherwise, subject g. cultural
to statutory limit) h. educational purposes or
10. Donations to Certain Foreign Institutions i. rehabilitation of veterans
or International Organizations which are j. Social welfare institutions
fully deductible in compliance with k. Non-government organizations: No part of
agreements, treaties or commitments the net income of which inures to the
entered into by the Government of the benefit of any private stockholder or
Philippines and the foreign institutions or individual
international organizations or in
pursuance of special laws Statutory Limit:
11. Donations to Accredited Non-government a. 10% in the case of an individual (individual
Organizations subject to conditions set donor), and
forth in RR No. 13-98 – NGO means a b. 5% in the case of a corporation (corporate
non-stock non-profit domestic corporation donor), of the taxpayer's/donor’s income
or organization: derived from trade, business or profession
a. Organized and operated exclusively computed before the deduction for
for: contributions and donations
i. scientific,
ii. research, The amount deductible is the actual
iii. educational, contribution or the statutory limit computed,
iv. character-building and youth and whichever is lower.
sports development,
v. health, Contributions to pension trusts
vi. social welfare, Based on the Code, An employer establishing
vii. cultural or or maintaining a pension trust to provide for the
viii. charitable purposes, or payment of reasonable pensions to his
ix. a combination thereof, employees shall be allowed as a deduction (in
addition to the contributions to such trust during
No part of the net income of which inures to the the taxable year to cover the pension liability
benefit of any private individual accruing during the year, allowed as a
deduction under Subsection (A) (1) of this
Administrative expense, on an annual basis, Section ) a reasonable amount transferred or
Page 379 of 494

paid into such trust during the taxable year in over a period of no less than 60 months (RA
excess of such contributions, but only if such 8424, Section 34, I)
amount (1)has not theretofore been allowed as
a deduction, and (2) is apportioned in equal Requisites:
parts over a period of ten (10) consecutive a. The expenditure is paid or incurred by
years beginning with the year in which the the taxpayer in connection with the
transfer or payment is made taxpayer’s trade, business, or
profession;
Contribution to a pension trust may be claimed b. The expenditure is not treated as a
as deduction as follows: current expense; and
a. Amount contributed for the present/normal c. The expenditure is chargeable to a
service cost – 100% deductible capital account but not chargeable to
i. Deductible under “ordinary and property that is subject to depreciation
necessary” expenses or depletion
b. Amount contributed for the past service
cost – 1/10 of the amount contributed is Optional Standard Deduction
deductible in year the contribution is
made, the remaining balance will be Individuals, except non-resident aliens
amortized equally over nine consecutive May be taken by an individual in lieu of itemized
years deductions except those earning purely
compensation income.
General Rule: An employer establishing or
maintaining a pension trust to provide for the If an individual opted to use OSD, he is no
payment of reasonable pensions to his longer allowed to deduct cost of sales or cost
employees shall be allowed as a deduction, a of services.
reasonable amount transferred or paid into
such trust in excess of the contributions to such Amount: 40% of gross sales or gross receipts
trust made during the taxable year. (under RA 9504, effective July 6, 2008)
Requisites:
Requisites for deductibility of payments to a. Taxpayer is a citizen or resident alien;
pension trusts b. Taxpayer’s income is not entirely from
a. There must be a pension or retirement compensation;
plan established to provide for the c. Taxpayer signifies in his return his
payment of reasonable pensions to intention to elect this deduction; otherwise
employees; he is considered as having availed of the
b. The pension plan is reasonable and itemized deductions;
actuarially sound; d. Election is irrevocable for the year in which
c. It must be funded by the employer; made; however, he can change to
d. The amount contributed must no longer be itemized deductions in succeeding years.
subject to the employer’s control or
disposition; and Corporations, except non-resident foreign
e. The payment has not theretofore been corporations
allowed before as a deduction. The option to elect Optional Standard
Deduction granted is now granted to
Research and Development Expenses corporations by virtue of RA 9504. The OSD is
40% of its gross income.
The Philippines grants a tax deduction for
qualifying R&D expenditure. Such expenditure Corporations availing of OSD are still required
may be treated as ordinary and necessary to submit their financial statements when they
expenses that are fully deductible from gross file their annual ITR and to keep such records
income in the year paid or incurred, or deferred pertaining to its gross income. [RR 2-2010].
and allowed as a deduction ratably distributed
Page 380 of 494

Partnerships covering the life of any officer, employee,
For purposes of taxation, the Code considers or any person financially interested in the
general co-partnerships as corporations. trade or business carried on by the
Hence, rules on OSD for corporations are taxpayer, individual or corporate, when the
applicable to general co-partnerships. taxpayer is directly or indirectly a
beneficiary under such policy
General professional partnerships e. Interest expense and bad debts between
For purposes of computing the distributive related parties [Sec. 36(B), NIRC)]
shares of the partners, the net income of the f. Losses from sales or exchanges of
GPP shall be computed in the same manner as property between related taxpayers.
a corporation. [Sec. 26, NIRC] g. Non-deductible interest – should the
taxpayer elect to deduct interest payments
As such, a GPP may likewise claim either against its gross income, he cannot at the
itemized deductions or it can opt to avail of the same time capitalize such interest and
OSD allowed to corporations in claiming the claim depreciation on the undepreciated
deductions in an amount not exceeding 40% of cost which includes the interest. [PICOP v.
its gross income. Commissioner, G.R. No. 106949-50
(1995)]
The net income determined by either claiming h. Non–deductible taxes
the itemized deduction or OSD from the GPP’s i. Non-deductible losses
gross income is the distributable net income j. Losses on Wash Sales (except if by dealer
from which the share of each partner is to be in securities in ordinary course of exempt
determined. Each partner shall report as gross corporations) These are:
income his distributive share, actually or k. Proprietary Educational Institutions and
constructively received, in the net income of hospitals
the partnership. [RR No. 2-2010] l. Government owned and controlled
corporations
c. Items Not Deductible m. Others
General rule: In determining deductions, one Relevant points regarding related taxpayers
of the general rules is that deductions must be a. Payment of interest is not deductible.
paid or incurred in connection with the b. Bad debts are not deductible.
taxpayer’s trade, business or profession. c. Losses from sales or exchanges of
Capital expenditures (e.g. acquisition cost of a property are not deductible.
building) are also not deductible, because
these are not expenses, but form part of Related Parties [Sec. 34(B), NIRC]
assets. a. Between members of a family (which shall
include only his brothers and sisters,
Exceptions: In computing taxable net income, spouse, ancestors and lineal
no deduction shall be allowed with respect to: descendants)
a. Personal, living or family expenses b. Between an individual and a corporation
b. Any amount paid out for new buildings or more than 50% in value of the outstanding
for permanent improvements (capital stock of which is owned, directly or
expenditures), or betterments made to indirectly, by or for such individual –
increase the value of any property or except in the case of distributions in
estate liquidation
c. Any amount expended in restoring c. Between two corporations more than 50%
property (major repairs) or in making good in value of the outstanding stock of each
the exhaustion thereof for which an of which is owned, directly or indirectly by
allowance [for depreciation or depletion] is or for the same individual
or has been made d. Between the grantor and the fiduciary of a
d. Premiums paid on any life insurance policy trust
Page 381 of 494

e. Between the fiduciary of a trust and the performed by an employee for his
fiduciary of another trust if the same employer, including the cash value of all
person is a grantor with respect to each non-cash remuneration. [Sec. 78(A), NIRC]
trust
f. Between the fiduciary of a trust and a Separation pay/retirement benefit not
beneficiary of such trust [Section 36(B), exempt
NIRC]
Retirement pay – a lump sum payment
8. Income Tax on Individuals received by an employee who has served
a company for a considerable period of
Summary Table for Taxation of Individuals time and has decided to withdraw from
(all individual taxpayers, including non- work into privacy. [Sec. 2(b), RR No. 6-82]
resident aliens)
Tax General rule: Retirement pay is taxable
Classification Taxable Income
Rates
Income from Exceptions:
Resident sources within and i. SSS or GSIS retirement pays [Sec.
0%-35%
Citizen outside the
32(B)(6), NIRC]
Philippines
Income from ii. Retirement benefit under R.A.
Non-Resident 7641 provided the following
sources within the 0%-35%
Citizen
Philippines requirements are met:
Income from a. Retirement program is
Resident Alien sources within the 0%-35% approved by the
Philippines Commissioner;
Non-resident b. Retirement benefit is pursuant
Income from
Alien Engaged
in Trade or
sources within the 0%-35% to a reasonable private benefit
Philippines plan
Business
Non-resident c. Retiree employed for 10 years
Alien Not Income from by the employer;
Engaged in sources within the 25% d. Retiree should have been 50
Trade or Philippines years old or above at the time
Business
of retirement; and
e. Retirement benefit availed only
a. Resident Citizens, Non-Resident once [Sec. 32 (B)(6)(a), NIRC].
Citizens and Resident Aliens [Sec.
24(A)(1)] Separation pay
General Rule: Separation pay taxable
1. Inclusions and Exclusions for if voluntarily availed of.
Taxation on Compensation Income
Exception: if due to causes such as
a. Inclusions death, sickness, disability,
reorganization or bankruptcy of the
1. Monetary compensation – If company or for any other cause
compensation is paid in cash, the full beyond the control of the said
amount received is the measure of the employee.
income subject to tax.
3. Bonuses, 13th month pay, and other
2. Regular salary/wage benefits not exempt
Salary – earnings received periodically for
a regular work other than manual labor, Tips and Gratuities – those paid directly
such as monthly salary of an employee. to the employee (usually by employer’s
Wages – all remuneration for services customer) which are not accounted for by
Page 382 of 494

the employee to the employer. (taxable [DOMONDON]
income but not subject to withholding tax)
[Sec. 2.78.1, RR No. 2-98] Convenience of the employer Rule
If meals, living quarters, and other facilities
13th month pay – taxable only for the part and privileges are furnished to an
which exceeds P90,000 [Sec. 32(7)(e), employee for the convenience of the
NIRC] employer, and incidental to the
requirement of the employee’s work or
Overtime Pay – premium payment position, the value of that privilege need not
received for working beyond regular hours be included as compensation [Henderson
of work which is included in the v. Collector (1961)]
computation of gross salary of employee.
2. De minimis benefits
4. Directors’ fees, allowances and Facilities or privileges of relatively small
bonuses value furnished by an employer to his
employees and are as a means of
General Rule: taxable as compensation promoting the health, goodwill,
income when the recipient director has an contentment, or efficiency of his employees
employee-employer relationship with the [RR No. 11-18].
corporation which pays the same
These are exempt from both fringe benefit
Exception: not taxable as compensation tax and compensation income tax [Sec. 33
income when recipient director’s duties is (C)(4), NIRC].
confined to attendance and participation
only in the meetings of the Board of (See Gross Income, supra for the
Directors, but taxable as income arising discussion of de minimis benefits)
from exercise of profession [R.M.C 34-08].
3. 13th month pay and other benefits and
5. Non-monetary compensation – measure payments specifically excluded from
of income subject to tax is the equivalent taxable compensation income
value in money. Gross benefits received by employees up
to P90,000 (amounts in excess are
b. Exclusions considered compensation income)
1. Fringe benefit subject to tax Benefits include:

(See Gross Income, supra for the a) Benefits received by government
discussion of Taxable and Non-taxable employees under RA 6686;
fringe benefits) b) Benefits received by employees
pursuant to PD 851 (13th Month Pay
If the recipient of the fringe benefits is a Decree);
rank and file employee, and the said fringe c) Benefits received by employees not
benefit is not tax-exempt, then the value of covered by PD 851 as amended by
such fringe benefit shall be considered as Memorandum Order No. 28; and,
part of taxable compensation income. d) Other benefits such as productivity
[DOMONDON] incentives and Christmas bonus.
Where the recipient of the fringe benefit is 2. Taxation of Business Income/Income

not a rank and file employee, and the said from Practice of Profession
benefit is not tax-exempt, then the value of
such fringe benefit shall not be included in All income obtained from doing business or
the taxable compensation income. It is exercising of profession shall be included in the
instead levied upon the employer. computation of gross income.
Page 383 of 494

Individuals earning purely business or Interest income
professional income • on any currency bank deposit, yield or any
Individuals earning income purely from self- other monetary benefit from deposit
employment and/or practice of profession, substitutes, trust funds and similar
whose gross sales/receipts and other non- arrangements - 20% final tax
operating income does not exceed the VAT • under the expanded foreign currency
threshold as provided under Sec. 109 (BB) of deposit system (EFCDS) - 15% final tax
the Tax Code, as amended, shall have the for residents, exempt if non-residents
option to avail of:
a. The graduated rates under Sec. 24 Treatment of income from long-term
(A)(2)(a) of the Tax Code, as amended; deposits
OR On long-term deposit or investment certificates
b. An eight percent (8%) tax on gross sales (LTDIC) in banks (e.g., savings, common or
or receipts and other non-operating individual trust funds, deposit substitutes,
income in excess of two hundred fifty investment management accounts and other
thousand pesos (P250,000.00) in lieu of investments, which have maturity of 5 years or
the graduated income tax rates under Sec. more) – exempt
24 (A) and the percentage tax under Sec.
116 of the NIRC if income does not exceed Should LTDIC holder pre-terminate LTDIC
the VAT threshold. before the 5th year, a final tax shall be imposed
on the entire income based on the remaining
Individuals earning mixed income maturity:
For mixed income earners, the income tax
rates applicable are: 4 years to less than 5 5%
a. The compensation income shall be subject years
to the tax rates prescribed under Section 3 years to less than 4 12%
24 (A)(2)(a); AND years
b. The income from business or practice of less than 3 years 20%
profession shall be subject to the following:
c. If the gross sales/receipts and other non- Any income of nonresidents, whether
operating income do not exceed the VAT individuals or corporations, from transactions
threshold, the individual has the option to with depository banks under the expanded
be taxed at: system shall be exempt from income tax.
d. The aforementioned graduated taxable
income rates; OR For interest from foreign currency loans
e. The aforementioned optional 8% gross granted by FCDUs to residents other than
income tax. Offshore Banking Units (OBUs) or other
If the gross sales/receipts and other non- depository banks under the expanded system
operating income exceeds the VAT threshold, – tax rate is 10% if payors are RESIDENTS,
the individual shall be subject to the graduated whether individuals or corporations.
income tax rates.
Royalties
3. Taxation of Passive Income (See summary table, infra)
Passive Income Subject to Final Tax Dividends from domestic corporation

“Final tax” means tax withheld from source, a. cash and/or property dividends actually or
and the amount received by the income earner constructively received by an individual
is net of the tax already. The income having from
been tax-paid already, it need not be included b. a domestic corporation
in the gross income in the yearly submission of c. a joint stock company
ITR. d. insurance or mutual fund companies
e. regional operating headquarters of
Page 384 of 494

multinational companies 4. Taxation of Capital Gains
f. share of an individual in the distributable
net income after tax of a partnership Income from sale of shares of stock of a
(except a general professional Philippine corporation
partnership) of which he is a partner
g. share of an individual member or co- Shares traded and listed in the stock exchange
venturer in the net income after tax of an – CGT-exempt, but subject to business tax
association, a joint account, or a joint
venture or consortium taxable as a The transaction is exempt from income tax
corporation regardless of the nature of business of the
seller or transferor. However, it is subject to a
Rate: business tax of six-tenths of one percent
a. 10% for residents (RC, RA) and non- (0.6%) of the gross selling price [Sec. 127 (A),
resident citizens (NRC); NIRC].
b. 20% for non-resident aliens engaged in
trade or business (NRAETB) Shares not listed and traded in the stock
exchange – subject to final tax
However, if a corporation cancels or redeems
stock issued as a dividend at such time and in On sale, barter, exchange or other disposition
such manner as to make the distribution and of shares of stock of a domestic corporation not
cancellation or redemption, in whole or in part, listed and traded through a local stock
essentially equivalent to the distribution of a exchange, held as a capital asset
taxable dividend, the amount so distributed in
redemption or cancellation of the stock shall be On the net capital gain: Final Tax of 15%
considered as taxable income to the extent that
it represents a distribution of earnings or Net capital gain: selling price less cost
profits. [Sec. 73 (B), NIRC] Selling price: consideration on the sale OR fair
market value of the shares of stock at the time
In other words, stock dividends are generally of the sale, whichever is higher
not subject to tax as long as there are no Cost: original purchase price
options in lieu of the shares of stock.
Income from the sale of real property situated
On the other hand, a stock dividend constitutes in the Philippines
income if it gives the shareholder an interest
different from that which his former Note: The FMV is taken into consideration in
stockholdings represented. determining if there is donor's tax due. If FMV
is higher than selling price, the excess is
Prizes and other winnings considered a donation. However, with the
Prizes and other winnings - 20%, except advent of Republic Act (RA) No. 10963, or the
a. Prizes amounting to P10,000 or less, which Tax Reform for Acceleration and Inclusion
shall be subjected to the graduated rates (TRAIN) Law, Section 100 of the National
under Subsection A of Section 24; and Internal Revenue Code (NIRC) was amended.
b. Philippine Charity sweepstakes / lotto Section 100 imposes donor’s tax on the
winnings which does not exceed P10,000 - transfer of property for less than adequate or
exempt ; full consideration in money or money’s worth.
c. Prizes excluded from gross income. The amendment leads to an exception to this.
In this case, a transaction that is bona fide, at
Prize, differentiated from winnings: arm’s length, and free from any donative intent
A prize is the result of an effort made (e.g., shall be deemed made for an adequate and full
prize in a beauty contest), while winnings are consideration, even if the selling price is lower
the result of a transaction where the outcome than the FMV.
depends upon chance (e.g., betting).
Page 385 of 494

What property covered sale]
Property located in the PH classified as capital
assets The historical cost or adjusted basis of the real
property sold or disposed shall be carried over
What transactions covered to the new principal residence built or acquired.
Sales, exchanges, or other disposition of real
property (classified as capital assets), including Computation for the basis of new principal
pacto de retro sales and other forms of residence:
conditional sales of the following: citizens,
resident aliens, NRAETB, NRANETB, Historical cost of old principal
domestic corporations. residence XXX
Add: Additional cost to acquire
Tax rate new principal residence* XXX
General rule: 6% of —whichever is higher of: Adjusted cost basis of the new
GSP, or FMV in accordance with Sec. 6 (E). principal residence XXX
Exception: *Additional cost to acquire new

a. In case of sales made to the government, principal residence:
any of its political subdivisions or Cost to acquire new principal
agencies, or to GOCCs, it can be taxed residence XXX
either: Less: Gross selling price of old
b. Under Sec. 24 (D)(1) – 6% CGT, or principal residence (XXX)
c. Under Sec. 24 (A), at the option of the Additional cost to acquire new
taxpayer. principal residence XXX
d. In case of the sale of or disposition of their
principal residence by natural persons a. Income from the sale, exchange, or other
disposition of other capital assets
Requirements:
a. Sale or disposition by a natural person of Other personal properties shall be subject
his principal residence, to income tax
b. The proceeds of which is fully utilized in a. At the graduated income tax rates, if the
acquiring/constructing a new principal seller is an individual
residence, b. Long-term capital gains: only 50% is
c. Such acquisition/construction taking place recognized.
within 18 calendar months from the date of c. Short-term capital asset transactions:
sale or disposition, 100% subject to tax [Sec. 39(B), NIRC].
d. The taxpayer notifies the Commissioner
within 30 days from the sale/disposition Note: if real property is an ordinary asset then
through a prescribed return of his intention gain is computed and graduated rates apply.
to avail of the exemption,
e. The tax exemption can only be availed of Determination of whether short- or long-
once every 10 years. term: Short-term if held for 12 months or less;
otherwise, it is a long-term capital gain.
Tax treatment of sale of principal residence:
Exempt from capital gains tax (CGT). If there is At 30% corporate income tax, if the seller is a
no full utilization of the proceeds of sale or corporation.
disposition, the portion of the gain presumed to
have been realized from the sale or disposition Rule: Capital gain/loss is recognized in full.
shall be subject to CGT. Capital assets shall refer to all real properties
held by a taxpayer, whether or not connected
How taxable portion and tax determined: with his trade or business, and which are not
[HIGHER of Gross selling price or FMV @ included among the real properties considered
Page 386 of 494

as ordinary assets under Section 39(A)(1). d. An insurance or mutual fund company;
e. A regional operating headquarters of
5. Capital Asset vs. Ordinary Asset multinational company;
f. The share of a nonresident alien individual
Capital Asset in the distributable net income after tax of
The term ‘capital assets’ means property held a partnership (except a general
by the taxpayer (whether or not connected with professional partnership) of which he is a
his trade or business), but does not include partner;
stock in trade of the taxpayer or other property g. The share of a nonresident alien individual
of a kind which would properly be included in in the net income after tax of an
the inventory of the taxpayer if on hand at the association, a joint account, or a joint
close of the taxable year or property held by the venture taxable as a corporation of which
taxpayer primarily for sale to customers in the he is a member or a co-venturer;
ordinary course of his trade or business, or h. Interests
property used in the trade or business, of a i. Royalties (in any form); and
character which is subject to the allowance for j. Prizes (except prizes amounting to Ten
depreciation provided in Subsection (F) of thousand pesos (P10,000) or less which
Section 34; or real property used in trade or shall be subject to graduated tax) and
business of the taxpayer. (Sec. 39(A), NIRC) other winnings (except PCSO/lotto
winnings which shall not exceed P10,000)
Ordinary assets
It shall refer to all real properties specifically Except:
excluded from the definition of capital assets The following Royalties shall be subject to
under Section 39(A)(1), NIRC, namely: a final tax of ten percent (10%) on the total
a. Stock in trade of a taxpayer or other real amount thereof:
property of a kind which would properly be a. On books as well as other literary works;
included in the inventory of the taxpayer if and
on hand at the close of the taxable year; or b. On musical compositions
b. Real property held by the taxpayer c. Cinematographic films and similar works
primarily for sale to customers in the shall be subject to twenty-five percent
ordinary course of his trade or business; or (25%) of the gross income
c. Real property used in trade or business d. Interest income from long-term deposit or
(i.e., buildings and/or improvements) of a investment in the form of savings,
character which is subject to the allowance common or individual trust funds, deposit
for depreciation provided for under Sec. substitutes, investment management
34(F) of the Code; or accounts and other investments
Real property used in trade or business of the evidenced by certificates in such form
taxpayer prescribed by the Bangko Sentral ng
Pilipinas (BSP) shall be exempt from the
b. Income Tax on Non-Resident Aliens tax
Engaged in Trade or Business
But should the holder of the certificate pre-
General Rule: Subject to income tax in the terminate the deposit or investment before the
same manner as an individual citizen and a fifth (5th) year, a final tax shall be imposed on
resident alien individual on taxable income the entire income and shall be deducted and
from all sources within the Philippines. withheld by the depository bank from the
proceeds of the long-term deposit or
The following shall be subject to an income investment certificate based on the remaining
tax of 20% on the total amount thereof: maturity thereof:
a. Cash and/or property dividends from: a. Four (4) years to less than five (5) years -
b. A domestic corporation; 5%;
c. A joint stock company; b. Three (3) years to less than four (4) years
Page 387 of 494

- 12%; and e. Individual Taxpayers Exempt from
c. Less than three (3) years - 20%. Income Tax
Capital gains All individuals and entities claiming exemption

Capital gains realized from sale, barter or from imposition of taxes on income and,
exchange of shares of stock in domestic consequently, from withholding taxes are
corporations not traded through the local stock required to provide a copy of a valid, current
exchange, and real properties shall be subject and subsisting tax exemption certificate or
to the similar tax prescribed on citizens and ruling, as per existing administrative issuances
resident aliens. and any issuance that may be issued from time
to time, before payment of the related income.
Sale, barter or exchange of Shares of stock in
domestic corporation not traded through the The tax exemption certificate or ruling must
stock exchange – 15% of net capital gains explicitly recognize the grant of tax exemption,
as well as the corresponding exemption from
Sale, barter or exchange of real properties – imposition of withholding tax. Failure on the
6% of gross selling price or current FMV part of the taxpayer to present the said tax
whichever is higher exemption certificate or ruling as herein
required shall subject him to the payment of
c. Income Tax on Non-Resident Aliens appropriate withholding taxes due on the
Not Engaged in Trade or Business transaction. [RMC No. 8-14]
There shall be levied, collected, and paid for Senior Citizens

each taxable year upon the entire income
received from all sources within the PH by Under RA 9994, otherwise known as the
every NRANETB within the PH as interest, “Senior Citizens Act of 2010,” which took effect
cash and/or property dividends, rents, salaries, on February 15, 2010, senior citizens who are
wages, premiums, annuities, compensation, considered to be minimum wage earners in
remuneration, emoluments, or other fixed or accordance with RA 9504 shall also be treated
determinable annual or periodic or casual as exempt from the payment of individual
gains, profits, and income, and capital gains, a income tax.
tax equivalent to 25% of such income.
Minimum Wage Earners
d. Aliens Employed by Regional
Headquarters, Regional Operating Rule: they shall be exempt from payment of
Headquarters, Offshore Banking income tax on their taxable income.
Units, and Petroleum Service
Limit: However, if he receives “other benefits”
Contractors
in excess of the allowable statutory amount of
P90,000, then he shall be taxable on the
The preferential tax treatment of 15% shall no
exceeds benefits as well as his salaries,
longer be applicable to employees of regional
wages, and allowances, just like an employee
headquarters (RHQs), regional operating
receiving compensation income beyond the
headquarters (ROHQs), offshore banking units
statutory minimum wage.
(OBUs) or petroleum service contractors and
subcontractors. They are now subject to
The treatment of bonuses and other benefits
regular income tax rates [Sec. 25 (F)]. [Note
that [a minimum wage earner] receives from
item A of veto message of the President on
the employer in excess of the [₱90,000] ceiling
TRAIN Law]
cannot but be the same as the prevailing
treatment prior to R.A. 9504 - anything in
excess of ₱30,000 is taxable; no more, no less.
The treatment of this excess cannot operate to
Page 388 of 494

disenfranchise the MWE from enjoying the Exemptions Granted Under International
exemption explicitly granted by R.A. 9504. Agreements
[Soriano v. Secretary of Finance, G.R. No.
184450 (2017)] See RMC No, 31-2013, April 12, 2013 –
taxation of compensation income of Philippine
The minimum wage shall be exempt from the nationals and alien individuals employed by
payment of income tax on their taxable income: foreign governments/embassies/diplomatic
Provided, further, That the holiday pay, missions and international organizations
overtime pay, night shift differential pay and situated in the Philippines.
hazard pay received by such minimum wage
earners shall likewise be exempt from income The Government of the Philippines is a
tax. signatory of certain international agreements
and a party to different tax treaties which
Compensation income including overtime pay, specifically provide for the exemption of certain
holiday pay and hazard pay, earned by persons or entities from taxes imposed by the
minimum wage earners who have no other Philippines.
returnable income are NOT taxable and not
subject to withholding tax on wages [RA 9504]. Examples of these tax exemptions are those
accorded to diplomats or ambassadors of other
countries here in the Philippines. The World
Health Organization is also tax exempt upon an
international agreement [CIR v. Gotamco, G.R.
No. L-31092 (1987)
SUMMARY TABLES OF RATES

Citizens,
Interest, Royalties, Prizes and Other Winnings NRAETB NRANETB
Residents
Interest from any currency bank deposit 20% 20% 25%
Yield or any other monetary benefit from deposit substitute 20% 20% 25%
Yield or any other monetary benefit from trust funds and
20% 20% 25%
similar arrangements
Royalties, in general 20% 20% 25%
Royalties on books as well as other literary works and musical
10% 10% 25%
compositions
Prizes exceeding P10,000 20% 20% 25%
Other winnings (except Philippine Charity Sweepstakes and
20% 20% 25%
Lotto winnings not exceeding P10,000)
15%
Interest incomes received from a depositary bank under Note: NRC –
Exempt Exempt
expanded foreign currency deposit system exempt (RR 1-
11)
Interest income from long-term deposit or investment
evidenced by certificates prescribed by BSP. If preterminated
Exempt Exempt 25%
before fifth year, a final tax shall be imposed based on
remaining maturity
4 years to less than 5 years 5% 5% 25%

3 years to less than 4 years 12% 12% 25%
Less than 3 years 20% 20% 25%
Citizens,
Cash and/or Property Dividends NRAETB NRANETB
Residents
Cash and/or property dividends actually or constructively
received from a domestic corp. or from a joint stock corp., 10% 20% 25%
insurance or mutual fund companies and regional operation
Page 389 of 494

headquarters of multinational companies (beginning Jan. 1,
2000)
Share of an individual in the distributable net income after tax
of a PARTNERSHIP (other than a general professional 10% 20% 25%
partnership) (beginning Jan. 1, 2000)
Share of an individual in the net income after tax of an
ASSOCIATION, a JOINT ACCOUNT, or a JOINT VENTURE
10% 20% 25%
or CONSORTIUM taxable as a corporation, of which he is a
member or a co-venturer (beginning Jan. 1, 2000)
Sec. 24 (C). Capital Gains Tax from Sale of Shares

Citizens,
of Stock of a domestic corporation NOT TRADED NRAETB NRANETB
Residents
in the Stock Exchange
Tax base: Net Capital Gain 15% 15% 15%
Sec. 24 (D). Capital Gains Tax from Sale of Real Citizens,

NRAETB NRANETB
Property Classified as Capital Asset Residents
Tax base: Gross selling price or current fair market
value, whichever is higher
Tax Rate 6% 6% 6%
Resident Non-Resident
Citizen Alien Citizen NRAETB NRANETB
Category of income
Within the Within the Within the Within the
All sources
Philippines Philippines Philippines Philippines
Based on Taxable (i.e. Net) Income
Schedular Income Tax Rates (i.e. 0% to 35% (Sec. 24) (See table
below)
Compensation/ Business/
Profession
For those earning purely business or professional income or mixed
income not exceeding the threshold gross sales/receipts for the year
Prizes of P10,000 or less
of P3,000,000, the taxpayer can opt to avail of the 8% tax on gross
sales/receipts in lieu of graduated income tax rates and percentage
tax – for the business/professional income portion – upon the option
of the taxpayer
Interest from any currency bank
deposit, etc.
Gross Income Within the Philippines (GIW) – 20% Final Withholding
Royalties, in general GIW – 25%
Tax
Winnings/ Prizes (except prizes
P10,000 and below)
Royalties from books, literary
GIW – 10% Final Withholding Tax
works, musical compositions
EXEMPT; However:
Interest from long-term deposit or In case of pre-termination, with remaining maturity of:
investment certificates, which have 4 years to less than 5 years -5% on entire income
a maturity of 5 years or more 3 years to less than 4 years – 12% on entire income
less than 3 years – 20% on entire income
Cash/ Property Dividends from a
domestic corporation, etc., OR share
in the distributed net income after tax GIW – 10% Final Withholding Tax GIW – 20%
of a partnership (except a general
professional partnership), etc.
Interest (Expanding Foreign
GIW – 15% Final Withholding Tax Exempt
Currency Deposit System)
Prizes Subject to schedular rates if not exceeding P10,000
Winnings on Philippine
Exempt if P10,000 and below
Sweepstakes/ Lotto
Capital Gains on Sale of Shares
Net capital gains: 15% Final Tax
of Domestic Corp (not traded in a
domestic stock exchange
Page 390 of 494

Capital Gains on Sale of Real
Gross Selling Price or FMV, whichever is higher – 6% Final Withholding Tax
Property in the Philippines
0.6 of 1% of the Selling Price (Stock Transaction Tax)
Sale of Shares of Domestic Corp.
(traded in a domestic stock
Note: Stock Transaction Tax is not an income tax, but a business (percentage)
exchange)
tax
Sale of Real Property located Schedular/Graduated Income Tax Rates (i.e. 0% to 35%) (Sec. 24)
Abroad For those earning purely business or professional income or mixed income, the
Sale of Shares of Foreign Corp. taxpayer can opt to avail of the 8% tax on gross sales/receipts in lieu of
graduated rates – for the business/professional income portion – upon the option
Passive Income from Abroad
of the taxpayer
SCHEDULE OF INCOME TAX RATES FOR INDIVIDUAL CITIZENS, RESIDENTS, AND NRAETB
RANGE OF TAXABLE INCOME TAX DUE (a+b)

Basic Amount (a) Additional Rate (b)
0 to 250,000 - -
Over 250,000 but not more than 400,000 - 20% of excess over 250,000
Over 400,000 but not more than 800,000 30,000 25% of excess over 400,000
Over 800,000 but not over 2,000,000 130,000 30% of excess over 800,000
32% of excess over
Over 2,000,000 but not over 8,000,000 490,000
2,000,000
35% of excess over
Over 8,000,000 2,410,000
8,000,000
Computations [RR 08-2018] Pure Compensation Income
Illustration: Mr. CSO earned, aside from his basic wage, additional pay of P140,000.00 which consists
of the overtime pay — P80,000.00, night shift differential — P30,000.00, hazard pay — P15,000.00,
and holiday pay — P15,000.00. He has P5,000 mandatory contributions (SSS, Pag-Ibig, Phil-health,
etc.) and P11,000 non-taxable benefits.
Total Compensation Income P135,000.00

Add: Overtime, night shift differential, hazard, and holiday pay 140,000.00
–––––––––––
Total Income P275,000.00
Less: Mandatory contributions P5,000.00
Non-taxable benefits 11,000.00 16,000.00
––––––––––– –––––––––––
Net taxable income P259,000.00
Tax due (20% in excess of P250,000) 1,800
Mixed-income (i.e. compensation income and business income/income from the practice of
profession – opted to avail of 8% tax on business/professional income)
Illustration: Mr. MAG, a Financial Comptroller of JAB Company, earned annual compensation in 2018
of P1,500,000.00, inclusive of 13th month and other benefits in the amount of P120,000.00 but net of
mandatory contributions to SSS and Philhealth. Aside from employment income, he owns a
convenience store, with gross sales of P2,400,000. His cost of sales and operating expenses are
P1,000,000.00 and P600,000.00, respectively, and with non-operating income of P100,000.00.
a. His tax due for 2018 shall be computed as follows if he opted to be taxed at eight percent
(8%) income tax rate on his gross sales for his income from business:
Total compensation income P1,500,000.00

Less: Non-taxable 13th month pay and other benefits (max) 90,000.00
Page 391 of 494

––––––––––––
Taxable Compensation Income P1,410,000.00
Tax due:
1. On Compensation:
On P800,000.00 P130,000.00
On excess (P1,410,000 - P800,000) x 30% 183,000.00
––––––––––––
Tax due on Compensation Income P313,000.00
––––––––––––
2. On Business Income:
Gross Sales P2,400,000.00
Add: Non-operating Income 100,000.00
––––––––––––
Taxable Business Income P2,500,000.00
Multiplied by income tax rate 8%
––––––––––––
Tax Due on Business Income P200,000.00
––––––––––––
Total Income Tax Due (Compensation and Business) P513,000.00
* The option of 8% income tax rate is

applicable only to taxpayer's income from
business, and the same is in lieu of
the income tax under the
graduated income tax rates and the
percentage tax under Section 116 of
the Tax Code, as amended.
* The amount of P250,000.00 allowed as
deduction under the law for taxpayers
earning solely from self-
employment/practice of profession, is not
applicable for mixed income earner under
the 8% income tax rate option.
* The P250,000.00 mentioned above is
already incorporated in the first tier of the
graduated income tax rates applicable to
compensation income.
|||
Mixed-income (i.e. compensation income and business income/income from the practice of
profession)
Illustration: Same facts for Mr. MAG. His tax due for 2018 shall be computed as follows if he did not
opt for the eight percent (8%) income tax based on gross sales/receipts and other non-operating
income:
Total compensation income P1,500,000.00

Less: Non-taxable 13th month pay and other benefits-max 90,000.00
––––––––––––
Taxable Compensation Income P1,410,000.00
Add: Taxable Income from Business —
Gross Sales P2,400,000.00
Less: Cost of Sales 1,000,000.00
–––––––––––
Gross Income P1,400,000.00
Less: Operating Expenses 600,000.00
Page 392 of 494

–––––––––––
Net Income from Operation P800,000.00
Add: Non-operating Income 100,000.00 900,000.00
––––––––––– ––––––––––––
Total Taxable Income P2,310,000.00
Tax Due:
On P2,000,000.00 P490,000.00
On excess (P2,310,000 - 2,000,000) x 32% 99,200.00
––––––––––––
Total Income Tax P589,200.00
* The taxable income from both compensation and business shall be combined for purposes of
computing the income tax due if the taxpayer chose to be subject under the
graduated income tax rates.
Pure Business/Professional Income (Opted income tax rates under subsection (A) hereof
to be taxed at 8% of gross sales or receipts) and percentage tax due, by express provision
Illustration: Ms. EBQ operates a convenience of law.
store while she offers bookkeeping services to
her clients. In 2018, her gross sales amounted Pure Business/Professional Income (Opted
to P800,000.00, in addition to her receipts from to be taxed at schedular rates)
bookkeeping services of P300,000.00. She Illustration: Ms. EBQ above, failed to signify
already signified her intention to be taxed at 8% her intention to be taxed at 8% income tax rate
income tax rate in her 1st quarter return. on gross sales in her initial Quarterly Income
Her income tax liability for the year will be Tax Return, and she incurred cost of sales and
computed as follows: operating expenses amounting to P600,000.00
and P200,000.00, respectively, or a total of
Gross Sales — Convenience P800,000.00, the income tax shall be
Store P800,000.00 computed as follows:
Gross Receipts — Bookkeeping 300,000.00
–––––––––––
Gross Sales/Receipts P1,100,000.00
–
Less: Cost of Sales 600,000.00
Total Sales/Receipts P1,100,000.00
–––––––––––
Less: Amount allowed as
–
deduction under Sec. 24 (A) (2)
Gross Income P500,000.00
(b) 250,000.00
Less: Operating Expenses 200,000.00
–––––––––––
–––––––––––
–
–
Taxable Income P850,000.00
Taxable Income P300,000.00
Tax Due:
Tax Due:
8% of P850,000.00 P68,000.00
On excess (P300,000 - P250,000)
x 20% P10,000.00
* The total of gross sales and gross receipts is
below the VAT threshold of P3,000,000.00.
* Taxpayer's source of income is purely from
self-employment, thus she is entitled to the
amount allowed as deduction of P250,000.00
under Sec. 24 (A) (2) (b) of the Tax Code, as
amended.
* Income tax imposed herein is based on the

total of gross sales and gross receipts.
* Income tax payment is in lieu of the graduated
Page 393 of 494

9 . Income Tax on Corporations RA 11534, also known as the Corporate
Recovery and Tax Incentives for Enterprises
a. Income Tax on Domestic (CREATE Act) revised the rate of corporate
Corporations and Resident Foreign income tax. The law took effect on April 11,
Corporations 2021.
The effectivity of the revised RCIT rates under

Domestic Corporations
the CREATE Act shall be as follows:
A corporation created and organized in the
Philippines or under its laws (the law of § Domestic Corporations and Resident
Foreign Corporations – July 1, 2020
incorporation test) [Sec. 22 (C), NIRC].
§ Non-Resident Foreign Corporations –
January 1, 2021
Taxable on all income derived from sources
within and without the Philippines; and
Prior to July 1, 2020, the income tax rate of
Resident Foreign Corporations corporations was at 30% of taxable income.
A corporation organized under the laws of a
foreign country, which is engaged in trade or General rule: RCIT rate for domestic
corporations and resident foreign corporations
business in the Philippines. [See “Doing
Business” definition under the FIA above] under the CREATE act shall be 25% of taxable
income.
Taxable only on income derived from
Exception: if the domestic corporation is
sources within the Philippines.
classified as Micro Small and Medium
Enterprises (MSME), the RCIT shall be 20%
A Philippine branch of a foreign corporation
of taxable income.
duly licensed by the SEC is considered a
resident foreign corporation. Thus, only the
MSME are domestic corporation with:
income of the Philippine branch from sources
within the Philippines is subject to Philippine a. Net taxable income of NOT more than
P5,000,000; AND
income tax.
b. Assets of NOT more than P100,000,000,
excluding the land on which the particular
As general rule, the head office of a foreign
corporation is the same juridical entity as its business entity’s office, plant, and
equipment are situated during the taxable
branch in the Philippines following the single
entity concept. Thus, the income from sources year for which the tax is imposed.
within the Philippines of the foreign head office
shall thus be taxable to the Philippine branch. Note: the 20% income tax rate for MSME is
NOT applicable to foreign corporations
But, when the head office of a foreign (resident or non-resident)
corporation independently and directly
invested in a domestic corporation without the Normal/Regular Corporate Income Tax Rate:
funds passing through its Philippine branch, 25% of Taxable Income, except MSMEs
subject to 20% of Taxable Income.
the taxpayer, with respect to the tax on
dividend income, would be the non-resident
Gross Income xxx
foreign corporation itself and the dividend
Less: Allowable Deductions xxx
income shall be subject to the tax similarly
imposed on non- resident foreign corporations. Taxable Income xxx
[Marubeni v. Commissioner, G.R. No. 76573
(1989)] Minimum Corporate Income Tax (MCIT)
1. Taxation in General a. Applies to domestic corporations and

RFCs:
(a) Regular Corporate Income Tax (RCIT) i. whenever such corporations have
Page 394 of 494

zero or negative taxable income, or where the goods are actually sold including
ii. whenever the MCIT is greater than insurance while the goods are in transit.
the normal income tax due.
b. Imposed beginning the fourth taxable year Manufacturing – include all costs of
from the taxable year the corporation production of finished goods, such as raw
commenced its business operations. For materials used, direct labor and manufacturing
purposes of MCIT, the taxable year in overhead, freight cost, insurance premiums
which business operations commenced and other costs incurred to bring the raw
shall be the year when the corporation materials to the factory or warehouse.
registers with the BIR (not in which the
corporation started commercial Gross Receipts xxx
operations). Less: Sales Returns xxx
c. Tax rates: Sales Discounts xxx
i. TRAIN Law (beginning Jan. 1, 2018):
Allowances xxx
2% of gross income
ii. CREATE Law Cost of Services xxx xxx
§ From July 1, 2020 to June 30, 2023: Gross Income xxx
1% of gross income Direct cost of services all direct costs and
§ Beginning July 1, 2023: 2% of gross expenses necessarily incurred to provide the
income services required by the customers and clients
including (i) salaries and employee benefits of
Gross Income personnel, consultants and specialists directly
Gross Sales xxx rendering the service and (ii) cost of facilities
Less: Sales Returns xxx directly utilized in providing the service such as
Sales Discounts xxx depreciation or rental of equipment used and
Allowances xxx cost of supplies. In the case of banks, it
includes interest expense.
Cost of Goods Sold xxx xxx
Gross Income xxx MCIT is in the nature of a tax credit, not an
allowable deduction.
If apart from deriving income from core
business activities there are other items of It addresses the previously rampant practice of
gross income realized or earned by the some corporations not declaring their actual
taxpayer which are subject to the normal income or bloating their expenses.
corporate income tax, they must be included as
part of gross income for computing MCIT. [Sec. There is no MCIT on the first three taxable
27 (E), NIRC; RR 12-07] years as incentive to do business.
This means that the term “gross income” will What amount of income tax is paid by the
also include all items of gross income corporation to the BIR?
enumerated under Section 32(A), except: (a) Whichever is higher between the normal tax
income exempt from income tax, and (b) and the minimum corporate income tax.
income subjected to FWT.
Coverage
Cost of goods sold The MCIT covers domestic and resident
In general – includes all business expenses foreign corporations which are subject to the
directly incurred to produce the merchandise to regular income tax. Corporations subject to a
bring them to their present location and use. special corporate tax system do not fall within
the coverage of the MCIT.
Trading or merchandising – includes invoice
cost of the goods sold, plus import duties, These special corporations include Proprietary
freight in transporting the goods to the place educational institutions, nonprofit hospitals,
Page 395 of 494

OBUs, FCDUs, ROHQs, firms registered in
PEZA/BCDA/other ecozones, International
Carriers .
For corporations whose operations or activities

are partly covered by regular income tax and
special income tax system, MCIT shall apply
on operations covered by the regular corporate
income tax system.
Page 396 of 494


Illustration:
E Co., a domestic trading corporation, in its fourth year of operations had a gross income from sales
of P300,000 and net taxable income of P100,000. How much was the income tax paid by the
corporation for the year?
MCIT (P300,000 x 2%) P6,000

Normal Income Tax (P100,000 x 25%) P25,000
Income Tax to be paid for the year (whichever is higher) P25,000
Carry forward of excess minimum tax

Any excess of the minimum corporate income tax over the normal income tax shall be carried forward
on an annual basis. The excess can be credited against the normal income tax in the next three (3)
succeeding taxable years only [Sec. 27(E)(2), NIRC]. In the year to which it was carried forward, the
normal tax should be higher than the MCIT.
Sample Computation of MCIT Carry Forward:

A domestic corporation had the following data on computations of the normal tax (NT) and the
minimum corporate income tax (MCIT) for five years.
Yr 4 Yr 5 Yr 6 Yr 7 Yr 8
MCIT 80K 50K 30K 40K 35K
NT 20K 30K 40K 20K 70K
The excess MCIT over NT carried-forward as follows:
Year 4 Year 5 Year 6 Year 7 Year 8

MCIT 80,000 50,000 30,000 40,000 35,000
NT 20,000 30,000 40,000 20,000 70,000
Excess MCIT over 60,000(a) 20,000(b) n/a 20,000(c) n/a

NT
(MCIT – NT)
Income Tax to be 80,000 50,000 40,000 40,000 70,000

paid
(Higher of MCIT or
NT)
Less: MCIT carry n/a n/a (40,000) (a) n/a (20,000) (a)
forward
(20,000) (b)
Tax Due 80,000 50,000 0 40,000 30,000
(a) 60k excess MCIT from year 4 is credited against the normal tax to be paid in year 6 and 8.
(b) 20k excess MCIT from year 5 is credited against the normal tax to be paid in year 8.
(c) 20k excess MCIT from year 7 will be credited against future normal tax to be paid.
Page 397 of 494


Relief from MCIT [Sec. 27 (E)(3), NIRC] quarterly normal income tax payments, (c)
The Secretary of Finance may suspend excess MCIT in the prior year/s (subject to the
imposition of MCIT on any corporation which prescriptive period allowed for its creditability),
sustained substantial losses on account of (d) CWTs in the current year, (d) excess CWTs
(LMB): in the prior year.
a. Prolonged labor dispute (losses from a
strike staged by employees that lasts for If in the computation of annual income tax due,
more than 6 months and caused the the computed annual MCIT due is higher than
temporary shutdown of operations), or the annual normal income tax due, the
b. Force majeure (acts of God and other following may be credited against the annual
calamity; includes armed conflicts like war income tax: (a) quarterly MCIT payments of
or insurgency), or current taxable quarter, (b) quarterly normal
c. Legitimate business reverses (substantial income tax payments in current year, (c) CWTs
losses due to fire, robbery, theft or other in the current year, (d) excess CWTs in the
economic reasons). prior year.
Quarterly MCIT Computation Excess MCIT from the previous taxable year/s
The computation and the payment of MCIT shall not be allowed to be credited against the
shall likewise apply at the time of filing the annual MCIT due as the same can only be
quarterly corporate income tax. In the applied against normal income tax.
computation of the tax due for the taxable
quarter, if the quarterly MCIT is higher than the Manner of Filing and Payment.
quarterly normal income tax, the tax due to be The MCIT shall be paid in the same manner
paid for such taxable quarter at the time of filing prescribed for the payment of the normal
the quarterly corporate income tax return shall corporate income tax which is on a quarterly
be the MCIT. and on a yearly basis.
Items allowed to be credited against quarterly a. Taxation of Passive Income

MCIT due: (a) CWT, (b) Quarterly income tax
payments under the normal income tax; and (c) Interest from deposits and yield or any other
MCIT paid in the previous taxable quarter(s). monetary benefit from deposit substitutes and
from trust funds and similar arrangements and
Excess MCIT from the previous taxable year/s royalties
shall not be allowed to be credited against the a. 20% final tax on:
quarterly MCIT tax due. i. interest on any currency bank deposit,
ii. yield or any other monetary benefit
Annual Income Tax Computation. from deposit substitutes,
The final comparison between the normal iii. yield or any monetary benefir from trust
income tax payable and the MCIT shall be funds and similar arrangements, and
made at the end of the taxable year. The iv. Royalties
payable or excess payment in the Annual b. same for Domestic Corporations and
Income Tax Return shall be computed taking Resident Foreign Corporations
into consideration corporate income tax c. Collected as Final Withholding Tax [Sec.
payment made at the time of filing of quarterly 57, NIRC]
corporate income tax returns whether this be
MCIT or normal income tax.
In the computation of annual income tax due, if

the normal income tax due is higher than the
computed annual MCIT, the following shall be
allowed to be credited against the annual
income tax: (a) quarterly MCIT payments, (b)
Page 398 of 494

Interest Income derived by a domestic capital gains [Sec. 28 (A)(6)(c), NIRC].
corporation from depository bank under the
expanded foreign currency deposit system Capital gains realized from the sale,
[Section 27 (D)(1), NIRC] exchange, or disposition of lands and/or
a. 15% final income tax buildings [Sec. 27 (D)(5)]
b. same for Domestic Corporations and a. Imposed on the sale, exchange or
Resident Foreign Corporations disposition of lands and/or buildings which
c. Collected as Final Withholding Tax [Sec. are not actually used in the business of a
57, NIRC] corporation and are treated as capital
assets
Inter-corporate dividends b. A final tax of 6% on the gross selling price,
a. Dividends received from a domestic or the current fair market value at the time
corporation by another domestic of the sale, whichever is higher;
corporation or resident foreign corporation c. The capital gains tax is applied on the
- Exempt gross selling price, or the current fair
b. Dividends received from a domestic market value at the time of the sale,
corporation by a non-resident foreign whichever is higher. Any gain or loss on
corporation (NRFC): 25% of the amount of the sale is immaterial because there is a
cash and/or property dividend; provided conclusive presumption by law that the
that it may be reduced to 15% of the sale resulted in a gain.
amount of cash and/or property dividend, d. Applicable to domestic corporations only.
if the country in which the NRFC is e. Tax treatment is similar to that of
domiciled shall allow a credit against the individuals.
tax due from the NRFC deemed to have
been paid in the Philippines equivalent to 2. Branch Profit Remittance Tax
15%, which represents the difference a. Applies only to a resident foreign
between the regular income tax of 30% corporation which is a branch of a non-
and the 15% tax sparing rate. resident foreign corporation. Imposed on
profits remitted by the Philippine branch to
Stock dividends are exempt if there is no the head office.
change in proportionate interest. b. Collected as Final Withholding Tax [Sec.
57, NIRC]
Taxation of Capital Gains
Taxable transaction – any profit remitted by a
Capital gain from sale of shares of stock not branch to its head office
traded in the stock exchange.
Tax Rate and Base – 15% final tax based on
Final tax on net capital gains realized by a the total profits applied or earmarked for
domestic corporation during the taxable year remittance without any deduction for the tax
from the sale, barter, exchange or other component (except those activities registered
disposition of shares of stock in a domestic with PEZA).
corporation not listed and traded through a
local stock exchange: 15% of net capital gains The following are not treated as branch profits
[Sec. 27 (D)(2), NIRC]. unless effectively connected with the conduct
of trade or business in the Philippines:
Final tax on net capital gains realized by a. Interests, dividends, rents, royalties
Resident Foreign Corporations and (including remuneration for technical
Nonresident Foreign Corporations during the services),
taxable year from the sale, barter, exchange or b. salaries, wages,
other disposition of shares of stock in a c. premiums, annuities, emoluments, or
domestic corporation not listed and traded d. other fixed or determinable annual,
through a local stock exchange: 15% of net periodic or casual gains, profits, income
Page 399 of 494

and capital gains received during each
taxable year from all sources within the Once the election to avail of OSD or
Philippines itemized deduction is signified in the
taxpayer’s return, it shall be irrevocable for
3. Itemized Deductions vs. Optional the taxable year for which the return is
Standard Deductions made.
A taxpayer engaged in business or in the
practice of profession shall choose either the General partnerships and general
optional or itemized deduction (described professional partnerships may likewise
below) deduction. claim either itemized deductions or it can
opt to avail of the OSD allowed to
Itemized Deductions corporations in claiming the deductions in
There shall be allowed as deduction from an amount not exceeding 40% of its gross
gross income all the ordinary and income.
necessary expenses paid or incurred
during the taxable year in carrying on or The net income determined by either
which are directly attributable to, the claiming the itemized deduction or OSD
development, management, operation from the GPP’s gross income is the
and/or conduct of the trade, business or distributable net income from which the
exercise of a profession including a share of each partner is to be determined.
reasonable allowance for salaries, travel, Each partner shall report as gross income
rental and entertainment expenses. his distributive share, actually or
Itemized deduction includes also interest, constructively received, in the net income
taxes, losses, bad debts, depreciation, of the partnership. [RR No. 2-2010]
depletion, charitable and other
contributions, research and development, b. Income Tax on Non-Resident Foreign
pension trust, premium payments on health Corporations
and/or hospitalization insurance.
Optional Standard Deductions 1. Taxation of NRFC in general

In the case of a corporation subject to tax
under Sections 27(A) and 28 (A)(1), it may A corporation organized under the laws of a
elect a standard deduction in an amount foreign country, which is not engaged in trade
not exceeding forty percent (40%) of its or business in the Philippines. [See “Doing
gross income as defined in Section 32 of Business” definition under the FIA in B.7.2.
the NIRC. [Sec. 34 (L), NIRC] Corporations]
“Gross income” shall mean the gross sales Taxable only on income derived from sources
less sales returns, discounts and within the Philippines.
allowances, and cost of goods sold. “Cost
of goods sold” shall include the purchase Income taxes on nonresident foreign
price or cost to produce the merchandise corporations are collected as Final Withholding
and all expenses directly incurred in Tax under Sec. 57, NIRC.
bringing them to their present location and
use. General rule
The tax is 25% of gross income received
Unless the taxpayer signifies in his return during each taxable year beginning January 1,
his intention to elect the optional standard 2021 from all sources within the Philippines
deduction, he shall be considered as
having availed himself of the itemized This includes: interests, dividends, rents,
deductions allowed in Sec. 34(A) to (J) of royalties, salaries, premiums (except
the NIRC. reinsurance premiums), annuities,
emoluments or other fixed or determinable
Page 400 of 494

annual, periodic or casual gains, profits and exchange or other disposition of shares of
income, and capital gains (except capital gains stock in a domestic corporation not listed and
on the sale of shares not traded in the stock traded through a local stock exchange: 15% on
exchange) the net capital gains
2. NRFCs subject to preferential tax c. Income Tax on Special Corporations

rates
1. Proprietary Educational
Non-resident cinematographic film owner, Institutions and Non-profit
lessor or distributor – 25% of gross income Hospitals [Sec. 27(B), NIRC]
from all sources within the Philippines
Tax Rates and Base:
Non-resident owner or lessor of vessels § Under TRAIN Law – 10% on taxable
chartered by Philippine nationals – 4.5% of
income
gross rentals, lease or charter fees from leases § Under CREATE Law
or charters to Filipino citizens or corporations,
a. From July 1, 2020 to June 30,
as approved by the Maritime Authority 2023 – 1% on taxable income
b. Beginning July 1, 2023 – 10% on
Non-resident owner or lessor of aircraft, taxable income
machineries and other equipment – 7.5% of
gross rentals, charters or other fees The above rates shall be imposed on taxable
income (except on income subject to capital
3. Tax on Certain Income Received gains tax and passive income subject to final
by the NRFC tax) within and without the Philippines
Tax on Interest on Foreign Loans Caveat: If gross income from unrelated trade or
Tax on Interest on foreign loans: contracted on business or other activity exceeds 50% of total
or after August 1, 1986 – 20% final withholding gross income derived from all sources, the tax
tax [Sec. 28 (B)(5)(a), NIRC] rate of 30% shall be imposed on the entire
taxable income.
Tax on Inter-corporate dividends
Inter-corporate Dividend – 15% on dividends Unrelated trade, business or other activity –
received from domestic corporations, if the any trade, business or other activity, the
country in which the nonresident foreign conduct of which is not substantially related to
corporation is domiciled allows a tax credit of at the exercise or performance by such
least 15% for taxes “deemed paid” in the educational institution or hospital of its primary
Philippines purpose or function.
The 15% foreign tax credit represents the Proprietary educational institution – any private
difference between the regular income tax of school maintained and administered by private
30% on corporations and the 15% tax on individuals or groups with an issued permit to
dividends (“tax sparing credit”) operate from DepEd, CHED or TESDA [Sec.
27 (B), NIRC].
If the country within which the NRFC is
domiciled does NOT allow a tax credit, the tax 2. Government-owned or Controlled
is 25% on dividends received from a domestic Corporations, Agencies,
corporation.
Instrumentalities [Sec. 27(C),
NIRC]
Tax on Capital gain from sale of shares of
stock not traded in the stock exchange
GOCCs
Final tax on net capital gains realized during
General rule: GOCCs are taxable as any other
the taxable year from the sale, barter,
Page 401 of 494

corporation engaged in similar business, from:
industry or activity
Foreign currency transactions with
Exceptions: nonresidents, offshore banking units in the
a. Government Service Insurance System Philippines, local commercial banks, including
(GSIS) branches of foreign banks authorized by the
b. Social Security System (SSS) BSP to transact business with foreign currency
c. Philippine Health Insurance Corporation depository system units and other depository
(PHIC) banks under the EFCDS – exempt from income
d. Local water districts (LWDs) [Sec. 27 (C), tax
NIRC]
Except net income from transactions specified
Government agencies or instrumentalities by the Secretary of Finance upon
General rule: The government is exempt from recommendation by the Monetary Board –
tax. subject to regular income tax payable by banks
Exception: When it chooses to tax itself. Foreign currency loans granted to residents
Nothing can prevent Congress from decreeing (other than offshore banking units in the
that even instrumentalities or agencies of the Philippines) – interest income subject to a final
government performing governmental tax of 10%
functions may be subject to tax. Where it is
done precisely to fulfill a constitutional mandate Income of nonresidents, individuals or
and national policy, no one can doubt its corporations, from transactions with depository
wisdom. [Mactan Cebu Airport v Marcos banks under the EFCDS – exempt from income
(1996)] tax
3. Foreign Currency Deposit Units Same for Domestic and Resident Foreign
[Sec. 27(D)(3), NIRC] Corporations.
Income derived by a depository bank under the Similar treatment to OBUs.

expanded foreign currency deposit system
Summary of Tax Bases and Rates of Corporations

Type of Corporation The higher between RCIT or MCIT rates
Regular MCIT (Gross Income)
Rate Effectivity Rate Effectivity
Domestic Corporation:
Domestic Corporations, in general 25% of taxable July 1, 2020 1% July 1, 2020 –

income June 30, 2023
(within and without)
July 1, 2023
2%
For corporations with net taxable 20% of taxable July 1, 2020 1% July 1, 2020 –
income not exceeding Five Million income June 30, 2023
Page 402 of 494

Pesos (P5,000,000) AND total

assets not exceeding One Hundred July 1, 2023
Million (P100,000,000), excluding
the land on which the particular 2%
business entity's office, plant and
equipment are situated
Proprietary Educational Institutions 1% of taxable July 1, 2020 – Not Applicable

and Hospitals income June 30, 2023
July 1, 2023
10% of taxable
income
Government Owned or Controlled 20% / 25% of July 1, 2020 Not Applicable

Corporations taxable income
Exempt if SSS,
GSIS, HDMF,
PHIC, local water
districts, [Sec.
27(C), NIRC]
Foreign Corporation [on taxable income (e.g., net or gross income, as applicable) derived from all sources
within the Philippines]:
Resident Foreign Corporation 25% of taxable July 1, 2021 1% July 1, 2020 –

income June 30, 2023
(within)
July 1, 2023
2%
International Carriers 2.5% of Gross

Philippine Billings
Offshore Banking Unit (OBUs) 25% taxable Upon the 1% Upon the
(Note: OBUs shall now be taxed as income effectivity of effectivity of
resident foreign corporation upon the CREATE the CREATE
effectivity of the CREATE) (Apr. 11, 2022) until June 30,
2023
2% July 1, 2023
Regional Operating Headquarters 25% taxable Jan. 1, 1% Jan. 1, 2022

(ROHQ) income 2022
Page 403 of 494

– June 30,
2023
2% July 1, 2023
Offshore Gaming Licensees 25% taxable Oct. 9, 2021 1% Oct. 9, 2021

income – June 30,
2023
2% July 1, 2023
Non-Resident Foreign 25% of gross Jan. 1, 2021 Not applicable

Corporation income
(within)
Non-Resident Cinematographic 25% of Jan. 1, 2021 Not applicable

Film Owners, Lessor or Distributor gross income from
all sources within
the Philippines
Non-Resident Owner or Lessors of 4.5% Jan. 1, 2021 Not applicable

Vessels Chartered by Philippine of gross rentals,
Nationals lease or charter
fees from leases or
charters to Filipino
citizens or
corporations
Non-Resident Owner or Lessors of 7.5% of gross Jan. 1, 2021 Not applicable

Aircraft, Machineries and Other rentals, charters or
Equipment other fees
Page 404 of 494

TAXATION 1 COMMERCIAL LAW
d. Exemptions from Tax on activities conducted for profit regardless of the
Corporations disposition made of such income, shall be
subject to tax imposed under the NIRC.
Tax exempt corporations [Sec. 30, NIRC]
a. Labor, agricultural or horticultural N.B. This means capital gains tax, tax on
organization – non-profit passive income, etc. applies to these otherwise
b. mutual savings bank or cooperative bank exempt organizations.
– non-stock, non-profit, operated for
mutual purposes Tax on Other Entities: General Partnerships,
c. Beneficiary society, order, or association – General Professional Partnerships, Co-
operating for the exclusive benefits of their ownerships, Joint Ventures, and Consortia
members; includes: fraternal organization
operating under the lodge system; or General Partnerships
mutual aid association or a nonstock Partnerships where all or part of their income is
corporation organized by employees derived from the conduct of trade or business;
providing life, sickness, accident, or other it is treated as a corporation [Sec. 22 (B),
benefits exclusively to the members NIRC].
d. Cemetery company – owned and
operated exclusively for the benefit of its General rule: The partnership is subject to the
members same rules and rates as corporations.
e. Non-stock corporation or association
organized and operated exclusively for Exceptions: A partner’s share in the
religious, charitable, scientific, athletic, or partnership’s distributable net income is
cultural purposes or for the rehabilitation of deemed actually or constructively received by
veterans, provided that no part of its the partners in the same taxable year [Sec. 73
income or asset belong to or inure to the (D), NIRC]. Consequently:
benefit of any individual a. such share will be subjected to dividend
f. Business league, chamber of commerce, tax (10%) whether actually distributed or
or board of trade – Non-profit; no part of not.
net income inures to the benefit of an b. there can never be an instance of
individual improperly accumulated taxable income;
g. Civic league or organization – Non-profit; note that RR 2-01 provides that IAET does
operating exclusively for the promotion of not apply to taxable partnerships.
social welfare
h. Non-stock and non-profit educational Distributable net income of the partnership is
institutions its taxable income less the normal corporate
i. Government educational institutions income tax (25%).
j. Organizations of a purely local character
whose income consists solely of A partner’s contribution to the general
assessment, duties and fees collected partnership fund is a capital investment and is
from their members to meet expenses; not taxable income of the partnership.
includes: farmers’ or other mutual typhoon
or fire insurance company, mutual ditch or General Professional Partnerships
irrigation company and mutual or Partnerships formed by persons for the sole
cooperative telephone company purpose of exercising their common
k. Farmers’, fruit growers’, and like profession, no part of the income of which is
association – whose primary function is to derived from engaging in any trade or
market the product of their members business. [Sec 22 (B), NIRC]
Notwithstanding the provisions in the A GPP as such shall not be subject to the
preceding paragraphs, the income of the income tax. It is not a taxable entity for income
foregoing organizations from (1) their tax purposes.
properties, real or personal, or from (2) their
Page 405 of 494
GPP is not a taxable entity belongs to different persons. [Art. 484, NCC] It
The GPP is deemed to be no more than a mere may be created by succession or donation.
mechanism or a flow-through entity in the
generation of income by, and the ultimate When Co-ownership is not subject to tax
mechanism distribution of such income to the When the co-ownership’s activities are limited
individual partners [Tan v. Commissioner, G.R. merely to the preservation of the co-owned
No. 109289 (1994)]. property and to the collection of the income
from the property. Each co-owner is taxed
But the partnership itself is required to file individually on his distributive share in the
income tax returns for the purpose of furnishing income of the co-ownership. [De Leon]
information as to the share in the gains or
profits which each partner shall include in his When Co-ownership is subject to tax
individual return [RR 2-98]. The following circumstances would render a
co-ownership subject to a corporate income
The share of an individual partner in the net tax:
profit of a general professional partnership is a. When a co-ownership is formed or
deemed to have been actually or constructively established voluntarily, or upon
received by the partner in the same taxable agreement of the parties;
year in which such partnership net income was b. When the individual co-owner reinvested
earned, and shall be taxed to them in their his share, and
individual capacities, whether actually c. When the inherited property remained
distributed or not, at the graduated income tax undivided for more than ten years, and no
ranging from 5% to 35%. attempt was ever made to divide to same
among the co-heirs, nor was the property
Because the principle of constructive receipt is under administration proceedings nor held
applied to undistributed profits of GPPs, the in trust, the property should be considered
actual distribution to the partners of such tax- as owned by an unregistered partnership.
paid profits in another year should no longer be [Valencia and Roxas]
liable to income tax. [MAMALATEO]
Automatically converted into an unregistered
A GPP may claim either the itemized partnership the moment the said common
deductions allowed under Section 34 of the properties and/or the incomes derived from
Code or in lieu thereof, it can opt to avail of the them are used as a common fund with intent to
OSD allowed to corporations in claiming the produce profits for the heirs in proportion to
deductions in an amount not exceeding forty their respective shares in the inheritance as
percent (40%) of its gross income. determined in a project partition either duly
executed in an extrajudicial settlement or
The distributable net income of the partnership approved by the court in the corresponding
may be determined by claiming either itemized testate or intestate proceeding. [Ona v. CIR,
deductions or OSD. The share in the net G.R. No. L-19342 (1972)]
income of the partnership, actually or
constructively received, shall be reported as Joint Ventures and Consortiums
taxable income of each partner. The partners To constitute a” joint venture,” certain factors
comprising the GPP can no longer claim further are essential. Each party to the venture must
deduction from their distributive share in the make a contribution, not necessarily of capital,
net income of the GPP and are not allowed to but by way of services, skill, knowledge,
avail of the 8% income tax rate option since material or money; profits must be shared
their distributive share from the GPP is already among the parties; there must be a joint
net of cost and expenses. [RR No. 08-2018] proprietary interest and right of mutual control
over the subject matter of the enterprise; and
Co-ownerships usually, there is single business transaction.
There is co-ownership whenever the
ownership of an undivided thing or right General rule: An unincorporated joint venture
Page 406 of 494

is taxed like a corporation. The share of the Every withholding agent required to deduct and
joint venture partners will no longer be taxable withhold taxes under Section 57 shall submit to
to them because they partake in the nature of the Commissioner an annual information return
inter-corporate dividends. containing the list of payees and income
payments, amount of taxes withheld from each
Exception: an unincorporated joint venture payee and such other pertinent information as
formed for the purpose of undertaking a may be required by the Commissioner [Sec. 58
construction project or engaging in petroleum (C), NIRC].
operations pursuant to the consortium
agreement with the Philippine Government is Every employer required to deduct and
not subject to the corporate income tax. Only withhold the taxes in respect of the wages of
the joint venture partners will be taxed on their his employees shall, on or before January 31st
respective shares in the income of the joint of the succeeding year, submit to the
ventures. [Sec. 22 (B), NIRC] Commissioner an annual information return
containing a list of employees, the total amount
Two elements necessary to exempt a joint of compensation income of each employee, the
venture or consortium from tax total amount of taxes withheld therefrom during
a. The joint venture must be an unincorporated the year, accompanied by copies of the
entity formed by two or more persons statement referred to in the preceding
b. The joint venture was formed for the paragraph, and such other information as may
purpose of undertaking a construction be deemed necessary [Sec. 83 (B), NIRC].
project, or engaging in the petroleum and
other energy operations with operating a. Individual Return
contract with the government.
1. Who are required to file; Exceptions
e. Period Within Which to File Income [Sec. 51(A), NIRC]
Tax Return of Individuals and
Corporations General Rule: The following are required to file
income tax return:
Tax Return a. Resident citizen
Tax return refers to a formal report prepared by b. Non-resident citizen, on income from
the taxpayer or his agent in a prescribed form sources within the Philippines
showing an enumeration of taxable amounts c. Resident alien, on income from sources
and description of taxable transactions, within the Philippines
allowable deductions, amount of tax and tax d. Non-resident alien engaged in trade or
payable to the government. business or in the exercise of profession in
the Philippines, on income from sources
Examples of tax returns are: within the Philippines
a. BIR Form Nos. 1700 and 1701 – Annual
Income Tax Returns for Individual Exceptions: The following shall not be
b. BIR Form No. 1702 – Annual Income Tax required to file income tax return:
Return for Corporations and Partnerships a. Individuals whose gross income does not
c. BIR Form No. 1800 – Donor’s Tax Return exceed P250,000 except citizen and alien
d. BIR Form No. 1801 – Estate Tax Return individuals engaged in business or
practice of profession within the
Information Return Philippines who shall file income tax
Any individual not required to file an income tax returns regardless of the amount of gross
return may nevertheless be required to file an income.
information return pursuant to rules and b. Individuals with respect to pure
regulations prescribed by the Secretary of compensation income from sources within
Finance, upon recommendation of the the Philippines, the income tax on which
Commissioner. [Sec. 51(A)(3), NIRC] has been withheld; except when such
compensation has been derived from
Page 407 of 494

more than one employer. by the BIR, shall be tantamount to the
c. Individuals whose sole income has been substituted filing of income tax returns by the
subjected to final withholding tax employee [Sec. 51-A, NIRC].
(pursuant to Sec. 57 (A)).
d. Minimum wage earner (as defined in Sec. 3. When and Where to File
22 (HH))
e. Individuals who are exempt from income Income tax return of an individual who is not on
tax pursuant to the provisions of the Tax a substituted basis shall be filed on or before
Code and other laws. April 15 of each year covering income of the
preceding taxable year. [Sec. 51 (C)(1), NIRC]
Special Provisions
Married individuals (whether citizens, resident Individuals subject to capital gains tax [Sec.
or nonresident aliens) who do not derive 51 (C)(2), NIRC]:
income purely from compensation, shall file a. Sale of shares not traded thru a local stock
only one consolidated return to cover the exchange – file a return within 30 days
income of both spouses for the taxable year, from the transaction, and a final
but where it is impracticable for the spouses to consolidated return on or before April 15
file one return, each spouse may file a separate of each year covering all stock
return of income but the returns so filed shall transactions of the preceding taxable year
be consolidated by the BIR for verification [Sec. b. Sale of real property – file a return within
51 (D), NIRC]. 30 days from each sale
The income of unmarried minors is a tax liability Individuals deriving self-employment

of the minor but where such income is derived income (as sole source of income or mixed) –
from property received from a living parent, the must file quarterly return of summary
income shall be included in the return of the declaration of gross income and deductions,
parent except (a) when the donor’s tax has and a final or adjustment [Sec. 74 (A), NIRC].
been paid on such property, or (b) when the
transfer of such property is exempt from the Due Date for Filing
donor’s tax [Sec. 51 (E), NIRC]. Period
Return
Q1 Return May 15 of the same year
If the taxpayer is unable to make his return, August 15 of the same
such as when he suffers from disability, the Q2 Return
year
return may be made by his duly authorized November 15 of the same
agent or representative or by the guardian or Q3 Return
year
other person charged with the care of the April 15 of the following
taxpayer or his property; the principal and his Annual Return
year
representative or guardian assuming
responsibility for penalties for erroneous, false Self-employment income consists of earnings
or fraudulent returns [Sec. 51 (F), NIRC]. derived by the individual from the practice of
profession or conduct of trade or business, as
2. Substituted Filing a sole proprietor or as a member in a general
professional partnership. [Sec. 74 (A), NIRC]
Applicable to individual taxpayers:
a. receiving purely compensation income, Filing of these returns shall be in lieu of filing of
regardless of amount a declaration of estimated income under Sec.
b. from only one employer in the Philippines 74, primarily for the reason that the procedure
for the calendar year, and prescribed in Sec. 74 may not reasonably
c. the income tax of which has been withheld approximate the correct amount of tax to be
correctly by the employer paid. [DE LEON citing RR No. 2-93]
The certificate of withholding filed by their Where to File

respective employers, duly stamped ‘received’ Except in cases where the CIR otherwise
Page 408 of 494
permits, the return shall be filed with an authorized agent bank, Revenue District
authorized agent bank, Revenue District Officer, Collection Agent or duly authorized
Officer, Collection Agent or duly authorized Treasurer of the city or municipality having
Treasurer of the city or municipality in which jurisdiction over the place where the
such person has his legal residence or corporation’s principal office is located and
principal place of business in the Philippines, where its books of accounts and other data are
or if there be no legal residence or place of kept; otherwise, the returns shall be filed and
business in the Philippines, with the Office of the tax paid thereon with the Office of the
the Commissioner [Sec. 51 (B), NIRC]. Commissioner of Internal Revenue [Sec. 77
(A), NIRC].
b. Corporate Returns
Payment of Income Tax
1. Quarterly Income Tax General rule: The total amount of tax imposed
by this Title (Tax on Income) shall be paid by
All corporations subject to income tax shall the person subject thereto at the time the return
render quarterly income tax returns and a final is filed.
or adjustment return, except foreign
corporations not engaged in trade or business Exception: When the tax due is in excess of
in the Philippines. P2,000, the taxpayer other than a corporation
may elect to pay the tax in 2 equal installments:
The return shall be filed by the President, Vice- the first installment paid at the time the return
President or other principal officer, and shall be is filed and the second installment, on or before
sworn to by such officer and by the treasurer or October 15 following the close of the calendar
assistant treasurer. year. [Sec. 56 (A)(2), NIRC]
2. When and Where to File Return of Corporations Contemplating

Dissolution or Reorganization
Domestic corporations and resident foreign Within 30 days after the adoption of the plan for
corporations shall file quarterly corporate dissolution or reorganization (including
income tax returns within 60 days after the end corporations notified of possible involuntary
of the calendar or fiscal quarter used, and dissolution by the SEC), render a correct return
annual corporate income tax return on or to the CIR, verified under oath, setting forth the
before the 15th day of the fourth month terms of such plan and such other information
following the close of the calendar year or fiscal required by rules and regulations. Prior to the
year, as the case may be [Sec. 77]. issuance by the SEC of the Certificate of
Dissolution or Reorganization, the corporation
The filing of the tax returns by a corporation shall secure a certificate of tax clearance from
using the calendar year: the BIR which shall be submitted to the SEC.
[Sec. 52 (C), NIRC]
Period Due Date for Filing Return
Period Due Date for Filing c. Return on Capital Gains Realized
Return from Sale of Shares of Stock and
Q1 Return May 30 of the same year Real Estate
Q2 Return August 29 of the same
year Return on Capital Gains Realized from Sale of
Q3 Return November 29 of the same Shares of Stock not Traded in the Local Stock
year Exchange – file a return within 30 days from the
Annual Return April 15 of the following transaction, and a final consolidated return on
year or before the 15th day of the fourth month
following the close of the taxable year [Sec. 52
Where to File (D), NIRC]
Except in cases where the CIR otherwise
permits, the return shall be filed with an
Page 409 of 494
d. Failure to File Returns the payee is the taxpayer, the person on whom
There shall be imposed and collected as part the tax is imposed, while the payor, a separate
of the tax: entity, acts no more than an agent of the
1. A surcharge of twenty five percent (25%) for government for the collection of the tax in order
each of the following violations: to ensure its payment.
(a) Failure to file any return and pay the
amount of tax or installment due on or The duty to withhold is different from the duty
before the due dates; to pay income tax. The revenue officers
(b) Filing a return with a person or office generally disallow the expenses claimed as
other than those with whom it is deduction from gross income, if no withholding
required to be filed; of tax as required by law or the regulations was
(c) Failure to pay the full or part of the withheld and remitted to the BIR within the
amount of tax shown on the return, or prescribed dates.
the full amount of tax due for which no
return is required to be filed, on or In addition, the withholding tax that should
before the due date; have been withheld and remitted to the BIR as
(d) Failure to pay the deficiency tax well as the penalties for non-, late or erroneous
within the time prescribed for its payment of the withholding tax such as
payment in the notice of Assessment surcharges and deficiency interest are
(Delinquency Surcharge) assessed by the BIR. [MAMALATEO]
2. A surcharge of fifty percent (50%) of the tax b. Creditable vs. Withholding Taxes
or of the deficiency tax, in case any payment
has been made on the basis of such return
Creditable Withholding Tax
before the discovery of the falsity or fraud, for Under the creditable withholding tax system,
each of the following violations:
taxes withheld on certain income payments are
(a) Willful neglect to file the return within the
intended to equal or at least approximate the
period prescribed by the Code or by rules
tax due of the payee on said income.
and regulations; or
(b) In case a false or fraudulent return is
The income recipient is still required to file an
willfully made.
income tax return, to report the income and/or
pay the difference between the tax withheld
3. Interest at the rate of double the legal
and the tax due on the income. Taxes withheld
interest rate for loans or forbearance of any
on income payments covered by the expanded
money in the absence of an express stipulation
withholding tax and compensation income are
as set by the Bangko Sentral ng Pilipinas from
creditable in nature.
the date prescribed for payment until the
amount is fully paid. [Sec. 249(A), NIRC]
Final Withholding Tax
Note: the current interest rate imposed by the The amount of income tax withheld by the
BIR is 12% or double the legal interest rate of withholding agent is constituted as a full and
6% as prescribed by the BSP. final payment of the income tax due from the
payee on the said income.
4. Compromise penalty.
The liability for payment of the tax rests
primarily on the payor as withholding agent.
10. Withholding Taxes Thus, in case of his failure to withhold the tax
or in case of under withholding, the deficiency
a. Concept tax shall be collected from the
payor/withholding agent. The payee is not
Withholding tax is a method of collecting required to file an income tax return for the
income tax in advance from the taxable income particular income.
of the recipient of income.
In the operation of the withholding tax system,
Page 410 of 494
Expanded Withholding Tax
1. Withholding Tax at Source [Sec 57,

NIRC]
Withholding of final tax of certain income –
Subject to rules and regulations the Secretary
of Finance may promulgate, upon the
recommendation of the CIR, the tax imposed
or prescribed by the NIRC on certain specified
items of income shall be withheld by payor-
corporation and/or person.
N.B. Sec. 57 contains an extensive list of taxes.

These items of income include taxes on certain
passive incomes (interest, dividends), capital
gains tax (shares not traded, real property),
branch profit remittance tax, and certain
payments to nonresident aliens /foreign
corporations.]
2. Withholding of creditable tax at

source
The Secretary of Finance may, upon the
recommendation of the CIR, require the
withholding of a tax on the items of income
payable to natural or juridical persons, residing
in the Philippines, by payor-
corporation/persons as provided for by law, at
the rate of not less than 1% but not more than
32%, which shall be credited against the
income tax liability of the taxpayer for the
taxable year. Provided, That, beginning
January 1, 2019, the rate of withholding shall
not be less than one percent (1%) but not more
than fifteen percent (15%) of the income
Page 411 of 494

TAXATION 2
TAXATION LAW

of service in the Philippines, or importation
of good
I. NATIONAL 2. The subject matter must be taxable goods
or properties or services
TAXATION 3. The sale must be made by a taxable
person in the course of trade or business
or in the furtherance of one’s profession.
A. Value – Added Tax (VAT)
Meaning of “in the course of trade or
1. Concept and Elements of VATable business” (Rule of Regularity)
Transactions
The regular conduct or pursuit of a commercial
a. Tax on value added or economic activity, including transactions
incidental thereto, by any person regardless of
It is imposed only on the value added of a whether or not the person engaged therein is a
taxpayer. “Value added” is the difference nonstock, nonprofit private organization
between total sales of the taxpayer and his total (irrespective of the disposition of its net income
purchases for the same period subject also to and whether or not it sells exclusively to
VAT. [MAMALATEO] members or their guests), or government
entity. [Sec. 105, NIRC; Section 4.105-3, RR
b. Sales Tax 16-2005]
The taxpayer (seller) determines his tax liability Exceptions:

by computing the tax on the gross selling price 1. Services rendered by non-resident foreign
on sale of goods or properties or gross receipts persons shall be considered as being
on sale of services (output tax), and rendered in the course of trade or
subtracting or crediting the VAT on the business, even if the performance of
purchase (or importation) of goods or services services is not regular. [Section 4.105-3,
(input tax) against the tax due on his own sale. RR 16-2005]
2. Importation are subject to VAT whether or
VAT rate: 12% standard rate; 0% on certain not made in the course of trade or business
sales or transactions [Sec. 4.105-1, RR 16-2005]
3. Any business where the gross sales or
VAT base: gross selling price or gross receipts receipts do not exceed P100,000 during
the 12-month period shall be considered
c. Tax on Consumption principally for subsistence or livelihood and
not in the course of trade or business.
VAT is a consumption tax imposed at every Thus, they are exempt from VAT and
stage of the distribution process on (i) the sale, percentage tax. [RMC 7-2014 in relation to
barter, exchange, or lease of goods or RR 7-2012]
properties, (ii) rendition of services in the
course of trade or business, and (iii) the 2. Impact and Incidence of Tax
importation of goods, whether or not such
imported goods are for use in business. [Sec.
4.105-2, RR 16-2005] Impact Incidence
Refers to the statutory Refers to the buyer /

d. Elements of a Vat-Taxable taxpayer (i.e., the final consumer, the
Transaction in General seller/importer), the one who ultimately
1. There must be a sale, barter, exchange, or one who collects tax
lease of goods or properties, performance
Page 413 of 494
Impact Incidence 4. Imposition of VAT on Transfer of

Goods by Tax Exempt Persons
and pays to the bears the burden of
government taxation Transfer of Goods by Tax-Exempt Persons
(Technical Importation):
a. If the importer is tax-exempt, the
3. Destination Principle and Cross- subsequent purchasers, transferees or
Border Doctrine recipients who are non-exempt persons
shall be considered as importers who shall
General rule: The VAT system uses the be liable for VAT due on such importation.
destination principle as a basis for the b. The tax due on such importation shall
jurisdictional reach of the tax. Goods and constitute a lien on the goods superior to all
services are taxed only in the country where charges or liens on the goods, irrespective
they are consumed. Thus, exports are zero- of the possessor thereof. [Sec. 107(B),
rated, while imports are taxed. [CIR v. NIRC]
American Express International, G.R. No.
152609 (2005)] 5. Transactions deemed sale
Exception: Zero-rated services under Sec. Rate: 12% VAT
108(b)(1)[1] and (2)
Basis: Market value of the goods deemed sold
Requisites for the exception to apply: as of the time of the occurrence of the
1. The service is performed in the Philippines; transactions
2. The service falls under any of the
categories provided in Section 108(b) of However, in case of retirement or cessation of
the Tax Code; and business, the tax base shall be the acquisition
cost or the current market price of the goods or
Note: The recipient of such services must properties, whichever is lower.
be doing business outside the Philippines.
[CIR v. Burmeister, G.R. No. 153205 In the case of a sale where the gross selling
(2007)] price is unreasonably lower than the FMV, the
actual market value shall be the tax base. The
3. It is paid for in acceptable foreign currency gross selling price is unreasonably lower than
that is accounted for in accordance with the the actual market value if it is lower by more
regulations of the BSP. [CIR v. American than 30% of the actual market value of the
Express International, G.R. No. 152609 same goods of the same quantity and quality
(2005)] sold in the immediate locality on or nearest the
date of sale. [Sec. 4.106-7, RR 16-2005]
In a zero-rated service, the place where the
service is rendered determines the The following are transactions deemed sale:
jurisdiction to impose the VAT. The place of [Sec. 106(B), NIRC]
payment is immaterial; much less is the place a. Transfer, use or consumption not in the
where the output of the service will be further course of business of goods or properties
or ultimately used. [ibid.] originally intended for sale or for use in the
course of business [Sec. 4.106-7(a)(1), RR
16-2005]
Example: when a VAT-registered person

withdraws goods from his business for his
personal use
Page 414 of 494

Note: Transmission of property to a trustee, 6. Zero-rated and Effectively Zero-
if such property is one for sale, lease or use rated sales of goods or properties,
in the ordinary course of trade or business and services
and the transfer constitutes a completed
gift, is subject to VAT as a deemed sale
Rate: 0% VAT
transaction. [Sec. 4.106-3, RR 16-2005]
Concept: A zero-rated sale of goods,
b. Distribution or transfer to:
properties, or services by a VAT-registered
person is a taxable transaction for VAT
(i) shareholders or investors as share in
purposes but shall not result in any output
the profits of the VAT-registered tax. However, the input tax on purchases of
person; or
goods, properties or services, related to such
(ii) creditors in payment of debt. [Sec. zero-rated sale, shall be available as tax credit
4.106-7(a)(2), RR 16-2005]
or refund.
c. Consignment of goods if actual sale is not
The following transactions are subject to VAT
made within 60 days following the date at 0%
such goods were consigned
7) Export sales
8) Sales of goods or property to persons or
Note: Consigned goods returned by the
entities who are tax-exempt (Effectively
consignee within the 60-day period are not Zero-Rated Sales)
deemed sold. [Sec. 4.106-7(a)(3), RR 16-
9) Zero-rated sale of services
2005] 10) Sales to offshore gaming licensees subject
to gaming tax under Section 125-A of NIRC
d. Retirement from or cessation of business
[RA No. 11590]
with respect to goods on hand
Provided that the 0% VAT shall only apply
This covers ALL goods on hand, whether if the OGLs are paying the 5% gaming tax
capital goods, stock-in-trade, supplies or
[RR 20-2021]
materials, as of the date of such retirement
or cessation, whether or not the business
Provided further, that in cases wherein the
is continued by the new owner or goods supplied are used in non-gaming
successor. [Sec. 4.106-7(a)(3), RR 16-
operations, the 0% shall NOT apply.
2005] [RR 20-2021]
Examples: Export Sales [Sec. 106(A)(2)(a), NIRC]
(i) change of ownership of the business
1. The (i) sale and actual shipment of goods
(e.g., when a sole proprietorship from the Philippines to a foreign country
incorporates, or the sole proprietor
AND (ii) paid for in acceptable foreign
sells his entire business) currency or its equivalent in goods or
(ii) dissolution of a partnership and services, AND (iii) accounted for in
creation of a new partnership which
accordance with the rules and regulations
takes over the business of the BSP
2. The (i) sale of raw materials or packaging
materials to a nonresident buyer (ii) for
delivery to a resident local export-oriented
enterprise (iii) to be used in manufacturing,
processing, packing or repacking in the
Philippines of the said buyer's goods AND
(iv) paid for in acceptable foreign currency
Page 415 of 494

AND (v) accounted for in accordance with manufactured, assembled or repacked
the rules and regulations of the BSP products, whether paid for in foreign
3. Sale of raw materials or packaging currency or not [Sec. 4.106-5(a)(4), RR
materials to export-oriented enterprise 16-2005]
whose export sales exceed 70% of total
annual production Notes:
a. Export sales of registered export
Export-oriented enterprise – any traders shall include commission
enterprise whose export sales exceed 70% income.
of the total annual production of the b. The exportation of goods on
preceding taxable year [Sec. 4.106-5(a)(3), consignment shall not be deemed
RR 16-2005] export sales until the export products
consigned are in fact sold by the
4. Those considered export sales under the consignee.
Omnibus Investment Code of 1987, and c. Sales by a VAT-registered supplier to a
other special laws (e.g. Bases Conversion manufacturer/producer whose
& Development Act of 1992) products are 100% exported are
considered export sales. A certification
Considered Export Sales under the to this effect must be issued by the
Omnibus Investment Code (EO 226): Board of Investment (BOI) which shall
a. Philippine port F.O.B. value be good for 1 year unless subsequently
determined from invoices, bills of re-issued [Sec. 4.106-5(a)(4), RR 16-
lading, inward letters of credit, landing 2005]
certificates, and other commercial
documents, of export products 5. The sale of goods, supplies, equipment
exported directly by a registered export and fuel to persons engaged in
producer; OR international shipping or international air
b. Net selling price of export products sold transport operations: Provided, That the
by a registered export producer to goods, supplies, equipment and fuel shall
another export producer, or to an be used exclusively for international
export trader that subsequently exports shipping or air transport operations [as
the same (only when actually exported amended by Train Law; Sec. 2, RR 13-
by the latter) as evidenced by landing 2018]
certificates. a. Limited to goods, supplies,
equipment and fuel to be used in
Constructive Exports (without actual the transport of goods and
exportation): passengers from a port in the
a. Sales to bonded manufacturing Philippines directly to a foreign
warehouses of export-oriented port, or vice versa without docking
manufacturers or stopping at any other port in the
b. Sales to export processing zones [R.A. Philippines unless it is for
7916, R.A. 7922, R.A. 7903 and other unloading passengers and/or
similar export zones]; cargoes originating abroad, or to
c. Sales to registered export traders load passengers and/or cargoes
operating bonded trading warehouses bound for abroad
supplying raw materials in the b. If any portion of such fuel, goods,
manufacture of export products; supplies or equipment is used for
d. Sales to diplomatic missions and other purposes other than that
agencies and/or instrumentalities mentioned, such portion shall be
granted tax immunities, of locally subject to 12% VAT [Sec. 4.106-5,
Page 416 of 494

RR 16-2005 as amended by RR services directly and exclusively used
13-2018] in the registered project or activity.
Note: items (2), (3), and (4) above shall be
subject to the 12% VAT and no longer be “Customs Territory” shall mean the national
considered export sales subject to 0% VAT territory of the Philippines outside of the
rate upon satisfaction of the following proclaimed boundaries of the ECOZONES
conditions: except those areas specifically declared by
1. The successful establishment and other laws and/or presidential
implementation of an enhanced VAT proclamations to have the status of special
refund system that grants refunds of economic zones and/or free ports. [Sec.
creditable input tax within 90 days from 2(g), Rule 1, Part I, RA 7916-IRR]
the filing of the VAT refund application
with the Bureau; and ii) Revenue Regulations (RR) No. 21-2021:
2. All pending VAT refund claims as of "direct and exclusive use in the registered
December 31, 2017 shall be fully paid project or activity" refers to such "raw
in cash by December 31, 2019. materials, supplies, equipment, goods.
packaging materials, services,
The Department of Finance shall establish a including provision of basic
VAT refund center in the BIR and in the BOC infrastructure, utilities, and
that will handle the processing and granting of maintenance, repair and overhaul of
cash refunds of creditable input tax. [Sec. equipment, and other expenditures"
106(A), NIRC] that must be "directly attributable to the
registered project or activity without
Effectively Zero-Rated Sales [Sec. which the registered project or activity
106(A)(2)(b), NIRC] cannot be carried out"
This refers to (i) the local sale of goods and
properties (ii) by a VAT-registered person (iii) iii) RMC No. 24-2022: expenses for
to a person or entity who was granted direct administrative purposes are excluded from
and indirect tax exemption under special laws the definition and that registered export
or international agreement (e.g., PEZA, Asian enterprises should adopt a method for
Development Bank, International Rice allocating local purchases between those
Research Institute). [MAMALATEO; RR 4- used in the registered export enterprise's
2007] registered project or activity and for
administrative purposes.
ECOZONES
If the local purchases are used in both the
Ecozones shall be managed and operated by registered export enterprise's registered
PEZA as a separate customs territory [Sec. 8, project or activity and for administrative
RA 7916 or the “Special Economic Zone Act of purposes and the proper allocation cannot
1995”]. be made, the local purchase will be subject
to the 12% VAT.
Tax Treatment of Sales to and by PEZA-
registered Enterprises [RMC 21-21; RMC Zero Rated Sale of Services [Sec. 108 (B),
24-22]: NIRC]
i) Incentives to Registered Enterprises under
the provisions of CREATE (Rationalization The following services performed in the
of Incentives) include Value-added tax Philippines by a VAT-registered person shall
exemption on importation and VAT zero- be subject to 0% VAT:
rating on local purchases of goods and i) Processing, manufacturing or repacking
goods for other persons doing business
Page 417 of 494

outside the Philippines which goods are Note: Gross receipts of international air or
subsequently exported, where the services shipping carriers doing business in the
are paid for in acceptable foreign currency Philippines derived from transport of
and accounted for in accordance with the passengers and cargo from the Philippines
rules and regulations of the BSP; to another country shall be subject to the
3% percentage tax. [Sec. 118, NIRC]
ii) Services other than those mentioned in the
preceding paragraph, rendered to a person vii) Sale of power or fuel generated through
engaged in business conducted outside the renewable sources of energy such as, but
Philippines or to a nonresident person not not limited to, biomass, solar, wind,
engaged in business who is outside the hydropower, geothermal, ocean energy,
Philippines when the services are and other emerging energy sources using
performed, the consideration for which is technologies such as fuel cells and
paid for in acceptable foreign currency and hydrogen fuels.
accounted for in accordance with the rules
and regulations of the BSP; viii) Services rendered to offshore gaming
licensees subject to gaming tax under
Note: The 0% VAT on services performed in Section 125-A of this Code by service
the Philippines is an exception to the providers, including accredited service
destination principle, which states that providers as defined in Section 27 (G) of
goods and services are taxed only in the this Code [RA 11590]
country where they are consumed. [CIR v.
American Express International, G.R. No. Provided that the 0% VAT shall only apply
152609 (2005)] if the OGLs are paying the 5% gaming tax
[RR 20-2021]
iii) Services rendered to persons or entities
whose exemption under special laws or Provided further, that in cases wherein the
international agreements to which the goods supplied are used in non-gaming
Philippines is a signatory effectively operations, the 0% shall NOT apply.
subjects the supply of such services to 0% [RR 20-2021]
rate;
Note: Items (1) and (5) above shall be subject
iv) Services rendered to persons engaged in to the 12% VAT and no longer be considered
international shipping or international air export sales subject to 0% VAT rate upon
transport operations, including leases of satisfaction of the following conditions:
property for use thereof: Provided, That 1. The successful establishment and
these services shall be exclusively for implementation of an enhanced VAT
international shipping or air transport refund system that grants refunds of
operations [as amended by TRAIN Law]; creditable input tax within 90 days from the
filing of the VAT refund application with the
v) Services performed by subcontractors Bureau; and
and/or contractors in processing, 2. All pending VAT refund claims as of
converting, or manufacturing goods for an December 31, 2017 shall be fully paid in
enterprise whose export sales exceed 70% cash by December 31, 2019. [Sec. 108(B),
of total annual production; NIRC]
vi) Transport of passengers and cargo by

domestic air or sea vessels from the
Philippines to a foreign country [as
amended by TRAIN Law]; and
Page 418 of 494

Difference between Zero-rated and VAT- Note: The VAT-registered person may elect
exempt that the exemption not apply to its sale of goods
or properties or services; provided that the
election made shall be irrevocable for a period
Zero-rated VAT-exempt
of three (3) years from the quarter the election
It is a taxable Not subject to output was made [Sec. 4.109-2, RR 16-2005 as
transaction and result tax amended by RR 13-2018].
in an output tax at
zero-percent Exempt Transactions
The following transactions are exempt from

The input VAT The seller is not VAT: [Sec. 109, NIRC]
attributable to zero- entitled to any input 1. Sale or importation of agricultural and
rated sales may be tax on his purchases marine food products in their original
allowed as tax credits despite the issuance state, livestock and poultry of a kind
or refund. of a VAT invoice or generally used as, or yielding or producing
receipt. foods for human consumption, and
breeding stock and genetic materials
therefor;
Persons engaged in VAT-exempt persons • Products in their original state remain
zero-rated shall register as non- as such even if they have undergone
transactions are VAT taxpayers. Some the simple processes of preparation or
required to register as VAT exempt persons preservation for the market, such as
VAT taxpayers may opt to register as freezing, drying, salting, broiling,
a VAT taxpayer, and roasting, smoking or stripping,
then be subject to including those using advanced
VAT. Eg. Gross technological means of packaging,
annual sale of goods, such as shrink wrapping in plastics,
properties, or services vacuum packing, tetra-pack, and other
that do not exceed similar packaging methods.
PhP3Million (Sec. 109 • Polished and/or husked rice, corn grits,
CC). raw cane sugar and molasses, ordinary
salt, AND COPRA shall be considered
in their original state
7. Value-added Tax-exempt • Livestock or poultry do not include
Transactions fighting cocks, race horses, zoo
animals and other animals generally
VAT-exempt transactions refer to the sale of considered as pets. [Sec. 4.109-
goods or properties and/or services and the 1(B)(1)(a), RR 16-2005]
use or lease of properties that is NOT subject 2. Sale or importation of fertilizers, seeds,
to VAT (output tax) and the seller is not allowed seedlings and fingerlings, fish, prawn,
any tax credit of VAT (input tax) on purchases. livestock and poultry feeds including
[Sec. 4.109-1(A), RR 16-2005] ingredients, whether locally produced or
imported, used in the manufacture of
The person making the exempt sale of goods, finished feeds (except specialty feeds for
properties or services shall not bill any output race horses, fighting cocks, aquarium fish,
tax to his customers. [Sec. 4.109-1(A), RR 16- zoo animals, and other animals generally
2005] considered as pets);
3. Importation of personal and household
effects belonging to (i) Philippine residents
Page 419 of 494

returning from abroad and (ii) non-resident 7. Medical, dental, hospital and veterinary
citizens coming to resettle in the services, except those rendered by
Philippines; provided, that such goods are professionals;
also exempt from customs duties under the a. Laboratory services are exempted. If
Tariff and Customs Code of the the hospital or clinic operates a
Philippines; pharmacy or drugstore, the sale of
4. Importation of professional instruments drugs and medicine is subject to VAT.
and implements, tools of trade, occupation [Sec. 4.109-1(B)(1)(g), RR 16-2005]
or employment, wearing apparel, domestic b. Note: R.A. 9337 removed the VAT-
animals, and personal household effects: exemption previously granted to
a. belonging to persons coming to doctors and lawyers.
settle in the Philippines, or Filipinos 8. Educational services (i) rendered by
or their families and descendants private educational institutions, duly
who are now residents or citizens accredited by DepEd, CHED, TESDA, and
of other countries (i.e., overseas (ii) those rendered by government
Filipinos educational institutions;
b. in quantities and of the class 9. Services rendered by individuals pursuant
suitable to the profession, rank or to an employer-employee relationship;
position of the persons importing 10. Services rendered by regional or area
said items headquarters established in the Philippines
c. for their own use and not for barter by multinational corporations which act as
or sale, supervisory, communications and
d. accompanying such persons, or coordinating centers for their affiliates,
arriving within a reasonable time subsidiaries or branches in the Asia-Pacific
[as amended by TRAIN Law] Region and do not earn or derive income
from the Philippines;
Note: The Bureau of Customs may, upon 11. Transactions which are exempt under
production of satisfactory evidence that international agreements to which the
such persons are actually coming to settle Philippines is a signatory or under special
in the Philippines and that the goods are laws, except those under PD No. 529
brought from their former place of abode, (Petroleum Exploration Concessionaires
exempt such goods from payment of duties under the Petroleum Act of 1949);
and taxes [as amended by TRAIN Law]; 12. Sales by agricultural cooperatives duly
registered with the Cooperative
Exception: Vehicles, vessels, aircrafts, Development Authority (CDA) to their
machineries, and other goods for use in members, as well as sale of their produce,
manufacturing shall be subject to duties, whether it is original state or processed
taxes and other charges. form, to non-members; their importation of
direct farm inputs, machineries and
5. Services subject to percentage tax; (see equipment, including spare parts thereof,
Percentage Tax, infra) to be used directly and exclusively in the
6. Services by agricultural contract growers production and/or processing of their
and milling for others of palay into rice, corn produce;
into grits, and sugar cane into raw sugar; a. Sale by agricultural cooperatives to
1) Agricultural contract growers refer to non-members are exempted from VAT
those producing for others poultry, if the producer is the cooperative itself.
livestock or other agricultural and If not (e.g., trader), then only those
marine food products in their original sales to its members shall be
state. [Sec. 4.109-1(B)(1)(f), RR 16- exempted from VAT. [RR 4-2007]
2005]
Page 420 of 494

13. Gross receipts from lending activities by under RA 7279, and other related
credit or multi-purpose cooperatives duly laws, such as RA 7835 and RA
registered with the CDA; 8763, wherein the price ceiling per
14. Sales by non-agricultural, non-electric and unit is P480,000 for a horizontal
non-credit cooperatives duly registered socialized housing with a minimum
and in good standing with the CDA; floor area of 24sq.m, and P700,000
Provided, that the share capital (if within NCR and nearby areas) or
contribution of each member does not P600,000 (in other areas) for
exceed P15,000 and regardless of the socialized vertical/condominium
aggregate capital and net surplus ratably projects with a minimum floor area
distributed among the members; of 22sq.m. [HUDCC Resolution
a. However, their importation of Nos. 1 and 2, series of 2018]
machineries and equipment, including • Socialized housing refers to
spare parts thereof, to be used by them housing programs and projects
are subject to VAT. [Sec. 4.109- covering houses and lots or
1(B)(1)(n), RR 16-2005] home lots only undertaken by
15. Export sales by persons who are not VAT- the Government or the private
registered; sector for the underprivileged
16. Sale of real properties as follows: and homeless citizens which
a. Sale of real properties NOT shall include sites and services
primarily held for sale to customers development, long-term
or held for lease in the ordinary financing, liberated terms on
course of trade or business. interest payments, and such
b. Sale of real properties utilized for other benefits. [RR 13-2018]
low-cost housing as defined by d. Sale of residential lot valued at
R.A. 7279 (Urban Development P1.5M and below, or house & lot
and Housing Act of 1992) and other and other residential dwellings
related laws (e.g., R.A. 7835, R.A. valued at P2.5M and below, as
8763; adjusted in 2011 using the 2010
• Low-cost housing refers to Consumer Price Index values.
housing projects intended for a. If two or more adjacent
homeless low-income family residential lots are sold or
beneficiaries, undertaken by disposed of in favor of one
the Government or private buyer (even if covered by
developers, which may either separate titles or tax
be a subdivision or a declarations or separate
condominium registered and deeds of conveyance), for
licensed by the Housing and the purpose of utilizing the
Land Use Regulatory Board / lots as one residential lot,
Housing (HLURB) under BP the sale shall be exempt
220, PD 957 or any other from VAT only if the
similar law, wherein the unit aggregate value of the lots
selling price is within the selling does not exceed P1.5M.
price ceiling per unit as set by [RR 13-2018]
the Housing and Urban b. Sale of parking lots shall
Development Coordinating not be considered a sale of
Council (HUDCC). [RR 13- residential lot. Hence, it
2018] shall be subject to VAT
c. Sale of real properties utilized for regardless of its selling
socialized housing as defined price. [RR 13-2012]
Page 421 of 494

d. Unit means an apartment unit in the
Note: Beginning January 1, 2021, case of apartments, house in the case
the VAT exemption shall only apply of residential houses; per person in the
to (i) sale of real properties not case of dormitories, boarding houses
primarily held for sale to customers and bed spaces; and per room in case
or held for lease in the ordinary of rooms for rent. [RR 13-2018]
course of trade or business, (ii) sale 18. Sale, importation, printing or publication of
of real property utilized for books and any newspaper, magazine,
socialized housing as defined by review or bulletin which appears at regular
RA No. 7279, (iii) sale of house and intervals with fixed prices for subscription
lot, and other residential dwellings and sale and which is not devoted
with selling price of not more than principally to the publication of paid
P2,000,000, as adjusted to advertisements;
P3,199,200 in 2011 using the 2010 19. Transport of passengers by international
Consumer Price Index values. carriers; [added by TRAIN Law]
[Sec. 109(1)(P), NIRC, as 1. Note: Transport of cargoes by
amended by TRAIN Law; RR 8- international carriers doing business in
2021] the Philippines is likewise exempt from
17. Lease of residential units with a monthly VAT, but subject to 3% percentage tax
rental per unit not exceeding P15,000; under Sec. 118 of the NIRC.
a. If more than P15,000 but the aggregate 20. Sale, importation or lease of passenger or
rentals of the lessor during the year do cargo vessels and aircraft, including
not exceed P3M, the lease shall be engine, equipment and spare parts thereof
exempt from VAT, but subject to 3% for domestic or international transport
percentage tax. operations;
b. Where a lessor has several residential A. The exemption from VAT on the
units for lease, his tax liability will be as importation and local purchase of
follows: passenger and/or cargo vessels shall
i. Gross receipts from rentals not be subject to the requirements on
exceeding P15,000 shall be restriction on vessel importation and
exempt from VAT and percentage mandatory vessel retirement program
tax regardless of the aggregate of the Maritime Industry Authority
annual gross receipts. (MARINA). [RR 13-2018]
ii. Gross receipts from rentals 21. Importation of fuel, goods, and supplies by
exceeding P15,000 shall be persons engaged in international shipping
subject to VAT IF the aggregate or air transport operations: Provided, That
annual gross receipts from said the fuel, goods, and supplies shall be used
units only exceed P3M. Otherwise, for international shipping or air transport
the gross receipts will be subject to operations [as amended by TRAIN Law];
the 3% tax imposed under Sec. 116 1. The said fuel, goods and supplies shall
of the NIRC. be used exclusively or shall pertain to
c. Residential units refers to apartments the transport of goods and/or
and houses & lots used for residential passengers from a port in the
purposes, and buildings or parts or Philippines directly to a foreign port
units thereof used solely as dwelling without stopping at any other port in the
places (e.g., dormitories, rooms and Philippines, except to unload
bed spaces) except motels, motel passengers and/or cargoes from
rooms, hotels and hotel rooms, lodging abroad or load the same bound for
houses, inns and pension houses. abroad.
Page 422 of 494


2. If any portion of such fuel, goods or coveralls, gown, surgical cap, surgical
supplies is used for any other purpose, mask, N-95 mask, scrub suits, goggles
such portion of fuel, goods and and face shield, double or surgical
supplies shall be subject to VAT. [RR gloves, dedicated shoes, and shoe
13-2018] covers, for COVID-19 prevention; and
22. Services of banks, non-bank financial b. All drugs, vaccines and medical
intermediaries performing quasi-banking devices specifically prescribed and
functions and other non-bank financial directly used for the treatment of
intermediaries (such as money changers COVID-19; and
and pawnshops) subject to percentage tax; c. Drugs for the treatment of COVID-19
[RR 13-2018] approved by the Food and Drug
23. Sale or lease of goods and services to Administration (FDA) for use in clinical
senior citizens and persons with disability, trials, including raw materials directly
as provided under RA Nos. 9994 necessary for the production of such
(Expanded Senior Citizens Act of 2010) drugs: Provided, That the Department
and 10754 (An Act Expanding the Benefits of Trade and Industry (DTI) shall certify
and Privileges of Persons with Disability), that such equipment, spare parts or
respectively [added by TRAIN Law]; raw materials for importation are not
24. Transfer of property pursuant to Section locally available or insufficient in
40 (2) of the NIRC, as amended [added by quantity, or not in accordance with the
TRAIN Law]; quality or specification required:
25. Association dues, membership fees, and Provided, further, That for item (ii),
other assessment and charges collected within sixty (60) days from the
by homeowners association and effectivity of this Act, and every three
condominium corporations [added by (3) months thereafter, the Department
TRAIN Law]; of Health (DOH) shall issue a list of
26. Sale of gold to BSP [added by TRAIN Law]; prescription drugs and medical devices
27. Sale of drugs and medicines prescribed covered by this provision: Provided,
for: finally, That the exemption claimed
a. Diabetes, high cholesterol, and under this subsection shall be subject
hypertension beginning January 1, to post audit by the Bureau of Internal
2020 [TRAIN Law, as amended by RA Revenue or the Bureau of Customs as
11467] may be applicable.
b. Cancer, mental illness, tuberculosis,
and kidney diseases beginning January 29. Sale or lease of goods or properties or the
1, 2021. [RA 11467] performance of services other than the
transactions mentioned in the preceding
Provided, That the DOH shall issue a list of paragraphs, the gross annual sales and/or
approved drugs and medicines for this purpose receipts do not exceed the amount of P3M;
within sixty (60) days from the effectivity of this a. For purposes of the threshold of P3M,
Act. the husband and the wife shall be
[RA 11467] considered separate taxpayers.
However, the aggregation rule (e.g.,
28. Sale or importation of the following combining income from business and
beginning January 1, 2021 to December profession) for each taxpayer shall
31, 2023: apply.
a. Capital equipment, its spare parts and b. The VAT-exempt sales shall NOT be
raw materials, necessary for the included in determining the threshold.
production of personal protective [Sec. 4.109-1(B), RR 16-2005]
equipment components such as
Page 423 of 494

30. Self-employed individuals and [RA 11469; RR 6-2020]
professionals availing of the 8% tax on 33. In case of foreign donation, the importation
gross sales and/or receipts and other non- of personal computers, laptops, tablets, or
operating income, under Sections similar equipment by the DepEd, CHED,
24(A)(2)(b) and 24(A)(2)(c)(2)(a) of the TESDA
NIRC [RR 13-2018].
31. Importation of critical or needed healthcare Provided, that if the importer/consignee is
equipment or supplies intended to combat other than the abovementioned agencies,
the COVID-19 public health emergency in order for the imported articles to be
including PPE (i.e., gloves, gowns, masks, exempt from VAT, the importer should
goggles, face shields, surgical equipment present a Deed of Donation duly accepted
and supplies; laboratory equipment and its by the abovementioned agencies.
reagents; medical supplies, tools, and [RA 11494; RR 26-2020]
consumable (i.e., alcohol, sanitizers,
tissue, thermometers, hand soap, 34. In the case of local donation where the
detergent, sodium hydrochloride, cleaning personal computers, laptops, tablets, or
materials, povidone iodine, common similar equipment are originally intended
medicines (e.g., paracetamol tablet and for sale or for use in the course of business
suspension, mefenamic acid, vitamins by the donor
tablet and suspension, hyoscine tablet and [RA 11494; RR 26-2020]
suspension, oral rehydration solution, and
cetirizine tablet and suspension; testing Note: Any input tax VAT attributable to the
kits, and such other supplies or equipment purchase of donated personal computers,
as may be determined by the DOH and laptops, tablets, or similar equipment not
other government agencies previously claimed as input tax shall be
[RA 11469; RR 6-2020] creditable against any output tax. The above
32. Importation of material needed to make rules shall also apply to donations by
health equipment and supplies deemed as ECOZONE locators to the abovementioned
critical or needed to address COVID-19 agencies. [RA 11494; RR 26-2020]
public health emergency
SUMMARY OF VAT-EXEMPTIONS [SEC. 109, NIRC]
1 Of agricultural and marine products in their original state

Of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock
Sale or importation
and poultry feeds.
2
Exception: specialty feeds for race horses, fighting cocks, aquarium
fish, zoo animals, and other animals generally considered pets.
Of personal and household effects belonging to (i) residents of the
3 Philippines returning from abroad and (ii) nonresident citizens coming
to resettle in the Philippines
Importation Of professional instruments and implements, tools of trade, occupation
or employment, wearing apparel, domestic animals and personal
4
household effects, belong to persons coming to settle in the Philippines
or overseas Filipinos for their own use and not for barter or sale.
5 Services Subject to percentage tax
Page 424 of 494

By agricultural contract growers and milling for others of palay into rice,
6
corn into grits and sugarcane into raw sugar
Medical, dental, hospital and veterinary services

7
Exception: those rendered by professionals
Educational services rendered by private educational institutions duly

8 accredited by DepEd, CHED, and TESDA, and those rendered by
governmental educational institutions
9 Rendered pursuant to an employer-employee relationship
10 Rendered by a RAHQ established in the Philippines
Transactions exempt under international agreements or special laws,

11 Others
except those under PD 529 (Petroleum concessionaires)
Sales By agricultural cooperatives duly registered with the CDA

12
By agricultural cooperatives of direct farm inputs, machineries and
Importation
equipment
Gross receipts from lending activities by credit or multi-purpose

13 Services
cooperatives duly registered with the CDA
By non-agricultural, non-electric, and non-credit cooperatives duly

14 Sales registered with the CDA. Provided, the share capital contribution of
each member does not exceed P15,000
15 Export sales By persons who are not VAT-registered

Of real property not primarily held for sale to customers or held for lease
in the ordinary course of business, or real property for low-cost and
16 Sales socialized housing, residential lot valued at P1.5M and below and
house and lot and other residential dwellings valued at P2.5M and
below
17 Lease Of a residential unit with a monthly rental not exceeding P15,000
Sale, importation, Of books and any newspaper, magazine, review or bulletin which
18 printing, or appears at regular intervals with fixed prices for subscription and sale
publication and is not devoted principally to publication of paid advertisements
19 Services Transport of passengers by international carriers

Of passenger or cargo vessels and aircraft, including engine,
Sale, importation,
20 equipment and spare parts thereof for domestic or international
or lease
transport operations
Page 425 of 494

Of fuel, goods, and supplies by persons engaged in international

21 Importation
shipping or air transport operations
Of banks, non-bank financial intermediaries performing quasi-banking

22 Services
functions and other non-bank financial intermediaries
23 Sale or lease Of goods and services to senior citizens and persons with disability
Of property pursuant to Section 40(C)(2) of the NIRC (tax free

24 Transfer
exchanges)
Association dues, membership fees, and other assessments and

25 Others charges collected by homeowners associations and condominium
corporations
26 Sale Of gold to BSP

Sale of drugs and medicines prescribed for:
i) Diabetes, high cholesterol, and hypertension beginning
January 1, 2020
ii) Cancer, mental illness, tuberculosis, and kidney diseases
27 Sale beginning January 1, 2021
Provided, That the DOH shall issue a list of approved drugs and
medicines for this purpose within sixty (60) days from the effectivity of
this Act.
Beginning January 1, 2021 to December 31, 2023:
(i) Capital equipment, its spare parts and raw materials, necessary for
the production of personal protective equipment components for
COVID-19 prevention
28 Sale or Importation
(ii) All drugs, vaccines and medical devices specifically prescribed and
directly used for the treatment of COVID-19; and
(iii) Drugs for the treatment of COVID-19 approved by the FDA for use
in clinical trials
Sale or lease or
Other than the transactions mentioned in the preceding paragraphs, the
29 performance of
gross annual sales and/or receipts do not exceed the amount of P3M
services
Self-employed individuals and professionals availing of the 8% tax on

Individuals
30 gross sales and/or receipts and other non-operating income, under
Availing 8% tax
Sections 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of the NIRC.
Importation of critical or needed healthcare equipment or supplies

31 Importation intended to combat the COVID-19 public health emergency
[RA 11469; RR 6-2020]
Importation of material needed to make health equipment and supplies

32 Importation deemed as critical or needed to address COVID-19 public health
emergency [RA 11469; RR 6-2020]
Page 426 of 494

In case of foreign donation, personal computers, laptops, tablets, or
similar equipment by the DepEd, CHED, TESDA
If the importer/consignee is other than the abovementioned agencies,

33 Importation
in order for the imported articles to be exempt from VAT, the importer
should present a Deed of Donation duly accepted by the
abovementioned agencies.
[RA 11494; RR 26-2020]
In case of local donation where the personal computers, laptops,
tablets, or similar equipment are originally intended for sale or for use
34 Importation
in the course of business by the donor
[RA 11494; RR 26-2020]
8. Input and Output Tax 3. Purchase of services in which VAT has

actually been paid
a. Definitions 4. Transactions deemed sale
5. Transitional Input Tax [Sec 111(A),
Input tax – the VAT due from or paid by a VAT- NIRC]
registered person on importation of goods or
local purchase of goods, properties, or Who may avail of transitional input tax:
services, including lease or use of properties, 1. A person who becomes VAT-liable for the
in the course of his trade or business [Sec. first time upon exceeding P3M in any 12-
110(A)(3), NIRC] month period, or
2. any person who voluntarily registers even
Output tax – the VAT due on the sale or lease if their turnover does not exceed P3M
of taxable goods or properties or services by (except franchise grantees of radio and
any person registered or required to register television broadcasting whose threshold is
under Section 236 of the NIRC [Sec. 110(A)(3), P10M) [Sec. 4.111-1(a), RR 16-2005]
NIRC]
Transitional Input VAT credit:
b. Sources of Input Tax Whichever is higher of:
1. two percent (2%) of the value of the
1. Purchase or Importation of Goods beginning inventory on hand, OR
(evidenced by VAT invoice/receipt) 2. actual VAT paid on such goods,
a. For sale; or materials and supplies.
b. For conversion into or intended to
form part of a finished product for Note: A real estate dealer is entitled to
sale including packaging materials; claim transitional input VAT on its
or beginning inventory based on the value of
c. For use as supplies in the course of the entire real property, including the
business; or improvements thereon, regardless of
d. For use as materials supplied in the whether there was prior payment of VAT on
sale of service; or the purchase of such real property. [Fort
e. For use in trade or business for Bonifacio Development Corp. v. CIR, G.R.
which deduction for depreciation or Nos. 158885 and 170680 (2009)]
amortization is allowed under the
NIRC. 6. Presumptive Input Tax [Sec. 111(B),
2. Purchase of real properties for which NIRC]
VAT has actually been paid
Page 427 of 494


Who may avail: Persons or firms engaged Claims for input tax on depreciable goods
in the:
1. processing of (i) sardines, (ii) mackerel Where a VAT-registered person purchases or
and (iii) milk, and imports capital goods, which are depreciable
2. manufacturing (i) refined sugar, (ii) assets for income tax purposes, the aggregate
cooking oil and (iii) packed noodle acquisition cost of which (excluding VAT) in a
based instant meals calendar month exceeds P1,000,000,
regardless of the acquisition cost of each
Rate and basis: 4% of the gross value in capital good:
money of their purchases of primary 1. If the estimated useful life is 5 years or
agricultural products which are used as more – the input tax shall be spread evenly
inputs to their production [Sec. 111(B), over the month of acquisition and the 59
NIRC] succeeding months (i.e., 60 months) and
the claim for input tax credit will start in the
“Processing” means pasteurization, month of acquisition
canning and activities which through 2. If the estimated useful life is less than 5
physical or chemical process alter the years – the input tax shall be spread over
exterior texture or form or inner substance such a shorter period by dividing the input
of a product in such manner as to prepare tax by the actual number of months
it for special use to which it could not have comprising the estimated useful life [Sec.
been put in its original form or condition. 4.110-3, RR 16-2005]
[Sec. 111(B), NIRC]
Notes:
c. Persons Who Can Avail of Input Tax 1. If the aggregate acquisition cost does not
Credit exceed P1,000,000, the total input taxes
will be allowable as credit against output
Input tax on domestic purchase or tax in the month of acquisition.
importation of goods or properties shall be 2. If the depreciable capital good is
creditable: sold/transferred within 5 years or prior to
a. To the importer upon payment of the VAT the exhaustion of the amortizable input tax,
prior to the release of the goods from the entire unamortized input tax can be
customs custody; claimed as input tax credit during the
b. To the purchaser of domestic goods or month/quarter when the sale or transfer
properties upon consummation of sale; or was made. [Sec. 4.110-3, RR 16-2005]
c. To the purchaser of services or the lessee 3. The amortization of the input VAT shall only
or licensee upon payment of the be allowed until December 31, 2021 after
compensation, rental, royalty or fee. [Sec. which taxpayers with unutilized input VAT
4.110-2, RR 16-2005] on capital goods purchased or imported
shall be allowed to apply the same as
d. Input Tax on Depreciable Goods scheduled until fully utilized
Capital goods or properties Claiming of input tax on motor vehicles

1. Goods or properties with estimated useful subject to the following conditions:
life greater than one (1) year; a. Purchase of vehicle must be substantiated
2. Treated as depreciable assets under Sec. with official receipts or other adequate
34(F) of the NIRC; and records;
3. Used directly or indirectly in the production b. Taxpayer has to prove the direct
or sale of taxable goods or services. [Sec. connection of the motor vehicle to the
16, RR 4-2007] business;
Page 428 of 494


c. Only one vehicle for land transport is d. No depreciation shall be allowed for
allowed for the use of an official/employee yachts, helicopters, airplanes [Sec. 3, RR
with value not exceeding P2.4 million; 12-2012]
ILLUSTRATION: CLAIMS FOR INPUT TAX ON DEPRECIABLE GOODS

[RR 13-2018]
(1) ABC Corporation sold capital goods on installment on October 1, 2018. It is agreed that the selling
price, including the VAT, shall be payable in 5 equal monthly installments with the first installment to
be paid on October 1, 2018. The data pertinent to the sold assets are as follows:
Selling Price 5,000,000 (exclusive of VAT)
Passed on VAT 600,000
Original Cost of Asset 3,000,000
Accumulated Depreciation 1,000,000
Unutilized Input Tax (Sold Asset) 100,000
Accounting:
SELLER BUYER
October 1, 2017 October 1, 2017
Cash [(P5M + 600k)/5] P1,120,000 Asset P5,000,000
Installment Receivable 4,480,000 Input Tax* 600,000

[(P5M+600k)-1.12M]
Accumulated Depreciation 1,000,000 Cash 1,120,000
Output Tax (12% x 600,000 Installment Payable 4,480,000

P5M)
Asset 3,000,000
Gain on sale of set 3,000,000
To record VAT liability:
Output Tax 600,000
Input Tax 100,000
VAT Payable 500,000
Periodic receipt of installment Periodic receipt of installment
Page 429 of 494

Cash 1,120,000 Installment 1,120,000

Payable
Installment Receivable 1,120,000 Cash 1,120,000

* The input tax of P600,000.00 shall be spread evenly over a period of 60 months starting on October
2018 or the month of purchase.
If the depreciable capital good is sold/transferred within a period of 5 years or prior to the exhaustion
of the amortizable input tax thereon, the entire unamortized input tax on the capital goods
sold/transferred can be claimed as input tax credit during the month/quarter when the sale or transfer
was made.
(2) A manufacturer purchased capital goods on different occasions as follow :
Month of Amount 12% Input Useful Life No. of Last Month of

Purchase Tax Monthly Amortization
Amortization
January 2018 P8,500,000 P1,020,000 6 Years 60 December

2022
February 2018 P8,500,000 P1,020,000 4 Years 48 January 2022
December P10,000,000 P1,020,000 5 Years 60 November

2018 2022
January 2018 P10,000,000 P1,020,000 5 Years - *Outright claim

on January
2022
a. For purchase made in January 2018, the amortization shall be for the shorter period of 5 years
only or up to December 2022 although the useful life is 6 years.
b. For purchase made in February 2018, the amortization shall be for a period of 4 years only or
up to January 2022 since the useful life of the asset is shorter than 5 years.
c. For purchase made in December 2021, the amortization shall be for the period of 5 years or
up to November 2026.
d. For purchase made in January 2022, no amortization shall be made and the input VAT shall
be claimed on the month of purchase or January 2022
9. Tax Refund or Tax Credit amount indicated in the invoice or receipt

by 12%.
Output VAT – Input VAT = VAT Payable "#$%#$ '() = +,-.. /011234 5,260
or Excess input VAT × '() 89$0
Determination of output tax 2. Output VAT in a sale of services shall be

[Sec. 4.110-6, RR 16-2005] computed by multiplying the total amount
1. Output VAT in a sale of goods/properties indicated in the invoice or receipt by 12%.
shall be computed by multiplying the total
Page 430 of 494

"#$%#$ '() = +,-.. 80602%$. Allocation of input tax on mixed
× '() 89$0 transactions
3. Where VAT is erroneously billed in the A VAT-registered person who is also engaged
invoice, the total invoice amount shall be in transactions not subject to VAT shall be
presumed to be comprised of the gross allowed tax credit as follows:
selling price or gross receipts plus the a. All input taxes directly attributable to
correct amount of VAT. Hence, the output transactions subject to VAT may be
tax is computed as follows: recognized for input tax credit. Input taxes
directly attributable to VAT taxable sales to
"#$%#$ '() the Government, including GOCCs, shall
<=% not be credited against output taxes arising
= )-$91 23:-260 9;-#3$ ×
<<=% from sales to non-government entities.
b. If any input tax cannot be directly attributed
Determination of input tax creditable to either a VAT taxable or VAT-exempt
a. Add all input tax creditable to a VAT- transaction, the input tax shall be pro-rated
registered person during the taxable month to the VAT taxable and VAT-exempt
or quarter and any excess input tax carried transactions and ONLY the ratable portion
over from the preceding month or quarter. pertaining to transactions subject to VAT
b. The sum shall be reduced by the amount of may be recognized for input tax credit.
claim for VAT refund or credit (whether filed [Sec. 4.110-4, RR 16-2005]
with the BIR, the Department of Finance,
the BOI or the BOC) and other
adjustments, such as purchase returns or
allowances and input tax attributable to
exempt sale. [Sec. 4.110-5, RR 16-2005]
ILLUSTRATION: ALLOCATION OF INPUT TAX ON MIXED TRANSACTIONS

[Sec. 4.110-4, RR 16-2005, as amended by RR 4-2007]
ERA Corporation has the following sales during the month:
Sale to private entities subject to 12% 100,000
Sale to private entities subject to 0% 100,000
Sale of exempt goods 100,000
Sale to government subjected to 5% final withholding VAT 100,000
Total sales for the month 400,000
The following input taxes were passed on by its VAT suppliers:

Input tax on taxable goods (12%) 5,000
Input tax on zero-rated sales 3,000
Input tax on sale of exempt goods 2,000
Input tax on sale to government 4,000
Page 431 of 494

Not attributable to any specific activity (monthly amortization for 60 months) 20,000
The creditable input tax for the month shall be computed as follows:
Input tax on sale subject to 12% 5,000
Ratable portion of the input tax not directly attributable to any activity:
!"#"$%& ("%&( (*+%)

!./"% 0"%&(
× ?@ABCD AE FCGBD DHI CAD JFKLMDNO HDDKFPBDHPNL DA HCO HMDFQFDO
100,000
× 20,000 = 5,000
400,000
Total input tax attributable to sales to private entities for the month: 10,000.00
The input tax attributable to zero-rated sales for the month shall be computed as follows:
Input directly attributable to zero-rated sale P 3,000
1&2. 2"/&3 ("%&(

!./"% 0"%&(
100,000
× 20,000 = 5,000
400,000
Total input tax attributable to zero-rated sales for the month: 8,000
The input tax attributable to VAT-exempt sales for the month shall be computed as follows:
Input tax on VAT-exempt sales - 2,000
45! &#&67/ ("%&(

!./"% 0"%&(
100,000
× 20,000 = 5,000
400,000
Total input tax attributable to VAT-exempt sales: 7,000
The input tax attributable to sales to government for the month shall be computed as follows:
Input tax on sale to gov’t. P 4,000
!"#"$%& ("%&( /. /8& 9.:&2;6&;/

!./"% 0"%&(
100,000
× 20,000 = 5,000
400,000
Page 432 of 494

Total input tax attributable to sales to government: 9,000
Determination of the VAT payable or excess e. Transitional input tax – inventory of

tax credits goods as shown in a detailed list to be
submitted to the BIR
If at the end of any taxable month or quarter: f. Input tax on "deemed sale" transactions
a. The output tax exceeds the input tax, the – required invoice
excess shall be paid by the VAT-registered g. Input tax from payments made to non-
person residents (such as for services, rentals
b. The input tax exceeds the output tax, the and royalties) – copy of the Monthly
excess shall be carried over to the Remittance Return of VAT Withheld (BIR
succeeding quarter or quarters. However, Form 1600) filed by the resident payor in
any input tax attributable to zero-rated behalf of the non-resident evidencing
sales may be refunded or credited. [Sec. remittance of VAT due which was withheld
110(B), NIRC] by the payor
h. Advance VAT on sugar – Payment Order
Illustration: showing payment of the advance VAT
For a given taxable quarter ABC Corp. has
output VAT of 100 and input VAT of 80. Since Who May Claim for Refund/Apply for
output tax exceeds the input tax for such Issuance of Tax Credit Certificate
taxable quarter, all of the input tax may be
utilized to offset against the output tax. Thus, a. Zero-Rated Sales [Sec. 112(A), NIRC]
the VAT payable is 20.
Requirements:
Substantiation of Input Tax Credits A claim for refund or tax credit for unutilized
input VAT may be allowed only if the following
Input taxes must be substantiated and requisites concur, namely:
supported by the following documents, and 1. the taxpayer is VAT-registered;
must be reported in the information returns 2. the taxpayer is engaged in zero-rated or
required to be submitted to the BIR: effectively zero-rated sales;
a. Importation of goods – import entry or 3. the input taxes are due or paid;
other equivalent document showing actual 4. the input taxes are not transitional input
payment of VAT on the imported goods taxes;
b. Domestic purchase of goods and 5. the input taxes have not been applied
properties – invoice showing the against output taxes during and in the
information required under Secs. 113 succeeding quarters;
(Invoicing Requirements) and 237 6. the input taxes claimed are attributable to
(Issuance of Receipts or Invoices) of the zero-rated or effectively zero-rated sales;
NIRC 7. for zero-rated sales under Section
c. Purchase of real property – public 106(A)(2)(a)(1) and (3) and 108(B)(1) and
instrument, i.e., deed of absolute sale, (2), the acceptable foreign currency
deed of conditional sale, exchange proceeds have been duly
contract/agreement to sell, etc., together accounted for in accordance with the rules
with VAT invoice issued by the seller and regulations of the BSP;
d. Purchase of services – official receipt 8. where there are both zero-rated or
showing the information required under effectively zero-rated sales and taxable or
Secs. 113 and 237 of the NIRC exempt sales, and the input taxes cannot
be directly and entirely attributable to any
of these sales, the input taxes shall be
Page 433 of 494

proportionately allocated on the basis of were made. The judicial claim may be
sales volume; and made beyond the two-year period [CIR v.
9. the claim is filed within two (2) years after San Roque Power Corporation, G.R.
the close of the taxable quarter when such 187485 (2013)]
sales were made. [Luzon Hydro
Corporation v. CIR, G.R. No. 188260 Note: Distinguish this process for
(2013); Sec. 4.112-1, RR 16-2005] claiming refund of unutilized input tax
credits from the claim for refunds of
b. Cancelled VAT Registration [Sec. erroneous tax payments under
112(B), NIRC] Sec. 229 of the NIRC, where the
administrative and judicial claims must
1. A VAT-registered person whose be made within the 2-year period from
registration has been cancelled due to (i) the date of payment.
retirement from or cessation of business, or
due to changes in or (ii) cessation of status b. The CIR shall act on the claim for
under Section 106(C) of the NIRC may, refund within 90 days from the date of
within two (2) years from the date of submission of complete documents in
cancellation, apply for the issuance of a tax support of the application.
credit certificate for any unused input tax
which may be used in payment of his other Note: Prior to January 1, 2018, all
internal revenue taxes. claims for refund or tax credit will be
2. The taxpayer shall be entitled to a refund if governed by the 120-day processing
he has no internal revenue tax liabilities period.
against which the tax credit certificate may
be utilized. c. Should the CIR find that the grant of
3. The date of cancellation shall be the date refund is not proper, the CIR must state
of issuance of tax clearance by the BIR, in writing the legal and factual basis for
after full settlement of all tax liabilities. the denial.
4. The filing of the claim shall be made only
after completion of the mandatory audit of Judicial Claim [Sec 112 (C), par. 2, NIRC]
all internal revenue tax liabilities covering
the immediately preceding year and the a. In case of full or partial denial of the claim
short period return and the issuance of the for tax refund, the taxpayer may appeal to
applicable tax clearance/s. [RR 13-2018] the CTA within 30 days from the receipt of
decision.
Period to File Claim/Apply for Issuance of b. The 30-day period to appeal is both
Tax Credit Certificate mandatory and jurisdictional.
Administrative Claim [Sec 112(C), par. 1, Exception: Premature filing is allowed only if
NIRC] filed between 10 December 2003 and 5
a. The claim must be filed within 2 years after October 2010, when BIR Ruling No. DA-489-
the close of the taxable quarter when the 03 was still in force. [CIR v. San Roque Power
sales were made (or 2 years from the date Corporation, G.R. 187485 (2013)]
of cancellation of registration). [Sec. 112(A)
and (B), NIRC] Effect of inaction by the CIR
Note: It is only the administrative claim that Failure on the part of any official, agent, or
must be filed within the two-year period, employee of the BIR to act on the application
which must be reckoned from the close of within the 90-day period shall be punishable
the taxable quarter when the relevant sales under Section 269 of the NIRC (Violations
Page 434 of 494

Committed by Government Enforcement Note: VAT is paid on a monthly basis.
Officers). [Sec. 112(C), NIRC] Payments in the monthly VAT declarations
shall be credited in the quarterly VAT return to
Note: The provision on the appeal of the CIR’s arrive at the net VAT payable or excess input
failure to act on the application for refund or tax tax/overpayment as of the end of a quarter.
credit was removed by the TRAIN Law. [Sec. 4.114-1(A), RR 16-2005]
Exclusive appellate jurisdiction of CTA
The CTA has exclusive appellate jurisdiction to

review by appeal the inaction by the CIR in
cases involving disputed assessments, refunds
of internal revenue taxes, fees or other
charges, penalties in relations thereto, or other
matters arising under the NIRC or other laws
administered by the BIR, where the NIRC
provides a specific period of action, in which
case the inaction shall be deemed a denial.
[Sec. 7(a)(2), R.A. 1125 as amended by R.A.
9282]
Manner of Refund
Refunds shall be made upon warrants drawn

by the CIR or by his duly authorized
representative without the necessity of being
countersigned by the Chairman of the
Commission on Audit (COA), provided that
refunds shall be subject to post audit by COA.
[Sec. 112(D), NIRC]
10. Filing of Returns and Payment
Procedure
1. Every person liable to pay VAT shall file a
quarterly return of the amount of his gross
sales or receipts within 25 days after the
close of each taxable quarter prescribed for
each taxpayer.
2. The monthly VAT Declarations of
taxpayers whether large or non-large shall
be filed and the taxes paid not later than
the 20th day following the end of each
month.
3. Beginning January 1, 2023, the filing of
return and payment of VAT shall be done
within 25 days following the close of each
taxable quarter. [Sec. 114(A), NIRC as
amended by TRAIN Law; Sec. 4.114-1(A),
RR 16-2005]
Page 435 of 494
VAT FORMULA (IN GENERAL)

Actual Sales/Receipts xxx
Add: Excise Tax xxx
Remaining Merchandise (Cessation of VAT-registered Status) xxx
Transactions Deemed Sale xxx xxx
Less: Sales Returns and Allowances xxx

Sales Discounts xxx xxx
Total Sales (Taxable Base) xxx

Multiplied by 12% 12%
Output VAT on sales or gross receipts xxx
Less: Allowable Input Tax:
Input VAT on current purchases/importations/services xxx
Input VAT on sales to nonresidents xxx
Input VAT on capital goods exceeding P1M
(deferred from prior period) xxx
(from current period) xxx
Transitional Input VAT, if applicable xxx
Presumptive Input VAT, if applicable xxx
Input VAT Carry-over from previous period xxx
Total available input tax xxx
Less: Input tax on capital goods exceeding P1M xxx
deferred to next period
Input tax on exempt sales xxx
Input tax subject to VAT refund/TCC xxx xxx
Net VAT payable xxx
Less: Tax Credits/Payments:
Creditable VAT withheld xxx
Advance payments xxx
VAT paid in return previously filed xxx xxx
VAT Still Payable (Overpayment) xxx
Page 436 of 494


Illustration of the VAT System
VAT System (All VAT)

Raw Material (VAT) Manufacturer (VAT) Trader (VAT) End-User
SP (100+12) 100 112 SP (300 + 36). 300 336 SP (450 +54) 450 504
Cost 50 Cost (100 + 12) 100 112 Cost (300+36) 300 336
Profit 50 Profit 200 Profit 150
Purchase 112 Purchases 336 Purchases 504

Input VAT 12 12% VAT 36 12% VAT 54
OT 12% 12 OT 12% 36 OT 12% 54

IT 0 IT 12 IT 36
VAT Payable 12 Vat Payable 24 VAT Payable 18
VAT to BIR 12 VAT to BIR 24 VAT to BIR 18 Total VAT 54
VAT System (VAT Exempt 1st chain)

Raw Material Manufacturer Trader End-User
(VAT Exempt)
SP (100+ 0) 100 SP (300 + 36) 300 336 SP (450 +54) 450 504
Cost 50 Cost (100) 100 Cost (300+36) 300 336

Input VAT 0 12% VAT 36 12% VAT 54
OT 0 OT 12% 36 OT 12% 54
IT 0 IT 0 IT 36
Page 437 of 494


VAT System (VAT Exempt mid-chain)
(VAT Exempt)
SP (100+12) 100 112 SP (300) 300 SP (450 +54) 450 504

Cost 50 Cost (100+12) 100 112 Cost (300) 300

No Input VAT 0 No VAT 0 12% VAT 54
OT 12% 12 OT 0 OT 12% 54
IT 0 IT 0 IT 0
VAT System (VAT zero-rate mid-chain)

(VAT Zero-rated)
SP (100+12) 100 112 SP (300+ 0) 300 SP (450 +54) 450 504

Cost 50 Cost (100 + 12) 100 112 Cost (300) 300

No Input VAT 12 No VAT 0 12% VAT 54
OT 12% 12 OT 12% 0 OT 12% 54

IT 0 IT 12 IT 0
VAT Payable 12 Vat Payable (12) VAT Payable 54
VAT to BIR 12 VAT to BIR (12) VAT to BIR 54 Total VAT 54
Page 438 of 494

B. Tax Remedies Under The General Rule: The issuance of an LOA is a
mandatory statutory requirement. [Sec. 13,
NIRC NIRC]
1. Assessment of Internal Revenue Any tax assessment issued without an LOA is

Taxes a violation of the taxpayers’ right to due
process and is therefore “inescapably void.”
Definition [RMC 75-2018; Medicard Philippines, Inc. v.
To assess means to impose a tax; to fix or CIR, G.R. No. 222743 (2017)]
settle a sum to be paid by way of tax; to settle
determine or fix the amount of tax to be paid Exception: The following cases need not be
(84 C.J.S 749-750) covered by a valid LOA:
1. Cases involving civil or criminal tax
An assessment is the notice to the effect that fraud which fall under the jurisdiction of
the amount therein stated is due from a the Tax Fraud Division of the
taxpayer as a tax with a demand for payment Enforcement Services, and
of the same within a stated period of time. [CIR 2. Policy cases under audit by the special
v. CTA, G.R. No. L-21483 (1969)] teams in the National Office. [RMO 36-
99]
Presumption of correctness
An assessment is presumed correct and made Letter of Authority vs. Letter Notice
in good faith in the performance of official
duties and failure to present proof of error will A Letter Notice (LN) is not found in the NIRC
prosper such assessment. [Atlas Consolidated and is not an authority to conduct an audit. The
Mining and Development Corp. v. CA, G.R. No. LN is merely a notice to the taxpayer that a
104151 and 105563 (1995)]. discrepancy is found based on the BIR’s third
party information data matching programs.
a. Procedural Due Process in Tax Thus, an LOA must still be secured before
Assessments proceeding with the further examination and
assessment of the taxpayer. [Medicard
[Sec. 228, NIRC; RR 12-99, as amended by Philippines, Inc. v. CIR, G.R. No. 222743
RR 18-13, RR 7-18, and RR 22-2020) (2017)]
Letter of Authority and Tax Audit Tax audit
Letter of Authority (LOA): A Letter of It is the process of examining, going over or

Authority (LOA) is the authority given to the scrutinizing the books and records of the
appropriate revenue officer to conduct the taxpayer to ascertain the correctness of the tax
assessment function. It empowers the revenue declared and paid by the taxpayer.
officer to examine the books of accounts and
other accounting records of the taxpayer for the There must be a grant of authority before any
purpose of collecting the correct amount of tax. revenue officer can conduct an examination or
[Republic v Robiegie Corporation, G.R. No. assessment. Equally important is that the
260261(2022)] revenue officer so authorized must not go
beyond the authority given. In the absence of
The LOA is premised on the power of the CIR such an authority, the assessment or
himself to investigate. Pursuant to Sec 6(A) of examination is a nullity. [CIR v. Sony
the NIRC, unless authorized by the CIR or his Philippines, Inc., G.R. No. 178697 (2010)]
representative, the investigation of a taxpayer
cannot ordinarily be undertaken. (ibid) Note: A Revenue Officer is allowed only 120
days from the date of receipt of an LOA by the
taxpayer to conduct the audit and submit the
Page 439 of 494

required report of investigation. If the Revenue If the taxpayer disagrees with the
Officer is unable to submit his final report of discrepancies during the audit/investigation, it
investigation within the 120-day period, he is during the Discussion of Discrepancy that
must then submit a progress report to his Head the taxpayer is given the opportunity to present
of Office, and surrender the LOA for his/her side of the case and explain the
revalidation. discrepancy found during the investigation of
the Revenue Officer assigned and submit
Re-assignment/Transfer of Revenue documents to support his/her explanation or
Officers arguments.
Reassigning or transferring revenue officers The “Discussion of Discrepancy” shall in no

originally named in the LOA and substituting case extend beyond 30 days from receipt of the
them with new revenue officers to continue the notice of discrepancy. The taxpayer must
audit or investigation without a separate or submit all necessary documents that supports
amended LOA (i) violates the taxpayer's right his explanation within 30 days after receipt of
to due process in tax audit or investigation; (ii) the Notice of Discrepancy.
usurps the statutory power of the CIR or his
duly authorized representative to grant the Should the taxpayer need more time to present
power to examine the books of account of a the documents, he may submit such
taxpayer; and (iii) does not comply with existing documents after the discussion.
BIR rules and regulations, particularly RMO
No. 43-90 dated September 20, 1990. [CIR v. If after being afforded the opportunity to
McDonald’s Philippine Realty Corporation, present his side through the Discussion of
G.R. No. 242670 (2021)] Discrepancy, it is still found that the taxpayer is
still liable for deficiency tax or taxes and the
Any reassignment/transfer of cases requires taxpayer does not address the discrepancy
the issuance of a new LOA. Assessment made through payment of the deficiency taxes or the
by new RO without a valid LOA is invalid. taxpayer does not agree with the findings, the
(Republic v Robiegie, supra) investigating office, shall endorse the case to
the reviewing office and approving official in the
Notice of Discrepancy (NOD) National Office or the Revenue Regional
Office, for issuance of a deficiency tax
[RR 22-2020] assessment in the form of a Preliminary
Assessment Notice within ten (10) days from
If a taxpayer is found to be liable for deficiency the conclusion of the Discussion.
tax or taxes in the course of an investigation
conducted by a Revenue Officer, the taxpayer Issuance of Preliminary Assessment
shalt be informed through a Notice of Notice (PAN)
Discrepancy. The Notice of Discrepancy aims
to fully afford the taxpayer with an opportunity General rule: A PAN shall be issued if it is
to present and explain his side on the determined that there exists sufficient basis to
discrepancies found. assess the taxpayer for any deficiency tax. It
shall show in detail the facts and the law on
The Revenue Officer who audited the which the proposed assessment is based.
taxpayer’s records shall state in his report,
among others, his findings of discrepancies. Exceptions to the issuance of a PAN
The taxpayer shall be informed in writing of the The NIC and the PAN shall not be required in
discrepancies in his/her payment of internal any of the following cases, in which case, a
revenue taxes, for the purposes of “Discussion Formal Letter of Demand and Assessment
of Discrepancy”. Notice (FLD/FAN) shall be issued outright:
Discussion of Discrepancy (DOD) ● The finding for any deficiency tax is the
result of mathematical error in the
Page 440 of 494

computation of the tax as appearing on 1. fails to respond to a PAN within the
the face of the return; or prescribed period of time, or
● A discrepancy has been determined 2. whose reply to the PAN was found to be
between the tax withheld and the without merit.
amount actually remitted by the
withholding agent; or Contents of the FLD/FAN
● A taxpayer who opted to claim a refund
or tax credit of excess creditable The taxpayer shall be informed in writing of the
withholding tax for a taxable period was law and the facts on which the assessment is
determined to have carried over and made; otherwise the assessment shall be void.
automatically applied the same amount [Sec. 228, NIRC]
claimed against the estimated tax
liabilities for the taxable quarter or An assessment contains not only a
quarters of the succeeding taxable computation of tax liabilities, but also a demand
year; or for payment within a certain period.
● The excise tax due on excisable
articles has not been paid; or Tax collection must be preceded by a valid
● An article locally purchased or assessment to allow the taxpayer to protest the
imported by an exempt person, such assessment, present their case and adduce
as, but not limited to, vehicles, capital supporting evidence. Without complying with
equipment, machineries and spare the unequivocal mandate of first informing the
parts, has been sold, traded or taxpayer of the government's claim, there can
transferred to a non-exempt person. be no deprivation of property, because no
[RR 18-2013] effective protest can be made. The
assessment is void [if it does not state] the
Note: Prior to the issuance of a PAN, the factual and legal bases therefor. Ultimately,
taxpayer may be allowed to make voluntary void assessment bears no valid fruit. [CIR v.
payments of probable deficiency taxes and Unioil Corporation, G.R. No. 204405 (2021)]
penalties. [RMC 11-2014]
Period for Issuance of the FLD/FAN
Reply to the PAN
It must be issued within 15 days from the
The taxpayer is given 15 days from the date of filing/submission of the taxpayer’s response to
receipt of the PAN to respond. the PAN.
1. If the taxpayer fails to respond, he is
considered in default and a formal 1. If the FLD/FAN is issued beyond the 15-
letter of demand and assessment day period, it shall still be valid, provided
notice (FLD/FAN) shall be issued to the that it is issued within the period of
taxpayer. limitation to assess internal revenue taxes.
2. If he responds that he disagrees with
the findings of deficiency taxes, an Note: The revenue officers who caused the
FLD/FAN shall be issued within 15 delay shall be subject to administrative
days from filing/submission of the sanction. [RMC 11-2014]
taxpayer’s response, calling for
payment of the taxpayer’s deficiency 2. If the FLD/FAN is issued before the lapse
tax liability, inclusive of the applicable of the 15-day period, it shall be void.
penalties. [RR 18-2013] Note: Prematurely issuing an FLD/FAN
Issuance of a Formal Letter of Demand before the lapse of the 15-day period is a
and Final Assessment Notice (FLD/FAN) wanton disregard of the mandatory due
process requirement. [CIR v. Pacific
An FLD/FAN is a declaration of deficiency Bayview Properties, Inc., CTA EB No. 1677
taxes issued to a taxpayer who:
Page 441 of 494

(2018), citing CIR v. Metro Star Superama, b. Requisites of a Valid Assessment
Inc., G.R. No. 185371 (2010)] 1. The taxpayer shall be informed in
writing of the law and the facts on which
Disputed Assessment the assessment is made; otherwise,
the assessment notice shall be
The taxpayer or his duly authorized rendered null and void. [Sec. 228,
representative may protest administratively NIRC]
against the FLD/FAN within 30 days from date 2. Assessment contains not only a
of receipt thereof. The taxpayer protesting an computation of tax liabilities, but also a
assessment may file a written request for demand for payment within a
reconsideration or reinvestigation. prescribed period. [CIR v. Fitness by
Design, Inc. G.R. No. 215957 (2016)]
Administrative Decision on a Disputed 3. Assessment must be served on and
Assessment received by the taxpayer. [CIR v.
Fitness by Design, Inc. G.R. No.
The FDAA issued by the CIR’s duly authorized 215957 (2016)]
representative cannot be considered as the
decision appealable to the CTA under Section Modes of service of assessment notice
7(a)(1) of RA 1125, as amended, if the 1. Personal Service – Notice is delivered
taxpayer availed of its remedy of appeal to the personally to the taxpayer at his known
Office of the Commissioner of Internal address. If not practicable, notice shall be
Revenue the denial of protest issued by the served by substituted service or by mail.
CIR’s duly authorized representative, under 2. Substituted Service – The notice is left with
Subsection 3.1.5 of RR 12-99: a clerk or a person in charge at the
taxpayer’s known address.
xxx “provided, however, that if the taxpayer 3. Service by mail [RR 18-2013]
elevates his protest to the CIR within 30-days
from date of receipt of the final decision of the Service to the tax agent shall be deemed
CIR’s duly authorized representative, the service to the taxpayer. [RR 18-2013]
latter’s decision shall not be considered final,
executory and demandable, in which case, the The notice shall first be served to the
protest shall be decided by the Commissioner.” taxpayer’s registered address before the same
[LRTA v CIR, G.R. No. 231238 (2022)] may be served to the taxpayer’s known
address, or in the alternative, may be served to
Appeal from an Administrative Decision the taxpayer’s registered address and known
on Disputed Assessment address simultaneously. [RMC 11-2014]
Appeal to the CTA must be filed 30 days from c. Tax Delinquency v. Tax Deficiency
receipt of the (final) adverse decision. In case
of inaction by the CIR, a taxpayer may either: Deficiency is defined as the amount still due
1. File a petition for review with the CTA within and collectible from a taxpayer upon audit or
30-days after the expiration of the 180-day investigation; whereas delinquency is defined
period; or as the failure of the taxpayer to pay the tax due
2. Await the final decision of the CIR on the on the date fixed by law or indicated in the
disputed assessment and appeal that final assessment notice or letter of demand.
decision to the CTA within 30-days. [Takenaka Corporation Philippine Branch v.
These options are mutually exclusive and CIR, CTA EB No. 745 (2012)]
resort to one bars the application of the other.
[LRTA v CIR, G.R. No. 231238 (2022)]
Page 442 of 494

Tax Delinquency v. Tax Deficiency d. Prescriptive Period for Assessment
Tax Delinquency Tax Deficiency General Rule: Within 3 years after the last day
The self-assessed The amount by prescribed by law for the filing of the return or
tax per return was which the tax from the date of actual filing, whichever comes
not paid or only imposed by law later; provided, that a return filed before the last
partially paid; or exceeds the amount day prescribed by law for filing shall be
shown in the tax considered as filed on such last day [Sec. 203,
The deficiency tax return; or NIRC]
assessed by the BIR
became final and If no amount is Exception: Within 10 years after the discovery
executory. shown in the return, of the falsity, fraud or omission in case of: (FFF)
or if there is no 1. False return
return, then the 2. Fraudulent return with intent to evade tax;
amount by which the or
tax as determined by 3. Failure to file a return. [Sec. 222, NIRC]
the CIR exceeds the
amount previously 1. False Returns vs. Fraudulent Returns
assessed as a vs. Non-Filing of Returns
deficiency [Sec.
56(B), NIRC] False return Fraudulent Failure to
Delinquency tax can Deficiency tax must return file a return
be collected be assessed and Contains Made with Omission to
administratively by must go through the wrong intent to file a return
distraint or levy or by process of filing the information evade taxes within the
judicial action protest by the due to due time
taxpayer and denial mistake, prescribed
of such protest by carelessnes by law
the BIR. s or
The filing of a civil The filing of a civil ignorance
action for the action at the ordinary Deviation Intentional or
Omission
collection of the court for collection may or may deceitfulmay or may
delinquent tax in the during the pendency not be entry with
not be
ordinary court is a of protest may be the intentional intent intentional
proper remedy. subject of a motion Not subject Subject to
Not subject
to dismiss. In to 50% 50% to 50%
addition, the surcharge, surchargesurcharge,
taxpayer must file a except if except if
petition for review done willfully omission is
with the CTA to toll willful
the running of the Assessment may be made within 10 years
prescriptive period. after discovery of the falsity, fraud or
Subject to Subject to omission
administrative administrative
penalties, such as penalties of interest 2. Suspension of the Running of Statute of
25% surcharge, and compromise Limitations
interest, and penalty, but NOT to a. When the CIR is prohibited from
compromise penalty the 25% surcharge making the assessment or beginning
[MAMALATEO] distraint or levy or a proceeding in
court, and for 60 days thereafter;
Page 443 of 494

b. When the taxpayer requests for a 3. Effect of Failure to File Protest
reinvestigation which is granted by the
CIR; Failure of the taxpayer to file a protest against
c. When the taxpayer cannot be located the FLD/FAN within 30 days will make the
in the address given by him in the assessment final, executory and demandable.
return filed, BUT if the taxpayer informs No request for reconsideration or
the CIR of any change in address, the reinvestigation shall be granted on tax
running of the statute of limitations shall assessments that have already become final,
not be suspended; executory and demandable.
d. When the warrant of distraint or levy is
duly served upon the taxpayer, his 4. Action of the Commissioner on the
authorized representative, or a Protest Filed
member of his household with sufficient
discretion, and no property is located; Period to act upon or decide the protest
and filed
e. When the taxpayer is out of the 1. By the CIR’s duly authorized
Philippines. representative
a. In a request for reinvestigation,
2. Taxpayer Remedies within 180 days from
submission of documents; or
a. Protesting the assessment b. In a request for
reconsideration, within 180
1. Period to File Protest days from the date of filing of
the protest
After issuance of the FLD/FAN, the taxpayer 2. By the CIR
may protest the assessment within 30 days a. In case of protest, within 180
from receipt thereof by filing a request for days from the filing of the
reconsideration or reinvestigation. protest
b. In case of an administrative
2. Submission of Supporting Documents appeal, within 180 days from
the filing of the administrative
For requests for reinvestigation, the taxpayer appeal
shall submit all relevant supporting documents
in support of his protest within 60 days from Note: An administrative appeal to the CIR may
filing of the protest; otherwise, the assessment only be availed of upon the denial of the protest
shall become final. to the FLD/FAN by the CIR’s duly authorized
● “Relevant supporting documents” representative. Under RR 18-2013, there is no
– documents necessary to support the administrative appeal to the CIR for inaction by
legal and factual bases in disputing a the CIR’s representative. The remedy is to
tax assessment as determined by the await the decision or file a petition for review to
taxpayer the CTA within 30 days after the lapse of the
● “Assessment shall become final” – 180-day waiting period.
taxpayer is barred from disputing the
correctness of the issued assessment b. Compromise and Abatement of Taxes
by introduction of newly discovered or
additional evidence, and the FDDA Authority to compromise and abate taxes
shall consequently be denied.
● The 60-day period to submit supporting General rule: The CIR has the authority to
documents shall NOT apply to compromise or abate any tax liability. [Sec.
requests for reconsideration. [RR 18- 7(C), NIRC]
2013
Page 444 of 494

Exception: The power to compromise may be without the full settlement of the offered
delegated to: amount. In case of disapproval of the
a. the Regional Evaluation Board (REB), in application for compromise settlement, the
case of: amount paid upon filing of the aforesaid
i. assessments issued by application shall be deducted from the total
regional offices involving basic outstanding tax liabilities. [RR 9-2013]
taxes of P500,000 or less; and
ii. minor criminal violations Requisites of a tax compromise
discovered by regional and a. The taxpayer must have a tax liability;
district officials [Sec. 7(C), b. There must be an offer by the taxpayer or
NIRC] the Commissioner of an amount to be paid
b. the National Evaluation Board (NEB), by the taxpayer
when: c. There must be an acceptance by the
i. the basic tax exceeds Commissioner or taxpayer as the case may
P1,000,000, or be, of the offer in settlement of the original
ii. the settlement offered is less claim.
than the prescribed minimum
rates [Sec. 204(A), NIRC] Note: A compromise is consensual in nature.
Hence, it may not be imposed on the taxpayer
COMPROMISE without his consent. The BIR may only suggest
settlement of the taxpayer’s liability through a
Grounds for a compromise compromise.
The CIR may compromise the payment of any Cases which may be compromised:
internal revenue tax in the following cases: a. Delinquent accounts
1. Doubtful validity of the assessment – b. Cases under administrative protest
when there exists reasonable doubt as to after issuance of the FAN to the
the validity of the claim against the taxpayer which are still pending in the
taxpayer (e.g., one arising from a jeopardy Regional Offices, Revenue District
assessment, arbitrary assessment); or Offices, Legal Service, Large Taxpayer
2. Financial incapacity – when the financial Service (LTS), Collection Service,
position of the taxpayer demonstrates a Enforcement Service and other offices
clear inability to pay the assessed tax. in the National Office
[Sec. 204(A), NIRC; Sec. 3, RR 30-2002] c. Civil tax cases being disputed before
the courts
Limits of the CIR’s power to compromise d. Collection cases filed in courts
e. Criminal violations, except (i) those
Ground Minimum compromise already filed in court or (ii) those
rate involving criminal tax fraud [Sec. 2, RR
Financial 10% of the basic assessed 30-2002]
incapacity tax
Other cases 40% of the basic assessed Cases which cannot be compromised:
tax a. Withholding tax cases, unless the
[Sec. 204(A), NIRC] applicant-taxpayer invokes provisions
of law that cast doubt on the taxpayer's
Payment of compromise upon filing of obligation to withhold
application b. Criminal tax fraud cases confirmed as
such by the CIR or his duly authorized
The compromise offer shall be paid by the representative
taxpayer upon filing of the application for c. Criminal violations already filed in court
compromise settlement. No application for
compromise settlement shall be processed
Page 445 of 494

d. Delinquent accounts with duly Compromise Abatement
approved schedule of installment litigation or to put an
appears to be
payments end to one already unjustly or
e. Cases where final reports of commenced. It
excessively
reinvestigation or reconsideration have reduces the amount assessed or the
been issued resulting in reduction in of taxpayer’s liability.
costs do not the
the original assessment and the collection of the
taxpayer is agreeable to such decision amount due.
by signing the required agreement form As to authorized officer
for the purpose. CIR and, in certain CIR
f. Cases which become final and cases, the NEB and
executory after final judgment of a REB
court, where compromise is requested As to grounds
on the ground of doubtful validity of the 1. Doubtful validity 1. Unjustly or
assessment of assessment excessively
g. Estate tax cases where compromise is 2. Financial assessed tax
requested on the ground of financial incapacity 2. Administration
incapacity of the taxpayer [Sec. 2, RR and collection
30-2002] costs do not
justify the
ABATEMENT collection of the
amount due
It refers to the cancellation of the entire amount
of tax payable. c. Recovery of Tax Erroneously or
Illegally Collected
Grounds for abatement
a. The tax or any portion thereof appears
Tax Refund as Distinguished from Tax
to be unjustly or excessively assessed;
Credit
or
1. Tax refund takes place when there is
b. The administration and collection costs
actual reimbursement.
do not justify the collection of the
2. Tax credit takes place upon the
amount due. [Sec. 204(B), NIRC]
issuance of a tax certificate or tax credit
memo, which can be applied against
Coverage of abatement
any sum that may be due and collected
from the taxpayer.
General rule: The CIR’s authority to abate is
applicable to surcharge and compromise
1. Grounds, Requisites, and Period for
penalties only.
Filing a Claim for Refund or Issuance of a
Exception: In meritorious instances, the CIR
Tax Credit Certificate (TCC)
may abate the interest as well as basic tax
assessed, provided that cases for abatement Grounds for filing a claim for tax refund or
or cancellation of tax, penalties and/or interest credit
by the CIR shall be coursed through certain a. Tax is erroneously or illegally assessed
officials. [Sec. 4, NIRC] or collected
i. Taxes are erroneously paid
when a taxpayer pays under a
Compromise Abatement
mistake of fact, as when he is
As to nature/definition
not aware of an existing
It is a contract It is the cancellation
exemption in his favor at the
whereby the parties, of the entire amount
time that payment is made.
by reciprocal of tax payable
concessions, avoid a because the tax
Page 446 of 494

ii.Taxes are illegally collected It is subject to waiver in the absence of
when payments are made objection to a claim filed after 2 years.
under duress.
iii. Penalty is collected without Two-year period when counted
authority
b. Penalty is collected without authority General Rule: From the date the tax was paid
c. Sum collected is excessive or in any Exceptions:
manner wrongfully collected [Sec. 229, ● If the tax is withheld at source – from
NIRC] the date it falls due at the end of the
taxable year [Gibbs v. CIR, G.R. No. L-
Requisites for tax refund or tax credit 17406 (1965)]
a. There is a tax collected erroneously or ● If the income is paid on a quarterly
illegally, or a penalty collected without basis – from the time of filing the final
authority, or a sum excessively or adjustment return [CIR v. CA, G.R. No.
wrongfully collected. 117254 (1999)]
b. There must be a written claim for refund ● When the tax is paid in installments
filed by the taxpayer to the CIR [Vda. De – from the date of final payment or the
Aguinaldo v. CIR, G.R. No. L-19927 last installment
(1965)]
Legal basis of tax refunds
Exceptions: Tax refunds are based on the principle of
● When on the face of the return upon quasi-contract or solutio indebiti. The
which payment was made, such Government is not exempted from the
payment appears clearly to have been application of the time-honored doctrine that no
erroneously paid, the CIR may refund person shall unjustly enrich himself at the
or credit the tax even without a written expense of another. [CIR v. Acesite
claim [Sec. 229, NIRC] (Philippines) Hotel Corporation, G.R. No.
● A return filed showing an overpayment 147295 (2007); Secs. 2142 and 2154, NCC]
shall be considered as a written claim
for credit or refund. [Sec. 204(C), Necessity of proof in claim for refund
NIRC] A claim for refund partakes of the nature of an
● The claim must be a categorical claim exemption and is strictly construed against the
for reimbursement [Bermejo v. CIR, claimant. The burden of proof is on the
G.R. No. L-3029 (1950)] taxpayer claiming the refund that he is entitled
● The claim for refund must be filed to the same. [CIR v. Tokyo Shipping, G.R. No.
within 2 years from the date of the L-68252 (1995)]
payment of the tax regardless of any
supervening cause [Sec. 229, NIRC] 2. Proper Party to File Claim for Refund or
Note: Both the claim for refund with the BIR Tax Credit
and the subsequent appeal to the CTA
must be filed within the 2-year period. General Rule: The “taxpayer” is the person
entitled to claim a tax refund; hence, the proper
● Taxpayer must show proof of the party to file a claim for refund or credit.
payment of tax [Sec. 229, NIRC]
Exceptions:
Note: The two-year period is not jurisdictional. 1. In case of indirect taxes, the proper party is
Even if it had already lapsed, the same may be the “statutory taxpayer, the person on
suspended for reasons of equity and other whom the tax is imposed by law and who
special circumstances. [CIR v. Philippine paid the same even if he shifts the burden
American Life Ins. Co., G.R. 105208 (1995)] thereof to another.” [Silkair (Singapore)
Pte. Ltd. v. CIR, G.R. No. 173594 (2008)]
2. Withholding agent
Page 447 of 494

a. In case the taxpayer does not file a sum has been paid under protest or duress.
claim for refund, the withholding agent [Sec. 229, NIRC].
may file the claim. [CIR v. Smart
Communications, Inc., G.R. Nos. Remedy upon Denial or Inaction by the CIR
179045-46 (2010)]
b. The withholding agent of a non-resident Taxpayer’s remedies
foreign corporation may file the claim. 1. If the CIR denies claim – appeal to the CTA
[CIR v. Procter & Gamble Phil. Mfg. within 30 days from receipt of the CIR’s
Corp., G.R. No. L-66838 (1991)] decision and within 2 years from the date
of payment
Reason: The withholding agent, who is made 2. If the CIR does not act on the claim and the
personally liable for the withholding tax, is a 2-year period is about to lapse – file a claim
“taxpayer” under the NIRC. The withholding before the CTA prior to the lapse of the 2-
agent is directly and independently liable for year period; otherwise, the claim shall be
the correct amount of tax that should be barred [R.A. 1125, as amended]
withheld and for deficiency assessments,
surcharges and penalties. [CIR v. Procter & Simultaneous filing allowed
Gamble Phil. Mfg. Corp., G.R. No. L-66838
(1991)] If the CIR takes time in deciding the claim and
the period of two years is about to end, the suit
Option of a corporate taxpayer in case of or proceeding must be started in the CTA
excess income tax payments before the end of the 2 year period without
awaiting the decision of the CIR. [Gibbs v. CIR,
If the sum of the quarterly tax payments made G.R. No. L-17406 (1965)]
during the taxable year exceeds the total tax
due on the entire taxable income of that year, Period for claiming refund once granted
the corporation shall either:
1. carry-over the excess credit; or The refund check or warrant must be claimed
2. be credited or refunded with the excess or cashed within 5 years from the date such
amount paid warrant or check was mailed or delivered;
otherwise it shall be forfeited in favor of the
Note: These two options under Section 76 are government and the amount thereof shall
alternative in nature. The choice of one revert to the general fund. [Sec. 230(A), NIRC]
precludes the other. [Republic v. Team (Phils.)
Energy Corporation, G.R. No. 188016 (2015)] Period for using the TCC
Irrevocability rule TCCs may be applied against all internal

revenue taxes, excluding withholding tax.
Once the option to carry over and apply the TCCs which remain unutilized after 5 years
excess income tax payments to succeeding from the date of issue shall, unless revalidated,
quarters of the succeeding years is taken, that be considered as invalid, and shall revert to the
option is irrevocable for that taxable period. general fund. [Sec. 230, NIRC]
Consequently, a taxpayer is barred from
securing a refund of, or tax credit certificate for, All TCCs issued by the BIR shall not be allowed
the excess amount that it has initially opted to to be transferred or assigned to any person.
carry-over. [Sec. 76, NIRC] [RR 14-2011]
Payment under protest not required Any TCC which remains unutilized for more
than one (1) year at any given interval of time
A suit or proceeding for tax refund may be during its validity shall be converted into cash
maintained whether or not such tax, penalty or with prior written notice by the BIR, subject to
the availability of funds in accordance with the
Page 448 of 494

procedural requirements that will be issued by Sec. 229 Sec. 112
the BIR for this purpose [RR 14-2020] without
authority, or
3. Distinction Between Refund of 3. any sum
Unutilized Input VAT (Sec. 112, NIRC) and excessively
Refund of Erroneously or Illegally or wrongfully
Collected Tax (Sec. 229, NIRC) collected
The 2-year period The 2-year period
Rules on refund of excess or unutilized shall be reckoned shall be reckoned
input VAT from the date of from the close of the
● When to file an administrative claim with payment of the tax taxable quarter
the CIR: or penalty. when the sales were
o General rule: Within 2 years from made.
the close of the taxable quarter Both the Only the
when the sales were made [Sec. administrative claim administrative claim
112(A), NIRC; CIR v. Mirant with the CIR and the is required to be filed
Pagbilao, G.R. No. 172129 (2008)] appeal to the CTA within the 2-year
o Exception: Within 2 years from the must be made within period.
date of payment of the output VAT, the 2-year period.
if the administrative claim was filed If the 2-year period is Sec. 112(C) of the
from June 8, 2007 (promulgation of about to lapse and NIRC provides a 90-
Atlas v. CIR) to September 12, the CIR has not day waiting period
2008 (promulgation of Mirant) acted on the claim, for the CIR to decide
● When to file a judicial claim with the CTA: the taxpayer may on the application for
o General rule: Section 112(D) already appeal to the tax refund or credit.
applies; not Section 229 CTA without waiting Compliance with the
§ Within 30 days from the full or for the decision of 90-day waiting
partial denial of the the CIR. period is mandatory
administrative claim by the CIR; and jurisdictional.
or
§ Within 30 days from the Thus, the taxpayer
expiration of the 90-day period may elevate his
provided to the CIR to decide claim to the CTA (a)
on the claim. This is mandatory within 30 days from
and jurisdictional. the full or partial
denial of the claim, or
Exception: The judicial claim need not await (b) within 30 days
the expiration of the 90-day period, if such was after the lapse of the
filed from December 10, 2003 (issuance of BIR 90-day waiting
Ruling No. DA-489-03) to October 6, 2010 period, in case of
(promulgation of Aichi). inaction by the CIR.
[CIR v. San Roque Power Corporation, G.R.
Sec. 229 Sec. 112 No. 187485 (2013); Visayas Geothermal
Refers to a refund or Refers to a refund or Power Company v. CIR, G.R. No. 197525
credit of tax credit of excess (2014); Sec. 112, NIRC, as amended by
1. tax or unutilized input TRAIN Law]
erroneously VAT attributable to
or illegally zero-rated sales
assessed or
collected, or
2. penalty
collected
Page 449 of 494
3. Government Remedies for issued within the extraordinary period of 10
Collection of Delinquent Taxes years in cases of false or fraudulent return or
failure to file a return. For assessments issued
a. Requisites within the 3-year ordinary prescriptive period to
assess, the CIR had another 3-years to initiate
1. The government can initiate collection the collection of taxes by distraint or levy or
administratively or judicially once the court proceedings. [CIR v CTA 2nd Division
assessment becomes final and executory. and QL Development Inc., G.R. No. 258947
2. Collection must be made within 3 or 5 years (2022)]
following the assessment of the tax. [Sec.
203 vis-à-vis 222(c), NIRC] The period to collect begins to run from the
date the assessment notice is released, mailed
The government has two ways to collect: or sent to the taxpayer. (ibid)
1. Summary or administrative remedies
a. Distraint on personal property For collection to be valid, the assessment must
b. Levy on real property be within the period of limitation. Essentially,
2. Judicial remedies (civil or criminal) when the assessment is issued beyond the
prescriptive period, the government's right to
Note: The remedies of distraint and levy shall collect deficiency taxes also prescribes.
not be availed of where the amount of tax Hence, there is no more basis for its collection
involved is not more than P100. save for certain exceptions. Both the
assessment and collection should be made in
A Final Decision on Disputed Assessment accordance with law as any arbitrariness will
(FDDA) is not a collection letter. The CIR’s negate the very reason for government itself.
collection efforts are initiated by distraint, levy, [La Flor Dela Isabela, Inc. v. CIR, G.R. No.
or court proceedings. [CIR v CTA 2nd Division 202105, (2021)]
and QL Development Inc., G.R. No. 258947
(2022)] While the government cannot be estopped by
the negligence or omission of its agents, the
The distraint and levy proceedings are validly mandatory provisions on Sections 203 and 228
begun or commenced by the issuance of a of the NIRC cannot be rendered nugatory by
warrant of distraint and levy, and service the mere act of the CIR. Article 5 of the Civil
thereof on the taxpayer. (ibid) Code is explicit: "[a]cts executed against the
provisions of mandatory or prohibitory laws
A judicial action for collection is initiated by (a) shall be void, except when the law itself
filing of a complaint with the court of competent authorizes their validity." [CIR v. Unioil
jurisdiction; or (b) where the assessment is Corporation, G.R. No. 204405 (2021)]
appealed to the CTA by filing an answer to the
taxpayer’s petition for review wherein payment Exception:
of the tax is prayed for. (ibid) a. In case of assessments issued within the
extra-ordinary period of 10 years in cases
of (i) false or fraudulent return with intent to
b. Prescriptive Periods
evade tax or of (ii) failure to file a return, the
CIR has another five (5) years within which
Prescriptive period
to collect the taxes [CIR v. CTA Second
General Rule: In case of assessments issued
Division and QL Development, Inc., G.R.
within the three-year ordinary period, the CIR
No. 258947, (March 29, 2022)]
has another three years within which to collect
b. When a waiver of the statute of limitation is
the taxes [CIR v. United Salvage and Towage
executed within the 5-year period,
(Phils.) Inc., G.R. No. 197515 (2014)]
collection may be made within the period
agreed upon. [Sec. 222(d), NIRC]
The five-year period for collection of taxes
(under Sec. 222) only applies to assessments
Page 450 of 494
Court proceeding for collection of tax CIR’s contention that the date of notarization of
General rule: No proceeding in court without waiver should be presumed as the date of
assessment for the collection of taxes may be acceptance of waiver is untenable. The notary
made after the 3-year period for making an public is distinct from the CIR who is authorized
assessment. [Sec. 203, NIRC] by law to accept waivers. (ibid)
Exception: A proceeding in court for the The doctrine of estoppel cannot be applied as
collection of such tax may be filed without an exception to the statute of limitations on
assessment in the case of (i) false or fraudulent assessment of taxes considering that the BIR
return with intent to evade tax or of (ii) failure to provides a detailed procedure for the proper
file a return [Sec. 222(a), NIRC] execution of waiver which must be strictly
followed. The BIR cannot invoke the doctrine of
Waiver of prescriptive period estoppel to conceal its failure to comply with its
If tax was assessed within the period agreed own issuances, namely, RMO No. 20-90 and
upon by the CIR and the taxpayer, such tax RDAO No. 05-01. It cannot collect taxes based
may be collected by distraint or levy or by a on an already prescribed assessment, even
proceeding in court within the period agreed when taxes are considered the lifeblood of
upon in writing before the expiration of the 5-yr government. [La Flor Dela Isabela, Inc. v. CIR,
period. [Sec. 222(d), NIRC] supra]
A waiver of the statute of limitations is a The taxpayer’s contributory fault or negligence

derogation of a taxpayer's right to security coupled with estoppel will, however, render
against prolonged and unscrupulous effective an otherwise flawed waiver,
investigations. Thus, it must be carefully and regardless of the physical number of mistakes
strictly construed. [La Flor Dela Isabela, Inc. v. attributable to a party. The doctrine of estoppel,
CIR, G.R.No.202105 (2021)] as a bar to the statute of limitations protecting
a taxpayer from prolonged investigations, must
Waiver must be (i) in the proper form; (ii) must be applied sparingly; but no taxpayer may be
be signed by the taxpayer himself or his duly allowed to execute haphazard waivers
authorized representative. In case of a deliberately, and lead the tax authorities to
corporation, the waiver must be signed by any believe that the assessment period has been
of its responsible official. If delegated, such extended, only to deny the validity thereof
delegation should be in writing and duly when it becomes unfavorable to him. [Asian
notarized; (iii) waiver should be duly notarized; Transmission Corp v CIR, G.R. No. 230861
(iv) CIR or RO authorized by him must sign the (2022)]
waiver indicating that the BIR has accepted
and agreed to the waiver. The date of such Suspension of running of statute of
acceptance by the BIR should be indicated; (v) limitations
both the date of execution by the taxpayer and [see discussion under Assessments]
the date of acceptance by the BIR should be
before the expiration of the period of 4. Civil Penalties
prescription or the lapse of the period agreed
upon in case a subsequent waiver is executed; a. Delinquency Interest and Deficiency
(vi) Executed in 3 copies; 1 copy attached to Interest
the docket, 2nd to the taxpayer, and 3rd to the
office accepting the waiver; (vii) he fact of INTEREST
receipt by the taxpayer must be indicated in the In general, interest is assessed and collected
original copy, showing that taxpayer was on any unpaid amount of tax at the rate of 12%
notified of acceptance by the BIR. [Republic v or double the legal interest rate for loans or
First Gas Power Corp. G.R. No. 214933 forbearance of any money as set by the BSP
(2022)] from the date prescribed for payment until the
Page 451 of 494

amount is fully paid. [Sec. 249(A), NIRC; Sec. delinquency interest SHALL NOT be imposed
2, RR 21-2018] simultaneously. [Sec. 249(A), NIRC; Sec. 5,
RR 21-2018]
Note: The rate of interest per BSP Circular No.
799 series of 2013 for loans or forbearance of c. Interest on extended payment – Interest
any money in the absence of an express at the rate of 12% per annum on the tax or
stipulation is 6%. Thus, the interest rate deficiency tax or any part thereof unpaid
imposable shall be 12%. [Sec. 2, RR 21-2018] from the date of notice and demand until it
is paid in the following cases:
a. Deficiency Interest – Interest at the rate of 1. When a person elects to pay the tax on
12% per annum on any deficiency tax due, installment, but fails to pay the tax or any
which interest shall be assessed and installment, or any part of such amount or
collected from the date prescribed for its installment on or before the date
payment until: (a) full payment thereof; or prescribed for its payment; or
(b) upon issuance of a notice and demand 2. Where the CIR has authorized an
by the CIR or his authorized extension of time within which to pay a tax
representative, whichever comes first [Sec or a deficiency tax or any part thereof [Sec.
249(B), NIRC; Sec. 3, RR 21-2018] 249(D), NIRC]
b. Delinquency interest – Interest at the rate Effectivity of the 12% interest rate
of 12% per annum on the unpaid amount in The interest rate of 12% is effective starting
case of failure to pay: January 1, 2018. Prior to such date, the
1. the amount of the tax due on any return applicable interest rate shall be 20%.
required to be filed; or
2. the amount of the tax due for which no b. Surcharge
return is required; or
3. a deficiency tax, or any surcharge or This is a civil penalty imposed in addition to the
interest thereon on the due date tax required to be paid [Sec. 248, NIRC]
appearing in the notice and demand of
the CIR or his authorized Rates of Surcharge (25% or 50%)
representative until the amount is fully a. 25% of the amount due in the following
paid, which interest shall form part of cases:
the tax [Sec. 249(C), NIRC; Sec. 4, RR ● Failure to file any return and pay the tax
21-2018] due on the prescribed date; or
● Filing a return with an internal revenue
Deficiency Delinquency officer other than those with whom the
interest interest return is required to be filed, unless the
Basic tax + CIR authorizes otherwise; or
deficiency ● Failure to pay the deficiency tax within
Base Basic tax
interest + the time prescribed for its payment in
surcharge the notice of assessment; or
From the due ● Failure to pay the full or part of the
From the date
date appearing amount of tax due on or before the date
prescribed for
Recko- in the notice and prescribed for its payment [Sec.
its payment
ning demand of the 248(A), NIRC]
until the full
date CIR until the
payment
amount is fully b. 50% of the tax or of the deficiency tax in
thereof
paid case any payment has been made, in the
Rate 12% per annum following cases:
• Willful neglect to file the return within
Note: Upon effectivity of the TRAIN Law on the prescribed period; or
January 1, 2018, the deficiency and the
Page 452 of 494

• A false or fraudulent return is willfully c. Compromise Penalty
made [Sec. 248(B), NIRC]
A compromise penalty is an amount of money
Prima facie evidence of a false or fraudulent paid by a taxpayer to compromise a tax
return violation that he has committed, instead of the
1. Substantial underdeclaration of sales, BIR instituting a criminal action against the
receipts or income – failure to report sales, taxpayer. A compromise is consensual in
receipts or income in an amount exceeding character, hence, may not be imposed on the
30% of that declared per return taxpayer without his consent.[Sec. 6, RR 12-
2. Substantial overstatement of deductions – 99]
a claim of deductions in an amount
exceeding 30% of actual deductions [Sec. Note: All criminal violations may be
248(B), NIRC] compromised except: (a) those already filed in
court, or (b) those involving fraud
ILLUSTRATION
Mr. A has been assessed deficiency income tax of P1,000,000, exclusive of interest and surcharge,
for taxable year 2015. The tax liability remained unpaid despite the lapse of June 30, 2017, the
deadline for payment stated in the notice and demand issued by the Commissioner. Payment was
made by Mr. A on February 10, 2018. The civil penalties are computed as follows:
Basic Tax Due P 1,000,000.00

Add: 25% surcharge for late payment P 250,000.00
20% Deficiency Interest
from April 16, 2016 to June 30, 2017
(441 days) 241,643.84 491,643.84
Total Amount Due, June 30,2017 P 1, 491,643.84
Add: 20% Deficiency Interest
from July 1, 2017 to December 31, 2017
(184 days based on P1M) 100,821.92
Add: 20% Delinquency Interest
from July 1, 2017 to December 31, 2017
(184 days; based on total amount as of
June 30, 2017) 150,390.39
Add: 12% Delinquency Interest
from January 1, 2018 to February 10, 2018
(41 days; based on total amount due as of
June 30, 2017) 20,106.54 271,318.85
Total Amount Due, February 10, 2018 P 1,762,962.90
Page 453 of 494

Congress may provide. [Sec. 5, Art. X,
1987 Constitution]
II. LOCAL TAXATION c. Legislative in nature – The power to
impose taxes is vested solely in the
legislative body (i.e., the Sanggunian)
A. Local Government Taxation of each LGU.
d. Territorial – It can only be exercised
within the territorial jurisdiction of each
1. General Principles
LGU.
i. Taxation shall be uniform in each local
Grant of Local Taxing Power Under the
government unit (LGU)
Local Government Code
ii. Taxes, fees, charges and other
a. “Each local government unit shall have
impositions shall be:
the power to create its own sources of
a. equitable and based as far as
revenues and to levy taxes, fees, and
practicable on the taxpayer’s liability to
charges subject to such guidelines and
pay;
limitations as the Congress may
b. be levied and collected only for public
provide, consistent with the basic policy
purposes;
of local autonomy. Such taxes, fees,
c. not be unjust, excessive, oppressive, or
and charges shall accrue exclusively to
confiscatory;
the local governments.” [Sec. 5, Art. X
d. not be contrary to law, public policy
of The 1987 Constitution]
national economic policy, or restraint of
b. “Each local government unit shall
trade
exercise its power to create its own
iii. The collection of local taxes, fees,
sources of revenue and to levy taxes,
charges and other impositions shall not
fees, and charges subject to the
be left to any private person;
provisions herein, consistent with the
basic policy of local autonomy. Such
iv. The revenue collected shall inure solely to
taxes, fees, and charges shall accrue
the benefit of, and be subject to the
exclusively to the local government
disposition by, the LGU levying the tax,
units.” [Sec. 129, LGC]
fee, charge or other imposition, unless
otherwise specifically provided herein;
Local Taxing Authority
and
v. Each LGU shall, as far as practicable,
The power to impose a tax, fee, or charge or to
evolve a progressive system of taxation.
generate revenue under the LGC shall be
[Sec. 130, LGC]
exercised by the Sanggunian of the LGU
concerned through an appropriate ordinance.
2. Nature and Source of Taxing Power [Sec. 132, LGC]
Nature of the taxing power of LGUs Local legislative power shall be exercised by
a. Not inherent - Municipal corporations, the ff:
being mere creatures of law, may a. Sangguniang Panlalawigan for the
exercise the power to tax only if province;
delegated to them by the national b. Sangguniang Panlungsod for the city;
legislature or conferred to them by the c. Sangguniang Bayan for the
Constitution. Sec. 5, Art. X of The 1987 municipality;
Constitution directly grants LGUs the d. Sangguniang Barangay for the
power to tax. barangay. [Sec. 48, LGC]
b. Limited – The taxing power of LGUs is
not absolute because it is subject to Note: The exercise of the power to tax by the
such guidelines and limitations that local legislative assembly is subject to the veto
Page 454 of 494

power of the local chief executive. [Sec. 55, General rule: Unless otherwise provided, tax
LGC] exemptions or incentives granted to, or
presently enjoyed by all persons, whether
Authority to Prescribe Penalties for Tax natural or juridical, including GOCCs, are
Violations withdrawn upon the effectivity of the LGC.
[Sec. 193, LGC]
1. The Sanggunian of an LGU is authorized
to prescribe fines or other penalties for Exemptions: Tax exemptions granted to the ff
violation of tax ordinances are not withdrawn:
a. in no case shall such fines be less a. Local water districts
than P1,000 nor more than P5,000 b. Cooperatives duly registered under RA
b. nor shall imprisonment be less than 1 6938 (Cooperative Code of the Philippines)
month nor more than 6 months c. Non-stock and non-profit hospitals and
2. Such fine or other penalty, or both, shall educational institutions. [Sec. 193, LGC]
be imposed at the discretion of the court
3. The Sangguniang Barangay may
prescribe a fine of not less than P100 nor Note: The LGC took effect on January 1, 1992.
more than P1,000. [Sec. 516, LGC]
By virtue of Sec. 193 of the LGC, all tax
Authority to Grant Local Tax Exemptions exemption privileges then enjoyed by all
persons, save those expressly mentioned,
LGUs may, through ordinances, grant tax have been withdrawn effective January 1, 1992
exemptions, incentives or reliefs under such – the date of effectivity of the LGC. However,
terms and conditions as they may deem the withdrawal of exemptions pertains only to
necessary. [Sec. 192, LGC] those already existing when the LGC was
enacted. The intention of the legislature was to
Withdrawal of Exemptions remove all tax exemptions or incentives
granted prior to the LGC. [City of Iloilo vs.
Local tax exemptions, in general Smart Communications, G.R. No. 167260,
Feb. 27, 2009]
3. Scope of Taxing Power
LGU Scope of Taxing Power

Province Except as otherwise provided in the LGC, a province may levy only the
following taxes, fees, and charges: [Sec. 134, LGC]
1. Transfer of real property ownership [Sec. 135, LGC]
2. Business of printing and publication [Sec. 136, LGC]
3. Franchise tax [Sec. 137, LGC]
4. Tax on sand, gravel and other quarry resources [Sec. 138, LGC]
5. Professional tax [Sec. 139, LGC]
6. Amusement tax [Sec. 140, LGC]
7. Annual fixed tax for every delivery truck or van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products. [Sec. 141, LGC]
Municipality May levy taxes, fees and charges not otherwise levied by provinces, such as:
1. Tax on business
2. Fees and charges on business and occupation
3. Fees for sealing and licensing of weights and measures
4. Fishery rentals, fees and charges [Sec. 142, LGC]
Page 455 of 494

LGU Scope of Taxing Power
City May levy taxes, fees and charges which the province or municipality may
impose; those levied and collected by highly urbanized and independent
component cities shall accrue to them and distributed in accordance with the
LGC; rate may exceed maximum rates allowed for the province or municipality
by not more than 50% except the rates of professional and amusement taxes.
[Sec. 151, LGC]
Barangay May levy taxes, fees, and charges, as provided in this Article, which shall
exclusively accrue to them:
1. Taxes on stores or retailers with fixed business establishments with gross
sales of receipts of the preceding calendar year of P50,000 or less, in the case
of cities and P30,000 or less, in the case of municipalities, at a rate not
exceeding 1% on such gross sales or receipts.
2. Service fees or charges rendered in connection with the regulations or the use
of barangay-owned properties or service facilities (e.g., palay, copra, tobacco
dryers)
3. Barangay clearance
4. Other fees and charges on commercial breeding of fighting cocks, cockfights
and cockpits, on places of recreation which charge admission fees, and
billboards, signboards, neon signs, and outdoor advertisements. [Sec. 152,
LGC]
4. Specific Taxing Power of Local Government Units
Specific Taxes Province Municipality City Barangay

Tax on Transfer of Real Property ✓ ✓
Tax on Business of Printing and Publication ✓ ✓
Franchise Tax ✓ ✓
Tax on Sand, Gravel and other Quarry ✓ ✓
Resources
Professional Tax [Sec. 139, LGC] ✓ ✓
Amusement Tax [Sec. 140, LGC] ✓ ✓
Annual Fixed Tax for Every Delivery Truck or ✓ ✓
Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in,
Certain Products [Sec. 141, LGC]
Tax on Business [Sec. 143, LGC] ✓ ✓
Fees and Charges on Regulation/Licensing ✓ ✓
of Business or Occupation, or Practice of
Profession [Sec. 147, LGC]
Fees for Sealing and Licensing of Weights
and Measures [Sec. 148, LGC]
Fishery Rentals, Fees and Charges [Sec. ✓ ✓
149, LGC]
Community Tax [Sec. 156, LGC] ✓ ✓
Tax on Small-scale Stores/Retailers [Sec. ✓
152(a), LGC]
Page 456 of 494

Specific Taxes Province Municipality City Barangay
Service Fees or Charges on the Regulation ✓
or Use of Barangay-owned Properties [Sec.
152(b), LGC]
Barangay Clearance [Sec. 152(c), LGC] ✓
Other Fees and Charges (on commercial ✓
breeding of fighting cocks, cockfights,
cockpits; places of recreation which charge
admission fees; outside advertisements)
[Sec. 152(d), LGC]
Reasonable Fees and Charges for Services ✓ ✓ ✓ ✓
Rendered [Sec. 153, LGC]
Public Utility Charges [Sec. 154, LGC] ✓ ✓ ✓ ✓
Toll Fees or Charges [Sec. 155, LGC] ✓ ✓ ✓ ✓
Real Property Tax [see separate discussion ✓ ✓ [within ✓
on Real Property Taxation] Metro Manila]
B. Taxing Powers of Provinces

Transaction Taxed Tax Rate and Tax Base Exemptions Others
TAX ON TRANSFER OF REAL PROPERTY
Imposed on the sale, Tax Rate: Not more than Sale, transfer, or other Person Liable:
donation, barter, or 50% of 1% disposition of real seller, donor,
any other mode of Tax Base: Total property pursuant to RA transferor,
transfer of ownership acquisition price or fair 6657 (Comprehensive executor or
or title to real property market value if monetary Agrarian Reform Law) administrator
[Sec 135, LGC] consideration is not Time of Payment:
substantial, whichever is Within 60 days
higher. from the date of
execution of deed
or from the date of
decedent's death
Note: Evidence of
payment of tax
must be presented
to the Register of
Deeds before
registration, and to
the provincial
assessor before
cancellation of an
old tax declaration.
TAX ON BUSINESS OF PRINTING AND PUBLICATION
Imposed on the Tax Rate: Not exceeding Receipts from printing
business of persons 50% of 1% and/or publishing of
engaged in the Tax Base: Gross annual books and other
printing, and/or receipts for the preceding reading materials
publication of books, calendar year prescribed by the
cards, posters, Department of
Page 457 of 494
leaflets, handbills, In the case of a newly Education as school
certificates, receipts, started business: texts or references
pamphlets, and others ● Tax Rate: Not
of similar nature [Sec exceeding 1/20 of 1% ●
136, LGC] Tax Base: Capital
investment
FRANCHISE TAX
Imposed on Tax Rate: Not exceeding No exception Franchise tax is a
businesses enjoying a 50% of 1 Notwithstanding any tax on the privilege
franchise [Sec 137, Tax Base: Gross annual exemption granted by of transacting
LGC] receipts for the preceding any law or other special business in the
calendar year based on law, the province may state and
the incoming receipt, or impose a tax on exercising
realized, within its businesses enjoying a corporate
territorial jurisdiction franchise. [Sec. 137, franchises granted
In the case of a newly LGC] by the state. It is
started business: not levied on the
● Tax Rate: Not more corporation simply
than 1/20 of 1% for existing as a
● Tax Base: Capital corporation.
investment Requisites to be
covered by
franchise tax:
a. that one has a
franchise
in the sense of a
secondary or
special franchise;
and
b. that it is
exercising its rights
or privileges under
this franchise
within the territory
of the concerned
LGU [NPC v.
Province of
Isabela, G.R. No.
165827 (2006)]
TAX ON SAND, GRAVEL AND OTHER QUARRY RESOURCES

Levied on ordinary Tax Rate: Not more than Who issues
stones, gravel, earth 10% permit to extract:
and other quarry Tax Base: Fair market issued exclusively
resources, as defined value in the locality per by the provincial
in the NIRC, extracted cubic meter of the governor pursuant
from public lands or extracted resources to an ordinance by
from the beds of seas, the Sangguniang
lakes, rivers, streams, Panlalawigan
creeks, and other
Page 458 of 494
public waters within Distribution of
its territorial jurisdiction proceeds:
[Sec 138, LGC] a. Province - 30%
b. Component
municipality
resources
extracted - 30%
c. Barangay where
resources were
extracted - 40%
PROFESSIONAL TAX
Exercise or practice of Tax Rate: Not to exceed Professionals Place of
profession requiring P300 exclusively employed payment: To the
government Tax Base: At such by the government province where the
examination [Sec 139, amount and reasonable profession is
LGC] classification determined practiced, or where
Note: A person who by the Sangguniang the principal office
has paid the Panlalawigan is maintained
professional tax is Time of payment:
entitled to practice his Payable annually,
profession anywhere on or before
in the country without January 31 or
being subjected to before beginning
similar taxes for the the practice of
practice of such profession
profession. Employers shall
require payment of
professional tax
before
employment and
annually
thereafter.
AMUSEMENT TAX
Collected from Tax Rate: Not more than Holding of operas, Note: In case of
proprietors, lessees, or 10% [RA 9640] concerts, dramas, theaters or
operators of theaters, Tax Base: Gross receipts recitals, paintings, and cinemas, tax shall
cinemas, concert halls, from admission fees art exhibitions, flower first be deducted
circuses, boxing shows, musical and withheld by
stadia, and other programs, literary and their proprietors,
places of amusement oratorical presentations lessees and
[Sec 140, LGC] operators before
Not subject to Exception to the gross receipts
amusement tax exemption (taxable): are divided among
under the LGC: Pop, rock, or similar them.
a. Resorts, swimming concerts Distribution of
pools, bath houses, proceeds: Shared
hot springs, and tourist equally by the
spots [Pelizloy Realty province and the
Corp. v. Province of municipality where
Page 459 of 494
Benguet, G.R. No. amusement places
183137 (2013)] are located
b. Professional
basketball games
[PBA v. CA, G.R. No.
119122 (2000)]
c. Golf courses [Alta
Vista Golf and Country
Club v. City of Cebu,
G.R. No. 180235
(2016)]
d. Those subject to
amusement tax under
Sec. 125 of the NIRC
TAX ON DELIVERY TRUCK/VAN

Imposed on vehicles Tax Rate: Not exceeding Such
used by P500 manufacturers,
manufacturers, producers,
producers, Tax Base: Every truck, wholesalers,
wholesalers, dealers van, or vehicle dealers and
or retailers in the retailers shall be
delivery or distribution exempt from the
of distilled spirits, tax on peddlers.
fermented liquors, soft
drinks, cigars and
cigarettes, and other
products, as may be
determined by the
Sangguniang
Panlalawigan, to sales
outlets, or consumers
in the province,
whether directly or
indirectly [Sec 141,
LGC]
C. Taxing Powers of Municipalities

Scope of taxing power: Municipalities may levy taxes, fees, and charges not otherwise levied by
provinces. [Sec. 142, LGC]
Tax on Various Types of Businesses [Sec. 143, LGC]
Businesses Taxed Rate/Amount and Base Other Information

Manufacturers, assemblers, Tax Rate: From P165 to
repackers, processors, P24,375 per annum or at a rate
brewers, distillers, rectifiers, not exceeding 37.5 % of 1%
and compounders of liquors,
distilled spirits, and wines or
Page 460 of 494
manufacturers of any article of Tax Base: Gross sales or
commerce of whatever kind or receipts for the preceding
nature [Sec. 143(a), LGC] calendar year
Wholesalers, distributors, or Tax Rate: From P18 to “Wholesale” means a sale

dealers in any article of P10,000 or at a rate not where the purchaser buys or
commerce of whatever kind or exceeding 50% of 1% imports the commodities for
nature [Sec. 143(b), LGC] Tax Base: Gross sales or resale to persons other than the
receipts for the preceding end user regardless of the
calendar year quantity of the transaction.
[Sec. 131(z), LGC]
“Dealer” means one whose
business is to buy and sell
merchandise, goods, and
chattels as a merchant. He
stands immediately between
the producer or manufacturer
and the consumer. [Sec.
131(k), LGC]
Exporters and manufacturers, Not exceeding 1⁄2 of rates Essential Commodities:
millers, producers, prescribed under Sec. 143 (a), [RWC- CLAPS]
wholesalers, distributor, (b) and (d) of the LGC (on a. Rice and corn
dealers or retailers of essential manufacturers; wholesalers, b. Wheat or cassava flour,
commodities enumerated distributors and dealers; and meat,
below: [Sec. 143(c), LGC] retailers, respectively) dairy products, locally
manufactured, processed or
preserved food, sugar, salt, and
other agricultural, marine, and
freshwater products, whether in
their original state or not
c. Cooking oil and cooking gas
d. Cement
e. Laundry soap, detergents,
and
medicine
f. Agricultural implements,
Equipment and post-harvest
facilities, fertilizers, pesticides,
insecticides, herbicides and
other farm inputs
g. Poultry feeds and other
animal feeds
h. School supplies [Sec. 143(c),
LGC]
Retailers [Sec. 143(d), LGC] Tax Rate: Note: Barangays have the
1. 2% per annum on sales exclusive power to tax gross
not exceeding sales or receipts amounting to:
P400,000 a. 50,000 or less in case of
2. 1% per annum on sales cities b. 30,000 or less in case
in excess of the first of
Page 461 of 494

P400,000 [Art. 232(d), municipalities [Sec. 143(d),
LGC IRR] Sec. 152, LGC]
Tax Base: Gross sales or “Retail” means a sale where
receipts for the preceding the purchaser buys the
calendar year commodity for his own
consumption, irrespective of
the quantity of the commodity
sold. [Sec. 131(w), LGC]
Contractors and other Tax Rate: From P27.50 to “Contractor” includes

independent contractors [Sec. P11,500 or at a rate not persons, natural or juridical, not
143(e), LGC] exceeding 50% of 1% subject to professional tax
Tax Base: Gross sales or under Sec. 139 of the LGC,
receipts for the preceding whose activity consists
calendar year essentially of the sale of all
kinds of services for a fee,
regardless of whether or not the
performance of the service
calls for the exercise or use of
the physical or mental faculties
of such contractor or his
employees. [Sec. 131(h), LGC]
Banks and other financial Tax Rate: Not exceeding 50% Note: All other income and
institutions[Sec. 143(f), LGC] of 1% receipts of banks and other
Tax Base: Gross receipts of financial institutions not
the preceding calendar year otherwise enumerated herein
derived from interest, shall be excluded from the
commissions and discounts taxing authority of the LGU
from lending activities, income concerned. [Art. 232(f), LGC
from financial leasing, IRR]
dividends, rentals on property
and profit from exchange or
sale of property, insurance
premium
Peddlers engaged in the sale of Tax Rate and Base: Not “Peddler” means any person
any merchandise or article of exceeding P50 per peddler who, either for himself or on
commerce [Sec. 143(g), LGC] annually commission, travels from place
to place and sells his goods or
offers to sell and deliver the
same. [Sec. 131(t), LGC]
Any other business which the Tax Base: Gross sales or Note: This is a catch-all
Sanggunian concerned may receipts provision.
deem proper to tax [Sec. Tax Rate: The Sanggunian Exception: Any business
143(h), LGC] may prescribe a schedule of engaged in the production,
graduated rates but in no case manufacture, refining,
to exceed the rates prescribed distribution or sale of oil,
herein. gasoline, and other petroleum
Note: For any business subject products shall not be subject to
to excise, value-added or any local tax imposed under
percentage tax under the Sec. 143 of the LGC. [Art.
NIRC, the rate of tax shall not 232(h), LGC IRR]
Page 462 of 494
exceed 2% of gross sales or
receipts of the preceding
calendar year.
Tax base of local business tax establishment or place where business subject
to tax is conducted.
Business tax must be based on gross sales or b. One line of business is not exempted
receipts, it being different from gross revenue. by being conducted with some other
[Ericsson Telecommunications Inc. v. City of businesses for which such tax has been paid.
Pasig, G.R. No. 176667 (2007)] c. The tax on a business must be paid by
the person conducting it.
“Gross Sales or Receipts” include the total d. If a person operates 2 or more
amount of money or its equivalent representing businesses mentioned in Sec. 143, the tax
the contract price, compensation or service shall be computed:
fee, including the amount charged or materials e. on the combined total gross sales or
supplied with the services and deposits or receipts, if they are subject to the same tax rate
advance payments actually or constructively f. separately based on the gross sales or
received during the taxable quarter for the receipts of each business, if they are subject to
services performed or to be performed for different tax rates [Sec. 146, LGC]
another person excluding discounts if
determinable at the time of sales, sales return, Note: Condominium corporations are not
excise tax, and VAT. [Sec. 131(n), LGC] business entities, and are thus not subject to
local business tax. Even though the
“Gross revenue” covers money or its corporation is empowered to levy assessments
equivalent actually or constructively received, or dues from the unit owners, these amounts
including the value of services rendered or are not intended for the incurrence of profit by
articles sold, exchanged or leased, the the corporation, but to shoulder the multitude of
payment of which is yet to be received. necessary expenses for maintenance of the
[Ericsson Telecommunications Inc. v. City of condominium. [Yamane v. BA Lepanto
Pasig, G.R. No. 176667 (2007)] Condominium Corp., G.R. No. 154993 (2005)]
Ceiling on business tax within Metro Manila Situs of business tax

Municipalities within Metro Manila may levy
taxes at rates which shall not exceed by 50% Rule 1:
the maximum rates prescribed in Sec. 143 of
the LGC. [Sec. 144, LGC] In case of persons maintaining/operating a
branch or sales outlet making the sale or
Tax on retirement of business transaction, the sale shall be recorded in said
branch or sales outlet and the tax paid to the
Upon termination of a business subject to tax municipality/city where the branch or sales
under Sec. 143 and 144, it shall submit a sworn outlet is located. [Sec. 150(a), LGC]
statement of its gross sales or receipts for the
current year. If the tax paid is less than the tax “Branch or Sales Office” – a fixed place in a
due, the difference shall be paid before the locality which conducts operations of the
business is considered officially retired. [Sec. business as an extension of the principal office.
145, LGC] Offices used only as display areas of the
products where no stocks or items are stored
Rules on payment of business taxes for sale, although orders for the products may
a. Taxes imposed under Sec. 143 of the be received thereat, are not branch or sales
LGC shall be paid for every separate or distinct offices as herein contemplated. A warehouse
which accepts orders and/or issues sales
Page 463 of 494

invoices independent of a branch with sales b. 70% of all sales recorded in the
office shall be considered as a sales office. [Art. principal office shall be taxable in Sta.
243(a)(2), LGC IRR] Rosa where the factory is located.
Rule 2: Rule 4:
Where there is NO branch or sales outlet in the In case the plantation is located in a place other
city/municipality where the sale is made, the than the place where the factory is located, the
sale shall be recorded in the principal office and 70% in Rule 3 will be divided as follows:
the tax shall be paid to such city/municipality. 1. 60% to the city/municipality where the
[Sec. 150(a), LGC] factory is located; and
2. 40% to the city/municipality where the
“Principal Office” – the head or main office of plantation is located. [Sec. 150 (c), LGC]
the business appearing in the pertinent
documents (e.g., articles of incorporation) Rule 5:
submitted to the SEC, or the DTI, or other
appropriate agencies, as the case may be [Art. In case of 2 or more factories, project offices,
243(a)(1), LGC IRR] plants or plantations in different localities, the
70% shall be prorated among the localities
Rule 3: where they are located in proportion to their
respective volumes of production. [Sec. 150(d),
In the case of manufacturers, assemblers, LGC]
contractors, producers, and exporters having
factories, project offices, plants, and Illustration: A company has a principal office
plantations, proceeds shall be allocated as in Valenzuela and 2 factories located in
follows: Malolos City, Bulacan and Mandaue City,
1. 30% of sales recorded in the principal Cebu, which produced 60% and 40%,
office shall be taxable by the respectively, of the total production for the
city/municipality where the principal year. It also has branches selling merchandise
office is located; and in Muntinlupa, Bacolod and Cebu City.
2. 70% shall be taxable by the 1. Sales made in Valenzuela will be
city/municipality where the factory, recorded in Valenzuela;
project office, plant, or plantation is 2. Sales made in Muntinlupa, Bacolod and
located [Sec. 150(b), LGC] Cebu City shall be taxable in the said cities;
3. Sales in all other places which do not
Illustration of Rules 1 to 3A company has a have a sales branch shall be distributed as
principal office in Mnadaluyong, and a sales follows: 30% to Valenzuela and 70% to be
office and a factory in Sta. Rosa: allocated between Malolos City, and
1. Sales made in Mandaluyong will be Mandaue City based on the factories’
recorded in Mandaluyong. volume of production. Hence, 42% shall be
2. Sales made in Sta. Rosa by the Sta. Rosa taxed in Malolos City; while 28% shall be
sales office will be recorded in Sta. Rosa. taxed in Mandaue City.
3. Sales made in Los Baños, Calamba or
Cabuyao [i.e., delivered to customers
located in these places and not made by the Note: The sales allocation shall be applied
Sta. Rosa sales office] will be recorded in irrespective of whether or not sales are made
Mandaluyong where the principal office is in the locality where the factory, project office,
located. The allocation shall be as follows: plant, or plantation is located. [Sec. 150(e),
a. 30% of all sales recorded in the LGC]
principal office shall be taxable in
Mandaluyong; Excise Tax: The business tax is imposed on
the performance of an act, enjoyment of a
Page 464 of 494

privilege, or engagement in an occupation. The Exception: Rates of professional and
power to levy such tax depends on the place in amusement taxes [Sec. 151, LGC]
which the act is performed or the occupation is
engaged in, not upon the location of the office E. Taxing Powers of Barangays
or the domicile of the person. [Allied Thread
Co., Inc. v. City Mayor of Manila, G.R. No. L- The following shall accrue exclusively to
40296 (1984)] the barangays:
1. Taxes on stores or retailers with fixed
Sales Tax: It is the place of the consummation business establishments with gross sales or
of the sale, associated with the delivery of the receipts for the preceding calendar year of
things which are the subject matter of the P50,000 or less in case of cities, and P30,000
contract, that determines the situs of the or less in case of municipalities. [Sec. 152(a),
contract for purposes of taxation, and not LGC]
merely the place of the perfection of the a. Tax Rate: not greater than 1%
contract. [Shell Co., Inc. v. Municipality of b. Tax Base: gross sales or receipts
Sipocot, Camarines Sur, G.R. No. L-12680
(1959)] 2. Service fees or charges – Barangays may
collect reasonable fees or charges for services
Municipal Fees and Charges For Regulation rendered in connection with the regulation or
& Licensing the use of barangay-owned properties or
General rule: The municipality may impose facilities. [Sec. 152(b), LGC]
reasonable fees and charges on the conduct of
business or practice of profession 3. Barangay clearance – A city or municipality
commensurate with the cost of regulation, cannot issue a permit for business without a
inspection and licensing. [Sec. 147, LGC] clearance from the barangay concerned. The
sangguniang barangay may impose a
Exception: Professional tax reserved to the reasonable fee on the clearance. [Sec. 152(c),
province in Sec. 139 of the LGC [Sec. 147, LGC]
LGC]
4. Reasonable fees and charges:
Specific rules: a. on commercial breeding of fighting cocks,
1. The municipality may impose reasonable cockfights and cockpits;
fees for sealing and licensing of weights and b. on places of recreation which charge
measures. [Sec. 148, LGC] admission fees; and
2. The municipality has exclusive authority to c. on billboards, signboards, neon signs, and
grant fishery privileges in municipal waters and outdoor advertisements. [Sec. 152(d), LGC]
impose rentals, fees or charges therefor. [Sec.
149, LGC] 5. Common Revenue Raising Powers
D. Taxing Powers of Cities a. Service fees and charges
Scope of taxing power: The city may levy taxes, LGUs may impose and collect such reasonable
fees, charges which the province or fees and charges for services rendered. [Sec.
municipality may impose. 153, LGC]
1. Those levied and collected by highly
urbanized and independent component b. Public utility charges
cities shall accrue to them and distributed
according to the provisions of the LGC. LGUs may fix the rates for the operation of
2. Rates of taxes that the city may levy may public utilities owned, operated and maintained
exceed the maximum rates allowed for the by them within their jurisdiction. [Sec. 154,
province or municipality by not more than LGC]
50%. [Sec. 151, LGC]
Page 465 of 494
c. Toll fees or charges 3. No toll fees or charges shall be collected
1. The Sanggunian may prescribe the terms from:
and conditions and fix the rates for the i. Officers and enlisted men of the AFP and
imposition of toll fees or charges for the use members of the PNP on mission.
of any public road, pier, or wharf, waterway, ii. Post office personnel delivering mail
bridge, ferry or telecommunication system iii. Persons who are physically
funded and constructed by the LGU handicapped
concerned. iv. Disabled citizens who are 65 years or
2. The Sanggunian may discontinue the older. [Sec. 155, LGC]
collection of the tolls when public safety and
welfare so requires.
6. Community Tax
Who may levy Cities or Municipalities

[Sec. 156, LGC]
Who are liable Natural Persons Juridical Persons
[Sec. 157 & 158, a. Inhabitants of the Philippines 1. Every corporation no matter
LGC] b. 18 years of age or over how created or organized
c. Either: 2. Whether domestic or resident
• Regularly employed on a wage or foreign
salary basis for at least 30 3. Engaged in or doing business
consecutive working days during in the Philippines
any calendar year, or
• Engaged in business or
occupation, or
• Owns real property with an
aggregate assessed value of
P1,000 or more, or
• Is required by law to file an income
tax return
Rates [Sec. 157 Natural Persons Juridical Persons

& 158, LGC] a. Annual community tax of P5.00 PLUS a. Annual community tax of P500
annual additional tax of P1.00 per P1,000 PLUS annual additional tax,
of income regardless of whether from which shall not exceed P10,000
business, exercise of profession or according to the following
property, but which shall not exceed schedule:
P5,000 b. P2.00 for every P5,000 worth of
b. Husband and wife shall pay a basic tax real property in the Philippines
of P5.00 each PLUS an additional tax of owned during the preceding
P1.00 for every P1,000 of income based year, based on the assessed
on the total property owned by them value used for the payment of
and/or the total gross receipts or earnings the real property tax; and
derived by them [Art. 246(b)(2), LGC IRR] c. P2.00 for every P5,000 of gross
receipts or earnings derived
from business in the Philippines
during the preceding year.
d. Dividends received by a
corporation from another
corporation shall be deemed
part of the gross receipts or
Page 466 of 494
Who may levy Cities or Municipalities
[Sec. 156, LGC]
earnings for purposes of
computing additional tax.
Persons a. Diplomatic and consular representatives

Exempt [Sec. b. Transient visitors who stay in the Philippines for not more than 3 months
159, LGC]
Place of Where individual resides, or where the principal office of the juridical entity is
Payment [Sec. located.
160, LGC] Note: In case of branch, sales office or warehouse where sales are made and
recorded, corresponding community tax shall be paid to the LGU where such
branch, sales office or warehouse is located. [Art. 246(e)(3), LGC IRR]
Time for Accrues on January 1 of each year to be paid not later than the last day of
Payment [Sec. February of each year.
161, LGC]
If a person reaches 18 years of age or otherwise loses the benefit of exemption:
a. on or before June 30 – he shall be liable on the day he reaches such
age or upon the day the exemption ends;
b. on or before March 31 – he shall have 20 days to pay without being
delinquent.
If a person comes to reside in the Philippines, or reaches 18 years old, or

ceases to belong to an exempt class on or after July 1, he shall not be subject
to community tax for that year.
If a corporation is established and organized:
• on or before June 30 – it shall be liable to community tax for that year
• on or before March 31 – it shall have 20 days to pay without becoming
delinquent
• on or after July 1 – it shall not be subject to community tax for that year
Penalty for If unpaid within the prescribed period, an interest of 24% per annum shall be
Delinquency added from the due date until payment.
[Sec. 161, LGC]
Community Tax Certificate (CTC) v. receives any money from any public
It shall be issued to every person or corporation fund
upon payment of the community tax. It may vi. transacts other official business; or
also be issued to any person or corporation not vii. receives any salary or wage from any
subject to the community tax upon payment of person or corporation [Sec. 163(a),
P1.00. [Sec. 162, LGC] LGC]
Presentation of CTC is necessary when an Note: Presentation of CTC is not needed in the
individual subject to community tax: registration of a voter. [Sec. 163(a), LGC]
i. acknowledges any document before
a notary public;
ii. takes the oath of office upon election
or appointment to any position in the Collection of community tax
government service; The city or municipal treasurer shall deputize
iii. receives any license, certificate, or the barangay treasurers to collect, provided the
permit from any public authority; latter be bonded. [Sec. 164(b), LGC]
iv. pays any tax or fee;
Page 467 of 494
Distribution of proceeds of community tax other taxes or charges in any form
1. If the community tax is actually and directly whatsoever, on goods or
collected by the city or municipal treasurer, the merchandise. It is therefore
proceeds shall accrue entirely to the general irrelevant if the fees imposed are
fund of the city or municipality. actually for police surveillance on
2. If the community tax is collected through the the goods, because any other
barangay treasurers, the proceeds shall be form of imposition on goods
apportioned equally between the passing through the territorial
city/municipality and the barangay. [Sec. jurisdiction of the municipality is
164(c), LGC] clearly prohibited. [Palma
Development Corp. v.
7. Common Limitations on the Taxing Municipality of Malangas, G.R.
Powers of Local Government Units No. 152492 (2003)]
Unless otherwise provided, the following 6. Taxes, fees or charges on Agricultural

cannot be levied by the local governments: and aquatic products when sold by
(IDEC-GAPEP-TRR-ECN): marginal farmers or fishermen;
1. Income tax, except when levied on • "Marginal Farmer or
banks and other financial institutions Fisherman" refers to an
under Sec. 143(f) of the LGC; individual engaged in subsistence
2. Documentary stamp tax; farming or fishing which shall be
3. Taxes on Estate, inheritance, gifts, limited to the sale, barter or
legacies and other acquisitions mortis exchange of agricultural or
causa; marine products produced by
• Exception: Tax on transfer of himself and his immediate family.
real property [Sec. 135, LGC; Art. [Sec. 131(p), LGC]
221(c), LGC IRR]
4. Customs duties, registration fees of 7. Taxes on business enterprises certified
vessel and wharfage on wharves, to by the Board of Investments as
tonnage dues, and all other kinds of Pioneer or non-pioneer for a period of
customs fees, charges and dues; 6 and 4 years, respectively from the
• Exception: wharfage on wharves date of registration;
constructed and maintained by 8. Excise taxes on articles enumerated
the LGU concerned under the NIRC, as amended, and
• “Wharfage” means a fee taxes, fees or charges on petroleum
assessed against the cargo of a products;
vessel engaged in foreign or 9. Percentage or VAT on sales, barters or
domestic trade based on quantity, exchanges or similar transactions on
weight, or measure received goods or services except as otherwise
and/or discharged by vessel. provided herein.
[Sec. 131(y), LGC] • Exceptions (Percentage taxes):
a. Tax on business of printing and
5. Taxes, fees or charges on Goods publication imposed by
carried into or out of, or passing provinces/cities [Sec. 136, LGC]
through, the territorial jurisdictions of b. Amusement tax imposed by
LGUs in the guise of charges for provinces/cities [Sec. 140, LGC]
wharfage, tolls for bridges or otherwise, c. Tax on business imposed by
or other taxes, fees, or charges in any municipalities/cities on
form; manufacturers, wholesalers,
• Note: Sec.133(e) prohibits the distributors, dealers, and
imposition, in the guise of contractors enumerated in Sec.
wharfage, of fees, as well as all 143 of the LGC in accordance
Page 468 of 494

with the schedules provided b. Substantive Test: reasonableness and
therein fairness of the ordinance and
significantly its compliance with the
10. Taxes on the gross receipts of: Constitution and existing statutes.
a. Transportation contractors and [Manila Electric Company v. Barlis, G.R. No.
persons engaged in the 198529. February 9, 2021]
transportation of passengers or
freight by hire and Local tax ordinance
b. common carriers by air, land or
water The power to impose a tax, fee, or charge or to
generate revenue under the LGC shall be
Exception: Tax on the operation exercised by the Sanggunian concerned
and franchising of tricycles [Art. through an appropriate ordinance. [Sec. 132,
221(j), LGC IRR] LGC]
11. Taxes on premiums paid by way of Tests of a valid ordinance:

reinsurance or retrocession; a. Not contrary to the Constitution or any
12. Taxes, fees or charges for the statute
Registration of motor vehicles and for b. Not unfair or oppressive;
the issuance of all kinds of licenses or c. Not partial or discriminatory;
permits for the driving thereof, except d. Not prohibit but may regulate trade;
tricycles; e. General and consistent with public
13. Taxes, fees, or other charges on policy; and
Philippine products actually Exported; f. Not unreasonable [Ferrer vs. Bautista,
a. Exception: Tax on exporters of G.R. No. 210551, (2015)]
essential commodities Note: An ordinance is presumed valid unless
b. [Sc. 143(c), LGC, Art. 221(m), declared otherwise by a court in an appropriate
LGC IRR] proceeding. [Rural Bank of Makati v.
Municipality of Makati, G.R. No. 150763
14. Taxes, fees, or charges on Countryside (2004)]
and Barangay Business Enterprises
and cooperatives duly registered under Public hearing
RA 6810 (Magna Carta for Countryside
and Barangay Business Enterprises) It should be conducted prior to the enactment
and RA 6938 (Cooperative Code of the of local tax ordinance and revenue measures.
Philippines), respectively; and [Sec. 187, LGC] When no valid public hearing
15. Taxes, fees or charges of any kind on has been duly conducted prior to the
the National Government, its agencies enactment of the tax ordinance, such is void
and instrumentalities, and LGUs. [Sec. and cannot be given any effect. [Suco vs.
133, LGC] Malones, G.R. No. 182065, (2009)]
8. Requirements for a Valid Tax Procedure for approval of tax ordinances

Ordinance 1. Within 10 days from the filing of the proposed
tax ordinance, the same shall be published
Validity of Local (Tax) Ordinance. The two- for 3 consecutive days in a newspaper of
pronged test: local circulation or posted simultaneously in
a. Formal Test: whether the ordinance at least 4 conspicuous public places within
was enacted within the corporate the territorial jurisdiction of the LGU. [Art.
powers of the LGU, and whether the 276(b)(1), LGC IRR]
same was passed pursuant to the 2. The Sanggunian shall send written notices,
procedure laid down by law. specifying the date and venue of public
hearing, to the interested or affected parties
Page 469 of 494

operating or doing business within the days from the date a copy is posted at the
concerned LGU. [Art. 276(b)(2), (3), LGC entrance of the provincial capitol or city,
IRR] municipal, or barangay hall, as the case may
3. The public hearing must be held not earlier be, and in at least 2 other conspicuous places
than 10 days from sending the notices, or in the LGU concerned. [Sec. 59, LGC]
the last day of publication, or date of posting,
whichever is later. [Art. 276(b)(3), LGC IRR] In case the effectivity falls on any date other
4. An ordinance must be approved on third than the beginning of the quarter, the same
reading by a majority of the sanggunian shall be considered as falling at the beginning
members present, there being a quorum. of the next quarter and the taxes, fees, or
[Art. 107(g), LGC IRR] charges due shall begin to accrue therefrom.
5. The enacted ordinance shall be presented [Art. 276(a), LGC IRR]
to the local chief executive (LCE), who
may: 9. Taxpayer's Remedies
a. Approve the same by affixing his
signature; or a. Protest
b. Veto and return the same with his
objections to the Sanggunian within 15 Protest: Upon the issuance of a notice of
days in case of a province, and 10 days assessment by the local treasurer, the
in case of a city or municipality; otherwise, taxpayer may file a written protest with said
the ordinance shall be deemed approved. local treasurer within 60 days from receipt of
[Art. 108, LGC IRR] the notice of assessment; otherwise, the
assessment shall become final an executory.
Note: The LCE, except the Punong Barangay,
may veto any ordinance on the ground that it is Decision: The local treasurer shall decide the
ultra vires or prejudicial to public welfare. His protest within 60 days from the time of its filing.
reasons shall be stated in writing. The LCE 3. Within 30 days from the receipt of the
may veto an ordinance only once. [Art. 109, denial of the protest or from the lapse of the 60-
LGC IRR] day period, the taxpayer may appeal with the
The sanggunian may override the veto of the court of competent jurisdiction, otherwise the
LCE by 2/3 vote of all its members, thereby assessment becomes conclusive and
making the ordinance effective. [Art. unappealable. [Sec. 195, LGC]
109(c), LGC IRR]
Once approved, the ordinance shall be Court of competent jurisdiction
transmitted to the higher level sanggunian 5. Depending on the amount of assessed tax
for review. If no action is taken by the latter involved, the taxpayer may appeal the
within 30 days after submission, the same decision of the local treasurer to the MTC,
shall be deemed approved. [Arts. 110 and MeTC, MCTC or the RTC in the exercise of
111, LGC IRR] its original jurisdiction.
Within 10 days after the approval of the 6. Local tax cases decided by the MTC,
ordinance, certified true copies of all tax MeTC and MCTC may be appealed to the
ordinances or revenue measures shall RTC in the exercise of its appellate
be published in full for 3 consecutive days jurisdiction.
in a newspaper of local circulation. Where 7. Said cases decided by the RTC in its
there are no newspapers of local original or appellate jurisdiction may be
circulation, it must be posted in at least 2 elevated to the CTA.
conspicuous and publicly accessible With the passage of R.A. No. 9282, the
places. [Art. 276, LGC, IRR] authority to exercise either original or appellate
Effectivity of ordinance jurisdiction over local tax cases depended on
the amount of the claim. In cases where the
a. Unless otherwise stated in the RTC exercises appellate jurisdiction, it
ordinance, the same shall take effect after 10 necessarily follows that there must be a court
Page 470 of 494

capable of exercising original jurisdiction – 2. The Secretary must render a decision
otherwise there would be no appeal over which within 60 days from receipt of the
the RTC would exercise appellate jurisdiction. appeal.
The RTC exercises appellate jurisdiction only
from cases decided by the MeTC, MTC, and The appeal shall not suspend the
MCTC in the proper cases, and not those effectivity of the ordinance and the
decided by non-judicial entities such as the City accrual and payment of the tax, fee or
Treasurer. [China Banking Corp. vs. City charge levied therein.
Treasurer of Manila, G.R. No. 204117, (2015)]
3. Within 30 days after receipt of the
b. Refund decision or the lapse of the 60-day period
without any action from the Secretary of
Requisites: Justice, the aggrieved party may file
1. A written claim for refund or credit must be appropriate proceedings with a court of
filed with the local treasurer; and competent jurisdiction. [Sec. 187, LGC]
2. The case or proceeding must be filed in
court within 2 years from the payment of Note: Failure to interpose the requisite appeal
tax or from the date the taxpayer became to the Secretary of Justice is fatal to a
entitled to refund or credit. [Sec. 196, LGC] complaint for a refund. [Reyes vs. CA G.R. No.
3. If the refund is brought about by an 118233, (1999)]
assessment made by the local treasurer,
the written claim for refund will be treated as 10. Assessment and Collection of
the written protest, and upon the denial of Local Taxes
the protest/refund or lapse of the 60-day
period for the local treasurer to decide, the a. Remedies of Local Government Units
taxpayer must appeal within 30 days
therefrom, even though the whole 2-year Local Government’s Lien
period has not been maximized. [City of
Manila vs. Cosmos Bottling Corp. G.R. No. Local taxes, fees, charges and other revenues
196681 (2018)] constitute a lien, superior to all liens or
c. Action before the Secretary of Justice encumbrances in favor of any person,
1. Any question on the constitutionality or enforceable by administrative or judicial action.
legality of tax ordinances or revenue [Sec. 173, LGC]
measures may be raised on appeal to
the Secretary of Justice. [Sec. 187, LGC] The lien may only be extinguished upon full
2. The Secretary of Justice can only review payment of the delinquent local taxes, fees,
the constitutionality or legality of the and charges including related surcharges and
tax ordinance, and, if warranted, to interest. [Sec. 173, LGC]
revoke it on either or both of these
grounds. Civil Remedies, in General
When he alters or modifies or sets aside a tax (a) Administrative action

ordinance, he is not also permitted to substitute
his own judgment for the judgment of the local DISTRAINT OF PERSONAL PROPERTY
government that enacted the measure. [Drilon
vs. Lim, G.R. No. 112497, (1994)] Subject of distraint: goods, chattels or effects
Procedure: and other personal property of whatever
1. Appeal must be made to the Secretary of character, including stocks and other
Justice within 30 days from effectivity of securities, debts, credits, bank accounts, and
the ordinance. interest in and rights to personal property [Sec.
174(a), LGC]
Page 471 of 494

Procedure: k. Redemption of property sold within 1
1. Seizure of personal property year from date of sale [Sec. 179, LGC]
2. Accounting of distrained goods l. If not redeemed, the local treasurer
3. Publication of time and place of sale and shall execute a deed conveying the property
the articles distrained to the purchaser [Sec. 180, LGC]
4. Release of distrained property upon m. Purchase of the real property by the
payment prior to sale local treasurer in case there is no bidder for
5. Sale of the goods or effects distrained at said property or if the highest bid is
public auction. insufficient to pay the taxes, fees, or
6. Disposition of proceeds [Sec. 175, LGC] charges, related surcharges, interests,
penalties and costs; resale of said property
Note: If the property distrained is not disposed may be made at a public auction [Sec. 181
of within 120 days from the date of distraint, the and 182, LGC]
same shall be considered as sold to the LGU
for the amount of the assessment made. [Sec. Further distraint or levy
175(e), LGC]
The remedies of distraint or levy may be
LEVY ON REAL PROPERTY repeated if necessary until the full amount due,
including all expenses, is collected [Sec. 184,
Subject of Levy: real property and interest in or LGC]
rights to real property
Procedure Note: In case the levy is not issued before or
a. After expiration of the time for payment simultaneously with the warrant of distraint,
of delinquent tax, fee or charge, real and the personal property of the taxpayer is not
property may be levied on before, sufficient to satisfy his delinquency, the local
simultaneously or after the distraint of treasurer shall within 30 days after execution of
personal property. the distraint, proceed with the levy on the
b. Preparation of a duly authenticated taxpayer's real property. [Sec. 176, LGC]
certificate by the local treasurer effecting the
levy and showing: Property exempt from distraint or levy
c. the name of the taxpayer, (ToB-CUPLAF)
d. the amount of the tax, fee or charge, a. Tools and implements necessarily
and penalty due, and used by the taxpayer in his trade or
the description of the property. employment
e. Service of written notice of levy to the b. One horse, cow, carabao, or other
assessor, Register of Deeds, and the Beast of burden, such as the delinquent
delinquent taxpayer (or his agent if he be taxpayer may select and necessarily used
absent from the Philippines, or if none, to by him in his ordinary occupation
the occupant of the property in question) c. His necessary clothing, and that of all
f. Annotation of the levy on the tax his family
declaration and the certificate of title d. Household furniture and Utensils
g. Report on any levy to be submitted to necessary for housekeeping and used for
the Sanggunian within 10 days after receipt that purpose by the delinquent taxpayer,
of warrant [Sec. 176, LGC] such as he may select, of a value not
h. Advertisement of the sale or auction exceeding P10,000
shall be held within 30 days after the levy. e. Provisions, including crops, actually
i. Before the date of sale, the taxpayer provided for individual or family use
may stay the proceedings by paying the sufficient for 4 months
taxes, fees, charges, penalties and f. The professional Libraries of doctors,
interests. engineers, lawyers and judges
j. Sale of the subject property [Sec. 178, g. One Fishing boat and net, not
LGC] exceeding the total value of P10,000 by the
Page 472 of 494

lawful use of which a fisherman earns his 1. The treasurer is legally prevented
livelihood from making the assessment or
h. Any material or Article forming part of a collection
house or improvement of any real property. 2. The taxpayer requests for
[sec. 185, LGC] reinvestigation and executes a
waiver in writing before the lapse of
Penalty on local treasurer for failure to issue the period for assessment or
and execute warrant of distraint or levy collection
Automatic dismissal from service after due 3. The taxpayer is out of the country
notice and hearing [Sec. 177, LGC] or otherwise cannot be located
[Sec. 194(d), LGC]
Judicial Action
The LGU may enforce the collection of III. REAL PROPERTY

delinquent taxes, fees, charges or other
revenues by civil action in any court of TAXATION
competent jurisdiction within 5 years from the
date they became due. [Secs. 183 and 194, 1. Fundamental Principles
LGC] The appraisal, assessment, levy and
collection of real property tax shall be guided
Note: Either of these remedies (administrative by the following fundamental principles:
or judicial action) or all may be pursued 1. Real property shall be appraised at its
concurrently or simultaneously at the discretion current and fair market value.
of the LGU concerned. [Sec. 174, LGC]. 2. Real property shall be classified for
assessment purposes on the basis of
Injunction against collection of local taxes its actual use.
The LGC does not contain a provision 3. Real property shall be assessed based
prohibiting courts from enjoining the collection on a uniform classification within
of local taxes. Such lapse may have allowed each local government unit.
preliminary injunction under Rule 58 of the 4. The appraisal, assessment, levy and
Rules of Court where local taxes are involved. collection of real property tax shall not
[Angeles City v. Angeles City Electric be left to any private person.
Corporation, G.R. No. 166134 (2010)] 5. The appraisal and assessment of real
property shall be equitable. [Sec. 198,
b. Prescriptive Period LGC]
Prescriptive period for assessment 2. Nature of Real Property Tax (RPT)

General Rule: Within 5 years from the date they a. It is a direct tax on the use of real
become due property.
Exception: In case of fraud or intent to evade • Note: Real property shall be classified,
tax, within 10 years from discovery of fraud or valued and assessed on the basis of its
intent to evade payment [Sec. 194(a),(b), LGC] actual use regardless of where located,
whoever owns it, and whoever uses it.
Prescriptive period for collection [Sec. 217, LGC]
Within 5 years from the date of assessment by b. It is an ad valorem tax where the tax
administrative or judicial action. No such action base is a fixed proportion of the value of the
shall be instituted after the expiration of said property. [Sec. 199(c), LGC]
period. [Sec. 194(c), LGC] c. It is proportionate because the tax is
calculated on the basis of a certain
Grounds for suspension of prescriptive percentage of the value assessed.
period d. It creates a single, indivisible
obligation.
Page 473 of 494
e. It attaches on the property (i.e., a lien) permanently attached to the real property
and is enforceable against it. which are actually, directly, and exclusively
used to meet the needs of the particular
3. Imposition industry, business or activity and which by their
very nature and purpose are designed for, or
a. Power to Levy Extent of taxing power necessary to its manufacturing, mining,
logging, commercial, industrial or agricultural
A province or city or a municipality within purposes [Sec. 199(o), LGC]
Metro Manila may levy an annual ad valorem
tax on real property such as land, building, Summary of rules on machinery
machinery, and other improvement not
hereinafter specifically exempted; and [Sec. a. Machinery that is permanently
232, LGC] attached to land and buildings is subject to
RPT.
Note: A province or city or a municipality b. Machinery that is not permanently
within Metro Manila shall fix a uniform rate of attached:
basic real property tax applicable to their 1. Subject to the RPT if it is an
respective localities. [Sec. 233, LGC] essential and principal element of
an industry, work or activity without
The following may levy real property tax: which such industry, work or activity
1. Province cannot function; and
2. City 2. Not subject to RPT if it is not an
3. Municipality within Metro Manila [Sec. essential and principal element of an
232, LGC] industry, work or activity. [DOF Local
Finance Circular No. 001- 2002]
Note: A special levy on lands benefited by
public works may be imposed by municipalities Improvement
outside Metro Manila.
It is a valuable addition made to a property or
PROPERTIES SUBJECT TO RPT an amelioration in its condition, amounting to
1. Land more than a mere repair or replacement of
2. Building parts involving capital expenditures and labor,
3. Machinery which is intended to enhance its value, beauty
4. Other improvements not specifically or utility or to adapt it for new or further
exempted [Sec. 232, LGC] purposes [Sec. 199(m), LGC]
Note: The LGC contains no definition of the Types of Real Property Tax
term “real property”. Therefore, reference
should be made to the enumeration of 1. Basic Real Property Tax
immovable property under Art. 415 of the Civil a. Province: not exceeding 1% of the assessed
Code. value of real property; and
b. City or municipality within Metro Manila: not
Machinery exceeding 2% of the assessed value of real
property. [Sec. 233, LGC]
It embraces machines, equipment, mechanical
contrivances, instruments, appliances or 2. Special Levies on Real Property
apparatus which may or may not be attached, a. Special Education Fund (SEF) – annual
permanently or temporarily, to the real tax of 1% on the assessed value of real
property. It includes the physical facilities for property which shall be in addition to the
production, the installations and appurtenant basic RPT [Sec. 235, LGC]
service facilities, those which are mobile, self-
powered or self-propelled, and those not
Page 474 of 494

Note: The LGU can impose SEF at a rate of construction of such projects or
less than 1%. The text in Sec. 235 of the LGC improvements. [Sec. 240, LGC]
is cast in a permissive language. Sec. 235’s
specified rate of 1% is a maximum rate rather Note: Municipalities outside Metro Manila may
than an immutable edict. [Demaala vs. COA, impose a special levy on lands benefited by
G.R. No. 199752, (2015)] public works.
b. Special Levy on Idle Lands – annual tax on b. Exemptions from RPT

idle lands at the rate not exceeding 5% of the
assessed value of the property in addition to a. Real property owned by the Republic of the
the basic RPT [Sec. 236, LGC] Philippines or any of its political subdivisions
Idle lands covered Exception: when beneficial use is granted

for a consideration or to a taxable person.
1. Agricultural lands more than 1 hectare in
area, suitable for cultivation, dairying, inland Beneficial use – means that the person or
fishery, and other agricultural uses, 1/2 of entity has the use and possession of the
which remain uncultivated or unimproved property. In contrast, actual use refers to the
2. Non-agricultural lands more than 1,000 sqm purpose for which the property is principally
in area, 1/2 of which remain unutilized or or predominantly utilized by the person in
unimproved [Sec. 237, LGC] possession thereof. [Herarc Realty
Corporation vs. Provincial Treasurer of
Lands not considered idle Batangas, G.R. No. 210736, (2018)]
1. Agricultural lands planted to permanent or The assessment of real property shall be

perennial crops with at least 50 trees to a based on its actual use. The liability to pay
hectare real property taxes on government-owned
2. Lands actually used for grazing purposes properties, the beneficial or actual use of
[Sec. 237(a), LGC] which was granted to a taxable entity,
devolves on the taxable beneficial user.
Idle lands may be exempted by reason of: While the liability for taxes generally rests on
1. Force majeure, the owner of the real property, liability for real
2. Civil disturbance, property taxes may also expressly rest on
3. Natural calamity, or the entity with the beneficial use of the real
4. Any cause or circumstance which property at the time the tax accrues. [MWSS
physically or legally prevents the owner v CBAA, G.R. No. 215955. January 13,
from improving, utilizing or cultivating the 2021]
same. [Sec. 238, LGC]
b. Charitable institutions, churches
c. Special Levy for Public Works – a special parsonages, or convents appurtenant
levy on lands specially benefited by public thereto, mosques, non-profit or religious
works projects or improvements funded by the cemeteries, and all lands, buildings, and
LGU concerned, but which shall not exceed improvements actually, directly and
60% of the actual cost of such projects and exclusively used for religious, charitable, or
improvements, including the costs of acquiring educational purposes
land and such other real property in connection
therewith [Sec. 240, LGC] c. Machinery and equipment actually, directly
and exclusively used by local water districts
Exception: The special levy shall not apply to: and GOCCs engaged in the supply and
a. lands exempt from basic RPT; and distribution of water and/or generation and
b. the remainder of the land, portions of transmission of electric power
which were donated to the LGU for the
Page 475 of 494

d. Real property owned by duly registered GOCCs not exempt from RPT
cooperatives as provided for under RA 6938
[Cooperative Code of the Philippines] The last paragraph of Sec. 234 of the LGC
expressly withdrew the exemption of GOCCs
e. Machinery and equipment used for pollution from RPT upon the effectivity of the LGC.
control and environmental protection [Sec.
234, LGC] Exemption of Charitable Institutions
A claim for exemption under Sec. 234(e) of the To be entitled to the exemption, claimant must
LGC should be supported by evidence that prove, that (a) it is a charitable institution; and
the property sought to be exempted is actually, (b) its real properties are actually, directly and
directly and exclusively used for pollution exclusively used for charitable purposes.
control and environmental protection.
[Provincial Assessor of Marinduque v. CA, What is meant by actual, direct and exclusive
G.R. No. 170532 (2009)] use of the property for charitable purposes is
the direct and immediate and actual application
Withdrawal of exemption of the property itself to the purposes for which
the charitable institution is organized. [Lung
Except as provided herein, any exemption from Center of the Philippines v. Quezon City, G.R.
payment of RPT previously granted to, or No. 144104 (2004)]
presently enjoyed by, all persons, whether
natural or juridical, including all government- 4. Appraisal and Assessment of Real
owned or controlled corporations (GOCCs) are Property
hereby withdrawn upon the effectivity of the
LGC. [Sec. 234, LGC] Appraisal is the act or process of determining
the value of property as of a specified date for
Note: Section 234 of the LGC applies a specific purpose. [Sec. 199(e), LGC]
specifically to RPT exemptions, while Sec. 193
of the LGC applies to exemptions from all other Assessment is the act or process of
local taxes. determining the value of a property, or
proportion thereof subject to tax, including the
Proof of exemption discovery, listing, classification, and appraisal
of properties. [Sec. 199(f), LGC]
Every person who shall claim tax exemption
shall file with the local assessor within 30 a. Classes of Real Property
days from the date of declaration of real For purposes of assessment, real property
property sufficient documentary evidence in shall be classified as follows: [Sec. 215, LGC]
support of such claim (e.g., corporate charters, 1. Residential land – land principally devoted
title of ownership, affidavits, by-laws, contract, to habitation [Sec. 199(u), LGC]
articles of incorporation). Otherwise, the 2. Agricultural land – land devoted principally
property will be listed as taxable in the to the planting of trees, raising of crops,
assessment roll. [Sec. 206, LGC] livestock and poultry, dairying, salt making,
inland fishing and similar aquaculture
The burden of proving exemption from local activities and other agricultural activities
taxation is upon whom the subject real property and is not classified as mineral, timber,
is declared; thus, said person shall be residential, commercial or industrial land
considered by law as the taxpayer thereof. [Sec. 199(d), LGC]
Failure to do so, said property shall be listed as 3. Commercial land – land devoted
taxable in the assessment roll. [Camp John principally for the object of profit and is not
Hay Development Corporation vs. Central classified as agricultural, industrial,
Board of Assessment Appeals, G.R. No. mineral, timber or residential land [Sec.
169234, (2013)] 199(i), LGC]
Page 476 of 494
4. Industrial land – land devoted principally Declaration of real property by the local
to industrial activity as capital investment assessor
and is not classified as agricultural,
commercial, timber, mineral or residential When the person required to file the sworn
land [Sec. 199(n), LGC] declaration under Sec. 202 of the LGC refuses
5. Mineral land – land in which minerals exist or fails to make such declaration, the
in sufficient quantity or grade to justify the provincial, city or municipal assessor shall
necessary expenditures to extract and declare the property in the name of the
utilize such minerals [Sec. 199(p), LGC] defaulting owner, and shall assess the property
6. Timberland – land identified as forest or for taxation. [Sec. 204, LGC]
reserved area by the government, which
may or may not be granted to a Notice of transfer of real property
concessionaire, licensee, lessee or
permitee [BLGF Manual on Real Property Any person who shall transfer real property
Appraisal and Assessment Operations] ownership to another shall notify the provincial,
7. Special city or municipal assessor within 60 days from
a. all lands, buildings and other the date of such transfer.
improvements actually, directly and The notification shall include the ff:
exclusively used for hospitals, cultural, 1. Mode of transfer,
or scientific purposes, and 2. Description of the property alienated,
b. those owned and used by local water 3. Name and address of the transferee
districts, and GOCCs rendering [Sec. 208, LGC]
essential public services in the supply
and distribution of water and/or Appraisal of Real Property at Fair Market
generation and transmission of electric Value
power [Sec. 216, LGC]
All real property shall be appraised at the
Declaration of real property by owner or current and fair market value (FMV) prevailing
administrator at the locality where the property is situated.
[Sec. 201, LGC]
All persons owning or administering real
property, including improvements therein, shall FMV is the price at which property may be sold
prepare a sworn statement: by a seller who is not compelled to sell and
4. declaring the true value of the property bought by a buyer who is not compelled to buy.
which shall be the current and FMV of the [Sec. 199(l), LGC]
property; and
5. containing a sufficient description of the Note: Sec. 201 of the LGC implies that an LGU
property for assessment purposes. may only collect real estate tax on properties
The declaration must be filed with the assessor falling within its territorial jurisdiction. Thus, the
once every 3 years during the period from settlement of a boundary dispute between 2
January 1 to June 30. [Sec. 202, LGC] LGUs presents a prejudicial question that must
Declaration by person acquiring real be resolved before determining the real
property or making improvement thereon property tax liability of a property that straddles
the border. [Sta. Lucia Realty vs. City of Pasig,
A sworn statement declaring the true value of G.R. No. 166838, (2011)]
the property must be filed with the provincial,
city or municipal assessor within 60 days after Determination of FMV
the acquisition of a real property or upon
completion or occupancy of the improvement, a. The assessor of the province, city or
whichever comes earlier. [Sec. 203, LGC] municipality or his deputy may summon
the owners or persons having legal
interest therein and witnesses, and may
Page 477 of 494

administer oaths, and take deposition reproduction cost, for each
concerning the property, its ownership, year of use
amount, nature, and value. [Sec. 213, The remaining value shall
LGC] be fixed at not less than
b. The assessors shall prepare a schedule 20% of such original,
of FMV for the different classes of real replacement or
property situated in their respective local reproduction cost for so
government units for enactment by long as the machinery is
ordinance of the Sanggunian concerned. useful and in operation.
[Sec. 212, LGC] [Sec. 225, LGC]
c. The schedule of FMV shall be published
in a newspaper of general circulation in b. Assessment of Real Property Based on
the LGU concerned or in the absence Actual Use
thereof, shall be posted in the provincial
capitol, city or municipal hall and in 2 Basis of assessment
other conspicuous public places therein.
[Sec. 212, LGC] Real property shall be classified, valued and
d. The assessor may recommend to the assessed on the basis of actual use
Sanggunian amendments to correct regardless of where located, whoever owns
errors in valuation in the schedule of it, and whoever uses it. [Sec. 217, LGC]
FMV. The Sanggunian shall, by
ordinance, act upon the “Actual Use” refers to the purpose for which
recommendation within 90 days from its the property is principally or predominantly
receipt. [Sec. 214, LGC] utilized by the person in possession thereof
[Sec. 199(b), LGC]
FMV of Machinery
Note: Unpaid realty taxes attach to the property
Brand New The FMV is the acquisition and are chargeable against the person who
cost. [Sec. 224(a), LGC] had actual or beneficial use and possession of
it regardless of whether or not he is the owner.
If the machinery is [Estate of Lim v. City of Manila, G.R. No. 90639
imported, the acquisition (1990)]
cost includes freight,
insurance, bank and other Assessment levels
charges, brokerage,
arrastre and handling, It is the percentage applied to the FMV to
duties and taxes, plus cost determine the taxable value of the property.
of inland transportation, [Sec. 199(g), LGC]
handling, and installation
charges at the present site. Note: Assessment levels shall be fixed by
[Sec. 224(b), LGC] ordinances of the Sanggunian at rates not
All other FMV is determined by exceeding those prescribed under Sec. 218 of
cases dividing the remaining the LGC.
economic life of the
machinery by its estimated Assessed or Taxable Value
economic life and multiplied
by the replacement or It is the FMV of the real property multiplied by
reproduction cost. [Sec. the assessment level. [Sec. 199(h), LGC]
224(a), LGC]
Depreciation Depreciation rate: not Assessed FMV × Assessment Level
Allowance exceeding 5% of its original Value
cost or its replacement or
Page 478 of 494

Real Property Assessed Value × Tax 3. any great and sudden inflation or
Tax Rate deflation
of real property values;
Computing the RPT 4. gross illegality of the assessment when
1. Compute for the assessed value made; or
2. Multiply the assessed value by the real 5. any other abnormal cause. [Sec. 221,
property tax rate (ref Sec. 233) LGC]
General revisions of assessments and Assessment of property subject to back taxes

property classification Property declared for the first time shall be
assessed for taxes for the period during which
The local assessor shall undertake a general it would have been liable but in no case for
revision of real property assessments every 3 more than 10 years prior to the date of initial
years. [Sec. 219, LGC] assessment [Sec. 222, LGC]
Valuation of real property by assessor Notification of new or revised assessment

The local assessor shall make a classification, When real property is assessed for the first
appraisal and assessment of the real property time or when an existing assessment is
irrespective of any previous assessment or increased or decreased, the local assessor
taxpayer’s valuation thereon in the following shall within 30 days give written notice of the
cases: new or revised assessment to the person in
1. real property is declared and listed for whose name the property is being declared.
taxation purposes for the first time;
2. there is an ongoing general revision of Notice may be given personally or by
property classification and assessment; registered mail or through the assistance of the
or Punong Barangay to the last known address of
3. a request is made by the person in whose the person to be served. [Sec. 223, LGC]
name the property is declared. [Sec. 220,
LGC] 5. Collection of Real Property Tax
Note: The assessment shall not be increased Collecting authority

more often than once every 3 years except in
case of new improvements substantially The collection of RPT shall be the responsibility
increasing the value of said property or of any of the city or municipal treasurer concerned. He
change in its actual use. [Sec. 220, LGC] may deputize the barangay treasurer to collect
all taxes on real property located in the
Date of effectivity of assessment or barangay provided the latter is bonded. [Sec.
reassessment 247, LGC]
General rule: All assessments or Duty of assessor to furnish local treasurer

reassessments made after January 1 of any with assessment rolls
year shall take effect on January 1 of the
succeeding year [Sec. 221, LGC] The provincial, city or municipal assessor shall
prepare and submit to the local treasurer, on or
Exceptions: Reassessments due to the before December 31 of each year, an
following causes shall be made within 90 days assessment roll containing a list of all persons
from the date of any cause and shall take effect whose real properties have been newly
at the beginning of the quarter subsequent to assessed or reassessed and the values of
the reassessment: such properties. [Sec. 248, LGC]
1. partial or total destruction
2. major change in actual use; Notice of time for collection of tax
Page 479 of 494

The local treasurer shall post the notice of the RULES ON PAYMENT
dates when the tax may be paid without interest
at a conspicuous and publicly accessible place Payment of RPT
at the city or municipal hall:
• on or before January 31 of each year in a. Payment of RPT and the additional tax
the case of basic RPT and additional for SEF, without interest, may be made in 4
tax for SEF; or equal installments:
• on any other date in the case of any 1. 1st: March 31
other tax. 2. 2nd: June 30
The notice shall also be published in a 3. 3rd: September 30
newspaper of general circulation in the locality 4. 4th: December 31
once a week for 2 consecutive weeks. [Sec. b. Any special levies shall be governed by
249, LGC] ordinance of the Sanggunian concerned.
[Sec. 250, LGC]
a. Date of Accrual
Note: Payments of RPT shall first be applied
Real property tax for any year shall accrue on to prior years’ delinquencies, interests and
the 1st day of January and from that date it penalties, if any, and only after the
shall constitute a lien on the property which delinquencies are settled may tax payments be
shall be superior to any other lien, mortgage, or credited for the current period. [Sec. 250, LGC]
encumbrance of any kind whatsoever, and
shall be extinguished only upon the payment of Interests on unpaid RPT
the delinquent tax. [Sec. 246, LGC]
Interest at the rate of 2% per month on the
b. Periods to Collect unpaid amount or a fraction thereof until the
delinquent tax shall have been fully paid, but
Ordinary Period to Collect: Within 5 years the total interest shall not exceed 36 months
from the date the taxes become due. [Sec. 255, LGC]
Extraordinary Period to Collect: In case of Discount for advance or prompt payment

fraud or intent to evade payment of tax, within
10 years from discovery of fraud or intent to 1. Advance payment – not exceeding 20% of
evade payment [Sec. 270, LGC] annual tax due [Sec. 251, LGC]
2. Prompt payment – not exceeding 10% of
Grounds for suspension of prescriptive annual tax due [Art. 342, LGC IRR]
period c. Remedies of LGUs
The period of prescription within which to Issuance of notice of delinquency

collect shall be suspended for the time during
which: When the real property tax becomes
1. The local treasurer is legally prevented from delinquent, the local treasurer shall post a
collecting the tax; notice of delinquency at the main hall and in a
2. The owner of the property or the person publicly accessible and conspicuous place in
having legal interest therein requests for each barangay of the LGU concerned. [Sec.
reinvestigation and executes a waiver in writing 254, LGC]
before the expiration of the period to collect;
and 1. Local Government’s Lien
3. The owner of the property or the person
having legal interest therein is out of the The RPT shall constitute a lien on the property
country or cannot be located. [Sec. 270, LGC] subject to tax, superior to all liens, charges or
encumbrances in favor of any person,
irrespective of the owner or possessor thereof,
Page 480 of 494

enforceable by administrative or judicial action m. Redemption of property sold within
and may only be extinguished upon payment of 1 year from date of sale upon
the tax and the related interests and expenses. payment of the delinquent tax [Sec.
[Sec. 257, LGC] 261, LGC]
n. If not redeemed, the local treasurer
It constitutes a lien on the property from the shall execute a deed conveying the
date of accrual (i.e., January 1) [Sec. 246, property to the purchaser. [Sec.
LGC]. 262, LGC]
o. Purchase of property by local
2. Administrative Action treasurer in case there is no bidder
for the real property or if the highest
Levy on real property bid is insufficient to pay the RPT and
a. After expiration of the time required other costs; resale of such property
to pay the tax when due, the local may be made at a public auction
treasurer shall issue a warrant of [Sec. 263 and 264, LGC]
levy on or before, or simultaneously
with, the institution of the civil action Further levy until full payment
for the collection of the delinquent Levy may be repeated if necessary until the full
tax. due, including all expenses, is collected. [Sec.
b. The warrant shall include a duly 265, LGC]
authenticated certificate showing:
c. the name of the owner or person Distraint of personal property
having legal interest therein, The notice of delinquency shall state that
d. description of the property, and personal property may be distrained to effect
e. amount of the tax due and interest payment. It shall likewise state that any time
thereon. before the distraint of personal property,
f. Warrant must be mailed to or served payment of the tax with surcharges, interests
upon the delinquent owner or and penalties may be made. [Sec. 254, LGC]
person having legal interest in the
property. Judicial Action
g. Written notice of levy with the The LGU concerned may enforce the collection
attached warrant must be mailed to of the basic RPT or any other related tax by civil
or served upon the assessor and the action in any court of competent jurisdiction.
Register of Deeds where the The civil action shall be filed by the local
property is located. treasurer within the period prescribed for
h. The Register of Deeds must collection (i.e., 5 years or 10 years) under Sec.
annotate the levy on the tax 270 of the LGC. [Sec. 266, LGC]
declaration and certificate of title.
i. The levying officer shall submit a 6. Taxpayer’s Remedies
report on the levy to the Sanggunian
within 10 days after receipt of a. Contesting an Assessment
warrant by the owner. [Sec. 258,
LGC] Payment Under Protest; Exceptions
j. Advertisement of the sale or auction
shall be made within 30 days after General Rule: No protest shall be entertained
service of warrant. unless the taxpayer first pays the tax. There
k. Before the date of sale, the shall be annotated on the tax receipts the
proceedings may be stayed by words "paid under protest". [Sec. 252, LGC]
paying the delinquent tax. When the taxpayer questions the
l. Sale of the real property [Sec. 260, excessiveness or reasonableness of the
LGC] assessment, the taxpayer is required to first
pay the tax due before his protest can be
Page 481 of 494

entertained. [NPC v. Provincial Treasurer of or applied as tax credit against his existing or
Benguet, G.R. No. 209303 (2016)] future tax liability. [Sec. 252(c), LGC]
2. If the protest is denied or the 60-day period
Exceptions to Payment Under Protest: expired, the taxpayer may appeal to the Local
a. “Payment under protest” is not a Board of Assessment Appeals (LBAA) and
prerequisite when the issue is the legality subsequently to the CBAA pursuant to Secs.
or validity of the assessment. Certainly, it 226 and 229 as in the case of assessment
would be unjust to require the realty owner appeals. [Sec. 252(d), LGC]
to first pay the tax, the validity of which he
precisely questions, before he can lodge a Erroneous assessment vs. illegal
complaint to the court. [NPC v. Municipal assessment
Government of Navotas, G.R. 192300
(2014)] Erroneous Illegal Assessment
b. When questioning the very authority Assessment
and power of the assessor, acting solely Definition
and independently, to impose the An erroneous An assessment is
assessment and of the treasurer to assessment illegal if it was made
collect the tax, such are not questions presupposes that the without the authority
merely of amounts of the increase in the tax taxpayer is subject to under the law.
but attacks on the very validity of any the tax but is
increase for which no payment under disputing the
protest is mandated. [NPC vs. Province of correctness of the
Quezon, G.R. No. 171568, (2010)] amount assessed.
c. When the taxpayer posts a surety The taxpayer claims
bond which guarantees the payment to the that the local
local treasurer of the total amount of real assessor erred in
property taxes and penalties due, such is determining any of
substantial compliance with the “payment the items for
under protest” requirement. [Manila Electric computing the RPT.
Co. vs. City Assessor, G.R. No. 166102,
(2015)]
File Protest with Local Treasurer Exhaustion of administrative remedies

Taxpayer must The taxpayer may
Period to file protest exhaust the directly resort to
The protest in writing must be filed within 30 administrative judicial action
days from payment of the tax to the provincial, remedies provided without paying under
city or municipal treasurer. [Sec. 252(a), LGC] under the LGC. protest the assessed
tax and filing an
Note: The tax or a portion thereof paid under appeal with the
protest shall be held in trust by the treasurer. LBAA and CBAA.
[Sec. 252(b), LGC]
[City of Lapu-Lapu v. PEZA, G.R. Nos. 184203
Period to decide
and 187583 (2014)]
The local treasurer shall decide the protest
Note: A claim for exemption from the payment
within 60 days from receipt. [Sec. 252(a), LGC]
of RPT pertains to the reasonableness or
correctness of the assessment by the local
Decision on the protest
assessor, a question of fact which should be
1. If the protest is decided in favor of the
resolved, at the very first instance, by the
taxpayer, the amount or portion of the tax
LBAA. [NPC v. Provincial Treasurer of
protested shall be refunded to the protestant,
Benguet, G.R. No. 209303 (2016)]
Page 482 of 494
Refunds or Credits of RPT subpoena and subpoena duces tecum. [Sec.
229(b), LGC]
Repayment of excessive collections
When an assessment of RPT is found to be Motion for reconsideration with local
illegal or erroneous and the tax is accordingly assessor not allowed
reduced or adjusted, the taxpayer may file a The procedure likewise does not permit the
written claim for refund or credit for taxes and property owner the remedy of filing a motion
interests with the provincial or city treasurer for reconsideration before the local assessor.
within 2 years from the date the taxpayer is If the taxpayer fails to appeal with the LBAA in
entitled to such reduction or adjustment due course, the right of the LGU to collect the
taxes due with respect to the taxpayer’s
The provincial or city treasurer shall decide the property becomes absolute upon the
claim for tax refund or credit within 60 days expiration of the period to appeal. [Fels
from receipt thereof. [Sec. 253, LGC] Energy Inc. v. Province of Batangas, G.R. No.
168557 (2007)]
Remedy in case of denial by the local
treasurer When appeal to LBAA not required
In case the claim for tax refund or credit is
denied, the taxpayer may follow the procedure An exception to the rule on exhaustion of
in questioning an assessment (i.e., appeal to administrative remedies is where the
the LBAA, then to the CBAA, and subsequently controversy does not involve questions of fact
to the CTA En Banc). [Sec. 253, LGC] but only of law. Under Sec. 229(b) of the LGC
"the proceedings of the Board shall be
b. Contesting the Valuation of Real conducted solely for the purpose of
Property ascertaining the facts." It follows that appeals
to the LBAA may be fruitful only where
Appeal to the Local Board of Assessment questions of fact are involved. [Ty v. Trampe,
Appeals (LBAA) G.R. No. 117577 (1995)]
Who may appeal The protest contemplated under Section 252 of

Any owner or person having legal interest in the the LGC is required when there is question as
property who is not satisfied with the action of to the reasonableness or correctness of the
the local assessor in the assessment of his amount assessed, while an appeal to the LBAA
property may appeal to the LBAA by filing a under Section 226 is fruitful only where
petition under oath, together with copies of the questions of fact are involved. When the very
tax declarations and such affidavits or authority and power of the assessor to impose
documents submitted in support of the appeal. the assessment, and of the treasurer to collect
[Sec. 226, LGC] real property taxes are in question, the proper
recourse is a judicial action. [MWSS v CBAA,
When to appeal supra]
The appeal must be filed within 60 days from
the date of receipt of the written notice of Appeal to the Central Board of Assessment
assessment. [Sec. 226, LGC] Appeals (CBAA)
Period to decide on the appeal Who may appeal and when to appeal
The LBAA shall decide the appeal within 120 The owner of the property or the person having
days from the date of receipt of such appeal. legal interest therein or the assessor who is not
[Sec. 229(a), LGC] satisfied with the decision of the LBAA, may,
within 30 days after receipt of the decision of
Note: The LBAA shall have the power to said LBAA, appeal to the CBAA. [Sec. 229,
summon witnesses, administer oaths, conduct LGC]
ocular inspection, take depositions, and issue
Page 483 of 494

Period to decide and finality of decision may, by ordinance, condone or reduce taxes
The CBAA shall decide cases on appeal within and interest for the succeeding year/s in the
12 months from the date of receipt thereof, city or municipality affected by the calamity.
which shall become final and executory 15 [Sec. 276, LGC]
days after receipt thereof by the appellant or
appellee, as the case may be. [Sec. 9, Rule 3, 2. The President of the Philippines may, when
Chapter VII, Manual of Real Property Appraisal public interest so requires, condone or reduce
and Assessment Operations] the real property tax and interest for any year
in any province or city or municipality within
Effect of Payment of Taxes Metro Manila. [Sec. 277, LGC]
Appeal on assessments of real property shall
not suspend the collection of the corresponding Compromise by authority of the President
realty taxes on the property involved as
assessed by the provincial or city assessor The CTA allowed the compromise agreement
without prejudice to subsequent readjustment between Batangas City, represented by its
depending upon the final outcome of the Mayor, and the taxpayer since it was entered
appeal. [Sec. 231, LGC] into in line with an executive order issued by
the President to address the real property tax
c. Compromising an RPT assessment issues of independent power producers
through the reduction of their tax liabilities and
Condonation or reduction of RPT the condonation of fines, penalties and interest
on deficiency taxes. [Kepco Ilijan Corporation
1. The Sanggunian, in case of general failure v. CBAA, CTA EB No. 909 (2013)]
of crops or substantial decrease in the price of
agricultural or agri-based products or calamity,
Page 484 of 494

Flowchart V: Procedure for Assessment of Land Value for Real Property Tax Purposes – Local
Government Code
For purposes of this flowchart, owner means owner or administrator of real property or any person having legal interest
thereto:
Owner declares real Assessor declares Assessor prepares
property once every 3 real property if assessment rolls wherein
START owner/administrator real property shall be
years (Sec. 202) listed, valued and
within Jan 1 to Jun 30 fails to do so (Sec.
204) assessed. (Sec. 205)
Submit documents
supporting exemption Owner may claim
Is real property
within 30 day from for tax exemption yes
exempt?
declaration (Sec. 206) (Sec. 206)
Required
documents Property Property shall be
submitted yes proven as yes dropped from
within 30 days? tax assessment roll
exempt? (Sec. 206)
No
END
Property shall be
listed as taxable in
the assessment No
roll (Sec. 206)
Within 30 days
from assessment,
assessor sends No
notice to owner
(Sec. 223)
Owner may If LBAA rejects

LBAA must
protest protest, owner may
decide within
assessment appeal to the CBAA
120 days from
within 60 days within 30 days from
receipt of appeal
from receipt of receipt of notice (Sec.
(Sec. 229)
notice to the 229)
LBAA (Sec. 226)
If CBAA rejects
protest, owner may
Appeal to the
END SC within 15 appeal to the CTA en
banc within 30 days
days from receipt of
decision
Page 485 of 494

Flowchart VI: Taxpayer’s Remedies Involving Collection of Real Property Tax – Loc Gov’t Code
Page 486 of 494

Flowchart VII: Procedure for Levy for purposes of Satisfying Real Property Taxes – Loc Gov’t
Code
Page 487 of 494

TAXATION LAW
day-period under Section 228 of the NIRC
shall be deemed a denial for purposes of
IV. JUDICIAL allowing the taxpayer to appeal his case to
the Court and does not necessarily
REMEDIES constitute a formal decision of the CIR on
the tax case; Provided, further, that should
the taxpayer opt to await the final decision
A. Jurisdiction of The Court Of
of the CIR on the disputed assessments
Tax Appeals beyond the one hundred eighty day-period
above mentioned, the taxpayer may appeal
[R.A. 1125, as amended by R.A. No. 3457 and such final decision to the Court under
further amended by R.A. 9282 and R.A. 9503, Section 3(a), Rule 8 of these Rules; and
and A.M. No. 05-11-07-CTA or the Revised Provided, still further, that in the case of
Rules of the Court of Tax Appeals (RRCTA)] claims for refund of taxes erroneously or
illegally collected, the taxpayer must file a
1. Exclusive Original and Appellate petition for review with the Court prior to the
Jurisdiction Over Civil Cases expiration of the two-year period under
Section 229 of the NIRC;
The Court in Divisions shall exercise exclusive 3. Decisions, resolutions or orders of the RTC
original jurisdiction in tax collection cases in local tax cases decided or resolved by
involving final and executory assessments for them in the exercise of their original
taxes, fees, charges and penalties, where the jurisdiction;
principal amount of taxes and fees, exclusive 4. Decisions of the Commissioner of Customs
of charges and penalties, claimed is one million in cases involving liability for customs
pesos or more. [Sec. 3(c)(1), Rule 4, RRCTA] duties, fees or other money charges,
seizure, detention or release of property
The Court in Divisions shall exercise exclusive affected, fines, forfeitures of other penalties
appellate jurisdiction over appeals from the in relation thereto, or other matters arising
judgments, resolutions or orders of the RTCs in under the Customs Law or other laws
tax collection cases originally decided by them administered by the Bureau of Customs;
within their respective territorial jurisdiction. 5. Decisions of the Secretary of Finance on
[Sec. 3(c)(2), Rule 4, RRCTA] customs cases elevated to him
automatically for review from decisions of
The Court in Divisions shall exercise exclusive the Commissioner of Customs adverse to
original or appellate jurisdiction to review by the Government under Section 2315 of the
appeal the following: Tariff and Customs Code; and
6. Decisions of the Secretary of Trade and
1. Decisions of the CIR in cases involving Industry, in the case of nonagricultural
disputed assessments, refunds of internal product, commodity or article, and the
revenue taxes, fees or other charges, Secretary of Agriculture, in the case of
penalties in relation thereto, or other agricultural product, commodity or article,
matters arising under the NIRC or other involving dumping and countervailing
laws administered by the BIR; duties under Section 301 and 302,
2. Inaction by the CIR in cases involving respectively, of the Tariff and Customs
disputed assessments, refunds of internal Code, and safeguard measures under
revenue taxes, fees or other charges, Republic Act No. 8800, where either party
penalties in relation thereto, or other may appeal the decision to impose or not
matters arising under the NIRC or other to impose said duties. [Sec. 3(a), Rule 4,
laws administered by the BIR, where the RRCTA]
NIRC or other applicable law provides a
specific period for action: Provided, that in Note, however, that applying PD No. 242,
case of disputed assessments, the inaction except in the case of Constitutional offices, it is
of the CIR within the one hundred eighty the Secretary of Justice or the Solicitor General
Page 488 of 494
TAXATION LAW
or the Government Corporate Counsel original jurisdiction over tax collection
depending on the issues and the government cases; and
agencies involved who has the jurisdiction to d. Decisions of the Central Board of
settle all intra-governmental disputes, including Assessment Appeals (CBAA) in the
disputed tax assessments, prior to resort to exercise of its appellate jurisdiction over
judicial action. (CIR v COMELEC, G.R. No. cases involving the assessment and
244155, May 11, 2021) The reason for vesting taxation of real property originally decided
jurisdiction to them is the President's by the provincial or city board of
constitutional power of control over all assessment appeals.
departments, bureaus, and offices under the
executive branch that cannot be curtailed or 2. Exclusive Original and Appellate
diminished by law. It is also in line with the Jurisdiction Over Criminal Cases
doctrine of exhaustion of administrative
remedies that every opportunity must be given The Court in Divisions shall exercise exclusive
to the administrative body to resolve the original jurisdiction over all criminal offenses
matter, and exhaust all options for a resolution arising from violations of the NIRC or Tariff and
under the remedy provided by statute before Customs Code and other laws administered by
bringing an action in or resorting to the courts the BIR or the Bureau of Customs, where the
of justice. (ibid) principal amount of taxes and fees, exclusive
of charges and penalties, claimed is one million
Civil cases within the jurisdiction of the pesos or more. [Sec. 3(b)(1), Rule 4, RRCTA]
Court En Banc [Sec. 2(a-e), Rule 4, RRCTA]
The Court En Banc shall exercise exclusive The Court in Divisions shall exercise exclusive
appellate jurisdiction to review by appeal the appellate jurisdiction over appeals from the
following: judgments, resolutions or orders of the RTC in
their original jurisdiction in criminal offenses
a. Decisions or resolutions on motions for arising from violations of the NIRC or Tariff and
reconsideration or new trial of the Court in Customs Code and other laws administered by
Divisions in the exercise of its exclusive the BIR or Bureau of Customs, where the
appellate jurisdiction over: principal amount of taxes and fees, exclusive
1. Cases arising from administrative of charges and penalties, claimed is less than
agencies – Bureau of Internal Revenue, one million pesos or where there is no specified
Bureau of Customs, Department of amount claimed. [Sec. 3(b)(2), Rule 4, RRCTA]
Finance, Department of Trade and
Industry, Department of Agriculture; Criminal cases within the jurisdiction of the
2. Local tax cases decided by the Regional Court En Banc [Sec. 2(f-h), Rule 4, RRCTA]
Trial Courts in the exercise of their The Court En Banc shall exercise exclusive
original jurisdiction; and appellate jurisdiction to review by appeal the
3. Tax collection cases decided by the following:
Regional Trial Courts in the exercise of 1. Decisions, resolutions or orders on motions
their original jurisdiction involving final for reconsideration or new trial of the Court
and executory assessments for taxes, in Division in the exercise of its exclusive
fees, charges and penalties, where the original jurisdiction over cases involving
principal amount of taxes and penalties criminal offenses arising from violations of
claimed is less than one million pesos. the NIRC or the Tariff and Customs Code
b. Decisions, resolutions or orders of the RTC and other laws administered by the BIR or
in local tax cases and in tax collection Bureau of Customs;
cases decided or resolved by them in the 2. Decisions, resolutions or orders on motions
exercise of their appellate jurisdiction; for reconsideration or new trial of the Court
c. Decisions, resolutions or orders on motions in Division in the exercise of its exclusive
for reconsideration or new trial of the Court appellate jurisdiction over criminal offenses
in Division in the exercise of its exclusive
Page 489 of 494

TAXATION LAW
mentioned in the preceding subparagraph; Presentation of Evidence in the CTA. Cases
and before the CTA are litigated de novo where
3. Decisions, resolutions or orders of the RTC party litigants should prove every minute
in the exercise of their appellate jurisdiction aspect of their cases. The CTA’s decision
over criminal offenses arising from should be solely based on the evidence
violations of the NIRC or the Tariff and formally presented before it, notwithstanding
Customs Code and other laws any pieces of evidence that may have been
administered by the BIR or Bureau of submitted (or not submitted) to the CIR. The
Customs. court is not limited by the evidence presented
in the administrative claim. (CIR v. PBCom,
Does the CTA have jurisdiction over a G.R. No. 211348. February 23, 2022)
special civil action for certiorari assailing Appeal. Section 1, Rule 8 of the RRCTA
an interlocutory order issued by the RTC in requires that an appeal to the CTA En Banc
a local tax case? YES. must be preceded by a motion for
reconsideration or new trial with the CTA
While there is no express grant of such power, Division that issued the decision or resolution.
with respect to the CTA, Section 1, Article VIII that the rule applies in an amended decision
of the 1987 Constitution provides, nonetheless, since an amended decision is a different
that judicial power shall be vested in one decision. (CIR v COMELEC, G.R. No. 244155,
Supreme Court and in such lower courts as May 11, 2021)
may be established by law and that judicial
power includes the duty of the courts of justice However, if the amended decision of the CTA
to settle actual controversies involving rights Division is not a "new" decision, but a mere
which are legally demandable and enforceable, clarification, a correction at best, appeal would
and to determine whether or not there has been be proper without aa motion for
a grave abuse of discretion amounting to lack reconsideration. (ibid)
or excess of jurisdiction on the part of any
branch or instrumentality of the Government. B. Procedures
On the strength of the above constitutional
1. Filing of an Action for Collection of
provisions, it can be fairly interpreted that the
power of the CTA includes that of determining Taxes
whether or not there has been grave abuse of
discretion amounting to lack or excess of a. Internal Revenue Taxes
jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the The remedies for the collection of internal
exclusive appellate jurisdiction of the tax court. revenue taxes, fees or charges, and any
[City of Manila v. Grecia-Cuerdo, G.R. No. increment thereto resulting from delinquency
175723 (2014)] can be through the institution of a civil or
criminal action. [Sec. 205, NIRC]
The CTA may take cognizance of a petition for
certiorari to determine whether there is grave Note: See Taxpayer’s Remedies – Collection
abuse of discretion amounting to lack or above.
excess of jurisdiction committed by the BIR in
issuing the 2017 LOA against petitioner as well When this remedy is resorted to:
as the subpoena duces tecum considering that The tax assessment becomes final and
a previous investigation of the same taxable executory because of the failure to appeal.
year 2007 was already conducted pursuant to
the 2008 LOA and petitioner has already Even pending decision of the administrative
settled its tax liabilities arising out of said protest [CIR v. Union Shipping, G.R. No. L-
investigation. [Golden Donuts, Inc. v. 66160 (1990)]
Commissioner of Internal Revenue, G.R. No.
252816 (Notice), February 3, 2021]
Page 490 of 494
TAXATION LAW
b. Local Taxes Appeal to CTA Division
The LGU concerned may enforce the collection 1. A party aggrieved or adversely affected by
of delinquent taxes, fees, charges or other the decision or ruling or inaction of
revenues by civil action in any court of a. CIR;
competent jurisdiction. The civil action shall be b. Commissioner of Customs;
filed by the local treasurer. [Sec. 183, LGC] c. Secretary of Finance;
d. Secretary of Trade and Industry;
MTC/RTC depending on jurisdictional e. Secretary of Agriculture; or
threshold amount. f. RTC exercising original jurisdiction
2. May appeal within 30 days from the receipt
Prescriptive period of the copy of the decision or ruling, or the
Local taxes, fees, or charges shall be assessed expiration of the period fixed by law for the
within five (5) years from the date they became Commissioner to decide, to the Court of
due. Tax Appeals Division.
No action for the collection of such taxes, fees, Mode of Appeal: Rule 42
or charges, whether administrative or judicial,
shall be instituted after the expiration of such Aggrieved party may file a motion for
period. reconsideration or new trial within 15 days from
receipt of the copy of the decision.
In case of fraud or intent to evade the payment
of taxes, fees, or charges, the same may be In view of respondent’s availment of a wrong
assessed within ten (10) years from discovery mode of appeal via notice of appeal stating that
of the fraud or intent to evade payment. it was elevating the case to the Court of
Local taxes, fees, or charges may be collected Appeals — instead of appealing by way of a
within 5 years from the date of assessment by petition for review to the CTA within thirty (30)
administrative or judicial action. days from receipt of a copy of the RTC’s
August 3, 2012 Order, as required by Section
No judicial or administrative action for 11 of RA 1125, as amended by Section 9 of RA
collection can be instituted after lapse of the 9282 — the Court is constrained to deem the
period for assessment except when there is RTC’s dismissal of respondent’s collection
fraud or intent to evade tax. [Sec. 194 LGC] case against petitioner final and executory.
[Mitsubishi Motors Phils. Corp. v. Bureau of
The running of the periods of prescription shall Customs, G.R. No. 209830 (2015)]
be suspended for the time during which:
a. The treasurer is legally prevented from b. Suspension of Collection of Taxes
making the assessment of collection;
b. The taxpayer requests for a reinvestigation General rule: No appeal taken to the Court
and executes a waiver in writing before shall suspend the payment, levy, distraint, or
expiration of the period within which to sale of any property of the taxpayer for the
assess or collect; and satisfaction of his tax liability as provided under
c. The taxpayer is out of the country or existing laws.
otherwise cannot be located. [Sec. 194,
LGC] Exception: Where the collection of the amount
of the taxpayer’s liability, sought by means of a
2. Civil Cases demand for payment, by levy, distraint or sale
of any property of the taxpayer, or by whatever
a. Who May Appeal, Mode of Appeal, means, as provided under existing laws, may
Effect of Appeal jeopardize the interest of the Government or
the taxpayer, an interested party may file a
motion for the suspension of the collection of
the tax liability [Sec. 11, RA 1125, as amended]
Page 491 of 494
TAXATION LAW
c. Injunction not available to restrain injunction applies only in cases where the
collection processes by which the collection sought to be
made by means thereof are carried out in
No court shall have authority to grant an consonance with the law for such cases
injunction to restrain the collection of any provided and not when said processes are
national internal revenue tax, fee or charge obviously in violation of the law to the extreme
imposed by the Code. [Sec. 217, NIRC] that they have to be suspended for
jeopardizing the interests of taxpayer.
Exception: Sec. 11, R.A. 1125, supra. [Privatization and Management Office v. Court
of Tax Appeals, G.R. No. 211839 (2019)]
Injunctive relief is not available as a remedy to
assail the collection of a tax. The more The wording of Section 11 of the CTA Law is
substantial reason that should have impelled clear in requiring the existence of a “tax liability”
the RTC to desist from taking cognizance of the before a Suspension Order may be availed of.
respondent’s petition for declaratory relief However, more than just proof of an issued
except to dismiss the petition was its lack of assessment, the said assessment must be
jurisdiction. Section 218 of the NIRC expressly properly assailed and elevated to the CTA for it
provides that “[n]o court shall have the to acquire jurisdiction to issue any and all kinds
authority to grant an injunction to restrain the of ancillary remedies in favor of the taxpayer,
collection of any national internal revenue tax, e.g., a Suspension Order. [Commissioner of
fee or charge imposed by the [NIRC].” Also, Internal Revenue v. Court of Tax Appeals (First
pursuant to Section 11 of RA 1125, as Division), G.R. Nos. 210501, 211294 &
amended, the decisions or rulings of the 212490, March 15, 2021]
Commissioner of Internal Revenue, among
others, assessing any tax, or levying, or A taxpayer may seek the following provisional
distraining, or selling any property of taxpayers remedies before the CTA: (a) a motion to
for the satisfaction of their tax liabilities are suspend the direct enforcement of the tax
immediately executory, and their enforcement assessment pursuant to the special provision
is not to be suspended by any appeals thereof of the CTA law; and/or (b) the ordinary
to the CTA unless “in the opinion of the Court injunctive writs (TRO/WPI) based on the
[of Tax Appeals] the collection by the Bureau of suppletory application of the Rules of Court
Internal Revenue or the Commissioner of against the implementation of the tax statute or
Customs may jeopardize the interest of the issuance assailed. To note, since the latter
Government and/or the taxpayer,” in which remedy (TRO/WPI) is meant to enjoin the
case the CTA “at any stage of the proceeding implementation of a tax statute or issuance, a
may suspend the said collection and require successful application thereof will indirectly
the taxpayer either to deposit the amount result in the suspended implementation of a tax
claimed or to file a surety bond for not more assessment or demand for payment of taxes, if
than double the amount.” [Commissioner of any, springing from the tax statute or issuance.
Internal Revenue v. Standard Insurance Co.,
Inc., G.R. No. 219340 (2018)] The issuance of one of two remedies does not
necessarily result into or preclude the other.
The CTA has ample authority to dispense with However, when a TRO/WPI is issued enjoining
the deposit of the amount claimed or the filing the implementation of a tax statute or issuance,
of the required bond, whenever the method the practical effect is to suspend the
employed by the BIR in the collection of tax assessment or collection of all taxes stemming
jeopardizes the interest of the taxpayer for from the same. In this regard, the TRO/WPI
being patently in violation of law. [Sps. may thus be considered as a broader relief
Pacquiao v. CTA First Division, G.R. No. which renders unnecessary further Suspension
213394 (2016)] Orders covering future assessments/collection
of taxes stemming from such tax statute or
The requirement of the bond as a condition issuance. [Commissioner of Internal Revenue
precedent to the issuance of the writ of v. Court of Tax Appeals (First Division), G.R.
Page 492 of 494
TAXATION LAW
Nos. 210501, 211294 & 212490, March 15, Revenue, represented by the Commissioner of
2021] Internal Revenue, G.R. No. 210238 (2020)]
3. Criminal Cases b. Institution of Civil Action in Criminal

Action
a. Institution and Prosecution of
Criminal Actions In cases within the jurisdiction of the Court, the
criminal action and the corresponding civil
Institution of criminal action action for the recovery of civil liability for taxes
Instituted by the filing an information in the and penalties shall be deemed jointly instituted
name of the People of the Philippines in the same proceeding. The filing of the
criminal action shall necessarily carry with it the
Those involving violations of the NIRC and filing of the civil action. No right to reserve the
other laws enforced by the BIR: Must be filing of such civil action separately from the
approved by the CIR criminal action shall be allowed or recognized.
Those involving violations of the tariff and Rule 111, Section 1(a) of the Rules of Court
Customs Code and other laws enforced by the provides that what is deemed instituted with the
Bureau of Customs: Must be approved by the criminal action is only the action to recover civil
Commissioner of Customs liability arising from the crime. Civil liability
arising from a different source of obligation,
Institution shall interrupt the running of the such as when the obligation is created by law,
period of prescription. such civil liability is not deemed instituted with
the criminal action. It is well-settled that the
Prosecution of criminal action taxpayer’s obligation to pay the tax is an
Conducted and prosecuted under the direction obligation that is created by law and does not
and control of the public prosecutor arise from the offense of tax evasion, as such,
the same is not deemed instituted in the
Those involving violations of the NIRC and criminal case. [Gaw, Jr. v. Commissioner of
other laws enforced by the BIR or violations of Internal Revenue, G.R. No. 222837 (2018)]
the tariff and Customs Code and other laws
enforced by the Bureau of Customs - The c. Period to Appeal
prosecution may be conducted by their
respective duly deputized legal officers. Deciding Period to Mode of
Body Appeal Appeal
All violations of any provision of this Code shall Regional Appeal
prescribe after five (5) years. Prescription shall Trial Court in pursuant to
begin to run from the day of the commission of the exercise 15 days from Sec. 3[a] and
the violation of the law, and if the same be not of its original receipt of 6, Rule 122
known at the time, from the discovery thereof jurisdiction decision of the Rules
and the institution of judicial proceedings for its [to CTA of Court
investigation and punishment. [Sec. 281, Division]
NIRC] 15 days from Petition for
receipt of review as
An offense under the Tax Code is considered decision provided in
discovered only after the manner of CTA Division Rule 43 of
commission and the nature and extent of fraud [to CTA En May be the Rules of
has been definitely ascertained. This occurs Banc] extended for Court
when the BIR renders its final decision and good cause
requires the taxpayer to pay the deficiency tax. for not more The Court En
[Imelda Sze, et al. v. Bureau of Internal than 15 days Banc shall
Page 493 of 494

TAXATION LAW
Deciding Period to Mode of within fifteen days from receipt of a copy of the
Body Appeal Appeal questioned decision or resolution. Upon proper
act on the motion and the payment of the full amount of
appeal. the docket and other lawful fees and deposit for
Regional costs before the expiration of the reglementary
Trial Courts Petition for period herein fixed, the Court may grant an
in the review as additional period not exceeding fifteen days
15 days from from the expiration of the original period within
exercise of provided in
receipt of which to file the petition for review. [Section
their Rule 43 of
decision 3(b) and (c), Rule 8 of the RRCTA]
appellate the Rules of
jurisdiction Court
[To CTA The CTA En Banc cannot annul a final and
division] executory judgment of a division of the court
The laws creating the CTA and expanding its
Solicitor General as counsel for the People jurisdiction, and the CTA’s own rules of
and government officials sued in their procedure do not provide for a scenario where
official capacity the CTA sitting En Banc is asked to annul a
decision of one of its divisions. Annulment by a
The Solicitor General shall represent the collegial court, sitting En Banc is tantamount to
People of the Philippines and government allowing a court to annul its own judgment and
officials sued in their official capacity in all acknowledging that a hierarchy exists within
cases brought to the Court in the exercise of its such court. A proper remedy would have been
appellate jurisdiction. He may deputize the an original action for Certiorari under Rule 65.
legal officers of the Bureau of Internal Revenue [CIR v. Kepco Ilijan Corp., G.R. No. 199422
in cases brought under the National Internal (2016)]
Revenue Code or other laws enforced by the
Bureau of Internal Revenue, or the legal The filing of a motion for reconsideration or new
officers of the Bureau of Customs in cases trial before the CTA Division is an
brought under the Tariff and Customs Code of indispensable requirement for filing an appeal
the Philippines or other laws enforced by the before the CTA En Banc. Failure to file such
Bureau of Customs, to appear in behalf of the motion for reconsideration or new trial is cause
officials of said agencies sued in their official for dismissal of the appeal before the CTA En
capacity: Provided, however, such duly Banc. [City of Manila v. Cosmos Bottling Corp.,
deputized legal officers shall remain at all times G.R. No. 196681 (2018)]
under the direct control and supervision of the
Solicitor General. 5. Petition for Review on Certiorari to
the Supreme Court
4. Appeal to the CTA En Banc
[Rule 16, A.M. No. 05-11-07]
No civil proceeding involving matters arising
under the National Internal Revenue Code, the A party adversely affected by a decision or
Tariff and Customs Code or the Local ruling of the Court En Banc may appeal by filing
Government Code shall be maintained, except with the Supreme Court a verified petition for
as herein provided, until and unless an appeal review on certiorari within fifteen days from
has been previously filed with the CTA and receipt of a copy of the decision or resolution,
disposed of in accordance with the provisions as provided in Rule 45 of the Rules of Court.
of this Act.
The motion for reconsideration or for new trial
A party adversely affected by a decision or filed before the Court shall be deemed
resolution of a Division of the Court on a motion abandoned if, during its pendency, the movant
for reconsideration or new trial may appeal to shall appeal to the Supreme Court.
the Court by filing before it a petition for review
Page 494 of 494

U.P. LAW BOC LABOR LAW
Page 1 of 269
Page 2 of 269
*cover*
Page 3 of 269
TABLE OF CONTENTS
LABOR LAW 1 .......................................................... 1 III. LABOR STANDARDS ................................ 26

I. FUNDAMENTAL PRINCIPLES ........................ 1 A. CONDITIONS OF EMPLOYMENT.......... 26
1. Hours of Work ..................................... 26
A. LEGAL BASIS ........................................... 1
2. Rest Periods ....................................... 37
1. 1987 Constitution .................................. 1
3. Service Charge ................................... 39
2. Civil Code ............................................. 2
3. Labor Code ........................................... 3 B. WAGES ................................................... 40
1. Definition, Components, and Exclusions
B. STATE POLICY TOWARDS LABOR ........ 3
40
1. Security of tenure .................................. 3
2. Principles ............................................ 49
2. Social justice ......................................... 4
3. Minimum Wage ................................... 50
3. Equal work opportunities ...................... 5
4. Payment of wages .............................. 51
4. Right to self-organization and collective
5. Prohibitions regarding wages .............. 52
bargaining .................................................... 5
6. Wage determination ............................ 54
5. Construction in favor of labor ................ 6
6. Burden of proof and quantum of evidence .. 7 C. LEAVES .................................................. 57
1. Labor Code ......................................... 57
II. RECRUITMENT AND PLACEMENT ............ 7
2. Special laws ........................................ 58
A. DEFINITION OF RECRUITMENT AND
D. SEXUAL HARASSMENT IN THE WORK
PLACEMENT .............................................. 7
ENVIRONMENT .................................................. 63
B. REGULATION OF RECRUITMENT AND 1. Definition ............................................. 63
PLACEMENT ACTIVITIES ................................ 9 2. Duties and Liabilities of Employers ..... 64
1. Regulatory Authorities .......................... 9 3. Applicable Laws .................................. 65
2. Ban on Direct Hiring ............................ 11
E. WORKING CONDITIONS FOR SPECIAL
3. Entities Prohibited from Recruiting ..... 11
GROUPS OF EMPLOYEES ............................ 66
4. Suspension or Cancellation of License or
1. Apprentices and Learners ................... 66
Authority .................................................... 12
2. Disabled Workers ................................ 69
5. Prohibited Practices ............................ 13
3. Gender ................................................ 72
C. ILLEGAL RECRUITMENT ...................... 15 4. Minors ................................................. 74
1. Elements ............................................. 15 5. Kasambahays ..................................... 77
2. Types .................................................. 17 6. Homeworkers ...................................... 80
3. Illegal Recruitment as Distinguished from 7. Solo Parents ....................................... 81
Estafa ........................................................ 18 8. Night Workers ..................................... 81
9. Migrant Workers .................................. 83
D. LIABILITY OF LOCAL RECRUITMENT
10. Security Guards .................................. 84
AGENCY AND FOREIGN EMPLOYER .......... 18
1. Solidary Liability .................................. 18 IV. POST-EMPLOYMENT ................................ 85
2. Theory of Imputed Knowledge ............ 20
A. EMPLOYER-EMPLOYEE RELATIONSHIP
E. TERMINATION OF CONTRACT OF MIGRANT ................................................................ 85
WORKER ........................................................ 21 1. Tests to Determine Existence ............. 86
2. Legitimate Subcontracting as
F. EMPLOYMENT OF NON-RESIDENT ALIENS 21
distinguished from Labor-Only
1. Coverage ............................................ 21
Contracting .......................................... 87
2. Conditions for Grant of Permit ............ 23
3. Kinds of Employment .......................... 91
3. Validity of AEP and Renewal .............. 24
4. Denial of Application ........................... 25 B. TERMINATION BY EMPLOYER ............. 99
5. Revocation; Cancellation .................... 25 1. Requisites for Validity ....................... 100
6. Appeal ................................................. 25 2. Preventive Suspension ..................... 113
7. Penalty ................................................ 26 3. Illegal Dismissal ................................ 114
4. Money Claims arising from Employer- F. BONA FIDE OCCUPATIONAL

Employee Relationship ............................ 121 QUALIFICATIONS ............................................. 195
5. When Not Deemed Dismissed; Employee on
G. POST-EMPLOYMENT RESTRICTIONS ....
Floating Status ........................................ 123
.............................................................. 195
C. TERMINATION BY EMPLOYEE ........... 124
H. MARRIAGE BETWEEN EMPLOYEES OF
1. With notice to the employer .............. 124
COMPETITOR-EMPLOYERS ................. 195
2. Without notice to the employer ......... 124
3. Distinguish voluntary resignation and VII. SOCIAL LEGISLATION ............................ 196
constructive dismissal ............................. 124
A. SOCIAL SECURITY SYSTEM LAW ..... 196
D. RETIREMENT ....................................... 125 1. Coverage and Exclusions ................. 196
1. Eligibility and Coverage .................... 125 2. Dependents and Beneficiaries .......... 197
2. Amount of Retirement Pay ................ 126 3. Benefits ............................................. 197
3. Retirement Benefits for Workers Paid by
B. GOVERNMENT SERVICE INSURANCE
Results .................................................... 127
SYSTEM LAW ................................................... 200
4. Retirement Benefit of Part-Time Workers
1. Coverage and Exclusions ................. 200
.......................................................... 127
2. Dependents and Beneficiaries .......... 201
5. Non-Taxable ..................................... 127
3. Benefits ............................................. 201
LABOR LAW 2 ...................................................... 129
C. LIMITED PORTABILITY LAW ............... 206
V. LABOR RELATIONS ................................ 130
D. DISABILITY AND DEATH BENEFITS .. 208
A. RIGHT TO SELF-ORGANIZATION ...... 130 1. Labor Code ....................................... 208
1. Who May or May Not Exercise the Right 2. Employees Compensation and State
.......................................................... 130 Insurance Fund ........................................ 213
2. Commingling or Mixture of Membership . 3. Philippine Overseas Employment
.......................................................... 134 Administration-Standard Employment
3. Rights and Conditions of Membership .... Contract ................................................... 215
.......................................................... 134
E. SOLO PARENTS .................................. 218
B. BARGAINING UNIT .............................. 137
F. KASAMBAHAY ..................................... 219
C. BARGAINING REPRESENTATIVE ...... 140
G. AGRARIAN RELATIONS ...................... 219
D. RIGHTS OF LABOR ORGANIZATIONS 1. Concept of Agrarian Reform ............. 219
158 2. Existence and Concept of Agricultural
1. Check off, Assessment, Agency Fees Tenancy ................................................... 219
158 3. Rights of Agricultural Tenants ........... 220
2. Collective Bargaining ........................ 160 4. Concept of Farmworkers ................... 221
E. UNFAIR LABOR PRACTICES .............. 169 H. UNIVERSAL HEALTH CARE ................ 222
1. Nature, Aspects ................................ 169 1. Policy ................................................ 222
2. By Employers .................................... 170 2. Coverage .......................................... 222
3. By Labor Organizations .................... 176 3. National Health Insurance Program .. 223
F. PEACEFUL CONCERTED ACTIVITIES178 VIII. JURISDICTION AND REMEDIES ........ 224
1. By Labor Organization ...................... 178
A. LABOR ARBITER ................................. 224
2. By Employer ..................................... 188
1. Jurisdiction of the Labor Arbiter as
3. Assumption of Jurisdiction by Secretary
distinguished from the Regional Director . 224
of Labor and Employment ............................. 189
2. Requirements to perfect appeal to National
VI. MANAGEMENT PREROGATIVE ............. 191 Labor Relations Commission ................... 225
3. Reinstatement and/or execution pending
A. DISCIPLINE .......................................... 192
appeal ...................................................... 226
B. TRANSFER OF EMPLOYEES ............. 193
B. NATIONAL LABOR RELATIONS COMMISSION
C. PRODUCTIVITY STANDARDS ............ 194 226
1. Jurisdiction/Powers ........................... 226
D. BONUS ................................................. 194
2. Remedies .......................................... 227
E. CHANGE OF WORKING HOURS ........ 194
C. COURT OF APPEALS .......................... 229

D. SUPREME COURT .............................. 230
E. BUREAU OF LABOR RELATIONS ...... 230
1. Jurisdiction ........................................ 230
2. Appeals ............................................. 232
3. Administrative Functions of the BLR . 232
F. NATIONAL CONCILIATION AND MEDIATION
BOARD .......................................................... 232
1. Jurisdiction ........................................ 232
2. Conciliation as distinguished from mediation
233
3. Preventive mediation ........................ 234
G. DEPARTMENT OF LABOR AND
EMPLOYMENT REGIONAL DIRECTORS ... 234
1. Jurisdiction ........................................ 234
2. Recovery and adjudicatory power .... 235
H. DEPARTMENT OF LABOR AND
EMPLOYMENT SECRETARY ...................... 236
1. Jurisdiction ........................................ 236
2. Visitorial and enforcement powers .... 243
3. Power to suspend effects of termination .
.......................................................... 244
4. Remedies .......................................... 244
I. VOLUNTARY ARBITRATOR .................... 244
1. Jurisdiction ........................................ 245
2. Remedies .......................................... 247
J. PRESCRIPTION OF ACTIONS ................ 248
1. Money claims .................................... 248
2. Illegal dismissal ................................. 248
3. Unfair labor practice .......................... 248
4. Offenses under the Labor Code ....... 249
5. Illegal recruitment ............................. 249
LAWS AND RULES OF PROCEDURE ................ 249
U.P. LAW BOC LABOR 1 LABOR LAW
LABOR LAW 1
LABOR LAW
Page 1 of 269
Labor as Protected Class; Presumption of

I. FUNDAMENTAL Inherent Inequality
PRINCIPLES The presumption is that the employer and the
employee are on unequal footing, so the State
has the responsibility to protect the employee.
A. LEGAL BASIS This presumption, however, must be taken on
a case-to-case basis. In situations where
special qualifications are required for
1. 1987 Constitution employment, such as a Master's degree,
prospective employees are at a better position
ART. II: Declaration of Principles and State to bargain with the employer. Employees with
Policies special qualifications would be on equal footing
The State shall: with their employers, and thus, would need a
a. Promote full employment, a rising standard lesser degree of protection from the State than
of living, and an improved quality of life for an ordinary rank-and-file worker. [Perfecto
all [Sec. 9, Art. II] Pascua v. Bank Wise Inc., G.R. No. 191460 &
b. Promote social justice [Sec. 10, Art. II] 191464 (2018)].
c. Affirm labor as a primary social economic
force [Sec. 18, Art. II] SEC. 3, par. 3-4, ART. XIII: Social Justice
d. Protect rights of workers and promote their and Human Rights
welfare [Sec. 18, Art. II] The State shall:
e. Recognize the indispensable role of the a. Promote the principle of shared
private sector [Sec. 20, Art. II.] responsibility between workers and
f. Encourage private enterprise [Sec. 20, Art. employers
II.] b. Promote the preferential use of voluntary
g. Provide incentives to needed investments modes in settling disputes
[Sec. 20, Art. II.] c. Regulate the relations between workers
and employers,
SEC. 3, par. 1-2, ART. XIII: Social Justice d. Recognize the right of labor to its just share
and Human Rights in the fruits of production and the right of
The State shall: enterprises to reasonable returns to
a. Afford full protection to labor, local and investments, and to expansion and growth.
overseas, organized and unorganized
b. Promote full employment and equality of Balancing of Interests
employment opportunities for all. While labor laws should be construed liberally
c. Guarantee the rights (also known as the in favor of labor, we must be able to balance
“Cardinal Labor Rights”) of all workers to this with the equally important right of the
1. Self-organization [employer] to due process [Gagui v. Dejero,
2. Collective bargaining and negotiations G.R. No. 196036 (2013)]
3. Peaceful concerted activities
4. Strike in accordance with law Due Process [Sec. 1, Art. III, 1987
5. Security of tenure, Constitution]
6. Humane conditions of work Under the Labor Code, as amended, the
7. A living wage. requirements for the lawful dismissal of an
8. To participate in policy and decision- employee by his employer are two-fold: the
making processes affecting their rights substantive and the procedural.
and benefits as may be provided by
law. Substantive: two requisites must concur: (1)
the dismissal must be for a just or authorized
cause; and (2) the employee must be afforded
an opportunity to be heard and to defend
Page 1 of 262
himself. [Jeffrey Nacague v. Sulpicio Lines, different from that provided in its terms, is a law
Inc., G.R. No. 172589 (2010)] which impairs the obligation of a contract and
is null and void. [Clemens v. Nolting, G.R. No.
Procedural: an opportunity to be heard and to L-17959 (1922)]
defend oneself must be observed before an
employee may be dismissed [Metro Eye Vis-à-vis the freedom of contract
Security v. Salsona, G.R. No. 167367 (2007)] The prohibition to impair the obligation of
contracts is not absolute and unqualified. In
Labor as Property Right spite of the constitutional prohibition and the
One’s employment is a property right, and the fact that both parties are of full age and
wrongful interference therewith is an actionable competent to contract, it does not necessarily
wrong. The right is considered to be property deprive the State of the power to interfere
within the protection of the constitutional where the parties do not stand upon an
guarantee of due process of law. [Texon equality, or where the public health demands
Manufacturing v. Millena, G.R. No. 141380 that one party to the contract shall be protected
(2004)] against himself. [Leyte Land Transportation
Co. v. Leyte Farmers & Workers Union, G.R.
The Right to Assemble No. L-1377 (1948)]
Sec. 4, Art. III. No law shall be passed Labor Rights and Protection
abridging the right of the people peaceably All persons shall have the right to a speedy
to assemble and petition the government for disposition of their cases before all judicial,
redress of grievances. quasi-judicial, or administrative bodies. [Sec.
16, Art. III.]
Right to peaceably assemble and petition for
redress of grievances is, together with freedom No involuntary servitude in any form shall exist.
of speech, of expression, and of the press, a [Sec. 18 (2), Art. III.]
right that enjoys primacy in the realm of
constitutional protection. [BAYAN, et al. v. Except as a punishment for a crime whereof
Ermita, G.R. No. 169838, (2006)]. the party shall have been duly convicted. [Sec.
18 (2), Art. III.]
Wearing armbands and putting up placards to
express one’s views without violating the rights 2. Civil Code
of third parties, are legal per se and even
constitutionally protected. [Bascon v. CA, G.R. Relations between labor and capital
No. 144899 (2004)] The relations between capital and labor are
not merely contractual. [Art. 1700, CC]
The Right to Form Associations [Sec. 8, Art.
III, 1987 Constitution] They are impressed with public interest that
The right to form associations shall not be labor contracts:
impaired except through a valid exercise of a. Must yield to the common good
police power. [Bernas, The 1987 Philippine b. Are subject to special laws on
Constitution: A Comprehensive Reviewer] 1. Labor unions,
2. Collective bargaining,
Non-impairment of Contracts [Sec. 10, Art. 3. Strikes and lockouts,
III, 1987 Constitution] 4. Closed shop,
A law which changes the terms of a legal 5. Wages,
contract between parties, either in the time or 6. Working conditions,
mode or performance, or imposes new 7. Hours of labor; and
conditions, or dispenses with those expressed, 8. Similar subjects
or authorizes for its satisfaction something
Page 2 of 262
Neither capital nor labor shall of their adoption in newspapers of general

a. Act oppressively against the other, or circulation. [Art. 5]
b. Impair the interest or convenience of the
public [Art. 1701, CC]. All rights and benefits granted to workers under
this Code shall, except as may otherwise be
No contract which practically amounts to provided herein, apply alike to all workers,
involuntary servitude, under any guise whether agricultural or non-agricultural. (As
whatsoever, shall be valid. [Art. 1702, CC] amended by Presidential Decree No. 570-A,
November 1, 1974) [Art. 6]
Provisions of applicable statutes are deemed
written into the contract. Hence, the parties are
not at liberty to insulate themselves and their B. STATE POLICY TOWARDS
relationships from the impact of labor laws and LABOR
regulations by simply contracting with each
other. [Innodata Philippines, Inc. v. Quejada- Labor Code Declaration of Basic Policy
Lopez, G.R. No. 162839 (2006)] [Art. 3, LC]
The State shall:
Courts cannot stipulate for the parties or a. Afford protection to labor,
amend the latter’s agreement, for to do so b. Promote full employment,
would be to alter the real intention of the c. Ensure equal work opportunities
contracting parties when the contrary function regardless of sex, race or creed, and
of courts is to give force and effect to the d. Regulate the relations between workers
intention of the parties. [Maynilad Water and employers.
Supervisors Association v. Maynilad Water
Services, Inc., G.R. No. 198935 (2013)] The State shall assure the rights of workers to:
a. Self-organization,
3. Labor Code b. Collective bargaining,
c. Security of tenure, and
The State shall d. Just and humane conditions of work.
a. Afford protection to labor,
b. Promote full employment, 1. Security of tenure
c. Ensure equal work opportunities
regardless of sex, race or creed, and All workers shall be entitled to security of
d. Regulate the relations between workers tenure. [1987 Constitution, Art. XIII, Sec. 3, par.
and employers. 2]
The State shall assure the rights of workers to Police power allows the State to regulate the
a. Self-organization, grant of the right to security of tenure. [St.
b. Collective bargaining, Luke’s Medical Center Employee’s
c. Security of tenure, and Association-AFW v. NLRC, G.R. No. 162053
d. Just and humane conditions of work. [Art. (2007)]
3] ● Purpose: to safeguard the general welfare
of the public.
The Department of Labor and other ● Example: Persons who desire to engage
government agencies charged with the in the learned professions may be required
administration and enforcement of this Code or to take an examination as a prerequisite to
any of its parts shall promulgate the necessary engaging in the same.
implementing rules and regulations.
Such rules and regulations shall become

effective fifteen (15) days after announcement
Page 3 of 262
2. Social justice Note: The welfare of the people should

be the supreme law.
Sec. 9, Art. II, 1987 Constitution: The State
shall promote a just and dynamic social order Limits of Social Justice
that will: Social justice should be used only to correct an
a. Ensure the prosperity and independence of injustice [Agabon v. NLRC, G.R. No. 158693
the nation; (2004)]. It is not intended to countenance
b. Free the people from poverty through wrongdoing simply because it is committed by
policies that provide adequate social the underprivileged. It cannot be permitted to
services; and be a refuge of scoundrels any more than can
c. Promote: equity be an impediment to the punishment of
1. Full employment, the guilty. Those who invoke social justice may
2. A rising standard of living do so only if their hands are clean and their
3. Improved quality of life for all motives blameless and not simply because
they happen to be poor. [Tirazona v. Phil EDS
Sec. 10, Art. II, 1987 Constitution: The State Techno-Service, Inc., G.R. 169712 (2009)].
shall promote social justice in all phases of
national development. Tilting the scales [Rivera vs. Genesis
Transport Service, Inc., G.R. No. 215568
Social Justice as justification [Calalang v. (2015)]
Williams, G.R. No. 47800 (1940)] Labor laws are meant to implement and effect
Social justice is neither communism, nor social justice. Thus, such considerations
despotism, nor atomism, nor anarchy BUT: should be taken into account when dealing with
a. The humanization of laws; and labor cases.
b. The equalization of social and economic
forces by the State. The social justice suppositions underlying labor
So that justice in its rational and objectively laws require that the statutory grounds
secular conception may at least be justifying termination of employment should not
approximated. be read to justify the view that employees
should, in all cases, be free from any kind of
Social justice means: error.
a. The promotion of the welfare of all the
people, Not every improper act should be taken to
b. The adoption by the Government of justify the termination of employment. To infer
measures calculated to insure economic from a single error that an employee committed
stability of all the competent elements of serious misconduct or besmirched his
society – employer’s trust is grave abuse of discretion. It
1. through the maintenance of a proper is an inference that is arbitrary and capricious.
economic and social equilibrium in the It is contrary to the high regard for labor and
interrelations of the members of the social justice enshrined in our Constitution and
community, constitutionally; our labor laws.
2. through the adoption of measures
legally justifiable, or extra- Welfare State [Alalayan v. National Power
constitutionally; and Corporation, G.R. No. L-24396 (1968)]
3. through the exercise of powers The welfare state concept is found in the
underlying the existence of all constitutional clause on the promotion of social
governments on the time-honored justice.
principle of salus populi est suprema
lex. Purpose:
a. To ensure the well-being and economic
security of all the people, and
Page 4 of 262
b. In the pledge of protection to labor with Sec. 3, par. 1, Art. XIII, 1987 Constitution.
specific authority to regulate the relations The State shall:
between landowners and tenants and a. Afford full protection to labor -
between labor and capital. 1. Local and overseas,
2. Organized and unorganized, and
Separation pay as measure of social justice b. Promote full employment and equality of
[PLDT v. NLRC, G.R. No. 80609 (1988)] employment opportunities for all.
The rule embodied in the Labor Code is that a
person dismissed for lawful cause is not Sec. 2, R.A. No. 10911. Declaration of
entitled to separation pay. Policies
The State shall promote equal opportunities in
Exception: Considerations of equity. Equity employment for everyone. To this end, it shall
has been defined as justice outside law, being be the policy of the State to:
ethical rather than jural and belonging to the a. Promote employment of individuals on the
sphere of morals than of law. basis of their –
1. Abilities,
Strictly speaking, however, it is not correct to 2. Knowledge,
say that there is no express justification for the 3. Skills, and
grant of separation pay to lawfully dismissed 4. Qualifications, rather than their age
employees other than the abstract b. Prohibit arbitrary age limitations in
consideration of equity. employment.
c. Promote the right of all employees and
Reason: Our Constitution is replete with workers, regardless of age, to be treated
positive commands for the promotion of social equally in terms of –
justice, and particularly the protection of the 1. Compensation,
rights of the workers. 2. Benefits,
3. Promotion,
3. Equal work opportunities 4. Training, and
5. Other employment opportunities.
Declaration of Basic Policy [Art. 4, LC]
The State shall: 4. Right to self-organization and
a. Afford protection to labor, collective bargaining
b. Promote full employment,
c. Ensure equal work opportunities 1987 Constitution
regardless of: The State shall guarantee:
1. Sex, a. The right of the people, including those
2. Race, or employed in the public and private sectors,
3. Creed, to form unions, associations, or societies
d. Regulate the relations between workers for purposes not contrary to law. [Sec. 8,
and employers. Art. III.]
b. The rights of all workers to –
The State shall assure the rights of workers to: 1. Self-organization [Sec. 3, Art. XIII]
a. Self-organization, 2. Collective bargaining and negotiations
b. Collective bargaining, [Sec. 3, Art. XIII]
c. Security of tenure, and 3. Peaceful concerted activities [Sec. 3,
d. Just and humane conditions of work. Art. XIII]
4. Strike in accordance with law. [Sec. 3,
Note: Art. 4 of the Labor Code must be read in Art. XIII]
relation to the 1987 Constitution since this is
still based on the 1973 Constitution.
Page 5 of 262
Art. 253, Labor Code one. [Heritage Hotel Manila v. PIGLAS-

All persons employed: Heritage, G.R. No. 177024 (2009)]
a. In commercial, industrial and agricultural 4. The right to form or join a labor organization
enterprises, and necessarily includes the right to refuse or
b. In religious, charitable, medical or refrain from exercising said right. It is
educational institutions, whether operating self-evident that just as no one should be
for profit or not, denied the exercise of a right granted by
shall have the right to – law, so also, no one should be compelled
a. Self-organization, to exercise such a conferred right. [Reyes
b. Form, join, or assist labor organization of v. Trajano, G.R. No. 84433 (1992)]
their own choosing for purposes of 5. The right of the employees to self-
collective bargaining. organization is a compelling reason why
their withdrawal from the cooperative
Ambulant, intermittent and itinerant workers, must be allowed. As pointed out by the
self-employed people, rural workers and those union, the resignation of the member-
without any definite employers may form labor employees is an expression of their
organizations for their mutual aid and preference for union membership over that
protection. of membership in the cooperative. [Central
Negros Electric Cooperative v. SOLE, G.R.
Art. 254, Labor Code No. 94045 (1991)]
Employees of government corporations 6. Their freedom to form organizations would
established under the corporation code shall be rendered nugatory if they could not
have the right to: choose their own leaders to speak on
a. Organize, and their behalf and to bargain for them. [Pan-
b. Bargain collectively with their respective American World Airways, Inc v. Pan-
employers. American Employees Association, G.R.
No. L-25094 (1969)]
All other employees in the civil service shall
have the right to form associations for 5. Construction in favor of labor
purposes not contrary to law.
All doubts in the implementation and
Infringement of the right to self- interpretation of the provisions of this Code,
organization including its implementing rules and
It shall be unlawful for any person to restrain, regulations, shall be resolved in favor of
coerce, discriminate against or unduly interfere labor. [Art. 4, Labor Code]
with employees and workers in their exercise
of the right to self-organization [Art. 257, LC] In case of doubt, all legislation and all labor
contracts shall be construed in favor of the
Scope of right to self-organization safety and decent living for the laborer. [Art.
1. Right to form, join or assist labor 1702, Civil Code]
organizations of their own choosing for
the purpose of collective bargaining Liberal Construction
through representatives of their own Of the laws
choosing [Art. 257]; Art. 4 of the Labor Code mandates that all
2. Right to engage in lawful concerted doubts in the implementation and interpretation
activities for the same purpose (collective of the provisions thereof shall be resolved in
bargaining) or for their mutual aid and favor of labor. This is merely in keeping with
protection [Art. 257] the spirit of our Constitution and laws which
3. The right of any person to join an lean over backwards in favor of the working
organization also includes the right to class, and mandate that every doubt must be
leave that organization and join another resolved in their favor. [Hocheng Philippines
Page 6 of 262
Corporation v. Farrales, G.R. No. 211497 ER has burden of proving valid dismissal
(2015)] Unsubstantiated accusations or baseless
conclusions of the employer are insufficient
Of labor contracts legal justifications to dismiss an employee. The
A CBA, as a labor contract within the unflinching rule in illegal dismissal cases is that
contemplation of Art. 1700 of the Civil Code of the employer bears the burden of proof.
the Philippines which governs the relations [Garza v. Coca-Cola Bottlers Philippines, Inc.,
between labor and capital, is not merely G.R. No. 180972 (2014)]
contractual in nature but impressed with public
interest, thus, it must yield to the common Penalty must be commensurate with gravity
good. As such, it must be construed liberally of offense
rather than narrowly and technically, and the Not every case of insubordination or willful
courts must place a practical and realistic disobedience by an employee reasonably
construction upon it, giving due consideration deserves the penalty of dismissal. The penalty
to the context in which it is negotiated and to be imposed on an erring employee must be
purpose which it is intended to serve. [Cirtek commensurate with the gravity of his offense.
Employees Labor Union-FFW v. Cirtek [Joel Montallana v. La Consolacion College
Electronics, G.R. No. 190515 (2010)] Manila, G.R. No. 208890 (2014)]
Mutual obligation
The employer's obligation to give his workers II. RECRUITMENT AND
just compensation and treatment carries with it PLACEMENT
the corollary right to expect from the workers
adequate work, diligence and good conduct. A. DEFINITION OF RECRUITMENT
[Judy Philippines, Inc. v NLRC, G.R. No. AND PLACEMENT
111934 (1998)]
6. Burden of proof and quantum of “Recruitment and placement" refers to any

evidence act of: [CETCHUP-R-CPA]
1. Canvassing,
2. Enlisting,
Summary on Burden of Proof
1. Existence of ER-EE Relationship: 3. Contracting,
Employee 4. Transporting,
2. Fact of dismissal: Employee 5. Utilizing
3. Validity of Dismissal: Employer 6. Hiring, or
7. Procuring workers
EE has burden of proving fact of
employment and of dismissal And includes –
Before a case for illegal dismissal can prosper, 1. Referrals,
an employer-employee relationship must first act of passing along or forwarding of an
be established by the employee. [Javier v. Fly applicant for employment after an initial
Ace Corp., G.R. No. 192558 (2012)] interview of a selected applicant for
employment to a selected employer,
The employee must first establish by placement officer or bureau." [Rodolfo v.
substantial evidence the fact of his dismissal People, G.R. No. 146964 (2006)]
from service. If there is no dismissal, then there 2. Contract services,
can be no question as to the legality or illegality 3. Promising, or
thereof. [MZR Industries v. Colambot, G.R. No. 4. Advertising for employment, locally or
179001 (2013)] abroad, whether for profit or not
Page 7 of 262
Provided, That any person or entity which, in License and Authority [Art. 13(d) and (f); Sec.
any manner, offers or promises for a fee 3 (h)(g), DO 141-14]
employment to two or more persons shall be
License Authority
deemed engaged in recruitment and
placement. [Art. 13 (b), Labor Code] document issued by the Department of
Labor and Employment (DOLE)
The proviso provides for a presumption that a
person or entity so described engages in Authorize an entity Authorize an entity
recruitment and placement. [People v. Panis, to operate as a to operate as a
G.R. No. 58674 (1988)] private employment private recruitment
agency entity
Number of persons: not essential
The number of persons dealt with is not an When a license is Does not entitle a
essential ingredient of the act of recruitment given, one is also private recruitment
and placement of workers. Any of the acts authorized to collect entity to collect fees.
mentioned in Art. 13(b) will constitute fees
recruitment and placement even if only one
prospective worker is involved. [People v. Private employment agency (PEA) v.
Panis, supra.] Private recruitment entity (PRE) [Art. 13 (c),
(e)]
Worker – any member of the labor force,
whether employed or unemployed. [Art.13 (a)] Private Private
Employment Recruitment
Overseas Filipino Worker/Migrant Worker – Agency Entity
a person who is to be engaged, is engaged, or
has been engaged in a remunerated activity: Definition Any person Any person or
1. in a state of which he or she is not a citizen, or entity association
or engaged in engaged in the
2. on board a vessel navigating the foreign recruitment recruitment
seas other than a government ship used for and and placement
military or non-commercial purposes, or placement of of workers,
3. on an installation located offshore or on the workers for a locally or
high seas. [Sec. 2 (a), RA 8042, as fee which is overseas,
amended] charged, without
directly or charging,
indirectly, directly or
from the indirectly,
workers or any fee
employers or
both
Require- License Authority

ment
Policy of Close Government Regulation

RA 9422 or the Act to Strengthen the
Regulatory Functions of the Philippine
Overseas Employment Administration of 2007
expressly repealed Sections 29 and 30 of RA
8042, which provided for the deregulation of
recruitment activities.
Page 8 of 262
Recruitment of Local and Migrant Workers: with internationally-accepted standards. [Sec.

Policy of Selective Deployment 3, RA 8042, as amended]
The State shall allow the deployment of
overseas Filipino workers only in countries
where the rights of Filipino migrant workers are B. REGULATION OF RECRUITMENT
protected. The government recognizes any of AND PLACEMENT ACTIVITIES
the following as a guarantee on the part of the
receiving country for the protection of the rights
1. Regulatory Authorities
of overseas Filipino workers:
1. It has existing labor and social laws
a. Philippine Overseas
protecting the rights of workers, including
Employment Administration
migrant workers;
2. It is a signatory to and/or a ratifier of
POEA supersedes OEDB and NSB
multilateral conventions, declarations or
Executive Order 797, Reorganizing the
resolutions relating to the protection of
Ministry of Labor and Employment, Creating
workers, including migrant workers; and
the Philippine Overseas Employment
3. It has concluded a bilateral agreement or
Administration (POEA), and for other
arrangement with the government on the
purposes, has superseded Art. 17 and 20, and
protection of the rights of overseas Filipino
provides for the POEA to take over the
Workers:
functions of the Overseas Employment
Development Board (OEDB) and the National
Provided, That the receiving country is taking
Seamen Board (NSB).
positive, concrete measures to protect the
rights of migrant workers in furtherance of any
POEA Powers and Functions
of the guarantees under subparagraphs (a), (b)
a. Regulate private sector participation in the
and (c) hereof. [Sec. 3, RA 8042, as amended]
recruitment and overseas placement of
workers by setting up a licensing and
[..] The Department of Foreign Affairs, through
registration system;
its foreign posts, shall issue a certification to
b. Formulate and implement, in
the POEA, specifying therein the pertinent
coordination with appropriate entities
provisions of the receiving country's labor/
concerned, when necessary, a system for
social law, or the convention/ declaration/
promoting and monitoring the overseas
resolution, or the bilateral agreement/
employment of Filipino workers taking into
arrangement which protect the rights of migrant
consideration their welfare and the
workers.
domestic manpower requirements;
c. Protect the rights of Filipino workers for
The State shall also allow the deployment of
overseas employment to fair and equitable
overseas Filipino workers to vessels navigating
recruitment and employment practices and
the foreign seas or to installations located
ensure their welfare;
offshore or on high seas, whose
d. Exercise original and exclusive
owners/employers are compliant with
jurisdiction to hear and decide all claims
international laws and standards that protect
arising out of an employer-employee
the rights of migrant workers.
relationship or by virtue of any law or
contract involving Filipino workers for
The State shall likewise allow the deployment
overseas employment including the
of overseas Filipino workers to companies and
disciplinary cases; and all pre employment
contractors with international operations:
cases which are administrative in character
Provided, That they are compliant with
involving or arising out of violation or
standards, conditions and requirements, as
requirement laws, rules and regulations
embodied in the employment contracts
including money claims arising therefrom,
prescribed by the POEA and in accordance
Page 9 of 262
or violation of the conditions for issuance of The Administration shall also establish and
license or authority to recruit workers. All maintain joint projects with private
prohibited recruitment. activities and organizations, domestic or foreign, in the
practices which are penal in character as furtherance of its objectives. [Sec. 3, EO 247]
enumerated and defined under and by
virtue of existing laws, shall be prosecuted POEA Standard Contract Deemed
in the regular courts in close coordination Integrated in every Employment Contract
with the appropriate Departments and While the seafarers and their employers are
agencies concerned; governed by their mutual agreements, the
e. Maintain a registry of skills for overseas POEA rules and regulations require that the
placement; POEA SEC, which contains the standard terms
f. Recruit and place workers to service the and conditions of the seafarers' employment in
requirements for trained and competent foreign ocean-going vessels, be integrated in
Filipino workers by foreign governments every seafarer's contract. [Wallem Maritime
and their instrumentalities and such other Services, Inc. v. Tanawan, G.R. No. 160444,
employers as public interest may require; (2012)]
g. Promote the development of skills and
careful selection of Filipino workers; POEA Jurisdiction vis-a-vis NLRC and RTC
h. Undertake overseas market development
Administrative Disciplinary
activities for placement of Filipino workers;
cases arising action cases
i. Secure the best terms and conditions of
out of and other
employment of Filipino contract workers
violations of special
and ensure compliance therewith;
rules and cases,
j. Promote and protect the well-being of
regulations involving
Filipino workers overseas;
relating to employers,
k. Develop and implement programs for the
licensing and principals,
effective monitoring of returning contract
registration of contracting
workers, promoting their re-training and re- POEA
recruitment partners, and
employment or their smooth re-integration
and Filipino
into the mainstream of national economy in
employment migrant
coordination with other government
agencies and workers
agencies;
entities. [Sec. [Sec. 28(b),
l. Institute a system for ensuring fair and
28(a), Omb. Omb. Rules
speedy disposition of cases involving
Rules Implementing
violation or recruitment rules and
Implementing RA 8042]
regulations as well as violation of terms and
RA 8042]
conditions of overseas employment;
m. Establish a system for speedy and Claims arising out of an ER-
efficient enforcement of decisions laid EE relationship or by virtue of
down through the exercise of its any law or contract involving
adjudicatory function; Filipino workers for overseas
n. Establish and maintain close relationship NLRC
deployment including actual,
and enter into joint projects with the moral, and exemplary and
Department of Foreign Affairs, Philippine other forms of damage. [Sec.
Tourism Authority, Manila International 10, RA 8042]
Airport Authority, Department of Justice,
Department of Budget and Management Criminal actions arising from
and other relevant government entities, in illegal recruitment [Sec. 9, RA
the pursuit of its objectives. RTC
8042]
Page 10 of 262
2. Ban on Direct Hiring

b. Regulatory and Visitorial
Powers of the Department of General Rule: No employer may hire a Filipino
Labor and Employment worker for overseas employment except
Secretary through the Boards and entities authorized by
the Secretary of Labor. [Art. 18]
Reports on Employment Status
Whenever the public interest requires, the No employer shall directly hire an Overseas
Secretary of Labor may direct all persons or Filipino Worker for overseas employment.
entities within the coverage of this Title to [Sec. 123, 2016 Revised POEA Rules and
submit a report on the status of employment, Regulations]
including job vacancies, details of job
requisitions, separation from jobs, wages, Exemptions:
other terms and conditions and other a. Members of the diplomatic corps;
employment data. [Art. 33] b. International organizations;
c. Heads of state and government officials
SOLE’s regulatory Power with the rank of at least deputy minister;
The SOLE shall have the power: d. Other employers as may be allowed by the
a. To restrict and regulate the recruitment and Secretary of Labor and Employment, such
placement activities of all agencies within as:
the coverage of this Title. [Title 1, 1. Those provided in (a), (b) and (c) who
Recruitment and Placement of Workers] bear a lesser rank, if endorsed by the
b. To issue orders and promulgate rules and Philippine Overseas Labor Office
regulations to carry out the objectives and (POLO), or Head of Mission in the
implement the provisions of this Title. [Art. absence of the POLO;
36] 2. Professionals and skilled workers with
duly executed/authenticated contracts
SOLE’s visitorial Power containing terms and conditions over
The SOLE or his duly authorized and above the standards set by the
representatives may, at any time, inspect the POEA. The number of professional and
premises, books of accounts and records of skilled Overseas Filipino Workers hired
any person or entity covered by this Title, for the first time by the employer shall
require it to submit reports regularly on not exceed five (5). For the purpose of
prescribed forms, and act on violation of any determining the number, workers hired
provisions of this Title. [Art. 37] as a group shall be counted as one; OR
3. Workers hired by a relative/family
SOLE’s arrest and seizure power declared member who is a permanent resident
unconstitutional of the host country. [Sec. 124, 2016
After the promulgation of the 1987 Constitution, Revised POEA Rules and Regulations]
only judges may issue search and arrest
warrants. The Secretary of Labor, not being a 3. Entities Prohibited from
judge, may no longer issue search of arrest Recruiting
warrants. Article 38(c) of the Labor Code is
declared unconstitutional and of no force or
Entities disqualified from Engaging in the
effect. [Salazar v. Achacoso, G.R. No. 81510, Business of Recruitment and Placement of
(1990)]
Workers for Local Employment
1. Travel agencies and sales agencies of
airline companies, whether for profit or not.
[Art. 26]
Page 11 of 262
2. Those who are convicted of illegal propose or provide an insurance contract

recruitment, trafficking in persons, anti- under the compulsory insurance coverage
child labor violation, or crimes involving for agency-hired OFWs;
moral turpitude; 5. Sole proprietors, partners or officers and
3. Those against whom probable cause or members of the board with derogatory
prima facie finding of guilt for illegal records, such as, but not limited to the ff:
recruitment or other related cases exist a. Those convicted or against whom
particularly to owners or directors of probable cause or prima facie finding of
agencies who have committed illegal guilt is determined by a competent
recruitment or other related cases. authority for illegal recruitment or for
4. Those agencies whose licenses have been other related crimes or offenses
previously revoked or cancelled by the committed in the course of, related to,
Department under Sec. 54 of these rules. or resulting from, illegal recruitment, or
5. Cooperatives whether registered or not for crimes involving moral turpitude;
under the Cooperative Act of the b. Those agencies whose licenses have
Philippines. been revoked for violation of RA 8042,
6. Law enforcers and any official and PD 442, RA 9208, and their IRRs;
employee of the Department of Labor and c. Those agencies whose licenses have
Employment (DOLE). been cancelled, or those who, pursuant
7. Sole proprietors of duly licensed agencies to the order of the Administrator, were
are prohibited from securing another included in the list of persons with
license to engage in recruitment and derogatory record for violation of
placement. recruitment laws and regulations;
8. Sole proprietors, partnerships or 6. Any official employee of the DOLE, POEA,
corporations licensed to engage in private OWWA, DFA, DOJ, DOH, BI, IC, NLRC,
recruitment and placement for local TESDA, CFO, NBI, PNP, Civil Aviation
employment are prohibited from engaging Authority of the Philippines, international
in job contracting or subcontracting airport authorities, and other government
activities. [Sec. 5, DO 141-14, Revised agencies directly involved in the
Rules and Regulations Governing implementation of RA 8042, as amended,
Recruitment and Placement for Local and/or any of his/her relatives within the
Employment] fourth civil degree of consanguinity or
affinity. [Part II, Rule I, Sec. 3, 2016
Entities disqualified from Engaging or Revised POEA Rules and Regulations]
Participating in the Business of
Recruitment and Placement of Workers for 4. Suspension or Cancellation of
Overseas Employment License or Authority
1. Travel agencies and sales agencies of
airline companies, whether for profit or not. The Secretary of Labor shall have the power to
[Art. 26] suspend or cancel any license or authority to
2. Officers or members of the Board of any recruit employees for overseas employment
corporation or partners in a partnership for:
engaged in the business of a travel agency; a. violation of rules and regulations issued by
3. Corporations and partnerships, where any the Department of Labor, the Overseas
of its officers, members of the board or Employment Development Board, and the
partners is also an officer, member of the National Seamen Board;
board or partner of a corporation or b. violation of the provisions of this and other
partnership engaged in the business of a applicable laws, General Orders and
travel agency; Letters of Instructions. [Art. 35]
4. Individuals, partners, officers, or directors
of an insurance company who make,
Page 12 of 262
Acts prohibited under Art. 34 are grounds for g. To obstruct or attempt to obstruct
suspension or cancellation of license. Note that inspection by the Secretary of Labor or by
these acts likewise constitute illegal his duly authorized representatives;
recruitment under RA 8042 as amended by RA h. To fail to file reports on the status of
10022. employment, placement vacancies,
remittance of foreign exchange earnings,
Who can suspend or cancel the license? separation from jobs, departures and such
1. DOLE Secretary other matters or information, as may be
2. POEA Administrator required by the Secretary of Labor;
i. To substitute or alter employment contracts
The power to suspend or cancel any license or approved and verified by the Department of
authority to recruit employees for overseas Labor from the time of actual signing
employment is concurrently vested with the thereof by the parties up to and including
POEA and the Secretary of Labor. [People v. the periods of expiration of the same
Diaz, G.R. 112175 (1996)] without the approval of the Secretary of
Labor;
5. Prohibited Practices j. To become an officer or member of the
Board of any corporation engaged in travel
Recruitment of Local Workers: Prohibited agency or to be engaged directly or
Practices under Art. 34 indirectly in the management of a travel
a. To charge or accept, directly or indirectly, agency; and
any amount greater than that specified in k. To withhold or deny travel documents from
the schedule of allowable fees prescribed applicant workers before departure for
by the Secretary of Labor, or to make a monetary or financial considerations other
worker pay any amount greater than that than those authorized under this Code and
actually received by him as a loan or its implementing rules and regulations.
advance;
b. To furnish or publish any false notice or Recruitment of Migrant Workers: Prohibited
information or document in relation to Acts under Sec. 6, R.A. No. 8042
recruitment or employment; a. To charge or accept directly or indirectly
c. To give any false notice, testimony, any amount greater than that specified in
information or document or commit any act the schedule of allowable fees prescribed
of misrepresentation for the purpose of by the Secretary of Labor and
securing a license or authority under this Employment, or to make a worker pay or
Code; acknowledge any amount greater than that
d. To induce or attempt to induce a worker actually received by him as a loan or
already employed to quit his employment in advance;
order to offer him to another, unless the b. To furnish or publish any false notice or
transfer is designed to liberate the worker information or document in relation to
from oppressive terms and conditions of recruitment or employment;
employment; c. To give any false notice, testimony,
e. To influence or to attempt to influence any information or document or commit any act
person or entity not to employ any worker of misrepresentation for the purpose of
who has not applied for employment securing a license or authority under the
through his agency; Labor Code, or for the purpose of
f. To engage in the recruitment or placement documenting hired workers with the
of workers in jobs harmful to public health POEA, which include the act of
or morality or to the dignity of the Republic reprocessing workers through a job
of the Philippines; order that pertains to nonexistent work,
work different from the actual overseas
work, or work with a different employer
Page 13 of 262
whether registered or not with the l. Failure to actually deploy a contracted

POEA; worker without valid reason as determined
d. To include or attempt to induce a worker by the Department of Labor and
already employed to quit his employment in Employment;
order to offer him another, unless the m. Failure to reimburse expenses incurred by
transfer is designed to liberate a worker the worker in connection with his
from oppressive terms and conditions of documentation and processing for
employment; purposes of deployment, in cases where
e. To influence or attempt to influence any the deployment does not actually take
person or entity not to employ any worker place without the worker's fault. Illegal
who has not applied for employment recruitment when committed by a
through his agency or who has formed, syndicate or in large scale shall be
joined or supported, or has contacted or considered an offense involving economic
is supported by any union or workers' sabotage; and
organization; n. To allow a non-Filipino citizen to head or
f. To engage in the recruitment or placement manage a licensed recruitment/manning
of workers in jobs harmful to public health agency. [Sec. 6, R.A. No. 8042]
or morality or to the dignity of the Republic
of the Philippines; Note: Bold parts differ from those stated in the
g. To obstruct or attempt to obstruct prohibited practices under Art. 34.
inspection by the Secretary of Labor and
Employment or by his duly authorized Prohibited Acts Added by Amendment
representative a. Grant a loan to an overseas Filipino worker
h. To fail to submit reports on the status of with interest exceeding eight percent (8%)
employment, placement vacancies, per annum, which will be used for payment
remittance of foreign exchange earnings, of legal and allowable placement fees and
separation from jobs, departures and such make the migrant worker issue, either
other matters or information as may be personally or through a guarantor or
required by the Secretary of Labor and accommodation party, postdated checks in
Employment; relation to the said loan;
i. To substitute or alter to the prejudice of b. Impose a compulsory and exclusive
the worker, employment contracts arrangement whereby an overseas Filipino
approved and verified by the Department of worker is required to avail of a loan only
Labor and Employment from the time of from specifically designated institutions,
actual signing thereof by the parties up to entities or persons;
and including the period of the expiration of c. Refuse to condone or renegotiate a loan
the same without the approval of the incurred by an overseas Filipino worker
Department of Labor and Employment; after the latter's employment contract has
j. For an officer or agent of a recruitment been prematurely terminated through no
or placement agency to become an fault of his or her own;
officer or member of the Board of any d. Impose a compulsory and exclusive
corporation engaged in travel agency or to arrangement whereby an overseas Filipino
be engaged directly or indirectly in the worker is required to undergo health
management of travel agency; examinations only from specifically
k. To withhold or deny travel documents from designated medical clinics, institutions,
applicant workers before departure for entities or persons, except in the case of a
monetary or financial considerations, or for seafarer whose medical examination cost
any other reasons, other than those is shouldered by the principal/shipowner;
authorized under the Labor Code and its e. Impose a compulsory and exclusive
implementing rules and regulations; arrangement whereby an overseas Filipino
worker is required to undergo training,
Page 14 of 262
seminar, instruction or schooling of any 1. Any activity within the meaning of

kind only from specifically designated recruitment and placement under
institutions, entities or persons, except for Art. 13(b)
recommendatory trainings mandated by 2. Any of the prohibited practices
principals/shipowners where the latter under Art. 34. [Art. 34 and 38]
shoulder the cost of such trainings;
f. For a suspended recruitment/manning Profit Immaterial
agency to engage in any kind of Recruitment may be "for profit or not." It is the
recruitment activity including the lack of the necessary license or authority, and
processing of pending workers' not the fact of payment, that renders
applications; and recruitment illegal. [Sharp v. Espanol, G.R. No.
g. For a recruitment/manning agency or a 155903 (2007)]
foreign principal/employer to pass on the
overseas Filipino worker or deduct from his b. Illegal Recruitment of Migrant Workers
or her salary the payment of the cost of
insurance fees, premium or other “Illegal Recruitment” Defined
insurance related charges, as provided Any act of canvassing, enlisting, contracting,
under the compulsory worker's insurance transporting, utilizing, hiring, or procuring
coverage. [Sec. 6, R.A. No. 8042 as workers and includes referring, contract
amended by R.A. No. 10022] services, promising or advertising for
employment abroad, whether for profit or not,
when undertaken by a non-licensee or non-
C. ILLEGAL RECRUITMENT holder of authority contemplated under Art.
13(f), P.D. No. 442 or LC. [Sec. 5, R.A. No.
10022]
1. Elements
Note: The Migrant Workers’ Act (R.A. No.
8042) expanded the concept of illegal
FIRST MAIN TYPE: Simple Illegal
recruitment found in the LC and provided stiffer
Recruitment
penalties, especially for when it constitutes
economic sabotage. [People v. Ocden, G.R.
a. Illegal Recruitment of Local Workers
No. 173198 (2011)]
Two Types Accdg. to the Kind of Offender
Two Types Accdg. to the Offense (Elements)
The following are the types of illegal
1. Undertakes any recruitment activity
recruitment of local workers and the elements
defined in Art. 13(b), LC without a valid
for each type:
license/authority
1. By a licensee/holder of authority
a. Offender has a valid license or
Note: Can only be committed by one who has
authority required by law to enable one
no valid license or authority to engage in
to lawfully engage in the recruitment
recruitment and placement
and placement of workers;
2. Commits any of the prohibited acts in
b. Offender undertakes any of the
Sec. 6, R.A. No. 8042, as amended by R.A.
prohibited acts under Art. 34
10022
2. By a non-licensee/non-holder of authority
a. Note: Immaterial whether an offender
a. Offender has no valid license or
is a holder or a non-holder of a license
authority required by law to enable one
or authority
to lawfully engage in the recruitment
and placement of workers;
Contract Substitution = Illegal Recruitment
b. Offender undertakes either –
The reduced salaries and employment period
in the new employment contract contradicted
Page 15 of 262
the POEA-approved employment contract. By

Non-
this act of contract substitution, respondents
Licensee/ licensee/
committed a prohibited practice; consequently,
MIGRANT holder of non-
engaged in illegal recruitment. [PERT/CPM
authority holder of
Manpower Exponent Co. v. Vinuya, G.R. No.
authority
197528 (2012)]
Recruitment Allowed Not
Possible Liability of Employee and placement allowed
Even the employee of a company engaged in [Sec. 6,
illegal recruitment can be held liable (along with R.A. No.
the employer) as a principal once it is shown 8042, as
that he had actively and consciously amended]
participated in the illegal recruitment. [People
v. Bayker, G.R. No. 170192 (2016)] Prohibited Not allowed [Sec. 6, R.A.
practices No. 8042, as amended]
Accused must give the impression of ability
to send complainant abroad for work Prohibited Not allowed [7 acts under
It must be shown that the accused gave acts Sec. 6, R.A. No. 8042 as
complainants the distinct impression that she amended by R.A. No.
had the power or ability to send them abroad 10022]
for work such that the latter were convinced to
part with their money in order to be employed. SECOND MAIN TYPE: Illegal Recruitment
[People v. Ochoa, G.R. No. 173792 (2011)] as Economic Sabotage
Lack of Receipts Not Fatal Two Types Accdg. to Qualifying
Mere failure of the complainant to present Circumstance
written receipts for money paid for acts Illegal recruitment is considered economic
constituting recruitment activities is not fatal to sabotage when attended by the ff. qualifying
the prosecution, provided payment can be circumstances:
proved by clear and convincing testimonies of 1. By a syndicate - carried out by a group of
credible witnesses. [People v. Alvarez, G.R. 3 or more persons conspiring and
142981 (2002)] confederating with one another;
2. In large scale - committed against 3 or
c. Comparison of Local and Migrant more persons individually or as a group.
[Art. 38(b), LC; Sec. 6 of R.A. No. 8042 as
Non- amended]
Licensee/ licensee/
LOCAL holder of non- Note re: In Large Scale –
authority holder of 3+ complainants must be in a single case
authority “Committed against 3 or more persons
individually or as a group” must be understood
Recruitment Allowed Not as referring to the number of complainants in
and placement allowed each case; otherwise, prosecutions for single
[Art. 13(b); crimes of illegal recruitment can be cumulated
Art. 38] to make it in large scale .[People v. Reyes,
G.R. No. 105204 (1995)].
Prohibited Not allowed [Art. 34; 38,]
practices
Page 16 of 262
Number of victims must be alleged 3. Illegal recruitment is carried out by a group

The information for illegal recruitment done in of 3 or more persons conspiring and/or
large scale must allege the number of victims. confederating with one another in carrying
[People v. Fernandez, 725 SCRA 152 (2014)] out any unlawful or illegal transaction,
enterprise or scheme. [People v. Sison,
a. For Local Workers (Elements) G.R. No. 187160 (2017)]
By a Syndicate In Large Scale

1. Offender undertakes either: 1. Offender undertook any recruitment activity
a. Any activity within the meaning of as defined under Sec. 6 of R.A. No. 8042
"recruitment and placement" defined 2. Offender did not have the license or the
under Art. 13(b) authority to lawfully engage in the
b. Any of the prohibited practices under recruitment of workers
Art. 34 3. Offender committed the same against 3 or
2. Offender has no valid license or authority more persons individually or as a group.
required by law to enable one to lawfully [People v. De los Reyes, G.R. No. 198795
engage in recruitment and placement of (2017)]
workers
3. Illegal recruitment is committed by a group 2. Types
of 3 or more persons conspiring or
confederating with one another. [People v. Summary of Types & Elements
Gallo, G.R. No. 187730 (2010)] There are at least 4 kinds of illegal recruitment.
[People v. Sadiosa [G.R. No. 107084 (1998)]
In Large Scale
1. Offender undertakes either:
Simple Illegal Recruitment
a. Any activity within the meaning of
"recruitment and placement" defined
1. Licensed/ 1. Licensee/Holder of
under Art. 13(b)
Authorized authority
b. Any of the prohibited practices under 2. Undertakes prohibited
Art. 34 practices under Art. 34,
2. Offender has not complied with the LC (Local) or Sec. 6 of
guidelines issued by the SOLE, particularly R.A. No. 8042 as
with respect to the securing of license or an amended (Migrant)
authority to recruit and deploy workers,
either locally or overseas 2.Unlicensed/ 1. Non-licensee/-holder of
3. Offender commits the unlawful acts against Unauthorized authority
3 or more persons individually or as a 2. Undertakes either:
group [Art. 38 (b)] a. Recruitment and
placement under
b. For Migrant Workers (Elements) Art. 13(b)
b. Prohibited
By a Syndicate practices/activities
1. Offender does not have the valid license or under Art. 34, LC
authority required by law to engage in (Local) or Sec. 6,
recruitment and placement of workers R.A. No. 8042
2. Offender undertakes either: (Migrant)
a. Any of the "recruitment and placement"
activities defined in Art. 13(b) Economic Sabotage
b. Any of the prohibited practices under
Sec. 6 of R.A. No. 8042 3. In a large 1. Undertakes either:
scale
Page 17 of 262
criminal intent of the accused is not necessary

a. Recruitment and
for conviction, while estafa is malum in se
placement under
where the criminal intent of the accused is
Art. 13(b)
crucial for conviction. Conviction for offenses
b. Prohibited
under the LC does not bar conviction for
practices/activities
offenses punishable by other laws. Conversely,
under Art. 34
conviction for estafa does not bar a conviction
(Local) or Sec. 6 of
for illegal recruitment. One's acquittal of the
R.A. No. 8042
crime of estafa will not necessarily result in his
(Migrant)
acquittal of the crime of illegal recruitment in
2. No valid license or an
large scale, and vice versa. [People v. Ochoa,
authority to recruit and
G.R. No. 173792 (2011); People v. Ocden,
deploy workers, either
G.R. No. 173198 (2011)]
locally or overseas
3. Committed against 3 or
As such, the filing of criminal cases for both
more persons
does not constitute double jeopardy. In illegal
individually or as a
recruitment, profit is immaterial; on the other
group
hand, a conviction for estafa requires a clear
4. By a 1. Undertakes either: showing that the offended party parted with his
syndicate a. Any activity within money or property upon the offender’s false
the meaning of pretenses, and suffered damage thereby. The
"recruitment and two are then completely different and distinct
placement" under crimes. [People v. Melissa Chua, G.R. No.
Art. 13(b) 187052 (2012)]
b. Any of the
prohibited practices
D. LIABILITY OF LOCAL RECRUITMENT
enumerated under
AGENCY AND FOREIGN EMPLOYER
Art. 34 (Local) or
Sec. 6 of R.A. No.
8042 (Migrant) 1. Solidary Liability
2. No valid license or
authority to recruit and a. Local Recruitment Agency
deploy workers, either
locally or overseas Illegal recruitment of local workers [Art. 39]
3. Committed by a group
of 3 or more persons Act Penalty
conspiring and
License/authority 2-5 years
confederating with one
holder violating or imprisonment or
another
causing another to P10K-P50K fine or
violate Title 1, Book both
3. Illegal Recruitment as 1 (Art. 34)
Distinguished from Estafa
Non- 4-8 years
Conviction for Illegal Recruitment NOT a license/authority imprisonment or
Bar to Conviction for Estafa and Vice versa holder violating or P20K-P100K fine or
A person who commits illegal recruitment may causing another to both
be charged and convicted separately of illegal violate Title 1, Book
recruitment under the LC and estafa under Art. 1 (Art. 38)
315(2a), RPC. The offense of illegal
recruitment is malum prohibitum where the
Page 18 of 262
2. For aliens, in addition to the penalties

Illegal recruitment Life imprisonment
herein prescribed, deportation without
constituting and P100K fine
further proceedings.
economic sabotage
(Art. 38)
Employees of a company or corporation
engaged in illegal recruitment may be held
If the offender is a corporation, partnership, liable as PRINCIPAL, together with his
association or entity, the penalty shall be employer if it is shown that he actively and
imposed upon the officer or officers consciously participated in illegal
responsible for the violation. recruitment. [People v. Sagayaga, GR 143726
(2004)]
In every case, conviction carries with it:
1. Automatic revocation of license/authority Two jurisdiction rule
and all permits and privileges granted A criminal action arising from illegal recruitment
under this Title of migrant workers shall be filed with the RTC
2. Forfeiture of cash and surety bonds in favor of the province or city:
of POEA or the Regional Department with 1. Where offense was committed, or
jurisdiction over the place where the 2. Where the offended party actually resides
agency or branch office is located at the time of the commission of the
3. For aliens, in addition to the penalties offense. [Sec. 9, RA 8042]
herein prescribed, deportation without
further proceedings. [Art. 39 (3)] Provided, the court where such action is first
filed acquires jurisdiction to the exclusion of
Illegal recruitment of migrant workers [Sec. other courts. [Sec. 6, Rule IV, Omnibus Rules
7, RA 8042 as amended] implementing RA 8042, as amended]
Act Penalty
Prescription
Prohibited Acts 6 years and 1 day - 12 Crime Classification Prescriptive
years imprisonment and Period
P500K-P1M fine
Local Simple/economic 3 years [Art.
Illegal 12 years and 1 day - 20 workers sabotage 305 LC]
Recruitment years imprisonment and
P1M-P2M fine Migrant Simple 5 years [Sec.
workers 12, RA 8042]
Illegal Life imprisonment and
recruitment P2M-P5M fine Economic 20 years
constituting Sabotage [Sec. 12, RA
economic Max penalty: 8042]
sabotage 1. Illegally recruited
person is below 18
b. Foreign Employer
years old, or
2. Offense is committed
Foreign employers shall assume joint and
without license/
solidary liability with the recruitment/
authority
placement agency for all claims arising out of
an employer-employee relationship or by virtue
In every case, conviction carries with it: of any law or contract involving Filipino workers
1. Automatic revocation of license or for overseas deployment including claims for
registration of the recruitment/manning damages. [Sec. 10 of RA 8042, as amended]
agency, lending institutions, training school
or medical clinic.
Page 19 of 262
c. Solidary Liability of Agent & 2. Assume joint and several liability with
Principal the employer for all claims and liabilities
which may arise in connection with the
Coverage implementation of the contract, including
The liability of the principal/employer and the but not limited to unpaid wages, death,
recruitment/placement agency for the claims disability compensation and repatriation.
involving Filipino workers for overseas 3. Assume full and complete responsibility
deployment including claims for damages is for all acts of its officers, employees and
joint and several. representatives done in connection with
recruitment and placement [Part II, Rule II,
Incorporation into the contract Sec. 4 (f) (7-9), 2016 Revised POEA Rules
This shall be incorporated in the contract for and Regulations].
overseas employment and shall be a condition
precedent for its approval. For corporations or partnerships, a duly
notarized undertaking by the corporate officers
Performance bond and directors, or partners, that they shall be
The performance bond filed by the joint and severally liable with the corporation or
recruitment/placement agency shall be partnership for claims and/or damages
answerable for all money claims or damages awarded to workers is also required. [Part II,
awarded to workers. Rule II, Sec. 4 (g), 2016 Revised POEA Rules
and Regulations]
Corporate officers and directors and
partners solidarily liable 2. Theory of Imputed Knowledge
If the recruitment/placement agency is a
juridical being, the corporate officers and This is a doctrine in agency stating that the
directors and partners as the case may be, principal is chargeable with and bound by the
shall be joint and severally liable with the knowledge of or notice to his agent received
corporation or partnership for the claims and while the agent was acting as such.
damages. [Sec. 10, RA 8042 as amended]
Notice to the agent is notice to the principal.
Purpose of solidary liability
The termination of agreement between the A local employment agency is considered the
manning agency and its principal does not agent of the foreign employer, the principal.
relieve the former of its liability. The agency Knowledge of the former of existing labor and
agreement extends until the expiration of the social legislation in the Philippines in binding
employment contracts of the employees on the latter. Notice to the former of any
recruited and employed. Otherwise, this violation thereof is notice to the latter.
renders nugatory the purpose of the law which
is to assure aggrieved workers of immediate But, notice to the principal is NOT notice to the
and sufficient payment of what is due them. agent. Notice to the foreign employer,
therefore, is not notice to the local employment
Requisite undertaking for application of agency.
license
The written application for a license to operate
a private employment agency shall be
submitted with, among others, a duly
notarized undertaking that the applicant:
1. Shall assume full and complete
responsibility for all claims and liabilities
which may arise in connection with the use
of the license;
Page 20 of 262
In the case of Yap v. Thenamaris Ship’s

E. TERMINATION OF CONTRACT Management and Intermare Maritime
OF MIGRANT WORKER Agencies, Inc [G.R. No. 179532, (May 30,
2011)], the SC affirmed the Serrano ruling, but
In case of – did not apply the Operative Fact doctrine: “As
a. Termination of overseas employment an exception to the general rule, the doctrine
without just, valid, or authorized cause as applies only as a matter of equity and fair play.”
defined by law or contract, or
b. Any unauthorized deductions from the Note: In 2010, a year after Serrano, RA 10022,
migrant worker’s salary in amending RA 8042, reincorporated the
. nullified 3-month salary cap clause. However,
... the worker shall be entitled to full the SC did not allow this and again struck the
reimbursement of: revived clause as unconstitutional in the 2014
a. His placement fee and the deductions case of Sameer Overseas Placement
made with interest at twelve percent (12%) Agency v. Cabiles [G.R. No. 170139, (August
per annum; AND 05, 2014)]. There, the SC said that: “when a
b. His salaries for the unexpired portion of his law or a provision of law is null because it is
employment contract inconsistent with the Constitution, the nullity
(*or for three (3) months for every year of the cannot be cured by a reincorporation or
unexpired term, whichever is less) reenactment of the same or a similar law or
[Sec. 10, RA8042, as amended by RA 10022] provision. A law or provision of law that was
already declared unconstitutional remains as
such unless circumstances have so changed
Rule before Rule after Serrano: as to warrant a reverse conclusion.” Hence, the
Serrano (1995- invalidated the 3- case of Serrano holds as binding precedent,
2009): 3-month month salary cap even after the passage of RA 10022.
salary rule applied clause
The employment The SC there held F. EMPLOYMENT OF NON-

contract involved in that “said clause is RESIDENT ALIENS
the instant case unconstitutional for
covers a two-year being an invalid
period but the classification, in 1. Coverage
overseas contract violation of the equal
worker actually protection clause.” Who should apply for an Alien Employment
worked for only 26 Permit
days prior to his Thus, the present a. Any alien seeking admission to the
illegal dismissal. rule is that OFWs Philippines for employment purposes, and
Thus, the three whose contracts are b. Any domestic or foreign employer who
months’ salary rule terminated without desires to engage an alien for employment
applies [Flourish just cause are in the Philippines. [Art. 40, Labor Code]
Maritime Shipping v. entitled to all the
Almanzor, G.R. No. salaries for the Art. 40 of the Labor Code which requires
177948 (2008)] entire unexpired employment permit refers to non-resident
portion of their aliens. Resident aliens do not fall within the
employment ambit of the provision [Almodiel v. NLRC, 223
contract, irrespective SCRA 341 (1993)]
of the stipulated
term or duration An alien cannot file a labor complaint without
thereof. having obtained an employment permit.
Page 21 of 262
[Andrew James McBurnie v. Eulalio Ganzon, 5. Contractual service supplier who is a

707 SCRA 646 (2013)] Manager, Executive, or Specialist
6. Representative of the Foreign
Who are exempted from securing an Alien Principal/Employer assigned in the Office
Employment Permit [DOISIPRRL] of Licensed Manning Agency (OLMA) in
1. All members of the Diplomatic service and accordance with the POEA law, rules and
foreign government Officials accredited by regulations. [Section 3, D.O. No. 186-17]
and with reciprocity arrangement with the
Philippine government; Intracorporate Transferee: Requisites for
2. Officers and staff of International exclusion
organizations of which the Philippine 1. Must be an Executive, Manager, or
government is a member, and their Specialist
legitimate Spouses desiring to work in the
Philippines; Executive: primarily directs the
3. Owners and representatives of foreign management of the organization and
principals whose companies are accredited exercises wide latitude in decision making
by the POEA, who come to the Philippines and receives only general supervision or
for a limited period and solely for the direction from higher level executives, the
purpose of Interviewing Filipino applicants board of directors, or stockholders of the
for employment abroad; business; an executive would not directly
4. Foreign national who comes to the perform tasks related to the actual
Philippines to teach, present and/or provision of the service or services of the
conduct research studies in universities organization
and colleges as visiting, exchange or
adjunct Professors under formal Manager: a natural person within the
agreements between the universities or organization who primarily directs the
colleges in the Philippines and foreign organization/department/ subdivision and
universities or colleges; or between the exercises supervisory and control functions
Philippine government and foreign over other supervisory, managerial or
government: provided that the exemption is professional staff; does not include first line
on a reciprocal basis; supervisors unless employees supervised
5. Permanent Resident foreign nationals, are professionals; does not include
probationary or temporary resident visa employees who primarily perform tasks
holders; necessary for the provision of the service
6. Refugees and stateless persons
recognized by DOJ; and Specialist: a natural person within the
7. All foreign nationals granted exemption by organization who possesses knowledge at
Law. [Section 2, D.O. No. 186-17] an advanced level of expertise essential to
the establishment/provision of the service
Who are excluded from securing an Alien and/or possesses proprietary knowledge of
Employment Permit [BPTCICR] the organization’s service, research
1. Members of the governing Board with equipment, techniques or management;
voting rights only and do not intervene in may include, but is not limited to, members
the management of the corporation or in of a licensed profession.
the day to day operation of the enterprise.
2. President and Treasurer, who are part- 2. At least 1 year of continuous employment
owner of the company. prior [Section 3, D.O. No. 186-17]
3. Those providing Consultancy services who
do not have employers in the Philippines.
4. Intra corporate transferee who is a
Manager, Executive or Specialist
Page 22 of 262
Contractual Service Supplier: Requisites a. General Rule (GR): within 15 working days
for exclusion after signing of contract/appointment
1. Must be an Executive, Manager, or b. If commencement of employment is later
Specialist that the 15 working day grace period:
2. Enters the Philippines temporarily to supply before the commencement of employment
a service pursuant to a contract between [Sec. 17, D.O. No. 186-17]
his/her employer and a service consumer
in the Philippines What documents should be submitted
3. Must possess the appropriate educational 1. Application form
and professional qualifications; and 2. Photocopy of passport with visa, or Cert of
4. Employed for at least 1 year prior [Section Recognition for Refugees or Stateless
3, D.O. No. 186-17] Persons
3. Original copy of notarized appointment or
Certificate of Exclusion contract of employment enumerating the
All foreign nationals excluded from securing duties and responsibilities, annual salary,
AEP shall secure Certificate of Exclusion from and other benefits of the foreign national
the Regional Office. Further, Regional Offices 4. Photocopy of Mayor’s Permit to operate
shall issue the Certificate of Exclusion within business, in case of locators in economic
two (2) working days after receipt of complete zones, certification from the PEZA or the
documentary requirements and fees. [Section Ecozone Authority that the company is
4, D.O. No. 186-17] located and operating within the ecozone,
while in case of a construction company,
2. Conditions for Grant of Permit photocopy of license from PCAB or D.O.
No. 174-17 Registration should be
Non-availability of Competent, Able, and submitted in lieu of Mayor’s Permit; and
Willing persons [CAW] 5. Business Name Registration and
The employment permit may be issued to a Application Form with the Department of
non-resident alien or to the applicant employer Trade and Industry (DTI) or SEC
after a determination of the non-availability of Registration and GIS;
a person in the Philippines who is 6. If the position title of the foreign national is
competent, able and willing at the time of included in the list of regulated professions,
application to perform the services for a Special Temporary Permit (STP) from the
which the alien is desired. Professional Regulations Commission
(PRC); and
For an enterprise registered in preferred areas 7. If the employer is covered by the Anti-
of investments, said employment permit may Dummy Law, an Authority to Employ
be issued upon recommendation of the Foreign National (ATEFN) from the DOJ or
government agency charged with the from the DENR in case of mining. [Section
supervision of said registered enterprise. 5a, D.O. No. 186-17]
[Art 40, Labor Code]
In case of additional position of change in
Where to file Applications position
All applications for AEP shall be filed and Additional position of the foreign national in
processed at the DOLE Regional Office or the same company or subsequent assignment
Field Office having jurisdiction over the in related companies during the validity or
intended place of work. [Sec. 5(a), D.O. No. renewal of the AEP will be subject for
186-17] publication requirement. A change of
position or employer shall require an
When to file Applications application for new AEP [Section 5(c), D.O.
Newly hired/appointed officers may file the No. 186-17]
application for new AEP without penalty:
Page 23 of 262
Only one AEP at a time to establish availability or non availability of

At any given time only one AEP shall be issued able and qualified Filipino workers.
to a foreign national. A foreign national may be b. Information or criminal offense and grave
issued one AEP only at any given time. [Sec. misconduct in dealing with or ill treatment
5d, D.O. No. 186-17] of workers filed with the Regional Offices
any time.
Fees
1. Upon filing: Processing and Issuance
a. One year validity: P9000 AEP shall be issued:
b. More than 1 year: plus P4000 per year a. Within three working days after publication
c. Renewal: P4000 per year and payment of fees: new AEP
2. Courier fee: P200 b. One day after receipt: renewal of AEP [Sec.
3. Loss/change of info, AEP replacement: 8, D.O. No. 186-17]
P1500
4. Certificate of exclusion: P500 Verification Inspection
[Sec. 6, D.O. No. 186-17] The authorized representatives of the Regional
Director may conduct inspection to verify
Labor Market Test [Sec. 7, D.O. No. 186-17] legitimacy of employment of the foreign
AEP application (new/change in or additional national as deemed necessary, based on the
position/subsequent assignment) should be documents submitted within two working days
published by the DOLE Regional Office in: upon payment of fees. [Sec. 9, D.O. No. 186-
1. Newspaper of general circulation within 2 17]
working days from receipt of application
2. DOLE Website (30 days) 3. Validity of AEP and Renewal
3. PESO (30 days)
Duration of Validity
Contents of the Publication: The AEP shall be valid for the position and the
1. Name, company for which it was issued for
2. Position,
3. Employer and address, GR: 1 year
4. A brief description of the functions to be Exception: period not exceeding 3 years; if the
performed by the foreign national, employment contract/mode of engagement
5. Qualifications, provides otherwise. [Sec. 10, D.O. No. 186-17]
6. Monthly salary range and other benefits, if
there are any. When to apply for renewal
7. Indicate that any person in the Philippines GR: not earlier than 60 days before expiration
who is competent, able and willing at the Exceptions:
time of the application to perform the a. Alien needs to leave the country;
services for which the foreign national is b. Other similar circumstances that will hinder
desired may file an objection at the DOLE the filling of renewal within this prescribed
Regional Office. period.
Where to file objection In case of officers to be appointed/elected

Regional Office within 30 days after a. Before AEP expiration: not later than 15
publication. working days after appointment, or before
its expiration, whichever comes later
Other information that DOLE may refer to b. After AEP expiration: before the expiration
a. Philjobnet and PESO Information System of the AEP, renewed for 1 year
(PEIS), the PRC Registry of professionals, c. Within 15 working days after the date of
and the TESDA registry of certified workers appointment or election, the foreign
national shall submit to the issuing
Page 24 of 262
Regional Office the Board Secretary’s 5. Revocation; Cancellation

Certification
1. The Regional Director shall revoke the Grounds for Cancellation [Non-Mi-Fa-Me-
AEP after 1 month from its issuance, if Con-Te-Mi]
no Certification is filed. [Sec. 11, D.O. a. Non-compliance with any of the
No. 186-17] requirements or conditions for which the
AEP was issued;
Expired AEP b. Misrepresentation of facts in the
Expired AEP shall be processed as a new application including fraudulent
application subject to the payment of required misrepresentation;
fees and penalties in relation to Section 17 c. Submission of Falsified or tampered
(Penalty for Working without AEP). [Sec. 11, documents;
D.O. No. 186-17] d. Meritorious objection or information against
the employment of the foreign national;
4. Denial of Application e. Foreign national has been Convicted of a
criminal offense or a fugitive from justice;
Grounds for Denial [Mi-Fa-Co-Mi-CAW-Wo- f. Employer Terminated the employment of
Ex]: foreign national;
a. Misrepresentation of facts in the g. Grave Misconduct in dealing with or ill
application including fraudulent treatment of workers. [Sec. 13, D.O. No.
misrepresentation 186-17]
1. i.e. false statement that has a negative
effect in the evaluation of the Effect of denial/revocation or cancellation
application made knowingly, or without Disqualified to re-apply for 10 years in case the
belief in its truth, or recklessly whether ground for denial or cancellation is:
it is true or false; a. Conviction of criminal offense or fugitive
b. Submission of Falsified documents; from justice in the country or abroad; or
c. Conviction to a criminal offense or a b. Grave misconduct in dealing with or ill
fugitive from justice in the country or treatment of workers [Sec. 14, D.O. No.
abroad; 186-17]
d. Grave Misconduct in dealing with or ill
treatment of workers; Effect of fraudulent application
e. Availability of a Filipino who is Competent, Employers, employer’s or foreign national’s
Able and Willing to do the job; representatives, and/or agents acting in behalf
f. Worked without valid AEP for more than a of the applicant found to have filed fraudulent
year; application for AEP for three (3) counts shall be
g. Application for renewal with Expired visa or barred from filing application for a period of five
with temporary visitor’s visa [Sec. 112, (5) years after due process. [Sec. 15, D.O. No.
D.O. No. 186-17] 186-17]
Effect of Denial 6. Appeal

Denial of application for AEP shall cause the
forfeiture of the fees paid by the applicant. When and where to file
[Sec. 12, D.O. No. 186-17] With the Secretary of the DOLE within 10 days
after receipt of denial/cancellation/revocation
order.
The decision of the DOLE Secretary shall be

final and executory unless a motion for
reconsideration is filled within 10 days after
receipt of the decision. No second motion for
Page 25 of 262
reconsideration shall be allowed. [Sec. 16, General principles in determining if time is

D.O. No. 186-17] considered as hours worked
All hours are hours worked which the employee
7. Penalty is required to give their employer, regardless
of whether or not such hours are spent in
Fines productive labor or involve physical or mental
Working without valid AEP: P10,000 for every exertion.
year or fraction thereof
An employee need not leave the premises of
Employing aliens without valid AEP: P10,000 the work place in order that their rest period
for every year or fraction thereof shall not be counted, it being enough that
they stop working, may rest completely and
Failure to pay penalty: not allowed to employ may leave their work place to go elsewhere,
foreign national for any position [Sec. 17, D.O. whether within or outside the premises of their
No. 186-17] work place. [Sec. 4(b), Rule I, Book III, IRR]
If the work performed was necessary, or it

benefited the employer, or the employee
III. LABOR STANDARDS could not abandon his work at the end of his
normal working hours because he had no
replacement, all time spent for such work shall
Labor Standards refers to the minimum
be considered as hours worked, if the work
requirements prescribed by existing laws, rules
was with the knowledge of his employer or
and regulations relating to wages, hours of
immediate supervisor. [Sec. 4(c), Rule I,
work, cost-of-living allowance and other
Book III, IRR]
monetary and welfare benefits, including
occupational, safety and health standards.
The time during which an employee is inactive
[Maternity Children’s Hospital v. Secretary of
by reason of interruptions in his work
Labor, G.R. 78909 (1989)]
beyond his control shall be considered
working time either:
Note: All Articles from hereon refer to the Labor
a. If the imminence of the resumption of work
Code, unless otherwise indicated.
requires the employee’s presence at the
place of work, or
A. CONDITIONS OF b. If the interval is too brief to be utilized
effectively and gainfully in the employee’s
EMPLOYMENT own interest. [Sec. 4, Rule I, Book III, IRR]
1. Hours of Work Employees exempted or not covered

General rule: Title I: Working Conditions and
a. Principles in determining hours Rest Periods shall apply to employees in all
worked and employees establishments and undertakings whether for
exempted or not covered profit or not. [Art. 82]
Principles in determining hours worked Note: Article 82 applies to the whole of Title I.
Hours worked shall include: This includes Service Incentive Leaves, which
1. All time during which an employee is will be discussed in a separate section.
required to be on duty or to be at a
prescribed workplace; AND Exceptions (i.e. those NOT covered by Title I):
2. All time during which an employee is 1. Government employees [Art. 82; Art. 76]
suffered or permitted to work. [Art. 84] (exception to the exception: Employees
Page 26 of 262
of GOCCs created under the Corporation transfer, suspend, lay off, recall, discharge,
Code) assign or discipline employees. [Art.
2. Managerial Employees [Art. 82] 219(m)]
3. Members of the managerial staff [Art. 82]
4. Field Personnel [Art. 82] Characteristics of managerial employees
5. Members of the family of the employer who [Sec. 2(b), Rule I, Book III, IRR]
are dependent on him for support [Art. 82]; Managerial employees are exempted from the
6. Domestic workers or kasambahay [Art. coverage of Book III Articles 83 through 96 if
141, RA 10361] (exception to the they meet all of the following conditions:
exception: Assignment in a Commercial, 1. Their primary duty consists of the
Industrial or Agricultural Enterprise) management of the establishment in
7. Persons in the personal service of another which they are employed or of a
8. Workers who are paid by result as department or subdivision thereof.
determined by DOLE regulation [Art. 82] 2. They customarily and regularly direct the
work of two or more employees therein.
(1) Government Employees 3. They have the authority to hire or fire
employees of lower rank; or their
The terms and conditions of employment of all suggestions and recommendations as
government employees, including employees to hiring and firing and as to the promotion
of GOCCs, are governed by the Civil Service or any other change of status of other
rules and regulations, not by the Labor Code employees, are given particular weight.
[Art. 291].
Managerial employees and managerial staff
However, not all GOCCs are governed by the are determined by their job description and not
Civil Service Rules; only those created by their job title. [Peñarada v. Baganga Plywood
original charter are governed by the Civil Corp., G.R. No. 159577 (2006)]
Service rules:
(3) Members of the managerial staff
“Following Sec. 2(i) Art. IX-B of 1987 Phil. (supervisory employees)
Constitution, the test in determining whether a
government owned corporation is subject to Definition
the Labor Code or the Civil Service law is Supervisory employees are those who, in the
finding out what created it – if it is created by interest of the employer, effectively
a special charter, then, Civil Service Law recommend such managerial actions if the
applies, if it is created by the General exercise of such authority is not merely
Corporation Law, then the Labor Code routinary or clerical in nature but requires the
applies.” [PNOC Energy Development Corp. v. use of independent judgment. [Art. 219(m)]
NLRC, G.R. No. 79182 (1991)]
Art. 82 also includes managerial staff
(2) Managerial Employees (supervisory employees) in the definition of
managerial employees. The definition in Art. 82
Two definitions of “managerial employee” covers more people than that in Art. 219(m). In
in the Labor Code: effect, managerial employees in Art. 82
1. One whose primary duty consists of the includes supervisors, but Art. 219(m) does not,
management of the establishment in which for purposes of the right to self-organization.
they are employed or of a department or
subdivision thereof and to other officers or
members of the managerial staff. [Art. 82]
2. One who is vested with the powers or
prerogatives to lay down and execute
management policies and/or to hire,
Page 27 of 262
Managerial Staff is included as they are ascertain if actual hours of work in the field can
considered managerial employees as well be determined with reasonable certainty by the
[Sec. 2(c), Rule I, Book III, IRR] employer. In so doing, an inquiry must be
Officers or members of a managerial staff are made as to whether or not the employee’s
also exempted if they perform the following time and performance are constantly
duties and responsibilities: supervised by the employer. [Far East
1. Their primary duty consists of the Agricultural Supply v. Lebatique, G.R. No.
performance of work directly related to 162813 (2007)]
management policies of their employer;
2. Customarily and regularly exercise Although the fishermen perform non-
discretion and independent judgment; agricultural work away from petitioner’s
3. (a) Regularly and directly assist a business offices, the fact remains that
proprietor or a managerial employee throughout the duration of their work they are
whose primary duty consists of the under the effective control and supervision
management of the establishment in which of petitioner through the vessel’s patron or
he is employed or subdivision thereof; OR master. Hence, the fishermen are not “field
(b) Execute under general supervision personnel”. [Mercidar Fishing Corporation v.
work along specialized or technical lines NLRC, G.R. No. 112574 (1998)]
requiring special training, experience, or
knowledge; OR (5) Dependent Family Members
(c) Execute, under general supervision,
special assignments and tasks; Workers who are family members of the
4. Do not devote more than 20% of their hours employer, and who are dependent on him for
worked in a work week to activities which their support, are outside the coverage of this
are not directly and closely related to the Title on working conditions and rest periods
performance of the work described in [Art. 82].
paragraphs (1), (2) and (3) above.
(6) Domestic Helpers (Workers)
Effective recommendatory power
Supervisory employees are those who, in the Definition
interest of the employer, effectively Domestic worker or “Kasambahay” refers to
recommend such managerial actions and the any person engaged in domestic work within
exercise of such authority is not merely an employment relationship such as but not
routinary or clerical in nature but requires the limited to the following:
use of independent judgment [Art. 219(m)]. 1. general househelp,
2. nursemaid or “yaya”,
(4) Field Personnel 3. cook,
4. gardener or
Field personnel are non-agricultural 5. laundry person
employees:
1. Who regularly perform their duties away "Domestic work" refers to work performed in
from the principal or place of business or or for a household. [Sec. 3(d), IRR of RA10361]
branch office of the employer; and
2. Whose actual hours of work in the field "Household" refers to the immediate
cannot be determined with reasonable members of the family or the occupants of the
certainty. [Art. 82] house who are directly and regularly provided
services by the kasambahay. [Sec. 3(g), IRR of
Legal Test: Control & Supervision of RA 10361]
employer
In order to determine whether an employee is
a field employee, it is also necessary to
Page 28 of 262
The definition of “Kasambahay” excludes: (8) Workers Paid by Result (piece-workers)

1. Any person who performs domestic work
only occasionally or sporadically and not Definition
on an occupational basis. Workers who are paid by results are those
2. Children who are under foster family whose output rates are in accordance with the
arrangement, and are provided access to standards prescribed under Sec. 8, Rule VII,
education and given an allowance Book Three of these regulations, or where such
incidental to education [Sec. 4(d), Art. 1, rates have been fixed by the Secretary of Labor
RA 10361] and Employment in accordance with the
3. Service providers, aforesaid Section.
4. Family drivers. [Sec. 2 of the IRR,
RA10361] These include those who are paid on piece
work, “takay,” “pakiao” or task basis, and other
Exclusivity of function required nontime work. [Sec. 2(e), Rule I, Book III, IRR]
Note that the definition contemplates a
domestic helper who is employed in the Workers under piece-rate employment have no
employer’s home to minister exclusively to the fixed salaries and their compensation is
personal comfort and enjoyment of the computed on the basis of accomplished tasks.
employer’s family. [Azucena] That their work output might have been
affected by the change in their specific work
Thus, it has been held that the following assignments does not necessarily imply that
personnel are NOT domestic employees: any resulting reduction in pay is tantamount to
1. House-help or laundry-women working in constructive dismissal. It is the prerogative of
staffhouses of a company, as well as the management to change their assignments
drivers, houseboys, or gardeners or to transfer them. [Best Wear Garments v. De
exclusively working in the company, the Lemos and Ocubillo, G.R. No. 191281 (2012)]
staffhouses and its premises [Apex Mining
Company v. NLRC, G.R. No. 94951 Workers paid by results may be grouped into
(1991)] two: 1) those whose time and performance is
2. House-help doing chores for the supervised by the employer and 2) those
employer's family, while also fulfilling tasks whose time and performance is unsupervised
connected with the employer's business by the employer [Azucena, p. 289].
(bakery) such as cooking, filling orders,
baking orders, and other clerical work Must be unsupervised to be excluded
[Fernando Co v. Vargas, G.R. No. 195167 Those who are engaged on task basis,
(2011)] purely commission basis, or those who are
paid a fixed amount for performing work
(7) Persons in Personal Service of Another irrespective of the time consumed in the
performance thereof are excluded from
Persons in the personal service of another are receiving benefits such as nightime pay,
not covered by Title I: Working Conditions and holiday pay, service incentive leave, inter alia,
Rest Periods if they: provided their time and performance is
a. Perform such services in the employer’s unsupervised by the employer. [Labor
home which are usually necessary or Congress of the Philippines v. NLRC, G.R. No.
desirable for the maintenance and 123938 (1998)]
enjoyment thereof; or
b. Minister to the personal comfort Rule on overtime pay
convenience or safety of the employer as Workers who are paid by results, if their
well as the members of his employer’s output rates are in accordance with the
household. [Sec. 2 (d), Rule I, Book III, standards prescribed under Sec. 8, Rule VII,
IRR] Book III, of those regulations, or where such
Page 29 of 262
rates have been fixed by the Secretary of Labor determining the existence or absence of
in accordance with the aforesaid section, are employer-employee relationship. [Tan v.
not entitled to receive overtime pay. [Sec. Lagrama, G.R. No. 111042 (1999)]
2(e), Rule I; Labor Congress of the Philippines
v. NLRC, G.R. No. 123938 (1998)] b. Compensable Time
Summary of benefits payable i. Normal hours of work

Benefit Unsuper- Supervised
vised General Rule: 8-Hour Labor Law
The normal hours of work of any employee
Applicable Yes shall not exceed eight (8) hours a day. [Art. 83]
statutory
minimum wage Note: Art. 83 of the Labor Code only sets a
[Art. 101] maximum of number of hours as "normal hours
of work" but did not prohibit work of less than
Night No Yes eight hours. [Legend Hotel v. Realuyo, G.R.
differential 153511 (2012)]
[Sec. 1(e),
Rule II] Exception to 8-Hour Law: Work Hours of
Service No Yes Health Personnel
incentive leave Health personnel in:
[Sec. 1(d), a. Cities and municipalities with a population
Rule V] of at least one million (1,000,000) OR
b. Hospitals and clinics with a bed capacity of
Holiday pay Yes at least one hundred (100)
[Sec. 8(b), shall hold regular office hours for eight (8)
Rule IV] hours a day, for five (5) days a week,
exclusive of time for meals.
13th month Yes, provided the worker
pay [Revised has rendered at least 1 HOWEVER, where the exigencies of the
Guidelines on month of service during the service require that they work for six (6) days
the calendar year or forty-eight (48) hours, they shall be entitled
Implementation to an additional compensation of at least thirty
of the 13th percent (30%) of their regular wage for work on
Month Pay the sixth day.
Law (1987)]
Other statutory No Yes “Health personnel" shall include:

benefits [Labor 1. Resident physicians, nurses, nutritionists,
Congress of dietitians, pharmacists, social workers,
the Philippines laboratory technicians, paramedical
v. NLRC, G.R. technicians, psychologists, midwives,
No. 123938 attendants and all other hospital or clinic
(1998)] personnel. [Art. 83]
2. Medical secretaries [Azucena]
Not determinative of EER ii. Night shift differential

Payment by result is not determinative of
employer-employee relationship. It is a method Definition
of compensation and does not define the Night Shift Differential is the additional
essence of the relation. It is a method of compensation of 10% of an employee’s
computing compensation, not a basis for
Page 30 of 262
regular wage for each hour of work performed for the statutorily fixed or voluntary agreed
between 10pm and 6am. [Art. 86] hours of labor he is supposed to do. [PNB v.
PEMA, G.R. No. L-30279 (1982)]
Illustration: If an employee has a regular wage
of P100 for each hour of work performed Overtime on ordinary working day
between 10PM and 6AM, he/she shall be paid Work may be performed beyond eight hours a
P110 per hour worked during such time day, provided that the employee is paid an
interval. additional compensation equivalent to his
regular wage plus at least 25% thereof. [Art. 87]
Coverage
Aside from those enumerated under Art. 82 as Overtime work on holiday or rest day
excluded from Title I: Working Conditions and Work performed beyond eight hours on a
Rest Periods, those employed in retail and holiday or rest day shall be paid an additional
service establishments regularly employing not compensation equivalent to the rate of the first
more than five (5) workers are also NOT eight hours on a holiday or rest day plus at least
entitled to Night Shift differential [Sec. 1, Rule 30% thereof. [Art. 87]
II, Book III, IRR]
Computation of additional compensation
Rest days (night-off) Base of Computation: Regular wage – means
Night shift employees are entitled to a weekly regular base pay.
night-off (usually Saturday evening) or a
weekly rest period of 24 hours beginning at the It includes the cash wage only without
start of the night shift [See also Art. 91]. deduction on account of facilities provided by
the employer. [Art. 90]
Work on special days
Night shift employees are also entitled to the It excludes money received in different
premium pay on special days and holidays. concepts, such as Christmas bonus and other
These days are reckoned as calendar days fringe benefits. [Bisig ng Manggagawa ng
which start at midnight and end at the following Philippine Refining Co. v. Philippine Refining
midnight. The premium pay for the night shift Co., G.R. L-27761 (1981)]
also starts or ends at midnight. However, the BUT when the overtime work was performed
employment contract, company policy or CBA on the employee’s rest day or on special
may provide that in the case of night shift days or regular holidays (Art. 93 and 94), the
workers, days—including special days and premium pay, must be included in the
regular holidays—shall begin on the night computation of the overtime pay. [See: p. 19 of
before a calendar day. [Chan, Pre-Week Handbook on Workers’ Statutory Monetary
Guidelines] Benefits, issued by the Bureau of Working
Conditions, 2006]
iii. Overtime work
ILLUSTRATIONS
Overtime compensation is additional pay for Overtime on a Regular Day (OTRD)
service or work rendered or performed in Work may be performed beyond eight (8) hours
excess of eight hours a day by employees or a day provided that the employee is paid for the
laborers covered by the Eight-hour Labor Law. overtime work, an additional compensation
[National Shipyard and Steel Corp. v. CIR, equivalent to his regular wage plus at least
G.R. No. L-17068 (1961)] twenty-five percent (25%) thereof [Art. 87]
Rationale OTRD = Hourly wage x 125% x number of

There can be no other reason than that he is hours of OT work
made to work longer than what is
commensurate with his agreed compensation
Page 31 of 262
Work on Scheduled Rest Day (WRD) 6. Where overtime work is necessary to avail
Work performed on a rest day shall be paid an of favorable weather or environmental
additional compensation equivalent to 30% of conditions where performance or quality of
the regular wage. [Art. 93] work is dependent thereon. [added by Rule
1, Sec. 10]
WRD = Regular Wage x 130%
Overtime pay does not preclude night
Overtime on Scheduled Rest Day (OTSRD) differential pay
Where an employee is made or permitted to When the tour of duty of a laborer falls at
work on his scheduled rest day, he shall be nighttime [between 10:00pm and 6:00am], the
paid an additional compensation of at least receipt of overtime pay will not preclude the
thirty percent (30%) of his regular wage. An right to night differential pay. The latter is
employee shall be entitled to such additional payment for work done during the night, while
compensation for work performed on Sunday the other is payment for the excess of the
only when it is his established rest day. [Art. regular eight-hour work. [Naric v. Naric
93(a)] Workers Union, G.R. No. L-12075 (1959)]
OTSRD = Hourly Wage x 169% x number of SYNTHESIS OF RULES

hours of OT work 1. An employer cannot compel an employee
to work overtime
Note: 169% was derived by adding 39% (which Exception: Emergency overtime work as
is 30% of 130 or 1.3x.3 to 130% provided for in Art. 89
Emergency overtime 2. Additional compensation is demandable

Any employee may be required by the only if the employer had knowledge and
employer to perform overtime work in any of consented to the overtime work rendered
the following cases: by the employee.
1. When the country is at war or when any Exception: Express approval by a superior
other national or local emergency has been NOT a requisite to make overtime
declared by the National Assembly or the compensable:
Chief Executive; a. If the work performed is necessary, or
2. When it is necessary to prevent loss of life that it benefited the company; or
or property or in case of imminent danger b. That the employee could not abandon
to public safety due to an actual or his work at the end of his eight-hour
impending emergency in the locality work because there was no substitute
caused by serious accidents, fire, flood, ready to take his place. [Sec. 4(c), Rule
typhoon, earthquake, epidemic, or other I; Manila Railroad Co. v. CIR, G.R. L-
disaster or calamity; 4614 (1952)]
3. When there is urgent work to be performed
on machines, installations, or equipment, in Note: However, the Court has also ruled
order to avoid serious loss or damage to that a claim for overtime pay is NOT
the employer or some other cause of justified in the absence of a written
similar nature; authority to render overtime after office
4. When the work is necessary to prevent loss hours during Sundays and holidays.
or damage to perishable goods; and [Global Incorporated v. Atienza, G.R. L-
5. Where the completion or continuation of 51612-13 (1986)]
the work started before the eighth hour is
necessary to prevent serious obstruction or Daily time records cannot prove the
prejudice to the business or operations of performance of overtime work if the same
the employer. [Art. 89] had no prior authorization by the
management. [Robina Farms Cebu/
Page 32 of 262
Universal Robina Corp. v. Villa, G.R. No. expressed through collective bargaining or
175869 (2016)] other legitimate workplace mechanisms of
participation such as labor management
3. Compensation for work rendered in excess councils, employee assemblies or
of the 8 normal working hours in a day: referenda.
a. For ordinary days, additional 25% of 2. In firms using substances, chemicals and
the basic hourly rate. processes or operating under conditions
b. For rest day/special day/holiday, where there are airborne contaminants,
additional 30% of the basic hourly rate. human carcinogens or noise prolonged
exposure to which may pose hazards to
4. A given day is considered an ordinary day, employees’ health and safety, there must
unless it is a rest day. be a certification from an accredited
health and safety organization or
5. Undertime does NOT offset overtime. practitioner from the firm’s safety
Undertime work on any particular day shall committee that work beyond eight hours is
not be offset by overtime work on any other within threshold limits or tolerable levels of
day. Permission given to the employee to exposure, as set in the OSHS.
go on leave on some other day of the week 3. The employer shall notify DOLE, through
shall NOT exempt the employer from the Regional Office having jurisdiction over
paying the additional compensation the workplace, of the adoption of the CWW
required in this Chapter. [Art. 88] scheme. The notice shall be in DOLE
CWW Report Form attached to this
Offsetting work on a regular day with work Advisory. [DOLE Advisory No. 02-04]
rendered on a holiday or rest day is prohibited
because such deprives the employee of Effects of CWW
additional pay or premium. [Lagatic v. NLRC, 1. Unless there is a more favorable practice
G.R. No. 121004 (1998)] existing in the firm, work beyond eight
hours will not be compensable by
(a) Compressed work week overtime premium provided the total
(CWW) number of hours worked per day shall not
exceed twelve (12) hours. In any case, any
[DOLE Advisory No. 02, Series of 2004] work performed beyond 12 hours a day or
48 hours a week shall be subject to
A CWW refers to one where the normal overtime premium.
workweek is reduced to less than 6 days but 2. Consistent with Art. 85, employees under a
the total number of work hours of 48 hours per CWW scheme are entitled to meal periods
week shall remain. Under the CWW scheme, of not less than 60 minutes. There shall be
the normal workday goes beyond eight no impairment of the right of the employees
hours but not exceed 12 hours, without the to rest days as well as to holiday pay, rest
corresponding overtime premium. [DOLE day pay or leaves in accordance with law
Advisory No. 04, Series of 2010]. or applicable collective bargaining
agreement or company practice.
In excess of such, the employer is obliged to 3. Adoption of the CWW scheme shall in no
pay the worker the overtime premium. case result in diminution of existing
benefits. Reversion to the normal eight-
Conditions for CWW hour workday shall not constitute a
1. The CWW scheme is undertaken as a diminution of benefits.
result of an express and voluntary
agreement of majority of the covered Rationale: Although the right to overtime pay
employees or their duly authorized cannot be waived as per Cruz v. Yee Sing
representatives. This agreement may be [G.R. No. L-12046 (1959)], D.O. No. 21
Page 33 of 262
sanctions the waiver of overtime pay in Exceptions: Employees may be given a meal
consideration of the benefits that the period of not less than twenty (20) minutes
employees will derive from the adoption of a provided that such shorter meal period is
compressed workweek scheme, thus: credited as compensable hours worked of the
employee:
The compressed workweek scheme was 1. Where the work is non-manual work in
originally conceived for establishments wishing nature or does not involve strenuous
to save on energy costs, promote greater work physical exertion;
efficiency and lower the rate of employee 2. Where the establishment regularly
absenteeism, among others. Thus, under this operates not less than sixteen (16) hours a
scheme, the generally observed workweek of day;
six (6) days is shortened to five (5) days, but 3. In case of actual or impending
prolonging the working hours from Monday to emergencies or there is urgent work to be
Friday without the employer being obliged for performed on machineries, equipment or
pay overtime premium compensation for work installations to avoid serious loss which the
performed in excess of eight (8) hours on employer would otherwise suffer; OR
weekdays, in exchange for the benefits that will 4. Where the work is necessary to prevent
accrue to the employees (e.g. savings on meal serious loss of perishable goods [par. 1,
and snack expenses; longer weekends etc). Sec. 1, Rule I, Book III, IRR]
[Bisig Manggagawa sa Tryco v. NLRC, et al.,
G.R. No. 151309 (2008)] The eight-hour work period does not include
the meal break. Employees are not prohibited
(b) Built-in overtime from going out of the premises as long as they
return to their posts on time. Nowhere in the
Composite or Package Pay NOT per se law may it be inferred that employees must
illegal; Conditions for Validity take their meals within the company premises.
Composite or “package pay” or “all-inclusive [Philippine Airlines v. NLRC, G.R. No. 132805
salary” is an arrangement where the (1999)]
employee’s salary includes the overtime pay.
In other words, the overtime pay is “built-in”. SYNTHESIS OF THE RULES
Such arrangement is valid provided that: General Rule: Meal periods are NOT
1. There is a clear written agreement compensable.
knowingly and freely entered by the
employee; and Exception:
2. The mathematical result shows that the It becomes compensable:
agreed legal wage rate and the overtime 1. Where the lunch period or meal time is
pay, computed separately, are equal to or predominantly spent for the employer’s
higher than the separate amounts legally benefit. [Azucena citing 31 Am. Jur. 881;
due. [Damasco v. NLRC, G.R. 115755 Duka, Labor Laws and Social Legislation]
(2000)] 2. Meal periods of 1 hour are deemed
compensable when the employee is on
c. Non-compensable hours; When continuous shift. [National Development
compensable Co. v. CIR, G.R. No. L-15422, (1962)]
3. Shortened meal period of less than 1 hour
i. Meal break (say, 30 minutes) must be compensable.
[Sec. 7, Rule I, Book III, IRR]
General Rule: Subject to such regulations as
the Secretary of Labor may prescribe, it shall Note: To shorten meal time to less than 20
be the duty of every employer to give his minutes is not allowed. If the so-called meal
employees not less than sixty (60) minutes time is less than 20 minutes, it becomes only a
time-off for their regular meals. [Art. 85]
Page 34 of 262
REST PERIOD and is considered working hours worked, whether used productively by
time. the employees or not.
Exception to the Exception: Shortened meal If they last more than 20 minutes, the time
breaks upon the employees’ request – NOT may not be treated as hours worked if:
compensable. 1. the employees can leave their workplace or
go elsewhere whether within or without the
The employees themselves may request that work premises; OR
the meal period be shortened so that they can 2. the employees can use the time effectively
leave work earlier than the previously for their own interest.
established schedule. [Drilon: Letter to Kodak
Philippines, Nov. 27, 1989; Cilindro: BWC- In this case, the employer may extend the
WHSD, Opinion No. 197, s. 1998] working hours beyond the regular schedule on
that day to compensate for the loss of
Conditions for shortened meal breaks upon productive man-hours without being liable for
employee’s request overtime pay. [Policy Instruction No. 36, May
1. The employees voluntarily agree in writing 22, 1978]
to a shortened meal period of 30 minutes
and are willing to waive the overtime pay Note: The time during which an employee is
for such shortened meal period; inactive by reason of work interruptions beyond
2. There will be no diminution whatsoever in his control is considered working time, either if
the salary and other fringe benefits of the the imminence of the resumption of work
employees existing before the effectivity of requires the employee’s presence at the place
the shortened meal period; of work or if the interval is too brief to be utilized
3. The work of the employees does not effectively and gainfully in the employee’s own
involve strenuous physical exertion and interest. [Sec. 4(d), Rule I, Book III, IRR]
they are provided with adequate “coffee
breaks” in the morning and afternoon; iii. Idle time
4. The value of the benefits derived by the
employees from the proposed work The idle time that an employee may spend for
arrangement is equal to or resting and dining which he may leave the spot
commensurate with the compensation or place of work though not the premises of his
due them for the shortened meal period as employer, is not counted as working time
well as the overtime pay for 30 minutes as only where the work is broken or is not
determined by the employees concerned; continuous. [National Development Co. v. CIR,
5. The overtime pay of the employees will G.R. No. L-15422 (1962)]
become due and demandable if ever they
are permitted or made beyond 4:30pm; A laborer need not leave the premises of the
and factory, shop or boat in order that his period of
6. The effectivity of the proposed working rest shall not be counted, it being enough that
time arrangement shall be of temporary he "cease to work", may rest completely and
duration as determined by the Secretary leave or may leave at his will the spot where he
of Labor. [BWC-WHSD Opinion No. 197, s. actually stays while working, to go somewhere
1998] else, whether within or outside the premises of
said factory, shop or boat. If these requisites
ii. Power interruptions or are complied with, the period of such rest
brownouts shall not be counted. [Luzon Stevedoring Co.
v. Luzon Marine Department Union, G.R. No.
Brownouts of short duration, but not L-9265 (1957)]
exceeding 20 minutes, shall be treated as
Page 35 of 262
iv. Travel time the employer are considered hours

worked.
Travel time [Department of Labor Manual] 2. Attendance in CBA negotiations or
Travel from home to work – An employee grievance meeting is compensable hours
who travels from home before his regular worked provided that such is stipulated in
workday and returns to his home at the end of the CBA. [Department of Labor Manual,
the workday is engaged in ordinary home-to- Sec. 4323.03]
work travel which is NOT considered hours 3. Attendance in hearings in cases filed by the
worked, EXCEPT: employee is NOT compensable hours
a. When called to travel during emergency; worked.
b. When travel is done through a conveyance 4. Participation in strikes is NOT
furnished by the employer; compensable working time.
c. Travel is done under vexing and dangerous
circumstances; Attendance in lectures, meetings, and training
d. Travel is done under the supervision and periods must necessarily beneficial to the
control of the employer. employer. [Sec. 6(c), Rule I, IRR]
Travel that is all in the. day’s work – Time v. Commuting time

spent by an employee in travel from jobsite to
jobsite during the workday, must be counted Employees performing tasks during their
as hours worked. Where an employee is commute which are not merely incidental to the
required to report at a meeting place to receive employee’s job, and are primarily for the
instructions or to perform other work there, the benefit of the employer (such as a company
travel from the designated place to the driver performing a carpool service for co-
workplace is part of the day’s work. workers according to an agreement with the
company), are entitled to overtime pay. [Hilario
Travel away from home – Travel that keeps Rada v. NLRC, G.R. No. 96078 (1992)]
an employee away from home overnight is
travel away from home. Travel away from vi. Waiting time
home is worktime when it cuts across the
employee’s workday. The time is hours worked Rest period – short duration or “coffee
not only on regular working hours but also break”
during the corresponding hours on non- 1. Rest periods of short duration during
working days. working hours shall be counted as hours
worked. [par. 2, Art. 84, par. 2]
Lectures, meetings, trainings 2. Rest periods or coffee breaks running from
Attendance at lectures, meetings, training five (5) to twenty (20) minutes shall be
programs, and other similar activities shall considered as compensable working time.
NOT be counted as working time if ALL of the [par. 2, Sec. 7, Rule I, Book III, IRR]
following conditions are met:
1. Attendance is outside of the employee’s On call
regular working hours; Compensable work time, if employee is:
2. Attendance is in fact voluntary; and 1. Required to remain on call in the
3. The employee does not perform any employer’s premises or so close thereto
productive work during such attendance. 2. That he cannot use the time effectively and
[Sec. 6, Rule I, Book III, IRR] gainfully for his own purpose shall be
considered as working while on call.
Notes:
1. Attendance in lectures, meetings, and Note: An employee who is not required to leave
training periods sanctioned or required by word at his home or with company officials
Page 36 of 262
where he may be reached is NOT working COMPULSORY WORK ON REST DAY

while on call. [Sec. 5 (b), Rule I, Book III, IRR] The employer may require his employees to
work on any day:
Inactive due to work interruptions 1. In case of actual or impending
The time during which an employee is inactive emergencies caused by serious accident,
by reason of interruptions in his work beyond fire, flood, typhoon, earthquake, epidemic
his control shall be considered working time or other disaster or calamity to prevent loss
either: of life and property, or imminent danger to
1. If the imminence of the resumption of work public safety;
requires the employee's presence at the 2. In cases of urgent work to be performed on
place of work OR the machinery, equipment, or installation,
2. If the interval is too brief to be utilized to avoid serious loss which the employer
effectively and gainfully in the employee's would otherwise suffer;
own interest. [Sec. 4 (d), Rule I, Book III, 3. In the event of abnormal pressure of work
IRR] due to special circumstances, where the
employer cannot ordinarily be expected to
2. Rest Periods resort to other measures;
. 4. To prevent loss or damage to perishable
It shall be the duty of every employer, whether goods;
operating for profit or not, to provide each of his 5. Where the nature of the work requires
employees a rest period of not less than continuous operations and the stoppage of
twenty-four (24) consecutive hours after work may result in irreparable injury or loss
every six (6) consecutive normal work days. to the employer; and
[Art. 91 (a)] 6. Under other circumstances analogous or
similar to the foregoing as determined by
Preference of the employee the Secretary of Labor and Employment.
The employer shall determine and schedule [Art. 92]
the weekly rest day of his employees subject to
collective bargaining agreement and to such Synthesis of the Rules
rules and regulations as the Secretary of Labor 1. Rest day of not less than 24 consecutive
and Employment may provide. However, the hours after 6 consecutive days of work.
employer shall respect the preference of 2. No work, no pay principle applies.
employees as to their weekly rest day when 3. If an employee works on his designated
such preference is based on religious grounds. rest day, he is entitled to a premium pay.
[Art. 94 (b)] 4. Premium pay is additional 30% of the basic
pay.
The employee shall make known his 5. Employer selects the rest day of his
preference to the employer in writing at least employees
seven days before the desired effectivity of the 6. However, employer must consider the
initial rest day so preferred. religious reasons for the choice of a rest
day.
When the choice of the employee as to his rest
day based on religious grounds will inevitably PREMIUM PAY
result in serious prejudice or obstruction to the Premium pay refers to the additional
operations and the employer cannot normally compensation for work performed within 8
be expected to resort to other measures, the hours on non-work days, such as rest days and
employer may so schedule the weekly rest day special days.
of his choice for at least two days in a month.
[Rule III, Sec. 4] Coverage [Sec. 7, Rule III, Book III, IRR]
General Rule: All employees
Page 37 of 262
Exceptions: Work on a Sunday or holiday which is also

1. Those of the government and any of the a scheduled rest day
political subdivision, including government- All establishments and enterprises may
owned and controlled corporations; operate or open for business on Sundays and
2. Managerial employees as defined in Book holidays provided that the employees are given
III; the weekly rest day and the benefits as
3. Househelpers and persons in the personal provided in this Rule. [Sec. 2, Rule III, Book III,
service of another; IRR]
4. Workers who are paid by results, including
those who are paid on piece rate, takay, Compensation on rest day/Sunday/holiday
pakyaw, or task basis, and other noontime Except those employees referred to under Sec.
work, if their output rates are in accordance 2, Rule I, Book III:
with the standards prescribed in the 1. An employee who is made or permitted to
regulations, or where such rates have been work on his scheduled rest day shall be
fixed by the Secretary of Labor and paid with an additional compensation of at
Employment; least 30% of his regular wage.
5. Field personnel, if they regularly perform 2. An employee shall be entitled to such
their duties away from the principal or additional compensation for work
branch office or place of business of the ER performed on a Sunday only when it is his
and whose actual hours of work in the field established rest day.
cannot be determined with reasonable 3. An employee shall be paid an additional
certainty. compensation of at least 30% of his regular
wage for work performed on Sundays and
Premium pay rates [Handbook on Workers holidays, where the nature of the work of
Statutory Monetary Benefits, 2018] the employee is such that he has no regular
work days and no regular rest days can be
When Work Performed Premium Pay
scheduled. [Sec. 7, Rule III, Book III, IRR]
On scheduled rest day 130% of regular
wage CBA on higher premium pay/Rate
Adjustments
On Sunday ONLY IF this 130% of regular Where the collective bargaining agreement or
is the ESTABLISHED wage other applicable employment contract
rest day stipulates the payment of a higher premium
pay than that prescribed under this Article, the
On Sunday and holidays, 130% of regular employer shall pay such higher rate. [Art. 93
when no regular work wage (d)] The employer and his employees or their
and rest days representatives are not prevented from
entering into any agreement with terms more
On any special 130% of regular favorable to the employees. [Sec. 9, Rule II,
holiday/special day wage Book III, IRR]
On any special holiday/ 150% of regular Nothing in this rule shall justify an employer in
special day falling on wage reducing the compensation of his employees
scheduled rest day for the unworked Sundays, holidays, or other
rest days, which are considered paid off days
On a regular holiday 260% of regular
or holidays by agreement or practice subsisting
falling on a rest day wage
upon the effectivity of the Code. [Sec. 8, Rule
III, Book III, IRR]
Page 38 of 262
3. Service Charge other. [Philippine Hoteliers, Inc., Dusit

Hotel-Nikko v. NUWHRAIN-APL-IUF-Dusit
Coverage Hotel Nikko Chapter, G.R. No. 181972
Employers (2009)]
This rule shall apply only to establishments
which collect service charges such as: Service charge not included in determining
a. Hotels, restaurants, lodging houses, night compliance with minimum wage
clubs, cocktail lounge, massage clinics, In the event that the minimum wage is
bars, casinos and gambling houses; increased by law or wage order, service
b. Similar enterprises including those entities charges paid to the covered employees shall
operating primarily as private subsidiaries not be considered in determining the covered
of the Government [Sec. 1, DO 206-19, establishment’s compliance with the increased
IRR of RA11360] minimum wage. [Sec. 5, DO 206-19, IRR of
RA11360]
Employees
Shall apply to ALL employees of covered In Relation to Collective Bargaining
employers: Agreements and Employer-Employee
1. Regardless of their positions, designations, Agreements
or employment status, and Nothing in the Rules shall prevent the employer
2. Irrespective of the method by which their and employee from entering into any
wages are paid. [Sec. 2 (a), DO 206-19, agreement with terms more favorable to the
IRR of RA11360] employees than those granted therein, or be
used to diminish any benefit granted to the
Exceptions employees under existing laws, agreement
Managerial employees [Sec. 2 (c), DO 2016- AND voluntary employer practice. [Sec. 6, Rule
19, IRR of RA11360] VI, Book III, IRR]
Distribution, amended by RA11360 The rule is without prejudice to existing, future

Pursuant to the 2019 amendments to Art. 96, collective bargaining agreements. [Sec. 7, Rule
all service charges collected by hotels, shall VI, Book III, IRR]
be distributed completely and equally
among the covered workers except managerial Synthesis of the Rules
employees, based on actual hours or days of 1. Service charges must be pooled;
work or service rendered, among the covered 2. Where a restaurant or similar
employees, including those already receiving establishment does not collect service
the benefit of sharing in the service charges. charges but has a practice or policy of
[Sec. 3, DO 206-19, IRR of RA11360] monitoring and pooling tips given
voluntarily by its customers to its
The shares shall be distributed to employees employees, the pooled tips should be
not less than once every 2 weeks or twice a monitored, accounted for and distributed in
month at intervals not exceeding 16 days. [Sec. the same manner as the services charges
4, DO 206-19, IRR of RA11360] [Handbook on Workers’ Statutory
Monetary Benefits, 2018];
Notes: 3. The amount collected shall be distributed
1. The P2,000.00 salary ceiling for completely and equally among the covered
entitlement thereto is no longer applicable. workers;
2. [The employees’] right to their shares in the 4. It shall be given twice a month with
service charges collected by [the employer] intervals of not more than 16 days;
is distinct and separate from their right to 5. Payment of service charges will not be
ECOLA; gratification by the [employer] of considered in compliance with any
one does not result in the satisfaction of the
Page 39 of 262
increase in the minimum wage by law or Cooperative Development upon approval

wage order. of the Secretary of Labor.
Note: Workers in registered barangay micro

B. WAGES business enterprise are only exempted from
the Minimum Wage Law, not from the Title on
Wages [RA 9178].
1. Definition, Components, and
a. Wage vs. Salary
Exclusions
Wages and salary are in essence synonymous.
Definition [Songco v. NLRC, G.R. No. L-50999 (1990)]
It is the remuneration or earnings, however
designated: There are slight differences:
1. Capable of being expressed in terms of
money; Wage Salary
2. Whether fixed or ascertained on a time,
task, piece, or commission basis, or other Paid for skilled or Paid to white collar
method of calculating the same; unskilled manual workers and denote
3. Payable by an employer to an employee labor a higher grade of
under a written or unwritten contract of employment
employment –
Not subject to Subject to
a. for work done or to be done; or
execution, execution,
b. for services rendered or to be rendered
garnishment or garnishment or
[Art. 97(f)]
attachment except for attachment [Gaa v.
debts related to CA, G.R. No. L-
Coverage/Exclusions
necessities [Art. 44169 (1985)]
Wage includes the fair and reasonable value of
1708]
facilities furnished by the employer to the
employee. [Art. 97(f)] while allowances are
excluded from the basic salary or wage b. Distinguish: Facilities and
computation. [Cebu Institute of Technology v. Supplements
Ople, G.R. No. L-58870 (1987)]
Criterion: In determining whether a privilege is
Note: Fair and reasonable value shall not a facility, the criterion is not so much its kind
include any profit to the employer, or to any but the PURPOSE for which it is given.
person affiliated with the employer. [Art. 97(f)] [Millares v. NLRC & PICOP, G.R. No. 122827
(1999)]
Applicability
The Labor Code Title on wages shall not apply Comparison between Facilities and
to the following [Art. 98 and Sec. 3, Rule VII, Supplements
Book III, IRR]: Facilities Supplements
a. Farm tenancy or leasehold;
b. Household or domestic helpers, including What it is
family drivers and other persons in the
personal service of another; Articles or Extra remuneration or
c. Homeworkers engaged in needlework; services/items of special benefits/
d. Workers in registered cottage industries expense; articles or services/
who actually work at home; EXCLUDES tools of tools of the trade
e. Workers in registered cooperatives when the trade or articles given to or received
so recommended by the Bureau of or service primarily by laborers over and
Page 40 of 262
If the fair rental value is lower than the

for the benefit of the above their ordinary
computed value, fair rental value will be used.
ER [Sec. 5, Rule 7- earning or wages
[Rule VII-A, Sec. 6]
A, Book III, IRR] [Sec. 5, Rule 7-A,
Book III, IRR;]
c. Bonus, 13th Month Pay
Who benefits
BONUS
For the benefit of For the benefit or General Rule: A bonus is an act of gratuity on
the employee and convenience of the the part of the employer, and is a management
his family; for their employer prerogative which cannot be forced upon the
existence and employer. [Kamaya Point Hotel v. NLRC, G.R.
subsistence No. 75289, August 31, 1989]
Part of the wage? Exception: For a bonus to be enforceable:

1. It must have been promised by the
Yes [Art. 97] No [Art. 97] employer and expressly agreed upon by
the parties; or
Deductible from wage? 2. It must have had a fixed amount and had
been a long and regular practice on the part
Yes – part of the No – independent of
wage so it is the wage so not of the employer. [American Wire and Cable
Union v. American Wire, G.R. No. 155059,
deductible [Art. 97] deductible [Art. 97]
April 29, 2005]
Requirements for deducting value of See also VI. D. Bonus for a more
facilities comprehensive discussion on company
Mere availment is not sufficient to allow practices*
deductions from employees’ wages. Before the
value of facilities can be deducted from the 13th MONTH PAY
employees’ wages, the following requisites [PD 851 (The 13th-Month Pay Law) and the
must all be attendant: Revised Guidelines on the Implementation of
a. Proof must be shown that such facilities are the 13th Month Pay Law]
customarily furnished by the trade;
b. The provision of deductible facilities must Coverage
be voluntarily accepted in writing by the General Rule: ALL EMPLOYERS are hereby
employee; and required to pay all their rank and file
c. Facilities must be charged at reasonable employees a 13th month pay not later than
value. [SLL International Cable Specialists Dec 24 of every year, Provided that they have
v. NLRC, G.R. No. 172161 (2011)] worked for at least one (1) month during a
calendar year. [Memorandum Order No. 28]
“Customary” means long-established and
constant practice connoting regularity. [Millares N.B.: The law distinguishes managerial
v. NLRC & PICOP, G.R. No. 122827 (1999)] employees from rank-and-file employees;
hence, managerial employees are not legally
Computation entitled to 13th month pay.
Value of Facilities = Cost of Operation and
maintenance + Adequate depreciation + Exempted Employers:
reasonable allowance (not more than 5.5% a. Government, its political subdivisions,
interest on the depreciated amount of capital including GOCCs except those operating
invested by the employer) essentially as private subsidiaries of the
Government;
Page 41 of 262
b. Employers already paying their employees 5. Holiday pay and, and

a 13th month pay or more in a calendar 6. Cost-of-living allowances.
year or its equivalent at the time of this
issuance; and Exception: A company practice favorable to
c. Employers of those who are paid on purely the employees had indeed been established if
commission, boundary or task basis and for a considerable length of time, the employer
those who are paid a fixed amount for had freely, voluntarily and continuously
performing specific work, irrespective of included in the computation of its employees'
the time consumed in the performance thirteenth month pay, the payments for sick,
thereof (except those workers who are paid vacation and maternity leaves, premiums for
on piece-rate basis, in which case their work done on rest days and special holidays,
employer shall grant them 13th month pay). and pay for regular holidays. Thus, the
payments made pursuant thereto, ripened into
Notes: benefits enjoyed by the employees, and any
“Equivalent” of a 13th month pay includes: benefit and supplement being enjoyed by them
a. Christmas bonus, mid-year bonus, cash cannot be reduced, diminished, discontinued
bonuses; and or eliminated by the employer. [Davao Fruits
b. Other payments amounting to not less than Corp. v. ALU, G.R. No. 85073 (1993)]
1/12 of the basic salary
But shall NOT INCLUDE cash and stock Time of payment
dividends, cost of living allowances and all General Rule: paid not later than Dec 24 of
other allowances regularly enjoyed by the each year.
employee, as well a non-monetary benefits.
Exception: ER may give to his employees half
Workers paid on a piece-rate basis – paid a (½) of the required 13th Month Pay before the
standard amount for every piece or unit of work opening of the regular school year and the
produced that is more or less regularly other half on or before the 24th of December
replicated, without regard to the time spent in every year.
producing the same. Their employer shall grant
them 13th month pay. The frequency of payment of this monetary
benefit may be the subject of agreement
Minimum Amount between the employer and the recognized CBA
1/12 of the total basic salary earned by an of the employees.
employee within a calendar year.
Rationale behind 13th Month Pay
Base Amount a. To further protect the level of real wages
General Rule: basic salary shall include: from the ravage of world-wide inflation;
a. Cost of living allowances (COLA) b. There had been no increase in the legal
integrated into the basic salary of a minimum wage rates since 1970;
covered employee pursuant to EO 178. c. The Christmas season is an opportune
b. All remunerations or earnings paid by this time for society to show its concern for the
employer for services rendered. plight of the working masses so they may
properly celebrate Christmas and New
Excluding the allowances and monetary Year. [Whereas clauses of PD 851]
benefits which are not considered or integrated
as part of the regular or basic salary, such as 13th Month Pay in Special Cases
the cash equivalent of: a. Paid by Results: Employees who are paid
1. Unused vacation and sick leave credits, on piece work basis are, by law, entitled to
2. Overtime, the 13th Month Pay. [Revised Guidelines
3. Premium, on the Implementation of the 13th Month
4. Night differential, Pay Law]
Page 42 of 262
b. Fixed or Guaranteed Wage: Employees Manufacturing Corp. v. NLRC, G.R. No.

who are paid a fixed or guaranteed wage 107225 (1995)]
plus commission are entitled to 13th month
pay (not purely commission); the basis for Additional Rules
computation shall be both their fixed or a. Commissions: If the commissions may be
guaranteed wage and commission. properly considered part of the basic
[Revised Guidelines] salary, then they should be INCLUDED. If
they are not an integral part of the basic
c. Those with Multiple Employers: salary, then they should be EXCLUDED.
Government Employees working part time [Phil. Duplicators Inc. v. NLRC, G.R. No.
in a private enterprise, including private 110068 (1995)]
educational institutions, as well as b. Substitute Payment not allowed:
Employees working in two or more private Benefits in the form of food or free
firms, whether on full or part time bases, electricity, assuming they were given, were
are entitled to the required 13th Month not a proper substitute for the 13th month
Pay from all their private Employers pay required by law. Neither may year-end
regardless of their total earnings from each rewards for loyalty and service be
or all their employers. [Revised Guidelines] considered in lieu of 13th month pay.
[Framanlis Farms, Inc. v. MOLE, G.R. No.
d. Private School Teachers: Private school 72616-17 (1989)]
teachers, including faculty members of c. Wage Difference: The difference between
universities and colleges, are entitled to the the minimum wage and the actual salary
required 13th month pay, regardless of the received by the Employee cannot be
number of months they teach or are paid deemed as his 13th month pay as such
within a year, if they have rendered service difference is not equivalent to or of the
for at least one (1) month within a year. same import as the said benefit
[Revised Guidelines] contemplated by law. [JPL Marketing
Promotions v. CA, G.R. No. 151966
Overload pay is NOT included in the (2005)]
computation for 13th month pay; overload is d. 14th Month Pay is not mandated:
not overtime as it is additional work done Employers already paying their employees
within the normal shift. [Letran Calamba a 13th month pay or its equivalent are not
Faculty v. NLRC, G.R. No. 156225 (2008)] covered by this Decree. [Kamaya Point
Hotel v. NLRC, G.R. No. 75289 (1989)]
e. Resigned or Separated Employee: An e. Non-inclusion in regular wage: The
Employee who has resigned or whose mandated 13th month pay need not be
services were terminated at any time credited as part of regular wage of
before the time for payment of the 13th employees for purposes of determining
month pay is entitled to this monetary overtime and premium pays, fringe benefits
benefit in proportion to the length of time he insurance fund, Social Security, Medicare
worked during the year, reckoned from the and private retirement plans. [Revised
time he started working during the calendar Rules]
year up to the time of his resignation or
termination from service. [Revised Commissions vis-à-vis 13th month pay
Guidelines] The Rule on Productivity Bonuses.
“Productivity bonuses” have no clear direct or
f. Terminated Employees: The payment of necessary relation to the amount of work
the 13th month pay may be demanded by actually done by each individual employee. If
the employee upon the cessation of an employer cannot be compelled to pay a
employer-employee relationship. [Archilles productivity bonus to its employees, it should
follow that such productivity bonus, when
Page 43 of 262
given, should not be deemed to fall within the Exceptions:

“basic salary” of employees when the time a. Those of the government and any of the
comes to compute their 13th month pay. [Boie- political subdivision, including government-
Takeda v. de la Serna, G.R. No. 92174 and owned and controlled corporation;
G.R. No. L-102552 (1993)] b. Those of retail and service establishments
regularly employing less than 10 workers;
The sales commission earned by the salesmen c. Domestic helpers and persons in the
who make or close a sale constitute part of the personal service of another;
compensation or remuneration paid to d. Managerial employees and officers or
salesmen for serving as salesmen, and hence members of the managerial staff as defined
as part of the “wage” or salary of petitioner’s in Book III;
salesmen. The sale commissions were an e. Field personnel and other employees
integral part of the basic salary structure used whose time and performance is
as the base amount for the computation of 13th unsupervised by the employer including
month pay. [Phil. Duplicators v. NLRC, G.R. those who are engaged on task or contract
No. 110068 (1995)] basis, purely commission basis, or those
who are paid a fixed amount for performing
CBA vis-à-vis 13th month pay work irrespective of the time consumed in
P.D. No. 851 is specific and mandatory. the performance thereof. [Sec. 1, Rule IV]
However, if the employers actually grant such
13th month pay in the monetary benefits Retail Establishment is one principally
provided for in the CBA, they could be engaged in the sale of goods to end-users for
exempted from the operation of the decree. To personal or household use.
be exempted, there must be actual payment.
[Marcopper Mining Corp. v. Ople, G.R. No. L- Service Establishment is one principally
51254 (1981)] engaged in the sale of service to individuals for
their own or household use and is generally
Effect of Deficiency in 13th month pay recognized as such. [RA 6727 (The Wage
An employer who pays less than 1/12th of the Rationalization Act) IRR]
employees’ basic salary as their 13th month
pay is only required to pay the difference. Regular holidays
[Revised Rules] RA 9492 and 9849 (which added the two
Muslim holidays) provide for the observance of
d. Holiday Pay the following regular holidays:
1. New Year’s Day – Jan. 1
Holiday pay is a one-day pay given by law to 2. Maundy Thursday – Movable date
an employee, even if he does not work on a 3. Good Friday – Movable date
regular holiday. This gift of a day’s pay is 4. Araw ng Kagitingan – Monday nearest Apr.
limited to each of the 12 regular holidays. 9
Note: Art. 94 (c), was superseded by E.O. 203, 5. Labor Day – Monday nearest May 1
which was subsequently amended by RA 6. Independence Day – Monday nearest June
9177, 9256, 9492, and 9849. The current state 12
of the law is discussed below. 7. Eid’l Fitr – Movable date
8. Eid’l Adha – Movable date
Coverage 9. National Heroes Day – Last Monday of
General Rule: All employees [Art. 94(a); Rule August
IV, Sec. 1] 10. Bonifacio Day – Monday nearest Nov. 30
11. Christmas Day – Dec. 25
12. Rizal Day – Monday nearest Dec. 30
Page 44 of 262
Special (Non-Working Days) holidays. Wages & other emoluments

RA 9492 and RA 10966 provide for the granted by law to the workingman are
observance of the following special holidays: determined on the basis of the criteria laid
1. Ninoy Aquino Day – Monday nearest Aug. down by laws, and not on worker’s faith.
21 Art. 3(3), PD 1083 states that nothing
2. All Saints Day – Nov. 1 herein shall be construed to operate to the
3. Immaculate Conception of Mary [RA prejudice of a non-Muslim. [San Miguel
10966] – Dec. 8 Corp v. CA, G.R. No. 146775 (2002)]
4. Last day of the year – Dec. 31
Holiday pay computation [Art. 94; Rule IV,
Note: Proclamation 269 fixed the data for the Book III, IRR; RA 9424; DOLE Memorandum
observance of the regular and special holidays Circular 1 Series of 2004]
including additional special holidays for 2018
and 2019 General Rule: An employer may require an
employee to work on a regular holiday but such
The dates for Eid’l Fitr and Eid’l Adha (special employee shall be paid a compensation
holidays) shall follow after approximate dates equivalent to twice his regular rate. If an
of the Islamic holidays have been determined. employee is required to work on a special
holiday, the additional compensation should be
Arts. 169-173, P.D. 1083 (Code of Muslim 30% of his regular rate.
Personal Laws)
Specifically for the Muslim Areas, P.D. 1083, in
Work on
its Book V, IRR Title, recognizes five (5) Muslim Computation
holiday
Holidays, namely:
1. Amun Jadid (New Year) which falls on the Work on a WRH = Regular wage x
first (1st) day of the lunar month of Regular 200%
Muharram; Holiday
2. Mauli-un-Nabi (Birthday of the Prophet (WRH) Note: The employer may
Muhammad) which falls on the twelfth require an employee to work
(12th) day of the third (3rd) lunar month of on any holiday but such
Rabi-ul-Awwal; employee shall be paid a
3. Lailatul Isra Wal Mi Rai (Nocturnal Journey compensation equivalent to
and Ascencion of the Prophet twice his regular rate [Art.
Muhammand) which falls on the twenty- 94(b)]
seventh (27th) day of the seventh (7th)
lunar month of Rajab; Overtime on OTRH = Hourly wage x
4. Id-ul-Fitr (Hari Raja Pausa) which falls on a Regular 260% x number of hours
the first (1st) day of the tenth (10th) lunar Holiday of OT work
month of Shawwal commemorating the (OTRH)
end of the fasting season; and Note: Work performed
5. Id-ul-Adha (Hari Raha Haji) which falls on beyond eight hours on a
the tenth (10th) day of the twelfth (12th) holiday or rest day shall be
lunar month of Dhu’l-Hijja. paid an additional
compensation equivalent to
Notes: the rate of the first eight
1. Id-ul-Fitr (Eid’l Fitr) and Id-ul-Adha (Eid’l hours on a holiday or rest
Adha) have been added to the list of day plus at least thirty
national legal holidays [RA 9849]. percent (30%) thereof. [Art.
2. There should be no distinction between 87]
Muslims & non-Muslims as regards to
the payment of benefits for Muslim
Page 45 of 262
200% of regular daily wage Work on WSHRD = Regular wage x

(for the 1st 8 hours)+ 60% of Special 150%
hourly rate on said day Holiday
[260%] which falls Note: Where such holiday
on a Rest work falls on the employee’s
Work on WRHRD = Regular wage x Day scheduled rest day, he shall
Regular 260% (WSHRD) be entitled to an additional
Holiday compensation of at least
which falls Note: Where an employee is 50% of his regular wage.
on a Rest made or permitted to work Regular daily wage + 50%
Day on his scheduled rest day, thereof [150%]
(WRHRD) he shall be paid an
additional compensation of Overtime OTWSHRD = Hourly wage
at least 30% of his regular during Work x 195% x number of hours
wage. [Art. 93(a)] on Special of OT work
200% of regular daily wage Holiday
+ 60% (which is 30% of which falls Note: 45% (which is 30% of
200%) [260%] on a Rest 150%) + 150% [195%]
Day
Overtime on OTWRHRD = Hourly Rate (OTWSHRD)
Regular x 338% x number of hours
Holiday of OT
which falls According to DOLE Memo Circular 1-04, a
on a Rest Note: Regular holiday-on- “special holiday”/”special day” includes the
Day rest day rate (200% of National Special Days, and declared special
(OTWRHRD) regular daily wage plus 30% days such as Special Non-working Holiday,
of such amount) + 30% of Special Public Holiday and Special National
hourly rate on said day. Holiday. Such days are entitled to the rates
[338%] prescribed above. These days are not the
same as a special working holiday.
Work on WSH = Regular wage x
Special 130% A special working holiday is considered an
Holiday ordinary working day, so there is no premium
(WSH) Note: Work performed on pay.
any special holiday shall be
paid an additional Double holiday pay
compensation of at least According to “DOLE Explanatory Bulletin on
30% of the regular wage of Worker’s Entitlement to Holiday Pay on 9 April
the employee. [Art. 93(c)] 1993,” if two holidays fall on the same day:
a. If unworked, 200% of basic wage.
Regular daily wage + 30% b. If worked, 300% of basic wage. [Azucena]
thereof [130%]
Double Holiday Rule for Monthly-paid
Overtime OTWSH = Hourly wage x employees
during Work 169% x number of hours For covered employees whose monthly
on Special of OT work salaries are computed based on 365 days and
Holiday for those other employees who are paid using
(OTWSH) Note: 130% of regular daily factor 314, or 262, or any other factor which
wage + 39 (which is 30% of already considers the payment for the 11 [now
130%) [169%] 12] regular holidays, NO additional payment is
Page 46 of 262
due them. [BWC-WHSD Opinion No. 053, s. increases should only be used for
1998] computations which would be advantageous to
the employer (i.e. deduction for absences) and
Successive holiday pay not for computations which would diminish the
According to IRR, Rule IV, Sec. 10, an existing benefits of the employees (i.e.,
employee is entitled to holiday pay for both overtime pay, holiday pay and leave
days, IF: conversions). [Trans Asia Phils. v. NLRC,
a. He is present on day immediately supra]
preceding first holiday; or
b. He works on first holiday, which entitles him Sundays
to pay on second holiday. (See “Work on a Sunday or holiday which is
also a scheduled rest day”)
Where the day immediately preceding the a. When a holiday falls on a Sunday, the
holiday is a non-working day in the following Monday will not be considered a
establishment or the scheduled rest day of the holiday unless a proclamation says so.
employee, he shall not be deemed to be on b. A legal holiday falling on a Sunday does not
leave of absence on that day, in which case he create a legal obligation to pay extra, aside
shall be entitled to the holiday pay if he worked from the usual holiday pay, to monthly-paid
on the day immediately preceding the non- employees. [Azucena, citing Letter of
working day or rest day. [Sec. 6, Rule IV, Book Instruction No. 1087]
III, IRR]
No provision of law requires any employer to
Divisors make adjustments in the monthly salary rate
The divisor assumes an important role in set by him to take account of legal holidays
determining whether or not holiday pay is falling on Sundays in a given year, otherwise to
already computed. reckon a year at more than 365 days.
a. Monthly paid employees are not entitled to [Wellington Investment and Manufacturing
the holiday pay if their total annual income Corporation v. Trajano, G.R. No. 114698
is divided by 365 days resulting in a wage (1995)]
which is beyond the minimum wage per
day because they are considered paid Non-working/scheduled rest day
everyday of the year including holidays, Where the day immediately preceding the
rest days, and other non-working days. holiday is a non-working day in the
b. As a general rule, for a company with a 6- establishment or the scheduled rest day of the
day working schedule, the divisor 313 employee, he shall not be deemed to be on
already means that the legal holidays are leave of absence on that day, in which case he
included in the monthly pay of the shall be entitled to the holiday pay if he
employee. The divisor is arrived at by worked on the day immediately preceding
subtracting all Sundays from the total the non-working day or rest day. [Sec. 6(c),
number of calendar days in a year. Rule IV, Book III, IRR]
c. As a general rule for a company with a 5-
day working schedule, the divisor 277 Example:
means that the holiday pay is already If a holiday falls on Monday, and Sunday is a
included in the monthly salary of the non-working day in the establishment or is the
employee. [Trans Asia Phils. v. NLRC, scheduled rest day of the employee, the
G.R. No. 118289 (1999)] employee shall be entitled to holiday pay if he
worked on Saturday (which is the day
An increase in the divisor that results in the immediately preceding Sunday, the non-
prejudice of the employees is a violation of the working day or rest day).
proscription against non-diminution of benefits
under Sec. 100 of the Labor Code. Such
Page 47 of 262
Right to holiday pay in case of absences b. Where a covered employee, is paid by

If an employee is on leave of absence with pay results or output, such as payment on
on the day immediately preceding a regular piece work, his holiday pay shall not be less
holiday, he is entitled to holiday pay. [Sec. 6(a), than his average daily earnings for the last
Rule IV, Book III, IRR] seven (7) actual working days preceding
the regular holiday; Provided, However,
If an employee is on leave of absence without that in no case shall the holiday pay be less
pay on the day immediately preceding a than the applicable statutory minimum
regular holiday, he is not entitled to holiday pay wage rate.
unless he works on such regular holiday. [Sec. c. Seasonal workers may not be paid the
6(a), Rule IV, Book III, IRR] required holiday pay during off-season
when they are not at work
In case of temporary cessation of work d. Workers who have no regular working days
a. In cases of temporary or periodic shutdown shall be entitled to the benefits provided in
and temporary cessation of work of an this Rule. [Sec. 8, Rule IV, Book III, IRR]
establishment, as when a yearly inventory
or when the repair or cleaning of Holiday Pay of Hourly-Paid Faculty
machineries and equipment is undertaken, Members
the regular holidays falling within the Not Entitled: Regular Holiday Pay
periods shall be compensated in Entitled: Regular hourly rate on days declared
accordance with this Rule. as special holidays or for some reason classes
b. The regular holiday during the are called off or shortened for the hours they
cessation of operation of an enterprise are supposed to have taught, whether
due to business reverses as authorized extensions of class days be ordered or not; in
by the Secretary of Labor may not be paid case of extensions said faculty members shall
by the employer. [Sec. 7, Rule IV, Book III, likewise be paid their hourly rates should they
IRR] teach during said extensions.
a. They are not entitled to payment of
An employee is entitled to holiday pay for the holiday pay because they are paid only for
regular holidays falling within the period in work actually done. Since regular
cases of temporary shutdowns or cessation of holidays are known to both the school and
work, when: faculty members as “no class day”;
a. An annual inventory; or certainly the latter do not expect payment
b. Repair or cleaning of machineries and for said unworked holidays.
equipment is undertaken. b. They are entitled to their hourly rate on
days declared as special holidays. When
The employer may not pay his employees for a special public holiday is declared, the
the regular holidays during the suspension of faculty member paid by the hour is
work if: the cessation of operation is due to deprived of expected income, and it does
business reverses, and is authorized by the not matter that the school calendar is
Secretary of Labor. extended in view of the days or hours lost,
for their income that could be earned from
Teachers, Piece Workers, Seafarers, other sources is lost during the extended
Seasonal Workers, Etc. days.
a. Private school teachers, including faculty c. Similarly, when classes are called off or
members of colleges and universities, may shortened on account of typhoons, floods,
not be paid for the regular holidays during rallies, and the like, these faculty members
semestral vacations. They shall, however, must likewise be paid, whether or not
be paid for the regular holidays during extensions are ordered. [Jose Rizal
Christmas vacation; College v. NLRC, G.R. No. L-65482
(1987)]
Page 48 of 262
Piece workers c. Fair wage for fair work

The philosophy underlying the exclusion of
piece workers from the 8-hour law is that said General Rule: The age-old rule governing the
workers are paid depending upon the work relation between labor and capital or
they do irrespective of the amount of time management and employee is that a "fair day's
employed in doing said work. [Red V Coconut wage for a fair day's labor." It is hardly fair or
Products Ltd. v. CIR, G.R. No. L-21348 (1966)] just for an employee or laborer to fight or litigate
against his employer on the employer's time.
Seafarers [Sugue v. Triumph International, G.R. No.
Any hours of work or duty including hours of 164804 (2009)]
watch-keeping performed by the seafarer on
designated rest days and holidays shall be paid Exception: When the laborer was able,
rest day or holiday pay. [Sec. 11.C, Standard willing and ready to work but was illegally
Terms and Conditions Governing the locked out, suspended or dismissed, or
Employment of Filipino Seafarers on Board otherwise illegally prevented from working.
Ocean-Going Vessels] [Sugue v Triumph International, supra]
Seasonal workers d. Non-diminution of benefits

Seasonal workers who do not work during off-
season are not entitled to pay for the regular General Rule: There is a prohibition against
holidays occurring during their off-season. elimination or diminution of benefits. [Art. 100]
Workers assigned to “skeleton crews” that
work during the off-season have the right to be No wage order issued by any regional board
paid on regular holidays falling in that duration. shall provide for wage rates lower than the
statutory minimum wage rates prescribed by
2. Principles Congress. [Art. 127, as amended by RA 6727]
a. No work, no pay Requisites

If the following are met, then the employer
General Rule: If there is no work performed by cannot remove or reduce benefits [Vergara Jr.
the employee, there can be no wage or pay. v. Coca-Cola Bottlers Phils, G.R. No. 176985
(2013)]:
Exception: Unless the laborer was able, 1. Ripened company policy – Benefit is
willing and ready to work but was prevented by founded on a policy which has ripened into
management or was illegally locked out, a practice over a long period;
suspended or dismissed. [Azucena, citing 2. Practice is consistent and deliberate; and
Philippine Airlines v. NLRC, G.R. No. 55159, 3. Not due to error in the construction or
June 22, 1989] application of a doubtful or difficult question
of law. [Globe Mackay Cable v. NLRC,
b. Equal pay for equal work G.R. No. L-74156 (1988)]
4. The diminution or discontinuance is done
Employees working in the Philippines, if they unilaterally by the employer.
are performing similar functions and
responsibilities under similar working See also VI. D. Bonus.
conditions, should be paid equally. If an
employer accords employees the same When not applicable: At least one of the
position and rank, the presumption is that these requisites is absent.
employees perform equal work. [International a. Mistake in the application of the law [Globe
School Alliance of Educators v. Hon. Mackay Cable v. NLRC, supra.]
Quisumbing, G.R. No. 128845 (2000)] b. Negotiated benefits [Azucena]
Page 49 of 262
c. Reclassification of Positions – e.g. loss of Basis of output pay rate

some benefits by promotion. a. On petition of any interested party, or upon
d. Contingent or Conditional Benefits – the its initiative, the Department of Labor shall
rule does not apply to a benefit whose grant use all available devices, including the use
depends on the existence of certain of time and motion studies and consultation
conditions, so that the benefit is not with representatives of employers’ and
demandable if those preconditions are workers’ organizations, to determine
absent. whether the employees in any industry or
enterprise are being compensated in
Benefits initiated through negotiation between accordance with the minimum wage
Employee and Employer, e.g. CBA, can only requirements of this Rule.
be eliminated or diminished bilaterally. b. The basis for the establishment of rates for
piece, output, or contract work shall be the
3. Minimum Wage performance of an ordinary worker of
minimum skill or ability.
Definition - “Statutory minimum wage” is the c. An ordinary worker of minimum skill or
lowest wage fixed by law that an employer can ability is the average worker of the lowest
pay his workers. [Rules Implementing RA producing group representing 50% of the
6727] total number of employees engaged in
similar employment in a particular
Payment of statutory minimum wage is establishment, excluding learners,
mandatory apprentices and handicapped workers
Lack of funds is not a valid defense from paying employed therein.
the statutory minimum wage, which is a d. Where the output rates established by the
mandatory statutory obligation. To uphold such employer do not conform with the
defense of lack of available funds would render standards prescribed herein, or with the
the Minimum Wage Law futile and defeat its rates prescribed by the DOLE in an
purpose. [De Racho v. Municipality of Ilagan, appropriate order, the employees shall be
G.R. No. L-23542, January 2, 1968] entitled to the difference between the
amount to which they are entitled to receive
a. Payment by hours worked under such prescribed standards or rates
and that actually paid them by the
The minimum wage rates for agricultural and employer. [Sec. 8, Rule VII-A, Book III,
non-agricultural employees and workers in IRR]
each and every region of the country shall be
those prescribed by the Regional Tripartite From the above rules, piece rate workers may
Wages and Productivity Boards. [Art. 99] be categorized into two:
1. Those who are paid piece rates which are
See III. A. 1. Hours of work. prescribed in Piece Rate Orders issued by
DOLE.
b. Payment by results
Wages or earnings in this category are
The Secretary of Labor and Employment shall determined by simply multiplying the
regulate the payment of wages by results, number of pieces produced by the rate per
including pakyao, piecework, and other non- piece. [Azucena]
time work, in order to ensure the payment of
fair and reasonable wage rates, preferably These workers are not covered by the Rule
through time and motion studies or in on Hours of Work which provides for
consultation with representatives of worker’s premium and overtime payments.
and employer’s organizations. [Art. 101]
Page 50 of 262
See III. A. 1. a. Principles in determining When payment through check, postal

hours worked and employees exempted or orders or money orders is allowed:
not covered for more details. a. When payment is customary (on the date
of Code effectivity);
2. Those who are paid output rates which are b. Where it is so stipulated in a collective
prescribed by the employer and are not yet agreement;
approved by the DOLE. c. Where all of the following conditions are
met:
The number of pieces produced is multiplied by 1. Bank/Facility for encashment is within
the rate per piece as determined by the 1-km radius from the workplace
employer. 2. ER did not receive any pecuniary
1. If the resulting amount is equivalent to or benefit because of said arrangement
more than the applicable statutory 3. EEs are given reasonable time during
minimum daily rate in relation to the banking hours to withdraw their wages
number of hours worked, the worker will (compensable hours, if during working
receive that amount. hours)
2. If the amount is less than the applicable 4. The payment by check is with the
legal rate, it is possible that the rates per written consent of the EEs concerned,
piece are not in accordance with the in the absence of a CBA. [Sec. 2, Rule
standards prescribed by the rules VIII]
implementing the Labor Code. The
employer is thus required by law to pay the b. Time of Payment [Art. 103; Sec.
difference between the resulting amount 3, Rule VIII, Book III, IRR]
and the applicable legal minimum wage
rate. [Azucena]
Time of Payment
4. Payment of wages Frequency At least once every 2

weeks or 2x per month
a. Form of Payment [Art. 102;
Secs. 1-2, Rule VIII, Book III, Intervals Must not be more than
IRR] 16 days
General Rule: Legal Tender Only Force Majeure or Valid excuse for
circumstances delayed payment
Exception: Check/Money Order if customary beyond ER’s
OR necessary because of special control BUT ER must pay
circumstances, as specified by the Secretary of immediately after
Labor or the CBA. cessation and not less
than once a month
Not allowed:
1. Promissory Notes Tasks which Payments should be
2. Vouchers cannot be made with intervals
3. Tokens completed in 2 not more than 16
4. Tickets weeks days, in proportion to
5. Chits; or work completed
6. Any other form alleged to represent a legal
Final settlement is
tender, even when expressly requested by
made upon completion
the employee. [Art. 102]
of the work.
Page 51 of 262
c. Place of Payment [Art. 104; Sec. d. Person to Pay [Sec. 5, Rule VIII,
4, Rule VIII, Book III, IRR] Book III, IRR]
General Rule: Shall be made at or near the General Rule: Directly to EE

place of undertaking (workplace).
Exceptions:
Exceptions: 1. Member of EE’s family → if ER is
1. Deterioration of peace and order authorized in writing by the EE.
conditions, or by reason of actual or 2. A 3rd person → if authorized by law (e.g.
impending emergencies (fire, flood, insurance companies for premiums, union
epidemic); dues where the right to check-off has been
2. Free transportation to the employees back recognized by ER in accordance with a
and forth; CBA or authorized in writing by EE
3. Under any other analogous circumstances concerned).
provided, that the time spent by the 3. Heirs → in case of death of EE, without
employees in collecting their wages shall necessity of intestate proceedings.
be considered as compensable hours a. If heirs are of age → they shall execute
worked. an affidavit attesting to their
relationship to the deceased and the
NO PAYMENT in any bar, night or day club, fact that they are his heirs to the
drinking establishment, massage clinic, dance exclusion of others
hall, or other similar places or in places where b. If any of the heirs is a minor → such
games are played with stakes of money or affidavit shall be executed in his behalf
things representing money, except in the case by his natural guardian or next of kin.
of persons employees in such places
When the employer engages the services of an
Condition for ATM payment [Labor organized group of workers, payment to their
Advisory on Payment of Salaries thru ATM leader cannot be considered a violation of the
(1996)] rule on direct payment. [Bermiso v. Escano,
1. ATM system of payment is with the written G.R. No. L-11606 (1959)]
consent of the EEs.
2. EEs are given reasonable time to withdraw 5. Prohibitions regarding wages
their wages from the banking facility
(compensable hours, if during work hours). a. Interference in disposal of wages [Art. 112]
3. System shall allow workers to receive their b. Wage deduction [Art. 113]
wages within the period/frequency c. Requirement to make deposits for loss or
provided by law. damage [Arts. 114-115]
4. There is a bank/ATM facility within 1km d. Withholding of wages [Art. 116]
radius from the place of work. e. Deduction to ensure employment [Art. 117]
5. Upon request of the concerned EEs, the f. Retaliatory measures [Art. 118]
ER shall issue a record of payment of g. False reporting [Art. 119]
wages, benefits and deductions for a
particular period. a. Prohibition against Interference
6. There shall be no additional expenses and in Disposal of Wages
no diminution of benefits and privileges.
7. The ER shall assume responsibility in case No employer shall:
the wage protection provisions of law and 1. Limit or otherwise interfere with the
regulations are not complied with under the freedom of any employee to dispose of his
arrangement. wages
2. Force, compel, or oblige his employees to:
Page 52 of 262
a. Purchase merchandise, commodities established I by Article 2244. [Republic v.

or other property from any other Peralta, G.R. 150537 (1987)]
person; or
b. Make use of any store or services of Note: RA 10142 (FRIA) subsequently
such employer or any other person. amended Art. 2244, CC and Art. 110 by
[Art. 112] elevating trade-related claims to 1st priority.
b. Prohibition against Wage c. Prohibition Against

Deduction [Art. 113] Requirement to Make Deposits
for Loss or Damage [Art. 114,
General Rule: ER cannot make any deduction 115]
from the wages of his EE.
General Rule: No employer shall require his
Exceptions: worker to make deposits from which
1. Insurance premiums deductions shall be made for the
2. Union dues reimbursement of loss of or damage to tools,
3. Other deductions authorized by materials, or equipment supplied by the
law/Secretary of Labor [e.g. SSS, employer
withholding tax]
4. When the deductions are with written Exception: It is allowed when the employer is
authorization of the employees for payment engaged in such trades, occupations or
to a third person and the employer agrees business where the practice of making
to do so, provided that the latter does not deductions or requiring deposits is:
receive any pecuniary benefit, directly or 1. A recognized one, or is necessary; or
indirectly, from the transaction. [Labor 2. Desirable as determined by the Secretary
Advisory No. 11 (2014)] of Labor and Employment in appropriate
rules and regulations. [Art. 114]
If the law prohibits a deduction, the
authorization given by the employee does not No deduction from the deposits of an EE for the
validate the deduction. actual amount of the loss/damage shall be
made unless:
In case of Bankruptcy or Liquidation of an 1. There is reasonable opportunity for EE to
ER’s business show cause why deduction should not be
Workers shall enjoy first preference as regards made;
their wages and other monetary claims, any 2. EE’s responsibility has been clearly shown
provision of law to the contrary 3. Amount is fair and reasonable and shall not
notwithstanding. Such unpaid wages and exceed the actual loss of damage; and
monetary claims shall be paid in full before the 4. Must not exceed 20% of weekly pay. [Art.
claims of the Government and other creditors 115; Rule VIII, Sec. 11]
may be paid. [Art. 110]
Attorney’s fees in any judicial or administrative
Article 110 of the Labor Code has modified proceedings for the recovery of wages shall not
Article 2244 of the Civil Code in two respects: exceed 10% of the amount awarded.
1. Firstly, by removing the one year
limitation found in Article 2244, number 2; d. Prohibition Against Withholding
and of Wage
2. Secondly, by moving up claims for unpaid
wages of laborers or workers of the General Rule: It shall be unlawful for any
Insolvent from second priority to first person, directly or indirectly, to:
priority in the order of preference 1. Withhold any amount from the wages of a
worker or;
Page 53 of 262
2. Induce him to give up any part of his wages 6. Wage determination

by force, stealth, intimidation, threat or by
any other means whatsoever without the a. Wage order
worker’s consent. [Art. 116]
Wage Order (WO) – an order issued by the
Exceptions: Regional Tripartite Wages and Productivity
1. Deduction is for insurance premium Boards (“Regional Boards”) that establishes
2. For union dues the minimum wage rates to be paid by ERs in
3. Authorized by law/ DOLE Sec the region, which shall in no case be lower than
4. Due & demandable debt to ER the applicable statutory minimum wage rates.
[NWPC Rules of Procedure on Minimum Wage
e. Prohibition Against Deduction Fixing].
to Ensure Employment
State Policy
It shall be unlawful to make any deduction from It is hereby declared the policy of the State to:
the wages of any employee for the benefit of 1. Rationalize the fixing of minimum wages
the employer or his representative or 2. Promote productivity-improvement and
intermediary as consideration of a promise gain-sharing measures to ensure a decent
of employment or retention in employment. standard of living for the workers and their
[Art. 117] families;
3. To guarantee the rights of labor to its just
f. Prohibition Against Retaliatory share in the fruits of production;
Measures 4. To enhance employment generation in the
countryside through industry dispersal;
It shall be unlawful for an employer to: 5. To allow business and industry reasonable
a. Refuse to pay or reduce the wages and returns on investment, expansion and
benefits growth. [Sec. 2, Wage Rationalization Act
b. Discharge, or (RA 6727)]
c. Discriminate in any manner against
any employee who has filed any complaint or Powers & Functions of the Regional Board
instituted any proceeding under this Title or 1. To determine and fix minimum wage rates
has testified or is about to testify in such applicable in their region, provinces or
proceedings. [Art. 118] industries therein
2. To issue the corresponding wage orders,
This covers offenses only under the title of subject to guidelines issued by the
Wages in the Labor Code. Commission [Art. 122]
g. Prohibition Against False Wage fixing takes place whenever the

Reporting conditions in the region so warrant, after
investigating and studying all pertinent facts
It shall be unlawful for any person to make any and based on the standards and criteria
statement, report, or record filed or kept prescribed by the Labor Code. [Art. 123, as
pursuant to the provisions of this Code knowing amended by RA 6727]
such statement, report or record to be false in
any material respect. [Art. 119] Standards/Criteria in Wage Fixing
a. The demand for living wages;
Covers all offenses under the Labor Code. b. Wage adjustment vis-a-vis the consumer
price index;
c. The cost of living and changes or increases
therein;
d. The needs of workers and their families;
Page 54 of 262
e. The need to induce industries to invest in Commission for payment to employees

the countryside; affected by the order of the corresponding
f. Improvements in standards of living; increase in the event such order is affirmed
g. The prevailing wage levels; [Art. 123].
h. Fair return of the capital invested and
capacity to pay of employers; Grounds for Appeals for Review of WO
i. Effects on employment generation and a. Non-conformity with prescribed guidelines
family income; and and/or procedure
j. The equitable distribution of income and b. Questions of law
wealth along the imperatives of economic c. Grave abuse of discretion [Sec. 2, Rule V,
and social development. [Art. 124, as Revised Rules of Procedure on Minimum
amended by RA 6727] Wage Fixing]
WO Effectivity: After 15 days from its Double Indemnity Doctrine

complete publication in at least one newspaper Double Indemnity is the payment to a
of general circulation. [Art. 123] concerned EE of the prescribed increase or
adjustments in the wage rate which was not
Note: Public hearing and publication are paid by an ER in an amount equivalent to 2x
mandatory [Cagayan Sugar Milling Co. v. Sec. the benefits owing to such employee.
of Labor, G.R. No. 128399 (1998)]. [Philippine Hoteliers, Inc. v. National Union of
Workers, GR No. 181972 (2009); RA 6727, as
Frequency: A WO issued by the Board may amended]
not be disturbed for a period of 12 months from
its effectivity and no petition for wage increase Unpaid Benefits
shall be entertained during said period. [Rule The prescribed wage rates which the ER failed
IV, Sec. 4, Revised rules of Procedure on to pay upon the effectivity of a WO, exclusive
Minimum Wage Fixing] of other wage-related benefits.
Exceptions: Unpaid benefits serve as the principal basis for

a. When Congress itself issues a law computing the double indemnity. [Sec. 2, D.O.
increasing wages. No. 10-98]
b. Supervening conditions (i.e. extraordinary
increases in prices of petroleum products Wages of apprentices, learners and
and basic goods/services. handicapped workers shall in no case be less
than 75% of the statutory minimum wage rates.
Appeal: Any party aggrieved by the Wage [Sec. 10, IRR of RA 6727]
Order issued by the Regional Board may
appeal such order to the Commission within METHODS OF FIXING
ten (10) calendar days from the publication of a. Floor Wage Method- fixing a determinate
such order. It shall be mandatory for the amount to be added to the prevailing
Commission to decide such appeal within sixty statutory minimum wage rates (e.g. setting
(60) calendar days from the filing thereof [Art. P25 increase for min. wage rates).
123]. b. Salary-Ceiling Method- Wage adjustment
to be applied to EEs receiving a certain
Effect of Appeal denominated salary or workers being paid
General Rule: Does not operate to stay the more than existing min. wage (e.g. WO
order. granting P25 increase to those earning up
to P250).
Exception: Party appealing such order shall
file with the Commission an undertaking with a
surety/sureties (surety bond) satisfactory to the
Page 55 of 262
Wage distortion can only exist where the wage

adjustment is brought about by a wage order,
Floor Wage Salary Ceiling
not by management prerogative. [Bankards
What it does Employees’ Union v. NLRC, G.R. No. 140689
(2004)]
Adds to previous All wages under a certain
minimum wage wage increases to that HOW TO RESOLVE WAGE DISTORTION
wage [Art. 124]
Organized Establishment
Example a. Employer and the union shall negotiate to
correct the distortions.
P456 + P100 = All wages under P456 b. Disputes shall be resolved through the
P556 must be increased to grievance procedure.
P556 c. If still unresolved, voluntary arbitration.
b. Wage distortion Grievance Procedure (under the CBA) → if

unresolved, VOLUNTARY arbitration
Wage Distortion/Rectification
A situation where an increase in prescribed Unorganized Establishment
wage rates results in the elimination or severe a. ERs and Ees shall endeavor to correct
contraction of intentional quantitative such distortions.
differences in wage or salary rates between b. Disputes shall be settled through the
and among employee groups in an National Conciliation and Mediation Board.
establishment as to effectively obliterate the c. If still unresolved after 10 calendar days of
distinctions embodied in such wage structure conciliation, it shall be referred to the
based on skills, length of service, or other appropriate branch of the NLRC –
logical bases of differentiation. [Art. 124] compulsory arbitration
Both the employer and employee cannot
Elements of wage distortion use economic weapons.
1. Existing hierarchy of positions with d. Employer cannot declare a lock-out;
corresponding salary rates; Employee cannot declare a strike because
2. A significant change in the salary rate of a the law has provided for a procedure for
lower pay class without a concomitant settling
increase in the salary rate of a higher one e. The salary or wage differential does not
(must be caused by a wage order) need to be maintained. [National
[Philippine Geothermal Inc. v. Chevron, Federation of Labor v. NLRC, G.R. No.
G.R. No. 190187 (2018)]; 103586 (1994)]
3. The elimination of the distinction between
the two levels; and National Conciliation and Mediation Board → if
4. The existence of the distortion in the same unresolved, COMPULSORY arbitration by the
region of the country. [Prubankers Assn. v. NLRC
Prudential Bank and Co., G.R. No. 131247
(1999)] CBA vis-à-vis Wage Orders – CBA
creditability
The implementation of wage orders in one In determining an employee’s regular wage,
region but not in others does not in itself the pertinent stipulations in the CBA are
necessarily result in wage distortion. controlling, provided the result is not less than
[Prubankers Assn. v. Prudential Bank and Co., the statutory requirement [Philippine National
G.R. No. 131247 (1999)] Bank v. PEMA, G.R. No. L-30279 (1982)]
Page 56 of 262
Note: The manner of resolving wage distortion Teachers of private school on contract basis
is largely based on the applicable wage order. are entitled to service incentive leave. [Cebu
The current one for NCR, WO 20, refers to the Institute of Technology v. Ople, G.R. No. L-
procedure in Art. 124 of the Labor Code 58870 (1987)]
The law grants annual SIL of five days to

C. LEAVES domestic workers, but their SIL shall not be
converted to cash or carried over to
succeeding years. [Sec. 5, RA 10361]
1. Labor Code
Meaning of “1 year of service”
General Rule: "At least one year service" shall
a. Service Incentive Leave (SIL)
mean service for NOT LESS than 12 months,
whether continuous or broken, reckoned from
Coverage
the date the employee started working,
Every employee who has rendered at least one
including authorized absences and paid
year of service shall be entitled to a yearly
regular holidays.
service incentive leave of five days with pay.
[Art. 95(a)]
Exception: Service for LESS than 12 months
is counted as “at least one year service” when:
Service Incentive Leave DOES NOT apply to
1. The working days of the establishment, as
the following employees:
a matter of practice or policy, is less than
a. Those of the government and any of its
12 months; or
political subdivisions, including GOCCs;
2. The employment contract provides working
b. Domestic helpers and persons in the
days that is less than 12 months. [Sec. 3,
personal service of another;
Rule V, Book III, IRR]
c. Managerial employees as defined in Book
III of this Code;
Arbitration or Administrative Action
d. Field personnel and other employees
The grant of benefit IN EXCESS of that
whose performance is unsupervised by the
provided herein shall not be made a subject of
employer including those who are engaged
arbitration or any court or administrative action.
on task or contract basis, purely
[Art. 95 (c)]
commission basis, or those who are paid a
fixed amount for performing work
Commutable nature of benefit
irrespective of the time consumed in the
The service incentive leave shall be
performance thereof;
commutable to its money equivalent if not used
e. Those who are already enjoying the benefit
or exhausted at the end of the year. [Sec. 5,
herein provided;
Rule V, Book III, IRR]
f. Those enjoying vacation leave with pay of
at least 5 days;
When Entitled EE’s Cause of Action
g. Those employed in establishments
Accrues
regularly employing less than 10
1. If the employee did not make use of said
employees. [Sec. 1, Rule V, Book III, IRR]
leave credits but instead chose to avail
of its commutation into money:
Piece-rate employees are entitled to service
The cause of action to claim his SIL pay
incentive leave pay provided that they are
accrues from the moment the employer
supervised. If they are unsupervised, they are
refuses to remunerate its monetary
not entitled to SIL. [Labor Congress of the
equivalent.
Phils. v. NLRC, G.R. No. 123938 (1998)]
2. If the employee wishes to accumulate
his leave credits and opts for its
Page 57 of 262
commutation upon his resignation or i. Any other person who solely provides
separation from employment: parental care and support to a child or
The cause of action to claim the whole children: Provided, that he/she is duly
amount of his accumulated SIL shall arise licensed as a foster parent by the
when the employer fails to pay such Department of Social Welfare and
amount at the time of his resignation or Development (DSWD) or duly appointed
separation from employment. [Auto Bus legal guardian by the court; and
Transport v. NLRC, G.R. No. 156367 j. Any family member who assumes the
(2005)] responsibility of head of family as a result
of the death, abandonment,
2. Special laws disappearance, or prolonged absence of
the parents or solo parent for at least one
a. Parental leave for solo parents (1) year. [Sec. 3 (a), RA 8972]
[RA 8972 (Solo Parents’ Welfare Act of 2000)] Conditions for Entitlement
A solo parent employee shall be entitled to the
Parental leave for solo parents – Leave parental leave under the following conditions:
benefits granted to a solo parent to enable a. He/she has rendered at least one (1) year
him/her to perform parental duties and of service, whether continuous or broken;
responsibilities where physical presence is b. He/she has notified his/her employer that
required. [Sec. 3 (d), RA 8972] he/she will avail himself/herself of it, within
a reasonable period of time; and
Coverage c. He/she has presented to his/her employer
Any solo parent or individual who is left alone a Solo Parent Identification Card, which
with the responsibility of parenthood due to: may be obtained from the DSWD office of
a. Giving birth as a result of rape or and other the city or municipality where he/she
crimes against chastity even without a final resides. [Sec. 19, Art. V, IRR, RA 8972]
conviction of the offender: Provided, That
the mother keeps and raises the child; Availment
b. Death of spouse; The parental leave is in addition to leave
c. Spouse is detained or is serving sentence privileges under existing laws with full pay,
for a criminal conviction for at least one (1) consisting of basic salary and mandatory
year; allowances. It shall not be more than seven (7)
d. Physical and/or mental incapacity of working days every year. [Sec. 8, RA 8972]
spouse as certified by a public medical
practitioner; Grant of Flexible Work Schedule
e. Legal separation or de facto separation The employer shall provide for a flexible
from spouse for at least one (1) year: working schedule for solo parents: Provided,
Provided, that he/she is entrusted with the That the same shall not affect individual and
custody of the children; company productivity: Provided, further, That
f. Declaration of nullity or annulment of any employer may request exemption from the
marriage as decreed by a court or by a above requirements from the DOLE on certain
church: Provided, that he/she is entrusted meritorious grounds. [Sec. 6, RA 8972]
with the custody of the children;
g. Abandonment of spouse for at least one (1) Protection against Work Discrimination
year; No employer shall discriminate against any
h. Unmarried father/mother who has solo parent employee with respect to terms and
preferred to keep and rear his/her conditions of employment on account of his/her
child/children, instead of having others status. [Sec. 7, RA 8972]
care for them or give them up to a welfare
institution;
Page 58 of 262
Termination of the Benefit b. Notice: The female worker shall have

A change in the status or circumstance of the notified her employer of her pregnancy and
parent claiming the benefit under the law, such the probable date of her childbirth, which
that he/she is no longer left alone with the notice shall be transmitted to the SSS in
responsibility of parenthood, shall terminate accordance with the rules and regulations
his/her eligibility for these benefits. [Sec. 3 (a), it may provide. [Sec. 1, Rule VI, IRR of
RA 8972] RA11210]
See III. E. 7. for discussion on other working Maternity leave benefit after termination of
conditions for solo parents* employment possible
General Rule: Maternity leave with full pay
See also VII. E. for discussion on support for shall be granted even if the childbirth,
solo parents* miscarriage, or emergency termination of
pregnancy occurs not more than 15 calendar
b. Expanded maternity leave days after the termination of an employee’s
service.
[RA 11210 (105-Day Expanded Maternity
Leave Law)] Exception: When the employment of the
pregnant woman worker has been terminated
Expanded Maternity Leave -- Maternity leave without just cause, the employer must pay her
of 105 days with full pay, with an option to the full amount equivalent to her salary for 105
extend for an additional 30 days without pay. days for childbirth and 60 days for miscarriage
[Sec. 3, RA 11210] and emergency termination of pregnancy
based on her full pay, in addition to the other
Coverage applicable daily cash maternity benefits that
Every female worker in government and the she should have received had her employment
private sector, including those in the informal not been illegally terminated. [Sec. 5, Rule IV,
economy, regardless of civil status or the IRR of RA 11210]
legitimacy of her child, is entitled to the
maternity leave benefits. Benefit received
A daily maternity benefit equivalent to 100% of
This is applicable to pregnancy and her average daily salary credit for:
miscarriage, or emergency termination of a. 105 days in cases of live childbirth
pregnancy, regardless of frequency. [Sec. 3, b. 60 days in cases of miscarriage or
RA 11210] emergency termination of pregnancy.
Maternity leave for female workers in The maternity leave can be credited as
private sector, requisites combinations of prenatal and postnatal leave
a. Contribution: The female worker must as long as it does not exceed 105 days or 60
have paid at least 3 monthly contributions days as the case may be. In no case shall
in the 12-month period immediately postnatal care be less than 60 days. [Sec. 2,
preceding the semester of her childbirth, Rule IV, IRR of RA 11210]
miscarriage, or emergency termination of
pregnancy. In case the employee qualifies as a solo parent
(see III. C. 2. a., above), the employee shall be
In determining the female member’s paid an additional maternity benefit of 15 days.
entitlement to the benefit, the SSS shall [Sec. 5 (a), RA 11210]
consider only those contributions paid prior
to the semester of contingency; and
Page 59 of 262
Extended maternity leave option, requisite a. That the maternity leave benefits have not
notice yet been commuted to cash, if applicable;
In cases of live childbirth, an additional and
maternity leave of 30 days, without pay, can be b. That a certified true copy of the death
availed of, at the option of the female worker, certificate or medical certificate or abstract
provided that the employer shall be given is provided to the employers of both the
notice. female worker and the child’s father or
alternate caregiver.
Due notice must be in writing must be given at
least 45 days before the end of the female In case the maternity leave benefits have
worker’s maternity leave. already been paid to the female worker in full,
the child’s father or alternate caregiver shall be
Exception: No prior notice shall be necessary entitled to enjoy the remaining unexpired leave
in the event of a medical emergency, but credits of the female worker, if any.
subsequent notice shall be given to the
employer. Provided, That such leave without pay shall not
be considered a gap in the service of the child’s
The period of extended maternity leave without father or alternate caregiver. [Sec. 4, Rule VIII,
pay shall not be considered a gap in the IRR of RA 11210]
service. [Sec. 3, Rule IV, IRR of RA 11210]
Other conditions
Allocation of maternity leave credits a. Employer shall advance the full payment
A female worker entitled to maternity leave subject to reimbursement by the SSS
benefits may, at her option, allocate up to 7 within 30 days from filing of leave
days of said benefits to the child’s father, application. [Sec. 3, Rule VI, IRR of RA
whether or not the father is married to the 11210]
mother. b. SSS shall immediately reimburse the
employer the maternity benefits advanced
The allocated benefit granted to the child’s to the employed female member, only to
father is over and above the paternity benefits the extent of 100% of her average daily
provided under RA 8187 (Paternity Leave Act). salary credit for 105 days, 120 days or 60
In case of death, absence, or incapacity of the days, as the case may be, upon receipt of
child’s father, the female worker may allocate satisfactory and legal proof of such
to an alternate caregiver who may be: payment. [Sec. 4, Rule VI, IRR of RA
a. A relative within the 4th degree of 11210]
consanguinity; or c. Availment shall be a bar to the recovery of
b. The current partner, regardless of sexual sickness benefits provided under RA 1161
orientation or gender identity, of the female (Social Security Law) for the same period
worker sharing the same household. for which daily maternity benefits have
been received. [Sec. 6, Rule VI, RA 11210]
The option to allocate maternity leave credits d. Sanction: That if an employee should give
shall not be applicable in cases of miscarriage birth or suffer miscarriage or emergency
or emergency termination of pregnancy. [Sec. termination of pregnancy:
1, Rule VIII, IRR of RA 11210] 1. Without the required contributions
having been remitted for her by her
Death or permanent incapacity employer to the SSS, or
If the female worker dies or becomes 2. Without the latter having been
permanently incapacitated, the balance of her previously notified by the ER of time of
maternity leave benefits shall accrue to the the pregnancy,
child’s father or to a qualified alternate the employer shall pay to the SSS
caregiver subject to the following conditions: damages equivalent to the benefits which
Page 60 of 262
said employee would otherwise have been Conditions for entitlement [Sec. 3, IRR, RA
entitled to. [Sec. 5, RA 11210] 8187]
a. He is married;
c. Paternity leave b. He is an employee at the time of the
delivery of his child
[RA 8187 (Paternity Leave Act of 1996)] c. He is cohabiting with his spouse at the time
that she gives birth or suffers a miscarriage
Paternity Leave – leave of 7 calendar days d. He has applied for paternity leave with his
with full pay for every married male employee ER within a reasonable period of time from
in the private and public sectors the expected date of delivery by his
pregnant spouse, or within such period as
Coverage and Purpose may be provided by company rules and
Paternity leave is granted to all married male regulations, or by CBA; and,
employees in the private and public sectors, e. His wife has given birth or suffered a
regardless of their employment status (e.g. miscarriage.
probationary, regular, contractual, project
basis). Application for paternity leave
See d. under conditions for entitlement.
The purpose of this benefit is to allow the
husband to lend support to his wife during her In case of miscarriage, prior application for
period of recovery and/or in nursing her paternity leave shall not be required. [Sec. 4,
newborn child. [Sec. 3, RA 8187] IRR, RA 8187]
Benefit Non-conversion to cash

It shall be for 7 calendar days, with full pay, In the event that the paternity leave is not
consisting of basic salary and mandatory availed of, it shall not be convertible to cash
allowances fixed by the Regional Wage Board, and shall not be cumulative. [Sec. 7, IRR, RA
if any, provided that his pay shall not be less 8187]
than the mandated minimum wage. [Sec. 2, RA
8187] Crediting of existing benefits
a. If the existing paternity leave benefit under
It shall apply to the first 4 deliveries of the the CBA, contract, or company policy is
employee’s lawful wife with whom he is greater than 7 calendar days as provided
cohabiting. for in RA 8187, the greater benefit shall
prevail.
Cohabiting means the obligation of the b. If the existing paternity leave benefit is less
husband and wife to live together. [Sec. 1, IRR, than that provided in RA 8187, the ER shall
RA 8187] If the spouses are not physically adjust the existing benefit to cover the
living together because of the workstation or difference. [Sec. 9, IRR, RA 8187]
occupation, the male employee is still entitled
to the paternity leave benefit. Where a company policy, contract, or CBA
provides for an emergency or contingency
Usage of the benefit leave without specific provisions on paternity
Usage of the leave shall be after the delivery, leave, the ER shall grant to the employee 7
without prejudice to an employer’s policy of calendar days of paternity leave. [Sec. 9, IRR,
allowing the employee to avail of the benefit RA 8187]
before or during the delivery, provided that the
total number of days shall not be more than 7
days for each covered delivery. [Sec. 5, IRR,
RA 8187]
Page 61 of 262
d. Gynecological leave Conditions for Entitlement

Any female employee, regardless of age and
[RA 9710 (Magna Carta for Women)] civil status, shall be entitled to a special leave
benefit, provided she has complied with the
Gynecological Leave - A female employee’s following conditions:
leave entitlement of two (2) months with full a. She has rendered at least 6 months
pay from her employer based on her gross continuous aggregate employment service
monthly compensation following surgery for the last 12 months prior to surgery;
caused by gynecological disorders, provided b. She has filed an application for special
that she has rendered continuous aggregate leave
employment service of at least six (6) months c. She has undergone surgery due to
for the last 12 months. gynecological disorders as certified by a
competent physician. [Sec. 2, D.O. No.
Gynecological Disorders 112]
Disorders that would require surgical
procedures such as, but not limited to: Application for Special Leave Before
1. Dilatation and curettage; Surgery
2. Those involving female reproductive The employee shall file her application for
organs such as the vagina, cervix, uterus, leave with her employer within a reasonable
fallopian tubes, ovaries, breast, adnexa period of time from the expected date of
and pelvic floor, as certified by a competent surgery, or within such period as may be
physician; provided by company rules and regulations or
3. Hysterectomy, ovariectomy, and by CBA.
mastectomy.
Application for Special Leave After Surgery
Gross Monthly Compensation Prior application for leave shall not be
The monthly basic pay plus mandatory necessary in cases requiring emergency
allowances fixed by the regional wage boards. surgical procedure, provided that the employer
[Sec. 7, Rule II, IRR, RA 9710] shall be notified verbally or in written form
within a reasonable period of time and provided
Basic Requirement further that after the surgery or appropriate
The woman employee should have been with recuperating period, the female employee shall
the company for 12 months prior to surgery. An immediately file her application using the
aggregate service of at least six (6) months prescribed form. [Sec. 3, D.O. No. 112]
within the said 12-month period is sufficient to
entitle her to avail of the special leave benefit. Period of Entitlement
The 2 months special leave is the maximum
Employment service includes absences with period of leave with pay that a woman
pay such as use of other mandated leaves, employee may avail of under RA 9710.
company-granted leaves and maternity leaves.
For purposes of determining the period of leave
Competent Physician with pay that will be allowed to a female
A medical doctor preferably specializing in employee, the certification of a competent
gynecological disorders or is in the position to physician as to the required period of
determine the period of recuperation of the recuperation shall be controlling. [Sec. 4, D.O.
woman employee. [Sec. 1, D.O. No. 112, as No. 112, as amended]
amended (Guidelines Governing the
Implementation of the Special Leave Benefits Availment
for Women Employees in the Private Sector)] The special leave shall be granted to the
qualified employee after she has undergone
surgery. [Sec. 5, D.O. No. 112, as amended]
Page 62 of 262
Frequency of Availment When availed of

A woman employee can avail of the SLB for A victim leave may be availed of at any time
every instance of surgery due to gynecological during the application of any protection order,
disorder for a maximum total period of 2 investigation, prosecution and/or trial of the
months per year. [Sec. 6, D.O. No. 112, as criminal case [Sec. 42, Rule VI, IRR]
amended]
Requirement
Special Leave Benefit vis-à-vis SSS In order to be entitled to the leave benefit, the
Sickness Benefit only requirement is for the victim-employee to
The SLB is different from the SSS sickness present to her employer a certification from the
benefit. The former is granted by the employer barangay chairman (Punong Barangay) or
in accordance with RA 9710. barangay councilor (barangay kagawad) or
prosecutor or the Clerk of Court, as the case
It is granted to a woman employee who has may be, that an action relative to the matter is
undergone surgery due to gynecological pending [Sec. 42, Rule VI, IRR].
disorder. The SSS sickness benefit, on the
other hand, is administered and given by the The usage of the ten-day leave shall be at the
SSS in accordance with RA 1161 as amended option of the woman employee. In the event
by RA 8282. [Sec. 7, D.O. No. 112, as that the leave benefit is not availed of, it shall
amended] not be convertible into cash and shall not be
cumulative [Sec. 42, Rule VI, IRR].
e. Battered woman leave
When denied; employer’s liability
[RA 9262 (Anti-Violence Against Women and The employer/agency head who denies the
Their Children Act of 2004 or VAWC)] application for leave, and who shall prejudice
the victim-survivor or any person for assisting
Victims of any of the acts covered by VAWC a co-employee who is a victim-survivor under
shall be entitled to take a paid leave of the Act shall be held liable for discrimination
absence up to ten (10) days in addition to and violation of R.A 9262. [Sec. 42, Rule VI,
other paid leaves under the Labor Code and IRR].
Civil Service Rules and Regulations,
extendible when the necessity arises as
specified in the protection order [Sec. 43, RA D. SEXUAL HARASSMENT IN
9262] THE WORK ENVIRONMENT
Acts covered by VAWC
1. Definition
1. “Physical violence” - refers to acts that
include bodily or physical harm
[RA 7877 - Anti-Sexual Harassment Act of
2. “Sexual violence” - refers to an act which is
1995; RA 11313 - Safe Spaces Act]
sexual in nature, committed against a
woman or her child.
ANTI-SEXUAL HARASSMENT ACT
3. “Psychological violence” - acts or
Work, education or training-related sexual
omissions causing or likely to cause mental
harassment is defined in Sec. 3, RA 7877.
or emotional suffering of the victim.
Acts Demanding, requesting or
4. “Economic abuse” - acts that make or
covered otherwise requiring any
attempt to make a woman financially
sexual favor from the other,
dependent.
regardless of whether these
are accepted by the object of
Note: To fall under VAWC, the offender must
said Act
have had a sexual or dating relationship with
the offended woman.
Page 63 of 262
Committed An employer, employee, individual's employment or education,

by manager, supervisor, agent job performance or opportunities.
of the employer, teacher, 2. A conduct of sexual nature and other
instructor, professor, coach, conduct based on sex:
trainor, or any other person a. affecting the dignity of a person, which
who, having authority, is unwelcome, unreasonable, and
influence or moral offensive to the recipient;
ascendancy over another b. whether done verbally, physically or
Where In a work or training or through the use of technology such as
education environment text messaging or electronic mail or
through any other forms of information
Employment or Work-Related Sexual and communication systems.
Harassment 3. A conduct that is unwelcome and pervasive
1. The sexual favor is made as a condition: and creates an intimidating, hostile or
a. in the hiring or in the employment, re- humiliating environment for the recipient.
employment or continued employment
of said individual; or Workplaces include all sites, locations, spaces,
b. in granting said individual favorable where work is being undertaken by an
compensation, terms, conditions, employee within or outside the premises of the
promotions, or privileges; or usual place of business of the employer. [Sec.
c. in the refusal to grant the sexual favor 18, Rule VI, IRR of RA11313]
results in limiting, segregating or
classifying the EE which in any way 2. Duties and Liabilities of
would discriminate, deprive or diminish Employers
employment opportunities or otherwise
adversely affect said employee; ANTI-SEXUAL HARASSMENT ACT
2. The above acts would either: Persons who may be liable
a. impair the employee’s rights or 1. Any employer, employee, manager,
privileges under existing labor laws; or supervisor, agent of the employer, teacher,
b. result in an intimidating, hostile, or instructor, professor, coach, trainer or any
offensive environment for the other person, regardless of whether the
employee. [Sec. 3, RA 7877] demand, request for requirement for
submission is accepted by the object of
SAFE SPACES ACT said act having authority, influence or
Gender-based Sexual Harassment (GBSH) moral ascendancy over another in a
in the Workplace work or training or education environment,
The crime of GSBH in the workplace includes who demands, requests or otherwise
the following: requires any sexual favor from another;
1. An act or series of acts: 2. Any person who directs or induces another
a. involving any unwelcome sexual to commit any act of sexual harassment as
advances, requests or demand for herein defined; OR
sexual favors or any act of sexual 3. Any person who cooperates in the
nature; commission by another without which it
b. whether done verbally, physically or would NOT have been committed, shall
through the use of technology such as also be held liable under this Act. [Sec. 3,
text messaging or electronic mail or RA 7877]
through any other forms of information
and communication systems; It is not necessary that the demand, request or
c. that has or could have a detrimental requirement of a sexual favor be articulated in
effect on the conditions of an a categorical oral or written statement. It may
be discerned, with equal certitude, from the
Page 64 of 262
acts of the offender. [Domingo v. Rayala, G.R. Anyone who commits any of the acts of GBSH
No. 155831 (2008)] may be held liable. GBSH may even be
committed between peers, and by a
Role of the employer or Head of Office subordinate to a superior officer. [Sec. 18, IRR
The Employer or Head of Office shall have the of RA 11313]
duty: Duties of employers
1. to prevent the commission of such acts and Employers, or other persons of authority,
2. to lay down the procedure for the influence or moral ascendancy have the
resolution, settlement or prosecution of following duties:
committed acts. [Sec. 4, RA 7877] a. Disseminate or post a copy of the Safe
Spaces Act to all persons in the workplace;
He shall be solidarily liable for damages: b. Provide measures to prevent GBSH in the
1. if he is informed of such acts by the workplace;
offended party, and c. Create an independent internal mechanism
2. no immediate action is taken thereon. [Sec. or a committee on decorum and
5, RA 7877] investigation to investigate and address
complaints of GBSH;
Independent action for damages d. Provide and disseminate, in consultation
The victim of work, education or training- with all persons in the workplace, a code of
related sexual harassment can institute a conduct or workplace policy. [Sec. 17, RA
separate and independent action for damages 11313]
and other affirmative relief. [Sec. 6, RA 7877]
In addition to liabilities for committing acts of
Sanctions GSBH, employers may also be held
Criminal: imprisonment of 1 month to mos. or responsible for:
fine of P10k to P20k or both a. Non-implementation of their duties under
Sec. 17 of this Act (see above), as provided
Prescription of such action is in 3 years. in the penal provisions; or
b. Not taking action on reported acts of GBSH
Termination committed in the workplace.
As a managerial employee, petitioner is
bound by more exacting work ethics. When Any person who violates (a) shall, upon
such moral perversity is perpetuated against conviction, be penalized with a fine of not less
his subordinate, he provides a justifiable than P5,000, nor more than P10,000.
ground for his dismissal for lack of trust and
confidence. [Sec. 7, RA 7877; Libres v. NLRC, Any person who violates (b) shall, upon
G.R. No. 123737 (1999)] conviction, be penalized with a fine of not less
than P10,000 nor more than P15,000. [Sec. 19,
The gravamen of the offense in sexual RA 11310]
harassment is not the violation of the
employee's sexuality but the abuse of power by Independent action for damages
the employer. Any employee, male or female, Nothing shall preclude the victim of work-
may rightfully cry "foul" provided the claim is related GBSH from instituting a separate and
well substantiated. Strictly speaking, there is independent action for damages and other
no time period within which he or she is affirmative relief.
expected to complain through the proper
channels. [Phil. Aelous Automotive United 3. Applicable Laws
Corp. v. NLRC, G.R. No. 124617 (2000)]
a. Sexual Harassment Act
SAFE SPACES ACT b. Safe Spaces Act
Page 65 of 262
See also D. 1 & 2 above Employment. [Nitto Enterprises v. NLRC, G.R.

No. 114337 (1995)]
Qualifications of apprentice
E. WORKING CONDITIONS FOR An apprentice must:
SPECIAL GROUPS OF EMPLOYEES 1. Be at least fifteen years of age; provided
those who are at least fifteen years of age
but less than eighteen may be eligible for
1. Apprentices and Learners
apprenticeship only in nonhazardous
occupations;
[RA 7796 (Technical Education and Skills
2. Be physically fit for the occupation in which
Development Act of 1994 or TESDA Act of
he desires to be trained;
1994)]
3. Possess vocational aptitude and capacity
for the particular occupation as established
a. Apprentices
through appropriate tests; and
4. Possess the ability to comprehend and
Definitions
follow oral and written instructions.
a. Apprenticeship - training within
employment with compulsory related
Trade and industry associations may
theoretical instruction involving a contract
recommend to the SOLE appropriate
between an apprentice and an employer on
educational qualifications for apprentices
an approved apprenticeable occupation.
in certain occupations.
[Sec 4(j), RA 7796]
General Rule: Such qualifications, if approved,
b. Apprentice is a person undergoing
shall be the educational requirements for
training for an approved apprenticeable
apprenticeship in such occupations.
occupation during an apprenticeship
agreement. [Sec 4(k), RA 7796]
Exception: The educational qualifications may
c. Apprenticeship Agreement is a contract
be waived by an employer in favor of an
wherein a prospective employer binds
applicant who has demonstrated exceptional
himself to train the apprentice, who in turn
ability. A certification explaining briefly the
accepts the terms of training for a
ground for such waiver, and signed by the
recognized apprenticeable occupation
person in charge of the program, shall be
emphasizing the rights, duties and
attached to the apprenticeship agreement of
responsibilities of each party. [Sec 4(l), RA
the applicant concerned. [Sec. 11, Rule VI,
7796]
Book II, IRR]
d. Apprenticeable Occupation is an
occupation officially endorsed by a tripartite
Period of Apprenticeship
body and approved for apprenticeship by
The period of apprenticeship shall not exceed
the Authority. [Sec 4(m), RA 7796]
six months.
Who may employ apprentices
Terms and conditions
Only employers in highly technical industries
Apprenticeship agreements, including the
may employ apprentices and only in
wage rates of apprentices, shall conform to the
apprenticeable occupations approved by the
rules issued by the Secretary of Labor and
SOLE. [Art. 60, LC].
Employment.
The act of filing the proposed apprenticeship
Wage rate
program with the DOLE is a preliminary step
Apprenticeship agreements providing for wage
towards its final approval, and does not
rates below the legal minimum wage, which in
instantaneously give rise to an employer-
no case shall start below 75 percent of the
apprentice relationship. It must be duly
applicable minimum wage, may be entered
approved by the Minister of Labor and
into only in accordance with apprenticeship
Page 66 of 262
programs duly approved by the Secretary of be granted to the person or enterprise

Labor and Employment. [Art. 61, as amended organizing an apprenticeship program. [Art. 71]
by E.O. 111-1986] Requisites of the deduction:
1. Apprenticeship program must be duly
Apprenticeship without compensation approved by the DOLE;
The Secretary of Labor and Employment may 2. Deduction shall NOT exceed 10% of direct
authorize the hiring of apprentices without labor wage;
compensation whose training on the job is 3. Employer must pay his apprentices the
required by the school or training program minimum wage. [Art. 71]
curriculum or as requisite for graduation or
board examination. [Art. 72] Summary of Rules:
1. The apprentice must be paid not less than
The wages of apprentices and learners shall in 75% of the prescribed minimum salary [Art.
no case be less than seventy-five percent 61]; HOWEVER, the employer MAY NOT
(75%) of the applicable minimum wage rates. pay any wage if the apprenticeship training
[Sec. 7, Wage Order No. NCR-19] is:
a. part of the school curriculum,
Enforcement b. a requirement for graduation, or
Investigation of violation of apprenticeship c. a requirement for board examination
agreement [Art. 72]
Upon complaint of any interested person or 2. The apprenticeship agreement must be
upon its own initiative, the appropriate agency approved by the DOLE Secretary (without
of the DOLE or its authorized representative such one shall be deemed a regular
shall investigate any violation of an employee) [Nitto Enterprises v. NLRC,
apprenticeship agreement pursuant to such G.R. No. 114337 (1995)];
rules and regulations as may be prescribed by 3. The employer is not compelled to continue
the Secretary of Labor and Employment. [Art. one’s employment upon termination of
65] apprenticeship;
4. One-half (1/2) of the value of labor training
Appeal to the Secretary of Labor and expenses incurred for developing the
Employment productivity and efficiency of apprentices of
The decision of the authorized agency of the the training cost is deducted from the
DOLE may be appealed by any aggrieved employer’s income tax, but it shall not
person to the SOLE within five (5) days from exceed 10% of direct labor wage. [Art. 71]
receipt of the decision. The decision of the
Secretary of Labor and Employment shall be Working scholars
final and executory. [Art. 66] There is no employer-employee relationship
between students on one hand, and schools,
Exhaustion of administrative remedies colleges or universities on the other, where
No person shall institute any action for the there is written agreement between them under
enforcement of any apprenticeship agreement which the former agree to work for the latter in
or damages for breach of any such agreement, exchange for the privilege to study free of
unless he has exhausted all available charge, provided, the students are given real
administrative remedies. [Art. 67] opportunities, including such facilities as may
be reasonable and necessary to finish their
Incentives for employers chosen courses under such agreement. [Sec.
An additional deduction from taxable income of 14, Rule X, Book III, IRR]
one-half (1/2) of the value of labor training
expenses incurred for developing the
productivity and efficiency of apprentices shall
Page 67 of 262
b. Learners Summary of Rules

1. The duration of learnership shall not
Definition exceed 3 months [Art. 73];
Learners are persons hired as trainees in semi- 2. If the learnership of 3 months is completed,
skilled and other industrial occupations: the employer may be compelled to
1. Which are non-apprenticeable; continue with the services of the learner as
2. Which may be learned through practical a regular employee; There is a
training on the job in a relatively short commitment from the employer to employ
period of time, which shall not exceed the learners if they so desire, as regular
three (3) months. [Art. 73; Sec 4(n), RA employees upon completion of the
7796] learnership;
3. If the learner is dismissed from service
When may learners be hired without just and valid cause and without
1. No experienced workers are available; due process after 2 months of service, he
2. The employment of learners being will be deemed as regular employee; [Art.
necessary to prevent the curtailment of 75(d)] and
employment opportunities; and 4. The wages or salary rates of the learners
3. The employment will neither create unfair which shall begin at not less than 75% of
competition in terms of labor costs nor the applicable minimum wage. [Art. 75(c)]
impair working standards. [Art. 74]
Distinctions between Learnership and
Terms and conditions of employment Apprenticeship
Any employer desiring to employ learners shall
Apprenticeship Learnership
enter into a learnership agreement with them,
which agreement shall include: Highly technical Semi-skilled
1. The duration of the learnership period, industries industrial
which shall not exceed three (3) months; occupations
2. The wages or salary rates of the learners
which shall begin at not less than seventy- Practical training Practical training
five percent (75%) of the applicable supplemented by whether or not such
minimum wage; and related theoretical practical training is
3. A commitment to employ the learners if instruction supplemented by
they so desire, as regular employees upon theoretical
completion of the learnership. All learners instructions
who have been allowed or suffered to work
during the first two (2) months shall be Apprenticeable Non-apprenticeable
deemed regular employees if training is occupations occupations
terminated by the employer before the end approved by the
of the stipulated period through no fault of SOLE
the learners.
Written apprentice Learnership
The learnership agreement shall be subject to agreement ratified agreement
inspection by the Secretary of Labor and by the appropriate
Employment or his duly authorized committees
representative. [Art. 75]
More than 3 months, Shall not exceed 3
Learners employed in piece or incentive-rate shall not exceed 6 months
jobs during the training period shall be paid in months
full for the work done. [Art. 76]
When apprentice When learner may
may be hired: be hired:
Page 68 of 262
1. The person is at 1. When no termination of if they so desire, as

least 15 years of experienced apprenticeship regular employees
age, provided workers are upon completion of
those who are at available; the learnership
least 15 years of 2. The employment
age but less of learners is Deductibility of ½ of No additional
than 18 may be necessary to training costs deduction from
eligible for prevent incurred, provided: taxable income for
apprenticeship curtailment of • Program is duly undertaking a
only in non- employment recognized by learnership
hazardous opportunities; DOLE agreement
occupation; and • Deduction shall
2. The person is 3. The employment not exceed 10%
physically fit for does not create of direct labor
the occupation in unfair wage
which he desires competition in • Payment of
to be trained; terms of labor minimum wage
3. The person costs or impair to apprentice
possesses or lower working
vocational standards.
2. Disabled Workers
aptitude and
capacity for the
[RA 7277 - Magna Carta for Disabled Persons,
particular
as amended by RA 9442]
occupation as
established
Definitions
through
a. Disabled persons are those suffering from
appropriate
restriction or different abilities, as a result
tests; and
of a mental, physical or sensory
4. The person is
impairment, to perform an activity in the
able to
manner or within the range considered
comprehend and
normal for a human being. [Sec. 4(a), RA
follow oral and
7277]
written
b. Impairment is any loss, diminution or
instructions.
aberration of psychological, physiological,
Wage rate shall Wage rate shall or anatomical structure or function. [Sec.
begin at not less begin at not less 4(b), RA 7277]
than 75% of the than 75% of the c. Disability shall mean (1) a physical or
minimum wage minimum wage mental impairment that substantially limits
one or more psychological, physiological or
No compensation if Learners in anatomical function of an individual or
SOLE authorizes, as piecework shall be activities of such individual; (2) a record of
OJT is required by paid in full for the such an impairment; (3) being regarded as
the school [Art. 72]. work done having such an impairment. [Sec. 4(c), RA
7277]
The employer is not Learnership d. Handicap refers to a disadvantage for a
compelled to agreement must given individual, resulting from an
continue one’s contain a impairment or a disability, that limits or
employment upon commitment to prevents the function or activity, that is
employ the learners considered normal given the age and sex
of the individual. [Sec. 4(d), RA 7277]
Page 69 of 262
Coverage If suitable employment for disabled persons

RA 7277 covers all disabled persons and, to cannot be found through open employment,
the extent herein provided, departments, the State shall endeavor to provide it by means
offices and agencies of the National of sheltered employment.
Government or nongovernment organizations
involved in the attainment of the objectives of In the placement of disabled persons in
this Act. [Sec. 3, RA 7227] sheltered employment, it shall accord due
regard to the individual qualities, vocational
a. Equal opportunity goals and inclinations to ensure a good
working atmosphere and efficient production.
Rights of disabled workers [Sec 6, RA 7277]
1. Equal opportunity for employment
4. Full minimum wage
No disabled person shall be denied access to
opportunities for suitable employment. A All qualified handicapped workers shall
qualified disabled EE shall be subject to the receive the full amount of the minimum wage
same terms and conditions of employment and rate prescribed herein. [Sec 7, Wage Order No.
the same compensation, privileges, benefits, NCR-19]
fringe benefits, incentives or allowances as a
qualified able-bodied person. [Sec. 5 (par. 1), A Qualified Individual with a Disability shall
RA 7277] mean an individual with a disability who, with or
without reasonable accommodations, can
Once they are regular employees, they are perform the essential functions of the
entitled to the benefits granted by law which the employment position that such individual holds
parties cannot stipulate away. [Bernardo v. or desires.
NLRC, 310 SCRA 186 (1999)]
However, consideration shall be given to:
2. Reserved contractual positions 1. The employer’s judgement as to what
functions of a job are essential
5% of all casual, emergency and contractual 2. The written description prepared by the
positions in the DSWD; DOH, DepEd; and employer before advertising or interviewing
other government agencies, offices or applicants for the job, which shall be
corporations engaged in social development considered evidence of the essential
shall be reserved for disabled persons. [par. 2, functions of the job. [Sec. 2(l), RA 7277
Sec. 5, RA 7277] (Magna Cart for Persons with Disability, as
amended by RA 9442)]
3. Sheltered employment
A qualified disabled EE should be given the
Definition same terms and conditions of employment as
The provision of productive work for disabled a qualified able-bodied person. Since the
persons through workshop providing special Magna Carta accords them the rights of
facilities, income producing projects or qualified able-bodied persons, they are thus
homework schemes. [Sec 4(i), RA 7277] covered by Art. 280 of the Labor Code. In the
present case, the handicap of petitioners (deaf-
Purpose mutes) is NOT a hindrance to their work. The
To give them the opportunity to earn a living eloquent proof of this statement is the repeated
thus enabling them to acquire a working renewal of their employment contracts.
capacity required in open industry. [Sec 4(i), [Bernardo v. NLRC, G.R. No. 122917 (1999)]
RA 7277]
Page 70 of 262
Apprenticeship Opportunities non-disabled person performing the same

Disabled persons shall be eligible as work is entitled;
apprentices or learners: Provided, that: 5. Favoring a non-disabled employee over a
1. Their handicap is NOT as much as to qualified disabled employee with respect to
effectively impede the performance of job promotion, training opportunities, study
operations in the particular occupation for and scholarship grants, solely on account
which they are hired; of the latter's disability;
2. After the lapse of the period of 6. Re-assigning or transferring a disabled
apprenticeship, if found satisfactory in the employee to a job or position he cannot
job performance, they shall be eligible for perform by reason of his disability;
employment. [Art. 81; Sec. 7, RA 7277; 7. Dismissing or terminating the services of a
Bernardo v. NLRC, supra.] disabled employee by reason of his
disability unless the employer can prove
b. Discrimination on employment that he impairs the satisfactory
performance of the work involved to the
No entity, whether public or private, shall prejudice of the business entity: Provided,
discriminate against a qualified disabled however, That the employer first sought to
person by reason of disability in regard to: provide reasonable accommodations for
1. Job application procedures disabled persons;
2. The hiring, promotion, or discharge of 8. Failing to select or administer in the most
employees effective manner employment tests which
3. Employee compensation accurately reflect the skills, aptitude or
4. Job training other factor of the disabled applicant or
5. Other terms, conditions, and privileges of employee that such tests purports to
employment. measure, rather than the impaired sensory,
manual or speaking skills of such applicant
Acts of Discrimination: or employee, if any; and
1. Limiting, segregating or classifying a 9. Excluding disabled persons from
disabled job applicant in such a manner membership in labor unions or similar
that adversely affects his work organizations. [Sec. 32, RA 7277]
opportunities;
2. Using qualification standards, employment Occasions when a Disabled Applicant may
tests or other selection criteria that screen be Subjected to Medical Examination
out or tend to screen out a disabled person Upon an offer of employment, a disabled
unless such standards, tests or other applicant may be subjected to medical
selection criteria are shown to be job- examinations, on the following occasions:
related for the position in question and are 1. All entering employees are subjected to
consistent with business necessity; such an examination regardless of
3. Utilizing standards, criteria, or methods of disability;
administration that: 2. Information obtained during the medical
a. have the effect of discrimination on the condition or history of the applicant is
basis of disability; or collected and maintained on separate
b. perpetuate the discrimination of others forms and in separate medical files and is
who are subject to common treated as a confidential medical record;
administrative control. Provided, however, That:
4. Providing less compensation, such as a. Supervisors and managers may be
salary, wage or other forms of informed regarding necessary
remuneration and fringe benefits, to a restrictions on the work or duties of the
qualified disabled employee, by reason of employees and necessary
his disability, than the amount to which a accommodations;
Page 71 of 262
b. First aid and safety personnel may be amended. [Sec. 32, RA 7277, as amended
informed, when appropriate, if the by RA 9442]
disability may require emergency
treatment; 3. Gender
c. Government officials investigating
compliance with this Act shall be Constitutional basis
provided relevant information on The State recognizes the role of women in
request; and nation-building, and shall:
d. The results of such examination are a. Ensure the fundamental equality before the
used only in accordance with this Act law of women and men;
[Sec. 33, RA 7277]. b. Protect working women by providing:
1. Safe and healthful working conditions,
c. Incentives for employers taking into account their maternal
functions, and
For employment of disabled persons - 2. Such facilities and opportunities that
additional deduction, from their gross income, will enhance their welfare and enable
equivalent to 25% of the total amount paid as them to realize their full potential in the
salaries and wages to disabled persons: service of the nation. [Sec. 14, Art. II &
a. Private entities that employ disabled Sec. 14, Art. XIII, 1987 Constitution]
persons either as regular EEs, apprentice
or learner; a. Discrimination
b. Provided such entities present proof as
certified by the DOLE and the DOH [Sec. It shall be unlawful for any employer to
8[b], RA 7277] discriminate against any woman employee with
respect to terms and conditions of employment
For construction of disabled-friendly solely on account of her sex.
facilities - additional deduction from their net
taxable income, equivalent to 50% of the direct The following are acts of discrimination:
costs of the improvements or modifications: a. Payment of a lesser compensation,
a. Private entities that improve or modify their including wage, salary or other form of
physical facilities in order to provide remuneration and fringe benefits, to a
reasonable accommodation for disabled female employee as against a male
persons; employee, for work of equal value; and
b. Does NOT apply to improvements or b. Favoring a male employee over a female
modifications or facilities required under employee with respect to promotion,
BP 344. [Sec. 8 (c), RA 7277] training opportunities, study and
scholarship grants solely on account of
For establishments giving discounts – may their sexes. [Art. 133]
claim such discounts as tax deductions based
on the net cost of the goods sold or services The Magna Carta of Women provides that the
rendered: State:
a. The cost of the discount shall be allowed 1. Condemns discrimination against women
as deduction from gross income for the in all its forms
same taxable year that the discount is 2. Pursues by all appropriate means and
granted without delay the policy of eliminating
b. The total amount of the claimed tax discrimination against women in keeping
deduction net of VAT if applicable, shall be with the Convention on the Elimination of
included in their gross sales receipts for tax All Forms of Discrimination Against
purposes and shall be subject to proper Women (CEDAW) and other international
documentation and to the provisions of the instruments consistent with Philippine law.
National Internal Revenue Code, as
Page 72 of 262
3. Shall accord women the rights, protection, distinction based on marital status, and there is
and opportunities available to every no better available or acceptable policy which
member of society would better accomplish the business purpose,
4. Shall take steps to review and, when an ER may discriminate against an EE based
necessary, amend and/or repeal existing on the identity of the EE’s spouse. [Star Paper
laws that are discriminatory to women Corp. v. Simbol, G.R. No. 164774 2006]
within three (3) years from the effectivity of
this Act. [Sec. 2 & Sec. 12, Magna Carta of A personal or marital relationship with an
Women] employee of a competitor might compromise
the interests of the company. Thus an
b. Stipulation against marriage [Art. 134; employer policy prohibiting the same may be
Sec. 13(e), Rule XII] held as valid [Duncan Association of Detailmen
v. Glaxo Wellcome, supra.]
It shall be unlawful for an employer to:
1. require as a condition of employment or c. Prohibited acts [Art. 135]
continuation of employment that a woman
employee shall not get married, or 1. Discharge to prevent enjoyment of
2. stipulate expressly or tacitly that upon benefits.
getting married a woman employee shall To deny any woman employee the benefits
be deemed resigned or separated or provided for in this Chapter or to discharge
3. actually dismiss, discharge, discriminate or any woman employed by him for the
otherwise prejudice a woman employee purpose of preventing her from enjoying
merely by reason of her marriage. [Art. 134; any of the benefits provided under this
Duncan Assoc of Detailman – PTGWO v. Code. [Art. 135 (1), as amended by R.A.
Glaxo Wellcome, G.R. No. 162994 (2004)] 6725]
The Magna Carta of Women protects women 2. Discharge on account of pregnancy.

against discrimination in all matters relating to To discharge such woman on account of
marriage and family relations, including the her pregnancy, while on leave or in
right to choose freely a spouse and to enter confinement due to her pregnancy. [Art.
into marriage only with their free and full 135 (2)]
consent.
3. Discharge or refusal of the admission to
Bona fide occupational qualification work
exception To discharge or refuse the admission of
While a marriage or no-marriage qualification such woman upon returning to her work for
may be justified as a "bona fide occupational fear that she may again be pregnant. [Art.
qualification," the employer must prove two 135 (3)]
factors necessitating its imposition, viz:
1. that the employment qualification is 4. Discharge on account of testimony
reasonably related to the essential To discharge any woman or child or any
operation of the job involved; and other employee for having filed a complaint
2. that there is a factual basis for believing or having testified or being about to testify
that all or substantially all persons meeting under the Code [Sec. 13 (d), Rule XII, Book
the qualification would be unable to III, IRR]
properly perform the duties of the job.
[Capin-Cadiz v. Brent Hospital and 5. Expulsion of Women faculty/female
Colleges, Inc., G.R. No. 187417 (2016)]. student due to pregnancy outside of
marriage
When the employer can prove that the Expulsion and non-readmission of women
reasonable demands of the business require a faculty due to pregnancy outside of
Page 73 of 262
marriage shall be outlawed. No school 2. In any night club, cocktail lounge, massage
shall turn out or refuse admission to a clinic, bar or similar establishments;
female student solely on the account of her 3. Under the effective control or supervision
having contracted pregnancy outside of of the employer for a substantial period of
marriage during her term in school. [Sec. time as determined by the SOLE;
13(c), RA 9710] shall be considered as an employee of such
establishment for purposes of labor and social
d. Facilities for women [Art. 130] legislation. [Art. 136]
The Secretary of Labor shall establish 4. Minors

standards that will insure the safety and health
of women employees. In appropriate cases, he Relevant Laws: RA 7610 (Special Protection
shall by regulations, require employers to: of Children Against Abuse, Exploitation and
a. Provide seats proper for women and permit Discrimination Act), RA 9231 (Special
them to use such seats when they are free Protection of Children Against Child Abuse,
from work and during working hours, Exploitation and Discrimination Act), Art.
provided they can perform their duties in 137(a)
this position without detriment to efficiency;
b. To establish separate toilet rooms and Constitutional basis
lavatories for men and women and provide The State recognizes the vital role of the youth
at least a dressing room for women; in nation-building and shall promote and
c. To establish a nursery in a workplace for protect their physical, moral, spiritual,
the benefit of the woman employees intellectual, and social well-being. It shall
therein; and inculcate in the youth patriotism and
d. To determine appropriate minimum age nationalism, and encourage their involvement
and other standards for retirement or in public and civic affairs. [Sec. 13, Art. II, 1987
termination in special occupations such as Constitution]
those of flight attendants and the like. [Sec.
130] General Rule: Children below 15 shall NOT be
employed.
Subject to the approval of the SOLE, the
Bureau of Women and Young Workers (The Exception (Employment of Children)
BWYW merged into the Bureau of Workers Children below fifteen (15) years of age shall
with Special Concerns in 2010), shall, within 30 not be employed except:
days from the effective date of these Rules, a. When a child works directly under the sole
determine in an appropriate issuance: responsibility of his/her parents or legal
1. The work situations for which the facilities guardian and where only members of
enumerated in Art. 130 of the Code shall be his/her family are employed: Provided,
provided; however, That his/her employment neither
2. The appropriate minimum age and endangers his/her life, safety, health, and
standards for retirement or termination of morals, nor impairs his/her normal
employment in special occupation in which development: Provided, further, That the
women are employed. [Sec. 14, Rule XII, parent or legal guardian shall provide the
Book III, IRR] said child with the prescribed primary
and/or secondary education; or
e. Women working in night clubs, a. Where a child's employment or
etc. [Art. 136] participation in public entertainment or
information through cinema, theater, radio,
Any woman who: television or other forms of media is
1. Is permitted or suffered to work, with or essential: Provided, That the employment
without compensation; contract is concluded by the child's parents
Page 74 of 262
or legal guardian, with the express 2. when the child is below fifteen (15) years of
agreement of the child concerned, if age, in work where he/she is directly under
possible, and the approval of the the responsibility of his/her parents or legal
Department of Labor and Employment: guardian and where only members of the
Provided, further, That the following child‘s family are employed; or in public
requirements in all instances are strictly entertainment or information. [Sec. 3, D.O.
complied with: No. 65-04]
1. The employer shall ensure the
protection, health, safety, morals and Exceptions
normal development of the child; a. Child works directly under the sole
2. The employer shall institute measures responsibility of his parents or legal
to prevent the child'.s exploitation or guardian and where only members of the
discrimination taking into account the employer’s family are employed, provided:
system and level of remuneration, and 1. his employment does NOT endanger
the duration and arrangement of his life, safety, health and morals,
working time; and 2. nor impairs his normal development,
3. The employer shall formulate and and
implement, subject to the approval and 3. the parent or legal guardian shall
supervision of competent authorities, a provide the said minor child with the
continuing program for training and prescribed primary and/or secondary
skills acquisition of the child. education; [Sec. 12 of RA 7610, as
amended by RA 7658]
In the above-exceptional cases where any b. Child’s employment or participation in
such child may be employed, the employer public entertainment or information through
shall first secure, before engaging such child, a cinema, theater, radio or television is
work permit from the DOLE which shall ensure essential, provided that [Sec. 12 of RA
observance of the above requirements. 7610, as amended by RA 7658]:
1. employment does NOT involve ads or
For purposes of this Article, the term "child" commercials promoting alcohol,
shall apply to all persons under eighteen (18) tobacco and its by-products or violence
years of age. [Sec. 2, RA 9231] [Sec. 14, RA 7610]
2. the employment contract is concluded
Children - refers to any person under 18 years by the child’s parents or guardian, and
of age or those over but are unable to fully take approved by DOLE
care of themselves or protect themselves from 3. The ER shall ensure the protection,
abuse, neglect, cruelty, exploitation or health, safety and morals of the child
discrimination because of a physical or mental 4. The ER shall institute measures to
disability or condition. [Sec. 2, RA 7610] prevent the child’s exploitation or
discrimination taking into account the
Child labor - refers to any work or economic system and level of remuneration, and
activity performed by a child that subjects the duration and arrangement of
him/her to any form of exploitation or is harmful working time
to his/her health and safety or physical, mental 5. The ER shall formulate and implement,
or psychosocial development. subject to the approval and supervision
of competent authorities, a continuing
Working child - refers to any child engaged as program for training and skills
follows: acquisition of the child. [Sec. 12 of RA
1. when the child is below eighteen (18) years 7610, as amended by RA 7658]
of age, in work or economic activity that is
not child labor as defined in the
immediately preceding subparagraph; and
Page 75 of 262
Employment of Children from 15 to 18 3. Is performed underground, underwater

Employment is allowed even without permit but or at dangerous heights; or
restricted to non-hazardous work. 4. Involves the use of dangerous
machinery, equipment and tools such
Non-hazardous work shall mean any work or as power-driven or explosive power-
activity in which the EE is not exposed to any actuated tools; or
risk which constitutes an imminent danger to 5. Exposes the child to physical danger
his safety and health. [Sec. 3, Rule XII, Book such as, but not limited to the
III, IRR] dangerous feats of balancing, physical
strength or contortion, or which
The Secretary of Labor shall from time to time requires the manual transport of heavy
publish a list of hazardous work and activities loads; or
in which persons 18 years of age and below 6. Is performed in an unhealthy
cannot be employed [Sec. 3, Rule XII, Book III, environment exposing the child to
IRR] hazardous working conditions,
elements, substances, co-agents or
The following are HAZARDOUS processes involving ionizing, radiation,
workplaces: fire, flammable substances, noxious
See DO 149-16 as amended by DO 149-A-17, components and the like, or to extreme
Sec. 6 temperatures, noise levels, or
vibrations; or
Worst Forms of Child Labor 7. Is performed under particularly difficult
a. All forms of slavery, as defined under the conditions; or
"Anti-trafficking in Persons Act of 2003", or 8. Exposes the child to biological agents
practices similar to slavery such as sale such as bacteria, fungi, viruses,
and trafficking of children, debt bondage protozoans, nematodes and other
and serfdom and forced or compulsory parasites; or
labor, including recruitment of children for 9. Involves the manufacture or handling
use in armed conflict; or of explosives and other pyrotechnic
b. The use, procuring, offering or exposing of products [Sec. 12-D, RA 9231 as
a child for prostitution, for the production of amended].
pornography or for pornographic
performances; or Working Hours of a Child
c. The use, procuring or offering of a child for Quantity
illegal or illicit activities, including the
Age Bracket Daily Max Weekly Max
production and trafficking of dangerous
drugs and volatile substances prohibited Below 15 y/o 4 hrs 20 hrs
under existing laws; or
d. Work which, by its nature or the 15 to below 8hrs. 40 hrs
circumstances in which it is carried out, is 18
hazardous or likely to be harmful to the
health, safety or morals of children, such
Night work prohibition
that it:
1. Debases, degrades or demeans the Age Bracket Prohibited Hours
intrinsic worth and dignity of a child as
a human being; or Below 15 y/o 8 pm to 6 am (10
2. Exposes the child to physical, hrs.)
emotional or sexual abuse, or is found
to be highly stressful psychologically or 15 to below 18 10 pm to 6 am (8
may prejudice morals; or hrs.)
Page 76 of 262
Discrimination Within one year from the effectivity of RA

No employer shall discriminate against any 10361, and periodically thereafter, the
person in respect to terms and conditions of Regional Board shall review, and if proper,
employment on account of his age. [Art. 138] determine and adjust the minimum wage rates
of domestic workers. [Sec. 24, RA 10361]
5. Kasambahays
Standard of Treatment
Relevant Law: RA 10361 (Batas Kasambahay The employer or any member of the household
or Domestic Worker’s Act shall not subject a domestic worker or
Note: RA 10361 has expressly repealed “kasambahay” to any kind of abuse nor inflict
Chapter III, “Employment of Househelpers”, any form of physical violence or harassment or
Title III, Book III of the Labor Code any act tending to degrade the dignity of a
domestic worker. [Sec. 5, RA 10361]
Domestic work - This refers to work
performed in or for a household or households. Board, Lodging and Medical Attendance
[Sec 4(c)., RA 10361] The employer shall provide for the basic
necessities of the domestic worker to include:
Household - refers to the immediate members 1. At least three adequate meals a day
of the family or the occupants of the house that 2. Humane sleeping arrangements that
are directly provided services by the domestic ensure safety
worker. [Sec 4(f), RA 10361] 3. Appropriate rest and assistance in case of
illnesses and injuries sustained during
Domestic worker or “Kasambahay” - Refers service without loss of benefits. [Sec. 6, RA
to any person engaged in domestic work within 10361]
an employment relationship such as, but not
limited to, the following: general househelp, Privacy
nursemaid or “yaya”, cook, gardener, or Respect for the privacy of the domestic worker
laundry person. [Sec 4(d), RA 10361] shall be guaranteed at all times and shall
extend to all forms of communication and
The term domestic worker or “kasambahay” personal effects [Sec. 7, RA 10361]
excludes any person who performs domestic
work only occasionally or sporadically and not Access to Outside Communication
on an occupational basis. [Sec.4(d), RA 10361] The employer shall grant the domestic worker
access to outside communication during free
Note: IRR, Sec. 2 does not include family time: Provided, That in case of emergency,
drivers. See previous discussion on domestic access to communication shall be granted
workers. See also discussion under III. A. 1. A. even during work time. [Sec. 8, RA 10361]
e. Domestic workers.
Education and Training
Minimum wage The employer shall afford the domestic worker
The minimum wage of domestic workers shall the opportunity to finish basic education and
not be less than the following: may allow access to alternative learning
a. P2,500 a month for those employed in systems and, as far as practicable, higher
NCR education or technical and vocational training.
b. P2,000 a month for those employed in [Sec. 9, RA 10361]
chartered cities and first class
municipalities Social and Other Benefits
c. P1,500 a month for those employed in A domestic worker who has rendered at least
other municipalities one (1) month of service shall be covered by
the Social Security System (SSS), the
Philippine Health Insurance Corporation
Page 77 of 262
(PhilHealth), and the Home Development Pre-Employment Prohibition

Mutual Fund or Pag-IBIG, and shall be entitled The ff. shall be unlawful:
to all the benefits in accordance with the 1. Charging any share in the recruitment or
pertinent provisions provided by law. finder’s fees against the domestic worker
by a private employment agency or third
Leave Benefits party. [Sec. 13, RA 10361]
A domestic worker who has rendered at least 2. Requiring a domestic worker to make
one (1) year of service shall be entitled to an deposits from which deductions shall be
annual service incentive leave of five (5) days made for the reimbursement of loss or
with pay. [Sec. 29, RA 10361] damage to tools, materials, furniture and
equipment in the household. [Sec. 14, RA
Rest Periods 10361]
Daily Rest Period: 8 hours 3. Placing the domestic worker under debt by
the employer or any person acting on
Weekly Rest Period: at least 24 consecutive behalf of the employer to [Sec. 15, RA
hours. The employer and employee may agree 10361]
to:
a. Offsetting a day of absence with a Time and Manner of Payment
particular rest day; Payment of wages shall be made:
b. Waiving a particular rest day in return for 1. Directly to the domestic worker in cash
an equivalent daily rate of pay; 2. At least once a month
c. Accumulating rest days not exceeding five 3. With no deductions from the wages other
(5) days; or than that which is mandated by law, unless
d. Other similar arrangements. [Sec. 20, 21, allowed by the domestic worker through a
RA 10361] written consent
Pre-Employment Requirement No employer shall pay the wages of a domestic

Prior to the execution of the employment worker by means of promissory notes,
contract, the employer may require the vouchers, coupons, tokens, tickets, chits, or
following from the domestic worker: any object other than the cash wage as
a. Medical certificate or a health certificate provided for under this Act. [Sec. 25, RA
issued by a local government health officer; 10361]
b. Barangay and police clearance;
c. National Bureau of Investigation (NBI) Payslip
clearance; and The employer shall at all times provide the
d. Duly authenticated birth certificate or if not domestic worker with a copy of the pay slip
available, any other document showing the containing the amount paid in cash every pay
age of the domestic worker such as voter’s day, and indicating all deductions made, if any.
identification card, baptismal record or The copies of the pay slip shall be kept by the
passport. employer for a period of three (3) years. [Sec.
26, RA 10361]
However, Sec. 12(a), (b), (c) and (d) shall be
standard requirements when the employment Wage Prohibitions
of the domestic worker is facilitated through the It shall be unlawful for the original employer to
PEA. charge any amount from the said household
where the service of the domestic worker was
The cost of the foregoing shall be borne by the temporarily performed. [Sec. 23, RA 10361]
prospective employer or agency, as the case
may be. [Sec. 12, RA 10361] Other Prohibited Acts
a. Interference in employee’s wage disposal
[Sec. 27, RA 10361]
Page 78 of 262
b. Direct or indirect withholding of wages by 6. Other causes analogous to the foregoing.

the employer [Sec. 28, RA 10361] [Sec. 33, RA 10361]
c. Payment in forms other than cash [Sec. 25,
RA 10361] Initiated by the employer
An employer may terminate the services of the
Right against assignment to non- domestic worker at any time before the
household work at a wage rate lower than that expiration of the contract, for any of the
mandated for agricultural or non-agricultural following causes:
enterprises depending on the case. [Sec. 22, 1. Misconduct or willful disobedience by the
RA 10361] domestic worker of the lawful order of the
employer in connection with the former’s
Employment Age of Domestic Workers: work;
Unlawful to employ any person below fifteen 2. Gross or habitual neglect or inefficiency by
(15) years of age as a domestic worker [Sec. the domestic worker in the performance of
16, RA 10361] duties;
3. Fraud or willful breach of the trust reposed
Persons between 15-18 years old should only by the employer on the domestic worker;
be employed in non-hazardous work. [D.O. No. 4. Commission of a crime or offense by the
4-99 Sec. 4] domestic worker against the person of the
employer or any immediate member of the
Daily Rest Period: Aggregate of eight (8) employer’s family;
hours per day. [Sec. 20, RA 10361] 5. Violation by the domestic worker of the
terms and conditions of the employment
Employment Certification: ER shall give the contract and other standards set forth
househelper a written statement of the nature under this law;
and duration of the service and his or her work 6. Any disease prejudicial to the health of the
performance as househelper upon severance. domestic worker, the employer, or
[Sec. 35, RA 10361] member/s of the household; and
7. Other causes analogous to the foregoing.
Termination [Sec. 34, RA 10361]
Initiated by the domestic worker
The domestic worker may terminate the Employment Certification
employment relationship at any time before the Upon the severance of the employment
expiration of the employment contract for any relationship, the employer shall issue the
of the following causes: domestic worker within five (5) days from
1. Verbal or emotional abuse of the domestic request a certificate of employment indicating
worker by the employer or any member of the nature, duration of the service and work
the household; performance [Sec. 35, RA 10361].
2. Inhuman treatment including physical
abuse of the domestic worker by the Unjust dismissal
employer or any member of the household; Neither the domestic worker nor the employer
3. Commission of a crime or offense against may terminate the contract before the
the domestic worker by the employer or expiration of the term except for grounds
any member of the household; provided in Secs. 33 and 34 of RA 10361.
4. Violation by the employer of the terms and
conditions of the employment contract and If the domestic worker is unjustly dismissed,
other standards set forth under this law; the domestic worker shall be paid the
5. Any disease prejudicial to the health of the compensation already earned plus the
domestic worker, the employer, or equivalent of 15 days work by way of indemnity
member/s of the household; and [Sec. 32, RA 10361].
Page 79 of 262
Leaving without justifiable reason by the processed or fabricated in or about a home

domestic worker and thereafter to be returned or to be
a. Any unpaid salary due not exceeding the disposed of or distributed in accordance
equivalent 15 days work shall be forfeited with employer’s direction; OR
AND b. Sells any goods, articles, or materials to be
b. The employer may recover from the processed or fabricated in or about a home
domestic worker the costs incurred related and then rebuys them after. [Art. 153]
to the deployment expenses, if any:
Provided, that the service has been Note: Sec. 2(d), Rule XIV, Book III is
terminated within 6 months from the substantially similar to the above.
domestic worker’s employment [Sec. 32,
RA 10361]. Rights and benefits accorded homeworkers
a. Right to form, join or assist organizations
Notice to end the working relationship [Sec. 3, Rule XIV, Book III, IRR]
If the duration of the domestic service is not b. Right to acquire legal personality and the
determined either in stipulation or by the nature rights and privileges granted by law to
of the service, the employer or the domestic legitimate labor organizations upon
worker may give notice to end the working issuance of the certification of registration
relationship five (5) days before the intended [Sec. 4, Rule XIV, Book III, IRR]
termination of the service. c. Immediate payment upon employer’s
receipt of finished goods or articles [Sec. 6,
The domestic worker and the employer may Rule XIV, Book III, IRR]
mutually agree upon written notice to pre- d. SSS, MEDICARE and ECC premium
terminate the contract of employment to end contributions shall be deducted from their
the employment relationship. [Sec. 32, RA pay and shall be remitted by
10361] ER/contractor/subcontractor to the SSS
[Sec. 6, Rule XIV, Book III, IRR]
6. Homeworkers
Liability of Employer
Note: D.O. No. 5, DOLE (February 4, 1992), is a. Employer may require homeworker to redo
now Rule XIV, Book III of the IRR. work improperly executed without
additional pay [Sec. 9(a), Rule XIV, Book
Industrial homework III, IRR]
a. Is a system of production under which work b. Employer need not pay homeworker for
for an employer or contractor is carried out any work done on goods or articles not
by a homeworker at his/her home. returned due to homeworker’s fault [Sec.
Materials may or may not be furnished by 9(b), Rule XIV, Book III, IRR]
the employer or contractor. c. If subcontractor/contractor fails to pay
b. Decentralized form of production, where homeworker, employer is jointly and
there is ordinarily very little supervision or severally liable with the former to the
regulation of methods of work. [Sec. 2(a), homeworker for his/her wage [Sec. 11,
Rule XIV, Book III, IRR] Rule XIV, Book III, IRR]
d. Employer shall assist the homeworkers in
Industrial Homeworker - a worker who is the maintenance of basic safe and
engaged in industrial homework. healthful working conditions at the
homeworkers’ place of work. [Sec. 11, Rule
Employer means any natural or artificial XIV, Book III, IRR]
person who:
a. Acts as a contractor or subcontractor – Regional Office shall provide technical
delivers or causes to be delivered any assistance to registered homeworkers’
goods, articles, or materials to be organizations [Sec. 14, Rule XIV, Book III, IRR]
Page 80 of 262
Prohibited Homework 8. Night Workers

a. explosives, fireworks and articles of like
character; Night worker
b. drugs and poisons; and Any employed person whose work requires
c. other articles, the processing of which performance of a substantial number of
requires exposure to toxic substances. hours of night work which exceed a
[Sec. 13, Rule XIV, Book III, IRR] specified limit. This limit shall be fixed by the
Sec of Labor after consulting the workers’
Deductions representatives/labor organizations and
No deduction from the homeworker’s earnings employers. [Art. 154, as amended by RA
for the value of materials lost, destroyed or 10151]
damaged unless:
a. Homeworker is clearly shown to be Any employed person whose work covers the
responsible for loss or damage period from 10:00 pm to 6:00 am the following
b. Reasonable opportunity to be heard morning, provided that the worker performs no
c. Amount of deduction is fair and less than 7 consecutive hours of work. [Sec. 2,
reasonable, and does not exceed actual Rule XV, Book III, Rule XV, Sec. 2, IRR,
loss or damage through D.O. No. 119-12]
d. Deduction does not exceed 20% of
homeworker’s weekly earnings [Sec. 8, Health Assessment
Rule XIV, Book III, IRR] At the worker’s request, they shall have the
right to undergo a health assessment without
7. Solo Parents charge and to receive advice on how to reduce
or avoid health problems associated with their
See III. C. 2. A. for discussion on definition of work:
solo parents and solo parent leave* a. Before taking up an assignment as a night
worker
See VII. E. for discussion on non-work related b. At regular intervals during such an
support for solo parents* assignment
c. If they experience health problems during
Flexible work schedule for solo parents such an assignment
“Flexible work schedule” is the right granted to
a solo parent to vary his/her arrival and With the exception of a finding of unfitness for
departure time without affecting core work night work, the findings of such assessments
hours as defined by the employer. [Sec. 3(e), shall be confidential and shall NOT be used to
RA 8972] their detriment, subject, however, to applicable
company policies. [Art. 155, as amended by
The employer shall provide a flexible work RA 10151; Sec. 3, Rule XV, Book III, IRR,
schedule for solo parents: Provided, through D.O. No. 119-12]
1. That the same shall not affect individual
and company productivity: Mandatory Facilities
2. That any employer may request exemption Mandatory facilities shall be made available for
from the above requirements from the workers performing night work, which include
DOLE on certain meritorious grounds. the following:
[Sec. 6, RA 8972] a. Suitable first-aid and emergency facilities;
b. Lactation station in required companies
Work discrimination illegal pursuant to RA 10028;
No employer shall discriminate against any c. Separate toilet facilities for men & women
solo parent employee with respect to terms and d. Facility for eating w/ potable drinking water;
conditions of employment on account of his/her AND
status. [Sec. 7, RA 8972]
Page 81 of 262
e. Facilities for transportation and/or properly would otherwise be called upon to perform
ventilated temporary sleeping or resting such work. Such measures may include:
quarters, separate for male and female a. Transfer to day work – As far as
workers, shall be provided except where practicable, pregnant or nursing
any of the ff. circumstances is present: employees shall be assigned to day work,
1. There is an existing company before and after childbirth, for a period of at
guideline, practice or policy, CBA, or least sixteen (16) weeks, which shall be
any similar agreement providing for an divided between the time before and after
equivalent or superior benefit; or childbirth;
2. Start or end of the night work does NOT
fall within 12 mn - 5 am; or Medical certificate issued by competent
3. Workplace is located in an area that is physician (OB/Gyne/Pedia) is necessary
accessible 24 hours to public for the grant of:
transportation; or 1. additional periods of assignment to day
4. Number of employees does NOT work during pregnancy or after
exceed a specified number as may be childbirth, provided that such shall not
provided for by the SOLE in be more than 4 weeks or for a longer
subsequent issuances [Art. 156, as period as may be agreed upon by
amended by RA 10151; Sec. 4, Rule employer and worker;
XV, Book III, IRR, through D.O. No. 2. extension of maternity leave; and
119-12] 3. clearance to render night work.
Transfer b. Provision of social security benefits - in

If night worker is unfit for night work due to accordance with provisions of Act No 8282
health reasons as certified by competent (Social Security Act of 1997) and other
physician, s/he shall be: existing company policy or collective
a. Transferred in good faith to a job for which bargaining agreement.
they are fit to work whenever practicable,
which must be similar and equivalent c. Extension of maternity leave – where
position; transfer to day work is not possible, but
b. If transfer is not practicable, or workers are requires recommendation by competent
unable to render night work for a physician; without pay or using earned
continuous period of not less than 6 leave credits, if any. [Art. 158, , as
months upon certification of a competent amended by RA 10151; Sec. 6, Rule XV,
public health authority, they shall be Book III, IRR, through D.O. No. 119-12]
granted the same benefits as other workers
who are unable to work due to illness. Protection against dismissal and loss of
c. If workers are certified as temporarily unfit benefits attached to employment status,
to render night work for a period of less seniority, and access to promotion
than 6 months, they shall be given the Where no alternative work can be provided to
same protection against dismissal or notice a woman employee who is not in a position to
of dismissal as other workers who are render night work, she shall be allowed to go
prevented from working for health reasons. on leave or on extended maternity leave, using
[Art. 157, as amended by RA 10151; Sec. her earned leave credits.
5, Rule XV, Book III, IRR, through D.O. No.
119-12] A woman employee shall NOT be dismissed
for reasons of pregnancy, childbirth and
Women Night Workers childcare responsibilities as defined under this
Employers shall ensure that measures shall be Rule. She shall NOT lose the benefits
taken to ensure that an alternative to night work regarding her employment status, seniority,
for pregnant and nursing employees who and access to promotion which may attach to
Page 82 of 262
her regular night work position. [Sec. 8, Rule Emergency repatriation

XV, Book III, IRR, through D.O. No. 119-12] The OWWA, in coordination with DFA, and in
appropriate situations, with international
See also Night Shift Differential above. agencies, shall undertake the repatriation of
workers in cases of war, epidemic, disasters or
9. Migrant Workers calamities, natural or man-made, and other
similar events, without prejudice to
See II. A. Policy of Selective Deployment reimbursement by the responsible principal or
above. agency within sixty (60) days from notice. [Sec.
5, Rule XIII, IRR of RA 8042, as amended by
Overseas Filipino Worker/Migrant Worker – RA 10022].
A person who is to be engaged, is engaged or
has been engaged in a remunerated activity: Underage migrant workers; repatriation is
1. In a state of which he or she is not a citizen mandatory
or Upon discovery or upon being informed of the
2. On board a vessel navigating the foreign presence of migrant workers whose actual
seas other than a government ship used for ages fall below the minimum age requirement
military or non-commercial purposes or for overseas deployment, the responsible
3. On an installation located offshore or on officers in the Foreign Service shall without
the high seas. [Sec. 2 (a), RA 8042, as delay repatriate said workers and advise the
amended] DFA through the fastest means of
communication available of such discovery and
Principals and agencies have primary other relevant information. [Sec. 6, Rule XIII,
responsibility for repatriation IRR of RA 8042, as amended by RA 10022]
The repatriation of the worker or his/her
remains, and the transport of his/her personal Prohibition on bonds and deposits
effects shall be the primary responsibility of the In no case shall a private recruitment/manning
principal, employer or agency that recruited or agency require any bond or cash deposit from
deployed him/her abroad. All costs attendant the worker to guarantee performance under the
thereto shall be borne by the principal, contract for his/her repatriation [Sec. 9, Rule
employer or the agency concerned. [Sec. 1, XIII, IRR of RA 8042, as amended by RA
Rule XIII, IRR of RA 8042, as amended by RA 10022]
10022]
Compulsory insurance coverage for all
Principals and agencies to advance migrant workers
repatriation costs Each migrant worker shall be covered by a
Principals and agencies have the obligation to compulsory insurance policy which shall be
advance the costs of repatriation, and to secured at no cost to said worker. Such
immediately repatriate the migrant worker insurance policy shall be effective for the
without a prior determination of the worker’s duration of the migrant worker’s employment.
employment. [Sec. 37-A, RA 8042, as amended by RA
10022]
However, after the worker has returned to the
country, the principal or agency may recover The insurance policy shall cover:
the cost of repatriation from the worker if the a. Accidental death;
termination of employment was solely due to b. Natural death;
the worker’s fault. [Sec. 2, Rule XIII, IRR of RA c. Permanent total disablement;
8042, as amended by RA 10022] d. Repatriation cost of the worker when
his/her employment is terminated by the
employer without any valid cause, or by the
Page 83 of 262
employee with just cause, including the b. Labor standards as may be provided in the
transport of his/her personal belongings; Service Agreement or under the Labor
e. Subsistence allowance benefit for a Code;
migrant worker who is involved in a case c. Retirement benefits under RA 7641, RA
for litigation for the protection of his/her 1161, as amended by RA 8282, and
rights in the receiving country; retirement plans of the security service
f. Money claims arising from employer’s contractor, if any;
liability which may be awarded or given to d. Social security and welfare benefits;
the worker in a judgment or settlement of e. Right to self-organization and collective
his/her case in the NLRC; bargaining, subject to the provisions of
g. Compassionate visit. When a migrant existing laws; and
worker is hospitalized and has been f. Security of tenure. [Sec. 6, DO 150-16]
confined for at least seven (7) consecutive
days, he shall be entitled to a PNP Examination required for employment
compassionate visit by one (1) family The security guards and other private security
member or a requested individual; personnel in the employ of any security service
h. Medical evacuation. When an adequate contractor (SSC)/private security agency
medical facility is not available proximate to (PSA) should be duly licensed and must have
the migrant worker, as determined by the passed the physical and neuro-psychiatric
insurance company's physician and/or a examination and drug test required by the PNP
consulting physician, the insurance for pre-employment and for continued
provider shall provide for the worker’s employment. Expenses for these examinations
evacuation; and and test shall be shouldered by the security
i. Medical repatriation. When medically guards.
necessary as determined by the attending
physician, repatriation under medical Any additional test may be required at the
supervision to the migrant worker's expense of the requesting party. [Sec. 7.1, DO
residence shall be undertaken by the 150-16]
insurance provider at such time that the
migrant worker is medically cleared for Minimum wage
travel by commercial carrier. [Sec. 2, Rule Unless a higher minimum wage is agreed upon
XVI, IRR of RA 8042, as amended by RA by the parties, the security guards and other
10022] private security personnel shall be entitled to
receive a salary of not less than the minimum
10. Security Guards wage rate prescribed for non-agricultural
sector or industry in the region where he/she is
[Relevant issuance: DO 150-16, Revised assigned, regardless of the nature of business
Guidelines Governing the Employment and of the principal. [Sec. 7.3, DO 150-16]
Working Conditions of Security Guards and
Private Security Personnel in the Private In case of transfer, the wage rate most
Sector Industry] favorable to the security guards and other
private security personnel shall apply. [Sec.
Rights of security guards and other private 7.4, DO 150-16]
security personnel
All security guards and other private security Deductions from salary
personnel, whether deployed or assigned as No deduction shall be made from the salary of
reliever, seasonal, week-ender, or temporary, the security guards and other private security
shall be entitled to all the rights and privileges personnel, except for:
as provided for in the Labor Code, which shall 1. SSS contribution;
include: 2. Pag-IBIG contribution;
a. Safe and healthful working conditions; 3. PhilHealth contribution;
Page 84 of 262
4. Withholding tax from income, provided a

proper withholding tax receipt is issued to IV. POST-EMPLOYMENT
the employee before the filing of income
tax return every year;
5. Union dues, if authorized in writing; A. EMPLOYER-EMPLOYEE
6. Agency fees which may be collected from RELATIONSHIP
employees who are not members of the
bargaining agent but accept benefits under
the collective bargaining agreement (CBA); Definitions
and 1. Employer
7. Other deduction as may be authorized in • Any person acting directly or indirectly in
writing by the security guard and other the interest of an employer in relation to an
private security personnel for payment to a employee. [Art. 97(b); Art. 219(f)]
third person and the employer agrees to do • Any person, natural or juridical, employing
so, provided that the latter does not receive the services of the employee. [Art. 173(f)]
any pecuniary benefit, directly or indirectly, • Includes:
from the transaction. o The government
o All its branches, subdivisions and
In case an SSC/PSA requires its security guard instrumentalities
and other private security personnel to post a o All government-owned or controlled
bond for use of firearms and other corporations and institutions
paraphernalia, such may only be imposed o All nonprofit private institutions, or
once. organizations. [Art. 97(b)]
• Does not include any labor organization or
The amount of the bond should not be more any of its officers or agents except when
than 5% of the amount of the firearm issued to acting as employer. [Art. 219(f)]
the security guard and other private security
personnel. The said cash bond, less the cost of 2. Employee
damage or loss of firearms or paraphernalia • Any individual employed by an employer.
due to the fault of the security guard, shall be [Art. 97(c); Art. 219(g)]
refunded to the security guards and other • Any person compulsorily covered by the
private security personnel within 15 calendar GSIS under C.A. No. 168, as amended.
days from severance of employment. [Art. 173(g)]
• Includes:
See III. B. 4. b. Prohibition against wage o The members of the AFP,
deductions for deduction from deposits. o Any person employed as casual,
emergency, temporary, substitute or
In the event that a SSC/PSA requires a cash contractual,
deposit from its employees, the maximum o Any person compulsorily covered by
amount shall not exceed the employee’s 1 the SSS under R.A. No. 1161, as
month basic salary. The said cash deposit may amended. [Art. 173(g)]
be deducted from the employee’s wages in an o Any individual whose work has ceased
amount which shall not exceed 20% of the as a result of or in connection with any
employee’s wages in a week. The full amount current labor dispute or because of any
of cash deposit deducted shall be returned to unfair labor practice if he has not
the employee within 10 days from his/her obtained any other substantially
separation from the service. [Sec. 8, DO 150- equivalent and regular employment.
16] [Art. 219(g)]
• The term shall not be limited to the
employees of a particular employer, unless
the Code so explicitly states. [Art. 219(g)]
Page 85 of 262
3. Person Power to control

• An individual, partnership, association, This is the most important element when
corporation, business trust, legal determining the existence of an EER. It
representatives, or any organized group of pertains not only to results, but also to the
persons. [Art. 97(a); Art. 173(h)] means and methods to attain those results.
[Lirio v. Genovia, G.R. No. 169757 (2011)].
Both a question of law and of fact
The existence or absence of EER is a question The “existence” of the right to control is
of law and of fact, each in its defined sense. sufficient for the element to be present. There
Ultimately, it is a question of fact because need not be “actual exercise” of the right.
whether one exists or not is dependent upon [Zanotte Shoes v. NLRC, G.R. No. 100665,
the facts of each case. [SSS v. CA and Ayalde, (1995)]
G.R. No. 100388, (2000)]. However, it is a
question of law because it cannot be made the Not every form of control will create an EER.
subject of agreement [Tabas et.al. v. California No EER exists when control is in the form of
Manufacturing Co., et. al., G.R. No. 80680, rules that merely serve as guidelines towards
(1989)]. Hence, the characterization of the law the achievement of results without dictating the
prevails over that in the contract. means or methods to attain them. EER exists
when control is in the form of rules that fix the
1. Tests to Determine Existence methodology to attain a specified result and
bind the worker to use such. [Insular Life
a. Four-Fold Test Assurance Co, LTD v. NLRC, G.R. No. 84484
(1989)].
Elements of an EER
1. Selection and engagement of the b. Economic Dependence Test
employee;
2. Payment of wages; Two-tiered approach
3. Power of dismissal; and 1. Control Test (refer to the Four-Fold Test)
4. Employer’s power to control the 2. Underlying economic realities within the
employee’s conduct with respect to the activity or relationship [Sevilla v. CA, G.R.
means and methods by which the work is Nos. L-41182-3 (1988)]
to be accomplished [Brotherhood Labor
Unity Movement of the PH v. Zamora, G.R. Underlying economic realities
No. 48645, (1987)] In determining the existence of an EER, these
realities must be examined, taking into
Payment of wages consideration the totality of circumstances
The following are not conclusive of the surrounding the true nature of the parties’
absence of an EER: relationship. The benchmark “reality” for the
• That a worker was not reported as an existence of an EER is economic dependence
employee to SSS; of the worker on his employer. “Economic
• That a worker’s name does not appear in dependence” is whether the worker is
the payrolls and pay envelope records dependent on the employer for his continued
submitted by the employer. employment. [Orozco v. CA, G.R. No. 155207
(2008)]
Note: For a payroll to be utilized to disprove the
EER, it must contain a true and complete list of
employees. [Southeast East International
Rattan v Coming, G.R. No. 186621 (2014)]
Page 86 of 262
Competent and relevant evidence needed be invoked to further ends subversive of

to prove EER justice. [Pamplona Plantation Co v Tinghil
No particular form of evidence is required to [G.R. No. 159121 (2005)]
prove the EER. Any competent and relevant
evidence to prove the relationship may be Doctrine illustrated in jurisprudence
admitted. For, if only documentary evidence In Sarona v. NLRC [G.R. No. 185280 (2012)],
would be required to show that relationship, no the doctrine was applied. It involved the illegal
scheming employer would ever be brought dismissal of Sarona, a security guard who first
before the bar of justice, as no employer would worked at Sceptre but was subsequently
wish to come out with any trace of the illegality assigned to Royale, where he was illegally
he has authored considering that it should take dismissed. In the computation of his separation
much weightier proof to invalidate a written pay, Sarona prayed that the corporate veil of
instrument. [Tenazas, et al., v. R. Villegas Taxi Royale be pierced as it was a mere
Transport, G.R. No. 192998 (2014)] continuation of Sceptre; hence, his separation
pay should be computed from the time he was
Burden of proof on alleged employee hired by Sceptre. This was granted.
The onus probandi rests on the employer to Circumstances indicated that Spectre and
prove that its dismissal was for a valid cause. Royale were one and the same (same office,
However, before a case for illegal dismissal same officers, same person exercising control
can prosper, an EER must first be established. and supervision over employees of both
It is incumbent upon the employee to prove the companies), and that Sarona’s transfer to
EER by substantial evidence. [Javier v. Fly Ace Royale was done in bad faith. As such, Sarona
Corporation, G.R. No. 192558 (2012)] could be said to have an EER with Sceptre.
Thus, his separation pay was to be computed
Doctrine of piercing the corporate veil from the time he was hired by Sceptre.
When this doctrine is applied, an employee can
be said to have an EER with the corporation 2. Legitimate Subcontracting as
that another corporation (who the employee distinguished from Labor-Only
“works” for) is merely an alter ego of. It applies Contracting
in these 3 basic scenarios:
1. Defeat of public convenience as when
Contracting or Subcontracting
corporate fiction is used as a vehicle to
Definition of Contracting/Subcontracting
evade existing obligations;
Contracting or subcontracting refers to an
2. Fraud cases as when the corporate entity
arrangement whereby a principal agrees to
is used to justify a wrong, protect fraud, or farm out to a contractor the performance or
defend a crime;
completion of a specific job or work –
3. Alter ego cases, where a corporation is a a. Within a definite or predetermined period,
farce, as it is a mere alter ego or business
b. Regardless of whether such job or work is
conduit of a person, or where the to be performed or completed within or
corporation is so organized and controlled
outside the premises of the principal. [Sec.
and its affairs are so conducted as to make 3(c), D.O. No. 174-17]
it merely an instrumentality, agency,
conduit or adjunct of another corporation. Contracting/Subcontracting as
[Maricalum Mining Corp. v. Florentino,
distinguished from Labor-Only Contracting
G.R. No. 221813 (2018)] There is "labor-only" contracting where:
1. The person supplying workers to an
Note: The corporate character is not fully
employer does not have substantial capital
abrogated. It continues for other legitimate or investment in the form of tools,
objectives. However, in certain circumstances,
equipment, machineries, work premises,
it may be pierced in order to promote among others, and
substantial justice. Such fiction of law cannot
Page 87 of 262
2. The workers recruited and placed by such 5. Contractors and subcontractors referred to
person are performing activities which are in these rules are prohibited from engaging
directly related to the principal business of in recruitment and placement activities as
such employer. defined in Art. 13(b), whether for local or
overseas employment. [Sec. 2. D.O. No.
In such cases, the person or intermediary shall 174-17: Rules Implementing Articles 106 to
be considered merely as an agent of the 109 of the Labor Code, as amended]
employer who shall be responsible to the
workers in the same manner and extent as if Applicability of Rules to Indirect Employers
the latter were directly employed by him. [Art. The provisions of Art. 106 shall likewise apply
106, par. 4] to any person, partnership, association or
corporation which, not being an employer,
Rules for Contracting/Subcontracting contracts with an independent contractor for
1. Whenever an employer enters into a the performance of any work, task, job or
contract with another person for the project. [Art. 107]
performance of the former’s work, the
employees of the contractor and of the Service Agreement
latter’s subcontractor, if any, shall be paid Service agreement refers to the contract
in accordance with the provisions of this between the principal and contractor
Code. [Art. 106, par. 1] containing the terms and conditions governing
2. In the event that the contractor or the performance or completion of a specific job
subcontractor fails to pay the wages of his or work being farmed out for a definite or
employees in accordance with this Code, predetermined period. [Sec. 3(j), D.O. No. 174-
the employer shall be jointly and severally 17]
liable with his contractor or subcontractor
to such employees: a. Elements
a. To the extent of the work performed
under the contract To be considered legitimate contracting or
b. In the same manner and extent that he subcontracting, the following elements must
is liable to employees directly concur:
employed by him. [Art. 106, par. 2] 1. Distinct and independent business:
3. The SOLE may, by appropriate Contractor or subcontractor is engaged in
regulations, restrict or prohibit the a distinct and independent business and
contracting-out of labor to protect the rights undertakes to perform the job on its own
of workers established under this Code. responsibility, according to its own manner
[Art. 106, par. 3] and method;
a. He may make appropriate distinctions 2. Substantial capital or investment:
between labor-only contracting and job Contractor or subcontractor has substantial
contracting as well as differentiations capital to carry out the job farmed out by
within these types of contracting. the principal on his account, manner and
b. He may determine who among the method, investment in the form of tools,
parties involved shall be considered equipment, machinery and supervision;
the employer for purposes of this Code. 3. Free from control/direction of the
4. An employer or indirect employer may principal: In performing the work,
require the contractor or subcontractor to contractor or subcontractor is free from the
furnish a bond equal to the cost of labor control/direction of the principal in all
under contract, on condition that the bond matters regarding performance of the work
will answer for the wages due the except the result;
employees should the contractor or 4. Compliance with labor laws: Service
subcontractor, as the case may be, fail to Agreement ensures that employees of the
pay the same. [Art. 108] contractor/subcontractor are given all the
Page 88 of 262
benefits and rights they are entitled to a. Specific description of the job or work
under labor laws. [Sec. 8, D.O. No. 174-17] to be performed by the employee; and
b. Place of work and terms and conditions
Substantial capital (#2) of employment, including a statement
Refers to paid-up capital stocks/shares of at of the wage rate applicable to the
least P5,000,000 in the case of corporations, individual employee.
partnerships and cooperatives; in case of 2. Service Agreement between the principal
single proprietorship, a net worth of at least and the contractor - It shall include the
P5,000,000. [Sec. 3(l), D.O. No. 174-17] following:
a. Specific description of the job or work
b. Trilateral relationship being subcontracted, including its term
or duration;
When the above-elements are present, a b. Place of work and terms and conditions
trilateral relationship arises. It consists of the governing the contracting
following parties: arrangement, including the agreed
1. Principal - Any natural or juridical entity, amount of the contracted job or work,
whether an employer or not, who puts out the standard administrative fee of not
or farms out a job or work to a contractor. less than 10% of the total contract cost;
2. Contractor - Any person or entity engaged c. Provision on the issuance of the bond/s
in a legitimate contracting or renewable every year. [Sec. 11, D.O.
subcontracting arrangement providing No. 174-17]
services for a specific job or undertaking
farmed out by a principal under a Service Rights of contractor’s employees
Agreement. 1. Security of tenure
3. Contractor’s employee - Employee of the 2. Safe and healthful working conditions;
contractor hired to perform or complete a 3. Labor standards such as but not limited to
job or work farmed out by the principal. service incentive leave, rest days, overtime
[Sec. 3, D.O. No. 174-17] pay, holiday pay, 13th month pay, and
separation pay
Note: Contractor may also be a subcontractor. 4. Retirement benefits under the SSS or
retirement plans of the
Relationships within the trilateral contractor/subcontractor;
relationship 5. Social security and welfare benefits; and
1. EER between the contractor and the 6. Self-organization, collective bargaining
employees it engaged to perform the and peaceful concerted activities including
specific job, work or service being the right to strike. [Sec. 10, D.O. No. 174-
contracted; and 17]
2. Contractual relationship between the
principal and the contractor as governed Termination of employment [Sec. 13, D.O.
by the provisions of the NCC. [Sec. 5, par. No. 174-17]
1, D.O. No. 18-A-11]
Cause Effect
Required contracts Prior to Governed by Art. 297 –
1. Employment contract between the expiration of 299
contractor and its employees - Service
Notwithstanding any oral or written Agreement
stipulations to the contrary, such contract
shall be governed by LC 294 and 295, and Pre- The right of the
provisions on general labor standards. It termination of contractor’s employee to
shall include the following: Service unpaid wages and other
Page 89 of 262
Labor-only contracting
Agreement. unpaid benefits including
This is one of the violations that may be
and not due to unremitted legal mandatory
committed by the principal and contractor,
authorized contributions, (e.g., SSS,
which may make them solidarily liable. There
causes PhilHealth, Pag-ibig, ECC),
are two kinds:
shall be borne by the party
1. Provided for by Article 206, Labor Code:
at fault, without prejudice
a. (i) The contractor does not have
to the solidary liability of
substantial capital; or
the parties to the Service
(ii) the contractor does not have
Agreement.
investments in the form of tools,
Due to Employee may opt to wait equipment, machineries, supervision,
expiration of for re-employment within 3 work premises, among others;
Service months to resign and b. The contractor’s employees are
Agreement, or transfer to another performing activities that are directly
from contractor-employer. related to the main business operation
completion of of the principal.
the phase of Failure of the contractor to 2. The contractor does not exercise the right
the job, work provide new employment to control the performance of the work of
or service for shall entitle the employee the employee. [Sec. 5., D.O. No. 174-17]
which to payment of separation
employee is benefits as may be Substantial capital under 1st kind
engaged provided by law or the Having substantial capitalization is not enough
Service Agreement, to declare one a legitimate contractor. If any of
whichever is higher, the other elements of labor-only contracting is
without prejudice to his/her present, they are labor-only contractors.
entitlement to completion [Quintanar v. Coca-Cola Bottlers, 794 SCRA
bonuses or other 654 (2016)]
emoluments, including
retirement benefits Presumption of labor-only contracting
whenever applicable. A contractor is presumed to be a labor-only
The mere expiration of the contractor and has the burden of proving the
Service Agreement shall contrary. [Polyfoam-RGC Int’l Corp. v.
not be deemed as a Concepcion, 672 SCRA 148 (2012)]
termination of employment
of the contractor’s Effect of labor-only contracting: employees
employees who are become regular employees
deemed regular employees Where an entity is declared to be a labor-only
of the contractor. contractor, the employees supplied by said
contractor to the principal become regular
employees of the latter. Having gained regular
c. Liabilities status, the employees are entitled to security of
tenure and can only be dismissed for just or
Solidary liability of principal and contractor authorized causes and after they had been
Every employer or indirect employer shall be afforded due process. [Norkis Trading v.
held responsible with his contractor for any Buenavista, G.R. No. 182018 (2012)]
violations of labor laws. For purposes of
determining the extent of their civil liability, they Other prohibitions
shall be considered as direct employers. [Art. 1. When the principal farms out work to a
109] “Cabo” [See definition under Sec. 3(a).,
D.O. No. 174-17];
Page 90 of 262
2. Contracting out of job or work through an Applicability

in-house agency; D.O. No. 174-17 applies only to trilateral
3. Contracting out of job or work through an relationships that can be characterized as
in-house cooperative which merely contracting or subcontracting arrangements. It
supplies workers to the principal; does not apply to:
4. Contracting out of a job or work by reason 1. Information technology-enabled services,
of a strike or lockout whether actual or such as:
imminent; a. Business process outsourcing
5. Contracting out of a job or work being b. Knowledge process outsourcing
performed by union members and such will c. Legal process outsourcing
interfere with, restrain or coerce employees d. IT infrastructure outsourcing
in the exercise of their rights to self- e. Application development
organization as provided in Art. 259; f. Hardware and/or software support
6. Requiring the contractor’s employees to g. Medical transcription
perform functions which are currently being h. Animation services
performed by the regular employees of the i. Back office operations/support
principal; 2. Construction industry under the licensing
7. Requiring the contractor’s employees to coverage of the Philippine Contractors
sign, as a precondition to employment or Accreditation Board, which shall be
continued employment, an antedated governed by D.O. No. 19-93; D.O. No. 13-
resignation letter; a blank payroll; a waiver 98; and DOLEDPWH-DILG-DTI and PCAB
of labor standards including minimum Memo of Agreement-Joint Admin Order 1-
wages and social or welfare benefits; or a 2011.
quitclaim releasing the principal or 3. Contracting or subcontracting
contractor from liability as to payment of arrangements in the private security
future claims; or require the employee to industry, which are governed by D.O. No.
become member of a cooperative; 150-16.
8. Repeated hiring by the contractor of 4. Contracts of sale, purchase, lease,
employees under an employment contract carriage, growing agreement, toll
of short duration; manufacturing, contract of management,
9. Requiring employees under a contracting operation and maintenance and other such
arrangement to sign a contract fixing the contracts governed by the NCC and other
period of employment to a term shorter special laws. [DOLE Dept. Circular No. 01-
than the term of the Service Agreement, 17]
unless the contract is divisible into phases
for which substantially different skills are 3. Kinds of Employment
required and this is made known to the
employee at the time of engagement; a. Regular
10. Such other practices, schemes or
employment arrangements designed to An employment shall be deemed to be regular
circumvent the right of workers to security where the employee has been engaged to
of tenure. [Sec. 6, D.O. No. 174-17] perform activities which are usually necessary
or desirable in the usual business or trade of
Mandatory registration the employer, except where:
It shall be mandatory for all persons or entities, a. The employment has been fixed for a
including cooperative, acting as contractors, to specific project or undertaking, the
register with the Regional Office of the DOLE completion or termination of which has
where it principally operates. Failure to register been determined at the time of the
shall give rise to the presumption that the engagement of the employee; or
contractor is engaged in labor-only contracting.
[Sec. 14, D.O. No. 174-17]
Page 91 of 262
b. The work or service to be performed is Trading Corp. v. Molina, G.R. No. 206061
seasonal in nature and the employment is (2013)]
for the duration of the season. [Art. 295]
When Art. 295 not applicable
An employee who is allowed to work after a It does not apply where the existence of an
probationary period shall be considered a EER is in dispute. It is not the yardstick for
regular employee. [Art. 296] determining the existence of an EER, as it
merely distinguishes between two kinds of
Regular employee defined employees, i.e., regular and casual, for
One who is engaged to perform activities that purposes of determining the right of an
are necessary and desirable in the usual employee to certain benefits, to join or form a
business or trade of the employer as against union, or to security of tenure. [Atok Big Wedge
those which are undertaken for a specific Co., Inc. v. Gison, G.R. No. 169510 (2011)]
project or are seasonal.
Hiring for an extended period
It is not synonymous with permanent Where the employment of project employees is
employee, because there is no such thing as a extended long after the supposed project has
permanent employment. Any employee may been finished, the employees are removed
be terminated for just cause. from the scope of project employees and
considered regular employees. [Audion
Two kinds of regular employee Electric Co., Inc. v. NLRC, G.R. No. 106648
1. Those engaged to perform activities which (1999)]
are necessary or desirable in the usual
business or trade of the employer; and While length of time is not a controlling test for
2. Casual employees who have rendered at project employment, it can be a strong factor in
least 1 year of service, whether continuous determining whether the employee was hired
or broken, with respect to the activity in for a specific undertaking or in fact tasked to
which they are employed. [Romares v. perform functions which are vital, necessary
NLRC, G.R. No. 122327 (1998)] and indispensable to the usual business or
trade of the employer. [Tomas Lao Const. v.
Reasonable connection rule NLRC, G.R. No. 116781 (1997)]
The primary standard to determine regular
employment is the reasonable connection Repeated renewal of contract
between the activity performed by the While contractual stipulations as to the duration
employee to the business or trade of the of employment are valid, they cannot apply
employer. where the contract-to-contract arrangement
was but an artifice to prevent the acquisition of
Test: W/N the employee is usually necessary security of tenure and to frustrate constitutional
or desirable in the usual business or trade of decrees. [Beta Electric Corp. v. NLRC, G.R.
the employer. No. 86408 (1990)]
If the employee has been performing the job for Length of time not controlling
at least one year, even if not continuous or Length of time is merely a badge of regular
merely intermittent, the repeated and employment. [Maraguinot v. NLRC, G.R. No.
continuing need for performance is sufficient 120969 (1998)]
evidence of necessity, if not indispensability of
that activity to the business of the employer.
Hence, the employment is also considered
regular, but only with respect to such activity
and while such activity exists. [Forever Richons
Page 92 of 262
b. Casual the job. If the job is usually necessary or

desirable to the main business of the employer,
An employment shall be deemed to be casual then employment is regular. [A. M. Oreta and
where: Co., Inc. v. NLRC, G.R. No. 74004 (1989)]
a. An employee is engaged to perform a job,
work or service which is merely incidental c. Contractual
to the business of the employer, and such
job, work or service is for a definite period See Discussion on Fixed-Term Employees
made known to the employee at the time of
engagement. [Sec. 5(b), Rule I, Book VI, Contractual employees defined
IRR] Those who employment is governed by the
b. The employment has been fixed for a contracts they sign every time they are hired.
specific project or undertaking, the Their employment is terminated when the
completion or termination of which has contract expires, which is usually fixed for a
been determined at the time of the certain period of time (e.g., seafarers). [Unica
engagement of the employee; or v. Anscor Swire Ship Management Corp., G.R.
c. The work or service to be performed is No. 184318 (2014)]
seasonal in nature and the employment is
for the duration of the season. [Art. 295] No implied renewal upon expiration
Absent a mutually-agreed upon agreement,
Provided, That any employee who has there is no renewal or extension of an expired
rendered at least one year of service, whether contract.
such service is continuous or broken, shall be
considered a regular employee with respect to Termination of contract
the activity in which he is employed and his The existence of a contract does not mean
employment shall continue while such activity there can be no illegal dismissal. Due process
exists. [Art. 295] (substantial and procedural) must still be
observed in termination and pre-termination of
Casual employee defined the contract. [Fuji Television Network Inc v.
One engaged to perform a job, work or service Espiritu, G.R. No. 204944-45 (2014)]
that is merely incidental to the business of the
employer, and such job, work or service is for d. Project
a definite period made known to the employee
at the time of engagement. Employment is not deemed regular where the
employment has been fixed for a specific
It is also someone who is not a regular, project project or undertaking the completion or
or seasonal employee. termination of which has been determined at
the time of the engagement of the employee.
Requirements to become regular employee [Art. 295]
1. One (1) year service, continuous or broken
with respect to activity employed, unless he Project employee defined
has been contracted for a specific project. One who is hired for carrying out a separate
[Tabas v. California Marketing Co., Inc., job, distinct from the other undertakings of the
G.R. No. L-80680 (1989)] company, the scope and duration of which has
2. Employment shall continue while such been determined and made known to the
activity exists. employees at the time of employment. [Hanjin
Heavy Industries & Const. Co. v. Ibañez, G.R.
Nature of work determines kind of No. 170181 (2008)]
employment
What determines regularity or casualness is
not the employment contract but the nature of
Page 93 of 262
Rationale for project employment 2. Such duration, as well as the specific

If a project has already been completed, it work/service to be performed, is defined in
would be unjust to require the employer to an employment contract;
maintain them in the payroll while they are 3. Agreement and is made clear to the
doing absolutely nothing except waiting until employee at the time of the hiring;
another project is begun. In effect, these stand- 4. The work/service to be performed by the
by workers would be enjoying the status of employee is in connection with the
privileged retainers, collecting payment for particular project/undertaking for which he
work not done, to be disbursed by the employer is engaged;
from profits not earned. [De Ocampo, Jr. v. 5. The employee, while not employed and
NLRC, G.R. No. 81077 (1990)] awaiting engagement, is free to offer his
services to any other employer;
Two kinds of project employee 6. The termination of his employment in the
1. For a particular job or undertaking that is particular project/undertaking is reported to
WITHIN the regular or usual business of the DOLE Regional Office having
the employer company, but which is jurisdiction over the workplace following
distinct and separate, and identifiable as the date of his separation from work, using
such, from the other undertakings of the the prescribed form on employees’
company (e.g., construction) terminations /dismissals/suspensions;
2. For a particular job or undertaking that is 7. An undertaking in the employment contract
NOT within the regular business of the by the employer to pay completion bonus
corporation. Such a job or undertaking to the project employee as practiced by
must also be identifiably separate and most construction companies. [D.O. No.
distinct from the ordinary or regular 19, Sec. 2.2; Samson v. NLRC, G.R. No.
business operations of the employer. [Villa 11366 (1996)].
v. NLRC, G.R. No. 117043 (1988)]
Repeated hiring, length of service not
Test of project employment determinative
W/N employment has been fixed for a specific The repeated and successive rehiring of
project or undertaking the completion or project employees do not qualify them as
termination of which has been determined at regular employees. What is determinative is
the time of the engagement of the employee. whether the employment has been fixed for a
[D.M. Consunji v. NLRC, G.R. No. 116572 specific project or undertaking, its
(2000)] completion has been determined at the time of
the engagement of the employee. [Leyte
Note: When the employment contract does not Geothermal Power Progressive Employees
state a particular date, but it does specify that Union v. Philippine National Oil Company, G.R.
termination of employment is to be on a “day No. 170351 (2011)]
certain” -- the day when the specified phase of
work would be completed --, the employee The fact that employment as project
cannot be considered regular. He is a project employees has gone beyond 1 year does not
employee. [Filipinas Pre-Fabricated Building legally dissolve their status as project
Systems, Inc. v. Puente, G.R. No. 153832 employees. LC 280(2) providing that an
(2005)] employee who has served at least 1 year
shall be considered a regular employee,
Indicators of project employment relates to casual employees, not to project
1. The duration of the specific/identified employees. [Raycor Aircontrol Systems v.
undertaking for which the worker is NLRC, G.R. No. 114290 (1996)]
engaged is reasonably determinable;
Generally, length of service provides a fair
yardstick for determining when an employee
Page 94 of 262
initially hired on a temporary basis becomes a trade of the employer. [Maraguinot v.

permanent one, entitled to the security and NLRC, G.R. No. 120969. (1998)]
benefits of regularization. But this standard
will not be fair, if applied to the construction Termination requirements
industry, simply because construction firms A report of termination to the nearest public
cannot guarantee work and funding for its employment office every time their
payrolls beyond the life of each project. employment was terminated due to completion
[William Uy Construction Corp. v. Trinidad, of each construction project. Failure of the
G.R. No. 183250 (2010)] employer to file termination reports after every
project completion proves that the employees
Work pool employee are not project employees. [Pasos v. Philippine
Project employees may or may not be National Construction Corp., G.R. No. 192394
members of a work pool. Those who are (2013)]
members of a work pool may either be project
or regular employees. [Raycor Aircontrol e. Seasonal
Systems, Inc. vs. NLRC, G.R. 114290, (1996)]
Employment is not deemed regular where the
A work pool may exist although the workers in work or service to be performed is seasonal in
the pool do not receive salaries and are free to nature and the employment is for the duration
seek other employment during temporary of the season. [Art. 295]
breaks in the business, provided, that the
worker shall be available when called to report Seasonal employees defined
for a project. Although primarily applicable to Those whose work or services to be performed
regular seasonal workers, this set-up can are seasonal in nature, as there is no
likewise be applied to project workers insofar continuing need for the worker. Their
as the effect of temporary cessation of work is employment is for the duration of the season.
concerned. [Maraguinot v. NLRC, G.R. No.
120969. (1998)] “Regular seasonal” employees after one
season
Work pools in construction companies Seasonal workers who are constantly rehired
Members of a work pool from which a and are only temporarily laid off during off-
construction company draws its project season are not separated from service in said
employees, if considered employees of the period, but are merely considered on leave
construction company while in the work pool, until work resumes. They are considered
are non-project employees or employees for an regular and permanent employees. The nature
indefinite period. If they are employed in a of their relationship is such that during off-
particular project, the completion of the project season they are temporarily laid off but during
or any phase thereof will not mean severance summer season they are re-employed, or when
of the EER. [Policy Instruction No. 20; J. & DO their services may be needed. They are not
Aguilar Corp. v. NLRC, G.R. No. 116352 strictly speaking separated from the service but
(1997)] are merely considered as on leave of absence
without pay until they are re-employed.
When a project employee or a member of a [Philippine Tobacco Flue-Curing & Redrying
work pool acquires the status of regular Corp. v. NLRC, G.R. No. 127395, (1998)]
employment
1. Continuous rehiring of project employees Must only be hired for the duration of one
even after cessation of a project; season
2. Task performed by the alleged “project To be considered seasonal employees, it is not
employees” are vital, necessary and enough that work or services performed are
indispensable to the usual business or seasonal in nature. The employees must have
been employed only for the duration of one
Page 95 of 262
season. [Hacienda Fatima v. National their employment contract on more equal

Federatiom of Sugarcane Workers, G.R. No. footing with the employer than the latter.
149440 (2003)] Furthermore, both kinds of employment
happen within a period. For project employees,
Exception to one season rule (illustrative the determining factor is the activity (w/n
case) project) to be performed. For fixed-term
Although respondent constantly availed herself employees, the determining factor is the day
of the petitioners’ services from year to year, it certain agreed upon (i.e., the commencement
was clear from the facts therein that they were and termination of the EER). [GMA Network v.
not in her regular employ. Petitioners therein Pabriga, G.R. No. 176419 (2013)]
performed different phases of agricultural work
in a given year. However, during that period, Distinguished from independent
they were free to work for other farm owners, contractors
and in fact they did. In other words, they No EER exists between independent
worked for respondent, but were nevertheless contractors and their principals; their contracts
free to contract their services with other farm are governed by the law on contracts and other
owners. The Court was thus emphatic when it applicable law. Employees under fixed-term
ruled that petitioners were mere project contracts cannot be independent contractors
employees, who could be hired by other farm because in fixed-term contracts, an EER
owners. [Mercado, Sr. v. NLRC, G.R. No. exists. [Fuji Television Network, Inc. v.
79869 (1991)] Espiritu, G.R. No. 204944-45 (2014)]
f. Fixed-term Regular fixed-term employee

Where an employee’s contract had been
Brent doctrine continuously extended or renewed to the same
When the following indicators are present, position, with the same duties and remained in
fixed-term employment is valid: the employ without any interruption, then such
1. Fixed period of employment was knowingly employee is a regular employee. The
and voluntarily agreed upon by the parties employee’s contract indicating a fixed-term did
absent any circumstance vitiating consent not automatically mean that he/she could never
2. It satisfactorily appears that the employer be a regular employee.
and employee dealt each other on more or
less equal footing with no moral dominance An employee can be a regular employee with a
exercised by one over the other. fixed-term contract. The law does not preclude
the possibility that a regular employee may opt
Reason for equal footing indicator to have a fixed-term contract for valid reasons.
When a prospective employee, on account of For as long as it was the employee who
special skills or market forces, is in a position requested, or bargained, that the contract have
to make demands upon the prospective a “definite date of termination,” or that the fixed-
employer, such prospective employee needs term contract be freely entered into by the
less protection than the ordinary worker. The employer and the employee, then the validity of
level of protection to labor must be determined the fixed-term contract will be upheld. [Fuji
on the basis of the nature of the work, Television Network Inc v. Espiritu, G.R. No.
qualifications of the employee, and other 204944-45 (2014)].
relevant circumstances. [Fuji Television
Network Inc v. Espiritu, G.R. No. 204944-45 No implied renewal upon termination
(2014)]. When the day certain for the termination of
employment comes, there is no implied
Distinguished from project employees renewal or extension of employment This must
Fixed-term employees are different from be expressly and mutually-agreed upon. [Unica
project employees, as the former negotiates
Page 96 of 262
v. Anscor Swire Ship Management Corp., G.R. Exceptions:

No. 184318 (2014)] 1. When it is covered by an apprenticeship
agreement stipulating a longer period. [Art.
In case of pre-termination 296]
Due process must be observed in the pre- 2. When the parties to the employment
termination of fixed-term contracts in order for contract agree otherwise, such as when
the employer to not be liable for illegal established by company policy or required
dismissal. [Fuji Television Network Inc v. by the nature of the work performed by the
Espiritu, G.R. No. 204944-45 (2014)] employee. [Buiser v. Leogardo, G.R. No. L-
63316, (1984)]
g. Probationary; Private School 3. When it involves the 3-year probationary
Teachers period of teachers. [Mercado v. AMA
Computer College, G.R. No. 183572,
Probationary employee defined (2010)]
One who is made to go on a trial period by an 4. When it involves an act of liberality on the
employer during which the employer part of his employer affording him a second
determines whether he is qualified for chance to make good after having initially
permanent employment, based on reasonable failed to prove his worth as an employee.
standards made known to him at the time of [Mariwasa v. Leogardo, G.R. No. 74246
engagement. [Robinson’s Galleria et al. v. (1989)]
Ranchez, G.R. No. 177937 (2011)]
Purpose of probationary employment
Rules for probationary employment 1. Observation Period – for the employee to
1. Shall not exceed 6 months from the date demonstrate his skills to the employer who
the employee started working, unless it is determines whether the former is qualified.
covered by an apprenticeship agreement 2. Restrictive - As long as termination was
stipulating a longer period. [Art. 296] made before the expiration of the 6-month
2. The services of an employee who has been probationary period, the employer has a
engaged on a probationary basis may be right to sever the EER.
terminated for a just cause or when he
fails to qualify as a regular employee in The employer has the right to choose who will
accordance with reasonable standards be hired. It is within the exercise of this right
made known by the employer to the that the employer may fix a probationary period
employee at the time of his engagement. within which he may test and observe the
[Art. 296] conduct of the employee before permanent
a. The employer shall make known to the hiring. [Grand Motor Parts Corp. v. MOLE, G.R.
employee the standards under which No. L-58958 (1984)]
he will qualify as regular employee at
the time of his engagement. Requirements for validity of qualification
b. Where no standards are made known standards
to the employee at the time of In order for the standards set by the employer
engagement, he shall be deemed a to be validly used in determining whether the
regular employee. [Sec. 6(d), Rule I, employee qualifies for permanent employee:
Book VI, IRR] 1. The employer must communicate such
3. An employee who is allowed to work after standards to the probationary employee;
a probationary period shall be considered and
a regular employee. [Art. 296] 2. Such communication must be made at the
time of the probationary employee’s
Duration engagement.
General Rule: Shall not exceed 6 months from
the date of the commencement of employment
Page 97 of 262
An employer is deemed to have made known termination of the 6-month probationary period,
the standards when it has exerted reasonable the employer was within his rights to sever the
efforts to apprise the employee of what he is EER. A contrary interpretation would defect the
expected to do or accomplish during the trial clear meaning of the term “probationary.” [De
period of probation. This employee must be la Cruz, Jr. v. NLRC, G.R. No. 145417 (2003)]
sufficiently made aware of his probationary
status as well as the length of time of the Termination can only be for:
probation. The exception to the foregoing is 1. Just causes;
when the job is self-descriptive in nature. 2. Authorized causes; or
[Abbott Laboratories Phil. et al. v. Alcaraz, G.R. 3. Failure to qualify as a regular employee in
No. 192571 (2013)] accordance with reasonable standards
made known by the employer to the
Effect of failure to comply employee at the time of engagement.
If the employer fails to comply with the above- [Robinson’s Galleria et al. v Ranchez, G.R.
requirements, the employee is deemed as a No. 177937, Jan. 19, (2011)]
regular and not probationary employee. [Alcira
v. NLRC, G.R. No. 149859, (2004)] Nonetheless, procedural and substantial due
process must be observed during termination
Burden of proof of compliance with of the probationary employee.
employer
The employer has the burden of proving that Note: In order to invoke “failure to meet the
they have informed the probationary employee probationary standards” as a justification for
of the standards, that those standards have dismissal, the employer must show how these
been applied to the employee, and that the standards have been applied to the subject
employee fell short of such standards. employee. [Univac Development, Inc. v.
Soriano, G.R. No. 182072 (2013)]
Prohibition on extended/double probation
When the employer renews the employment Limits to termination
contract after the lapse of the 6-month 1. It must be exercised in accordance with the
probationary period, the employees thereby specific requirements of the contract
became regular employees. No employer is 2. If a particular time is prescribed, the
allowed to indefinitely determine the fitness of termination must be within such time and if
its employees. [Bernardo v. NLRC, supra.] formal notice is required, then that form
must be used
Furthermore, an employee who is merely 3. Employer’s dissatisfaction must be real
transferred to his employer’s sister company and in good faith, not feigned so as to
cannot be subjected to new probationary circumvent the contract or the law
employment when he had already attained 4. There must be no unlawful discrimination in
regular employment under his original the dismissal [Manila Hotel Corporation v.
employer. [A Prime Security Services, Inc. v. NLRC, G.R. No. 53453 (1986)]
NLRC, G.R. No. 107023, (2000)]
Private school teachers
Termination of probationary employee A private school teacher’s entitlement to
A probationary employee enjoys only a security of tenure is governed by the Manual of
temporary employment status. He is Regulations for Private Schools and not the
terminable at any time, permanent employment Labor Code. Thus, for a private school teacher
not having been attained in the meantime. The to acquire permanent employment (security of
employer could decide he no longer needed tenure), these must be present:
the probationary employee’s services or his 1. Must be a full-time teacher
performance fell short of expectations. As long 2. Must have rendered 3 consecutive years of
as termination was made before the service
Page 98 of 262
3. Service must have been satisfactory. [La 3. Other benefits or their monetary equivalent
Salette of Santiago v. NLRC, G.R. No.
82918 (1991)] Reckoning period of computation: from the
time his compensation was withheld up to his
Mere completion of the 3-year probation, even actual reinstatement.
with an above-average performance, does not
guarantee that the employee will automatically Rationale
acquire a permanent employment status. The It is a constitutionally protected right under Sec.
probationer can only qualify upon fulfillment of 3, Art. XIII, 1987 Constitution.
the reasonable standards set for permanent
employment as a member of the teaching Termination of employment is not anymore a
personnel. [Herrera-Manaois v. St. mere cessation or severance of a contractual
Scholastica’s College, G.R. No. 18891 (2013)] relationship, but an economic phenomenon
affecting members of the family. Under the
These standards should be made known to the principle of social justice, dismissal of
teachers on probationary status at the start of employees is adequately protected by the
their probationary period, or at the very least laws. [Albambra Industries v. NLRC, GR No.
under the circumstances of the present case, 106771 (1994)]
at the start of the semester or the trimester
during which the probationary standards are to Management Prerogative
be applied. Of critical importance in invoking a An employer cannot be compelled to continue
failure to meet the probationary standards, is in its employ a person whose continuance in
that the school should show – as a matter of the service would patently be inimical to its
due process – how these standards have been interests. [Baguio Central University v.
applied. [Colegio del Santisimo Rosario v. Gallente, GR No, 188267 (2013)]
Rojo, G.R. No. 170388 (2013)]
Requisites for the valid invocation of
management prerogative affecting security of
B. TERMINATION BY tenure:
EMPLOYER 1. Exercised in good faith for the
advancement of employer’s interest, and
Coverage 2. Not for the purpose of defeating or
All establishments or undertakings, whether for circumventing the rights of the employees
profit or not. [Art. 293] under special laws or valid agreements.
[San Miguel Brewery Sales Force Union v.
Exception Ople, GR No. 52515 (1989)]
Government and its political subdivisions
including GOCCs without original charter. [Sec. Disposition of labor disputes
1, Rule 1, Book VI, IRR] Bare and vague allegations as to the manner
of service and the circumstances surrounding
Security of Tenure [Art. 294] the same would not suffice.
In case of regular employment, the employer
shall not terminate the services of an employee Example: a mere copy of the notice of
except for a just cause or when authorized termination allegedly sent by the employer to
by this Title. the employee, without proof of receipt or at the
very least, actual service is not substantial
An employee who is unjustly dismissed from evidence. [Mansion Printing Center v. Bitara
work shall be entitled to: Jr., GR No. 168120 (2012)]
1. Reinstatement without loss of seniority
rights, and other privileges, Substantive issues must be addressed more
2. Full backwages inclusive of allowance, and than anything else, and so, the Court may
Page 99 of 262
forego the matter of procedural infirmities in While an employer enjoys a wild latitude of
labor cases. [Ang v. San Joaquin, Jr., GR No. discretion in the promulgation of policies, rules
182249 (2013)] and regulations on work-related activities, such
must be fair and reasonable, and the
Burden of Proof corresponding penalties, when prescribed
In order: must be commensurate to the offense
1. Existence of ER-EE Relationship - borne involved and to the degree of infraction.
by employee [Moreno v. San Sebastian College-Recoletos,
2. Fact of dismissal - borne by employee GR No. 175283 (2008)]
3. Legality of dismissal - borne by employer
1. Requisites for Validity
Employee must first establish fact of
dismissal a. Substantive due process
Before the employer must bear the burden of
proving that the dismissal was legal, the Substantive Due Process - whether the
employee must prove by substantial evidence termination was based on the provisions of the
the fact of his dismissal from service for the Labor Code or in accordance with
question of the legality or illegality of the jurisprudence.
dismissal to arise. [MZR Industries v.
Colambot, GR No. 179001 (2013)] The dismissal must be for any of the causes
provided for in Art. 297-299.
Employer’s burden of proving legality of
dismissal i. Just causes
The burden of proving the termination was for
a valid or authorized cause shall rest on the a. Serious Misconduct or Willful
employer. (Art. 292 (b)) Disobedience (Insubordination)
b. Gross & Habitual Neglect of Duties
Unsubstantiated accusations or baseless c. Fraud/Willful Breach of Trust
conclusions of the employer are insufficient d. Commission of A Crime
legal justifications to dismiss and employee. e. Analogous cases
[Garza v. Coca-Cola Bottlers Inc, GR No.
180972 (2014)] An employer may terminate an employment for
any of the following causes:
The employer’s case succeeds or fails on the a. Serious misconduct or willful disobedience
strength of its evidence, and not the weakness by the employee of the lawful orders of his
of that adduced by the employee in keeping employer or representatives in connection
with the principle that the scales of justice with his work;
should be titled in favor of the latter in case of b. Gross and habitual neglect by the
doubt in the evidence presented. [Functional employee of his duties;
Inc. v Garafil, GR No, 176377 (2011)] c. Fraud or willful breach by the employee of
the trust reposed in him by his employer or
Measure of Penalty duly authorized representative;
Not every case of insubordination or willful d. Commission of a crime or offense by the
disobedience by an employee reasonably employee against the person of his
deserves the penalty of dismissal. The penalty employer or any immediate member of his
must be commensurate with the gravity of family or his duly authorized
the offense. [Joel Montallana v. La representatives; and
Consolacion College Manila, GR No. 208890 e. Other causes analogous to the foregoing.
(2014)] [Art. 297]
Page 100 of 262

Basis disrespect and defiance, was for honest and

As a measure of self-protection against acts well-intentioned reasons to protect the
inimical to the employer’s interest. An employer company from liability under the Bouncing
cannot be compelled to continue employing an Checks Law. It was not wrongful nor willful.
employee guilty of acts inimical to the Neither can it be considered an obstinate
employer’s interest, justifying loss of defiance of company authority. [Lores Realty
confidence in him. [Yabut v. Meralco, GR No. Enterprises v. Paria, GR No. 171189 (2011)]
190436 (2012)]
(b) Gross and Habitual Neglect of Duties
(a) Serious Misconduct or Willful
Disobedience Requisites
1. There must be a neglect of duty
Requisites of Serious Misconduct 2. The neglect must be both gross and
1. There must be misconduct habitual in character.
2. The misconduct is of such grave and
aggravated character Gross negligence has been defined as the
3. It must relate to the performance of the want or absence of or failure to exercise slight
employee’s duties care or diligence, or the entire absence of care.
4. A showing that the employee becomes It evinces a thoughtless disregard of
unfit to continue working for the consequences without exerting any effort to
employer. [Sec. 5.2(a), D.O. No. 147-15] avoid them. In order to constitute just cause for
an employee’s dismissal due to negligence, it
Misconduct refers to the improper or wrong must be both gross and habitual. A single or an
conduct that transgresses some established isolated act cannot be categorized as habitual.
and definite rule of action, a forbidden act, a [National Bookstore v. CA, GR No. 146741
dereliction of duty, willful in character, and (2002)]
implies wrongful intent and not mere error in
judgment. [Northwest Airlines Inc v. Del Gross negligence - want of care in the
Rosario, GR No. 157633 (2014)] performance of one’s duties
Example: Accusatory and inflammatory Habitual neglect - repeated failure to perform

language used by an employee to the one’s duties for a period of time.
employer or superior. [Nissan Motors Phils v.
Angelo, GR No. 164181 (2011)] Estoppel by toleration of management
Breach of rules and regulations which are
Requisites of Willful Disobedience tolerated by management cannot serve as a
1. There must be disobedience or basis for termination. The rule only applies
insubordination; when the violation is not tantamount to fraud or
2. The disobedience or insubordination must commission of illegal activities. One cannot
be willful or intentional characterized by evade liability based on obedience to the
a wrongful and perverse attitude; corporate chain of command. [PNB V. Padao,
3. The order violated must be reasonable, GR No. 180849, 187143 (2011)]
lawful and made known to the employee
[Mirant Philippines Corp v. Sario, GR No. Gross negligence includes gross
197598 (2012)]; and inefficiency
4. The order must pertain to the duties which Gross and habitual neglect of duty includes
he has been engaged to discharge. [Sec. gross inefficiency, negligence and
5.2(b), D.O. No. 147-15] carelessness. [Century Iron Works, Inv. c.
Banas, GR No. 184116 (2013)]
The employee’s initial reluctance to prepare
the checks which was seemingly an act of
Page 101 of 262

(c) Fraud/Willful Breach of Trust The employee is one holding a position of trust
and confidence (e.g. managerial or fiduciary
Requisites of fraud or willful breach of trust: employees). There must be an act that justifies
1. There must be an act, omission or the loss of trust and confidence based on a
concealment; willful breach of trust and founded on clearly
2. The act, omission or concealment involves established facts. [Wesleyan University -
a breach of legal duty, trust, or Philippines v. Reyes, GR No. 208321 (2014)]
confidence justly reposed;
3. It must be committed against the Moreover, the act complained must be related
employer or his/her representative; and to the performance of the duties of the
4. It must be in connection with employee’s employee such as would show him to be
work. [Sec. 5.2 (d), DO No. 147-15] thereby unfit to continue working for the
employer. [Equitable Banking Corp. v. NLRC,
When dismissal is proper for fraud/willful GR No. 102467 (1997)]
breach of trust
Such breach is willful if it is done intentionally, Note: DO 174-15 distinguishes fraud or willful
knowingly, and purposely, without justifiable breach of trust from loss of confidence, but, as
excuse as distinguished from an act done seen in cases, jurisprudence seems to make
carelessly, thoughtlessly, heedlessly or no such distinction.
inadvertently. The act complained of must be
work-related and shows that the employee is Positions of trust and confidence
unfit to continue working. In addition, it must be 1. Managerial employees - vested with
premised on the fact that the employee powers or prerogatives to lay down
concerned holds a position of responsibility, management policies and to hire, transfer,
trust and confidence or is entrusted with suspend, lay-off, recall, discharge, assign
confidence with respect to delicate matters or discipline employees or effectively
such as handling or case and protection of the recommend such managerial actions.
property and assets of the employer. 2. Fiduciary Rank and File - those who in the
[Villanueva, Jr. v. NLRC, GR No. 176893 normal and routine exercise of their
(2012)] functions, regularly handle significant
amounts of money or property. Ex.
Requisites of loss of confidence cashiers, auditors, property custodians.
1. There must be an act, omission or [Prudential Guarantee and Assurance
concealment; Employee Labor Union v. NLRC, GR No.
2. The act, omission or concealment justifies 185335 (2012)].
the loss of trust and confidence of the
employer to the employee;
Managerial Fiduciary Rank-
3. The employee concerned must be holding
and-File
a position of trust and confidence;
4. The loss of trust and confidence should Mere existence of a Proof of involvement
not be simulated; basis for the belief in the alleged events
5. It should not be used as a subterfuge for of employee’s guilt. in question required;
causes which are improper, illegal or [Grand Asian mere uncorroborated
unqualified; and Shipping Lines assertions and
6. It must be genuine and not a mere Inc.v. Galvez, GR accusations are not
afterthought to justify an earlier action No. 178184 (2014) enough. [Etcuban,
taken in bad faith. [Sec. 5.2(e), DO No. Jr. v. Sulpico Lines
147-15] Employment for a Inc, GR No. 148410
long time is counted (2005)]
When dismissal is proper for loss of AGAINST the
trust/confidence
Page 102 of 262

employer, his immediate family

employee. [Salvador
member, or his duly authorized
v. Philippine Mining
representative. [Sec. 5.2(f), D.O. No. 147-
Service, GR No.
15]
148766]
The employer may validly dismiss for loss of
Reason for Rule on Managerial Employees trust and confidence an employee who
While plain accusations are not sufficient to commits an act of fraud prejudicial to the
justify the dismissal of rank and file employees, interest of the employer. Neither a criminal
the mere existence of a basis for believing that prosecution nor a conviction beyond
managerial employees have breached the trust reasonable doubt for the crime is a requisite for
reposed on them by their employer would the validity of the dismissal. [Concepcion v.
suffice to justify their dismissal. [Grand Asian Mimex Import Corporation, GR No. 153569
Shipping Lines Inc.v. Galvez, GR No. 178184 (2012)]
(2014)]
(e) Analogous causes
Acquittal in Criminal Case arising from
Misconduct Requisites
Notwithstanding acquittal in the criminal case 1. There must be an act or omission similar
for qualified theft, the company had adequately to those specified just causes; and
established the basis for the company’s loss of 2. The act or omission must be voluntary
confidence as a just cause to terminate. As and/or willful on the part of the
opposed to the “proof beyond reasonable employees.
doubt” standard of evidence in criminal cases,
labor suits require only substantial evidence to No act or omission shall be considered as
prove the validity of the dismissal. [Paulino v. analogous cause unless expressly specified in
NLRC, GR No. 176184 (2012)] the company rules and regulations or policies.
[Sec 5.2. (g), D.O. No. 147-15]
Betrayal by a long-time employee
Length of service is not a bargaining chip that Analogous means susceptible of comparison
can simply be stacked against the employer. with another either in general or in some
After all, an employer-employee relationship is specific detail; or has a close relationship with
symbiotic where both parties benefit from the latter.
mutual loyalty and dedicated service, If an
employer had treated his employees well, has Other causes
accorded him fairness and adequate 1. Abandonment
compensation as determined by law, it is only 2. Courtesy resignation
fair to expect a long-time employee to return 3. Change of ownership
such fairness with at least some respect and 4. Habitual absenteeism/tardiness
honesty. Thus, it may be said that betrayal by 5. Poor performance
a long-time employee is more insulting and 6. Past offenses
odious for a fair employer. [Moya v. First Solid 7. Habitual infractions
Rubber Industries, GR No. 184011 (2013)]. 8. Immorality
9. Totality of infractions
(d) Commission of a Crime 10. Pregnancy out of wedlock
11. Conviction/commission of a crime
Requisites: 12. Temporary “off-detail” or “floating status”
1. There must be an act or omission
punishable or prohibited by law; and
2. The act or omission was committed by the
employee against the person of the
Page 103 of 262

Abandonment time. [RB Michael Press v. Galit, GR NO.

It is the deliberate and unjustified refusal of an 153510 (2008)]
employee to resume his employment. It is a
form of neglect of duty. However, there are instances when
absenteeism is not sufficient to justify
Requisites termination. In the case of Cavite Apparel v.
1. Failure to report for work or absence Michelle Marquez, GR No. 172044 (2013), the
without valid or justifiable reason, and SC ruled that though Michelle was guilty of
2. Clear intention to sever the employer- violating company rules on leaves of absences
employee relationship (more determinative and discipline, the dismissal imposed on her
factor and manifested in overt acts). was unjustified under the circumstances.
Michelle had been employed with the employer
The burden to prove whether the employee for 6 years, with no derogatory record other
abandoned his work rests on the employer. than the four absences without official leave,
[Protective Maximum Security Inc. v. Celso E. not to mention she had already been penalized
Fuentes, GR No. 169303 (2015)] for the first three absences, the most serious
being a six-day suspension.
Absence must be accompanied by overt acts
unerringly pointing to the fact that the Poor performance
employee simply does not want to work It is tantamount to inefficiency and
anymore. The employer has the burden of incompetence in the performance of official
proof to show a deliberate and unjustified duties. An unsatisfactory rating can be a just
refusal of the employee to resume employment cause for dismissal only if it amounts to gross
without any intention of returning. [Tan and habitual neglect of duties. Poor or
Brothers Corp v. Escudero, GR No. 188711 unsatisfactory performance of an employee
(2013)] does not necessarily mean he is guilty of gross
and habitual neglect of duty. [Shipmanagement
Courtesy resignation Inc. v. Campo-Redondo, GR No. 199931
Resignation per se means voluntary (2015)]
relinquishment of a position or office. Adding
the word ‘courtesy’ did not change the essence Past offenses
of the resignation. [Batongbacal v. Associated Previous offenses may be used as a valid
Bank, GR No. 184517 (2013)] justification for dismissal only if the infractions
are related to the subsequent offense upon
Change of ownership which the basis of termination is decreed.
A mere change in the equity composition of a [Century Canning Corporation v. Ramil, GR
corporation is neither just nor an authorized No. 171630 (2010)
cause that would legally permit the dismissal of
the corporation’s employees en masse. [SME Habitual infractions
Bank Inc. v. De Guzman, GR No. 184517, A series of irregularities when put together may
186641 (2013)] constitute serious misconduct, under which Art.
297 of the Labor Code is a just cause for
Habitual absenteeism/tardiness dismissal. [Gustilo v. Wyeth Phil Inc., GR No.
It is a form of neglect of duty. Lack of initiative, 149629 (2004)]
diligence and discipline to come to work on
time everyday exhibit the employee’s Immorality
deportment towards work. It is inimical to the DECS Order No. 92 provides that disgraceful
general productivity and business of the or immoral conduct can be used as a basis for
employer. This is especially true when the termination of employment. [Santos, Jr. v.
tardiness and/or absenteeism occur frequently NLRC, GR No. 116795 (1998)]
and repeatedly within an extensive period of
Page 104 of 262

The act of engaging in extramarital affairs was misconduct and present behavior must be
specifically provided for by the cooperative’s taken together in determining the proper
Personnel Policy as one of the grounds for imposable penalty. [Merin v. NLRC, GR No.
termination of employment. The Board 171790 (2008)]
received complaints and petitions from the
cooperative members for the removal of Pregnancy out of wedlock
Bandiola because of his immoral conduct, When the law speaks of immoral or
hence immorality (extramarital affair) justified necessarily, disgraceful conduct, it pertains to
the termination of his employment. [Alilem public and secular morality.
Credit Cooperative v. Bandila, Jr. GR No.
173489 (2013) Pre-marital sexual relations between two
consenting adults, who have no impediment to
Standard of morality marry each other, and consequently,
It is public and secular, not religious. Whether conceiving a child out of wedlock, gauged from
a conduct is considered disgraceful or immoral a purely public and secular view of morality
should be made in accordance with the does NOT amount to an immoral conduct.
prevailing norms of conduct, which as stated in [Cheryl Leus v. St. Scholastica College
Leus, refer to those conducts which are Westgrove, GR No. 187226 (2015)]
proscribed because they are detrimental to
conditions upon which depend the existence of Conviction/commission of a crime
and progress of human society. The charge of drug abuse within the company’s
premises and during work hours constitutes
The fact that a particular act does not conform serious misconduct which is a just cause for
to the traditional moral views of a certain termination. [Bughaw Jr. v. Treasure Island
sectarian institution is insufficient to qualify the Industrial, GR No. 173151 (2008)]
act as immoral unless it likewise does not
conform to the public and secular standards. Temporary “off-detail” or “floating status”
More importantly, there must be substantial This is the period of time when security guards
evidence to establish premarital sexual are in between assignments or when they are
relations and pregnancy out of wedlock is made to wait after being relieved from a
considered disgraceful or immoral. [Capin- previous post until they are transferred to a new
Cadiz v. Brent Hospital, GR No. 187417 one.
(2016)]
When this occurs
Totality of infractions 1. Security agency’s clients decide not to
The totality of infractions or the number of renew their contracts with the agency,
violations committed during the period of resulting in a situation where the available
employment shall be considered in determining posts under its existing contracts are less
the penalty to be imposed upon an erring than the number of guards in its roster,
employee. Fitness for continued employment 2. Contracts stipulate that the client may
cannot be compartmentalized into tight little request the agency for replacement of
cubicles of aspects of character, conduct and guards assigned to it even for want of
ability separate and independent of each other. cause.
While it may be true that the petitioner was During such time, the security guard does not
penalized for his previous infractions, this does receive any salary or financial assistance
not and should not mean that his employment provided by law. It does not constitute a
record would be wiped clean. After all, the dismissal, as the assignments primarily
record of an employee is a relevant depend on contracts entered into between
consideration in determining the penalty that security agencies and third parties, so as long
should be meted out since an employee’s past as such status does not continue beyond a
Page 105 of 262

reasonable time. When such status lasts for Payment of Separation Pay
more than 6 months, the employee may be
Authorized Cause Separation Pay
considered constructively dismissed.
[Salvaloza v. NLRC, GR No. 182086 (2010)] Labor-saving 1 month pay or at
devices least 1 month pay
Transfer/Reassignment of work for every year of
Jurisprudential guidelines Redundancy service, whichever is
1. A transfer is a movement from one position higher [Art. 298]
to another of equivalent rank, level or
salary without break in the service or a Retrenchment, 1 month pay or at
lateral movement from one position to closure, or least ½ month pay
another of equivalent rank or salary; suspension of for every year of
2. The employer has the inherent right to operations service, whichever is
transfer or reassign an employee for higher. [Art. 298]
legitimate business purposes;
3. A transfer becomes unlawful where it is
Note: A fraction of at least 6 months shall be
motivated by discrimination or bad faith or
considered 1 whole year. [Art. 298]
is effected as a form of punishment or is a
demotion without sufficient cause;
Basis
4. The employer must be able to show that
Employment is the lifeblood upon which the
the transfer is not unreasonable,
worker and his family owe their survival. [Flight
inconvenient or prejudicial to the
Attendants and Stewards Ass’n of the
employee. [Rural Bank of Cantilan Inc v.
Philippines v. PAL, GR. No. 178083 (2009)]
Julve, GR No. 169750 (2007)]
Written notice
ii. Authorized causes
For all authorized causes, a written notice
served on both the employees and the DOLE
Also known as “Business-related Causes”
at least one month prior to the intended date of
termination is required.
The employer may also terminate the
employment of any employee due to:
(a) Installation of labor-saving devices
a. The installation of labor-saving devices,
b. Redundancy,
This refers to the installation of machinery to
c. Retrenchment to prevent losses or
effect efficiency and economy in the
d. The closing or cessation of operation of the
employer’s method of production. [Edge
establishment or undertaking not due to
Apparel Inc v. NLRC, GR No. 121314 (1998)]
serious loss [Art. 298]
Requisites
Other causes
1. There must be introduction of
a. Disease incurable in 6 months [Art. 299]
machinery, equipment, or other
b. Enforcement of union security clause in the
devices;
CBA
2. The introduction must be done in good
c. Dismissal of union officers for the conduct
faith;
of an illegal strike; Dismissal of union
3. The purpose for such introduction must
members for participating in the
be valid such as to save on cost, enhance
commission of illegal acts in a strike [Art.
efficiency and other justifiable economic
279 (a)]
reasons;
d. Termination in conformity with existing
4. There is no other option available to
statute/qualification requirements.
employer than the introduction of
machinery, equipment or device and the
Page 106 of 262

consequent termination of employment of

those affected thereby; and In implementing a redundancy program, the
5. There must be fair and reasonable employer is required to adopt fair and
criteria in selecting employees to be reasonable criteria taking into consideration
terminated. factors such as (a) preferred status, (b)
efficiency, and (c) seniority among others.
General Rule: In cases of installation of labor- [Morales v. Metrobank, GR No. 182475 (2012)]
saving devices, redundancy and retrenchment,
the Last-In, First-Out Rule shall apply. (c) Retrenchment to prevent serious loss
Exception: Employee volunteers to be Requisites

separated from employment. [Sec. 5.2(a), D.O. 1. The retrenchment is reasonably
No. 147-15] necessary and likely to prevent business
losses;
(b) Redundancy 2. The losses, if already incurred, are not
merely de minimis, but substantial,
Redundancy exists when the service capability serious, actual and real, or if only
of the workforce is in excess of what is expected are reasonably imminent as
reasonably needed to meet the demands of the perceived objectively and in good faith by
business enterprise. the employer;
3. The expected or actual losses must be
A position is redundant when it is superfluous proved by sufficient and convincing
and superfluity of a position or positions could evidence;
be the result of a number of factors such the 4. The retrenchment must be in good faith for
overhiring of workers, a decrease in the volume the advancement of its interest and not to
of business or dropping of a particular line or defeat or circumvent the employees’ right
service previously manufactured or undertaken to security of tenure; and
by the enterprise. [Morales v. Metrobank, GR 5. There must be fair and reasonable
No. 182475 (2012)] criteria in ascertaining who would be
dismissed and would be retained among
Requisites the employees such as status, efficiency,
1. There must be superfluous positions or seniority, physical fitness, age and financial
services of employees; hardship for certain workers. [Sec. 5.4(c),
2. The positions or services are in excess of D.O. No. 147-15]
what is reasonably demanded by the
actual requirements of the enterprise to The employer bears the burden of proving the
operate in an efficient and economical existence of the imminence of substantial
manner; losses with clear and satisfactory evidence that
3. There must be good faith in abolishing there are legitimate business reasons justifying
redundant positions; a retrenchment. [Mount Carmel College
4. There must be fair and reasonable Employees Union v. Mount Carmel College,
criteria in selecting the employees to be GR No. 187621 (2014)]
terminated; and
5. There must be adequate proof of Two kinds of losses justifying retrenchment
redundancy such as but not limited to the 1. Incurred losses - substantial, serious actual
new staffing pattern, feasibility and real
studies/proposal, on the viability of newly 2. Expected losses - reasonably imminent
created positions, job description and the [Sanoh Fulton Phils v. Bernardo Tagohoy, GR
approval by the management of the No. 187214 (2013)]
restructuring. [Sec. 5.4(b), D.O. No. 147-
15]
Page 107 of 262

(d) Closing or cessation of business not separation pay. Otherwise, the affected
due to serious loss employees are entitled to separation pay.
5. The burden of proving compliance with all
Requisites the above-stated falls upon the employer.
1. There must be a decision to close or cease [Manila Polo Club Employees’ Union v.
operation of the enterprise by the Manila Polo Club, GR No. 172846 (2013)]
management;
2. The decision was made in good faith; and Closure of Department
3. There is no other option available to the The closure of a department or division of a
employer except to close or cease company constitutes retrenchment by, and not
operations. [Sec 5.4(d), DO No. 147-15] closure of, the company itself. [Waterfront
Cebu City Hotel v. Jimenez, GR No. 174214
Unless the closing is for the purpose of (2012)]
circumventing the provisions of this Title [Art.
298] Corporate Acquisitions
Asset Sales Stock Sales
By serving a written notice on the workers and
the Ministry of Labor and Employment at least
Sale
1 month before the intended date thereof. [Art.
298]
Corporate entity The individual or
Guidelines sells all or corporate
1. Closure or cessation of operations of substantially all of its shareholders sell a
establishment or undertaking may either be assets to another controlling lock of
partial or total. entity. stock to new or
2. Closure or cessation of operations of existing
establishment or undertaking may or may shareholders.
not be due to serious business losses or
financial reverses. In both instances, proof Obligations of Seller
must be shown that:
a. It was done in good faith to advance the Seller in good faith is A shift in the
employer's interest and not for the authorized to composition of its
purpose of defeating or circumventing dismiss the affected shareholders will not
the rights of employees under the law employees, but is affect its existence
or a valid agreement; and liable for the and continuity.
b. A written notice on the affected payment of
employees and the DOLE is served at separation pay. Notwithstanding the
least 1 month before the intended date stock sale, the
of termination of employment. corporation
3. The employer can lawfully close shop even continues to be the
if not due to serious business losses or employer of its
financial reverses but separation pay, people and
which is equivalent to at least one month continues to be
pay as provided for by Article 283 of the liable for the
Labor Code, as amended, must be given to payment of their
all the affected employees. wages.
4. If the closure or cessation of operations of
establishment or undertaking is due to Obligation of Buyer
serious business losses or financial
reverses, the employer must prove such
allegation in order to avoid the payment of
Page 108 of 262

Asset Sales Stock Sales
The buyer in good The corporation or

faith is not obliged to its new majority
absorb the shareholders are not
employees affected entitled to lawfully
by the sale, nor is it dismiss corporate
liable for the employees absent a
payment of their just or authorized
claims. The most cause. [SME Bank v.
that it may do, for De Guzman, GR
reasons of public No.184517 (2013)]
policy and social
justice, is to give
preference to the
qualified separated
personnel of the
selling firm.
Criteria in selecting employees for

dismissal
1. Preferred status (e.g. temporary, casual or
regular employees)
2. Efficiency
3. Physical fitness
4. Age
5. Financial hardship
6. Seniority [Asian Alcohol Corp v. NLRC, GR
No. 131108 (1999)]
Summary
Retrenchment Redundancy Closure
Reduction of personnel usually Service of employee is in The reversal of the fortune of

due to poor financial returns so excess of what is required by the employer whereby there is
as to cut down on costs of an enterprise a complete cessation of
operations in terms of wages business operations and/or
and salaries actual locking-up of the doors
of the establishment, usually
due to financial losses.
To avoid or minimize business To save production costs. To prevent further financial

losses. drain upon the employer.
1 month or ½ month pay per 1 month or 1 month pay per Closure not due to serious
year of service separation pay year of service separation pay business losses, 1 month or ½
(whichever is higher) (whichever is higher) month pay per year of service
separation pay (whichever is
higher).
Page 109 of 262

Retrenchment Redundancy Closure
Closure due to serious

business losses, no separation
pay. [Manila Polo Club
Employees union v. Manila
Polo Club, GR No. 172846
(2013)]
(e) Disease Burden of proof with employer

The burden of proof falls upon the employer to
An employer may terminate the services of an establish the requisites. In the absence of such
employee: certification, the dismissal must be necessarily
1. Who has been found to be suffering from declared illegal.
any disease; and
2. Whose continued employment is prohibited Prior certification required
by law or is prejudicial to his health as well It is only where there is a prior certification from
as the health of his co-employees. [Art. a competent public authority that the disease
299] afflicting the employee sought to be dismissed
is of such nature or at such stage that it cannot
Separation Pay be cured within 6 months even with proper
An employee terminated on the ground of medical treatment that the latter could be
disease shall be paid separation pay validly terminated from his job. [Crayons
equivalent to at least 1 month salary or to ½ Processing v. Pula, GR No. 167727 (2007)]
month salary for every year of service,
whichever is greater. [Art. 299] Note: If the disease or ailment can be cured
within the period of 6 months, the employer
Note: A fraction of at least six (6) months being shall not terminate the employee but shall ask
considered as one (1) whole year. the employee to take a leave of absence. The
employer shall reinstate such employee to his
Requisites former position immediately upon the
1. The employee must be suffering from a restoration of his health. [Sec. 8, Rule I, Book
disease which cannot be cured within 6 VI]
month, even with proper medical
treatment; (f) Enforcement of Union Security Clause
2. Continued employment is either: in CBA
a. Prohibited by law or
b. Prejudicial to his health or The law authorizes the enforcement of union
c. Prejudicial to the health of his co- security clauses, provided it is not
employees; and characterized by arbitrariness and always with
3. A certification to that effect issued by a due process.
competent public health authority, which
must state that the disease is of such In terminating the employment of an employee
nature or at such a stage that it cannot be by enforcing the Union Security Clause, the
cured within a period of six (6) months even employer needs only to determine and prove
with proper medical treatment [Sec. 8, Rule that:
I, Book VI; Crayons Processing v. Pula, GR 1. The union security clause is applicable
No. 167727 (2007), Sec. 5.2(f), D.O. 147- 2. The union is requesting for the
15] enforcement of the union security provision
in the CBA
Page 110 of 262

3. There is sufficient evidence to support the the National Labor Relations Commission.
union’s decision to expel the employee [Art. 292 (b)]
from the union or company.
Procedural Due Process - manner in which
(g) Dismissal of Union Officers for the the dismissal was effected.
conduct of an illegal strike; Dismissal of 1. The first written notice to be served on the
union members for participating in the employees should contain the specific
commission of illegal acts in a strike causes or grounds for termination against
them, and a directive that the employees
Any union officer who knowingly participates in are given the opportunity to submit their
an illegal strike, and any worker or union officer written explanation within a reasonable
who knowingly participates in the commission period.
of illegal acts during a strike may be declared 2. The requirement of a hearing is complied
to have lost employment status. [Art. 279 (a)] with as long as there was an opportunity to
be heard, and not necessarily an actual
(h) Termination in Conformity with Existing hearing was conducted.
Statute/ Qualification Requirements 3. After determining that termination of
employment is justified, the employers
While the right of workers to security of tenure shall serve the employees a written notice
is guaranteed by the Constitution, its exercise of termination indicating that:
may be reasonably regulated pursuant to the a. All circumstances involving the charge
police powers of the State to safeguard health, against the employee have been
morals, peace, education, order, safety, and considered, and
the general welfare of the people. b. The grounds have been established to
justify the severance of the
Consequently, persons who desire to engage employment. [Inguillo v. First Phil
in the learned professions requiring scientific or Scales, GR No. 165407 (2019)]
technical knowledge may be required to take
an examination as a prerequisite to engaging The employee must be afforded an opportunity
in their chosen careers. [St. Luke's Medical to be heard and defend himself. [Fujitsu
Center Employees Assn v. NLRC, GR No. Computer Products Corporation of the Phil v.
162053 (2007)] CA, GR No. 158232 (2005)]
b. Procedural due process The employer may not substitute the required
prior notice and opportunity to be heard with
The employer shall: the mere payment of 30 day’s salary. [PNB V.
1. Furnish the worker, whose employment is Cabansag, GR No. 157010 (2005)]
sought to be terminated, a written notice
containing a statement of the causes for Right to Counsel
termination; and The right to counsel, a very basic requirement
2. Afford the latter ample opportunity to be of substantive due process, has to be
heard and to defend himself, with the observed. Indeed the rights to counsel and to
assistance of his representative if he so due process of law are two of the fundamental
desires, in accordance with company rules rights guaranteed by the 1987 Constitution to
and regulations promulgated pursuant to any person under investigation, be the
guidelines set by the DOLE. [Art. 292 (b)] proceeding administrative, civil or criminal.
[Salaw v. NLRC, GR No. 90786 (1991)]
Any decision taken by the employer shall be
without prejudice to the right of the worker to The procedure can be summarized as follows:
contest the validity or legality of his dismissal
by filing a complaint with the regional branch of
Page 111 of 262

1. Employer must furnish the employee with a 2. Directive that the employee is given the
written notice containing the cause for opportunity to submit his written
termination. explanation within a “reasonable period” or
2. The employer must give the employee an every kind of assistance that management
opportunity to be heard. This can be done must accord to enable him to prepare
either through: adequately for his defense. This should be
a. Position paper or construed as a period of at least 5 calendar
b. Clarificatory hearing. days from receipt of notice.
3. The employee MAY also be assisted by a 3. Detailed narration of the facts and
representative or counsel. circumstances that will serve as basis for
4. The employer must give another written the charge against the employees. A
notice apprising the employee of its general description of the charge will not
findings and the penalty to be imposed suffice. [Unilever v. Rivera, GR No. 201701
against the employee, if any. (2013)]
4. The company rules, if any, violated and/or
In labor cases, these requisites meet the the grounds under Art. 288 being charged
constitutional requirement of procedural due against the employee. [United Tourist
process, which contemplates, “notice and Promotions v. Kemplin, GR No. 205453
opportunity to be heard before judgment is (2014)]
rendered affecting one’s person or property”.
[Montinola v. PAL, GR No. 198656 (2014)] CONTENTS OF SECOND NOTICE
1. All circumstances involving the charge
i. Twin Notice Requirement against the employee considered
2. Grounds established to justify the
The employer has the burden of proving that a severance of employment. [United Tourist
dismissed worker has been served two notices: Promotions v. Kemplin, GR No. 205453
1. First written notice: specifying the (2014)]
ground(s) for termination and giving the
employee the reasonable opportunity PRE-DISMISSAL NOTICE GROUNDS
within which to explain his side. An employee may be dismissed only if the
2. Second written notice: indicating that upon grounds mentioned in the pre-dismissal notice
due consideration of all circumstances, were the ones cited for termination of
grounds have been established to justify employment. [Erector Advertising Sign Groups
his termination v. Cloma, GR No. 167218 (2010)]
Reasonable opportunity for the first written ii. Hearing

notice should be construed at least 5 calendar
days from receipt of the notice. In employee dismissal cases, the essence of
due process is simply the opportunity to be
Ratio: to give the employee an opportunity to heard, it is the denial of this that constitutes a
study the accusation against him, consult a violation of due process of law. [Technol Eight
union official or lawyer, gather data and Philippines Corporation v. NLRC, GR No.
evidence, and decide on his defenses. [King of 187605 (2010)]
Kings Transport v. Mamac, GR No. 166208
(2007); Puncia v. Toyota Shaw/Pasig, GR No. While a formal hearing or conference is ideal, it
214399 (2016)] is not an absolute, mandatory or exclusive
avenue of due process. [Perez v. PT&T, GR
CONTENTS OF FIRST NOTICE No. 152048 (2009)]
1. Specific causes or grounds for termination
against the employee
Page 112 of 262

Guidelines in hearing requirements Consequences for non-compliance of

1. “Ample opportunity to be heard” means any Procedural Due Process (PDP)
meaningful opportunity (verbal or written)
Just/ PDP Dismissal Employer’s
given to the employee to:
Autho- liability
a. Answer the charges against him and
rized
b. Submit evidence in support of his
cause
defense, whether in a hearing,
conference or some other fair, just and YES YES VALID No liability.
reasonable way. Separation
2. A formal hearing or conference becomes pay only in
mandatory when: authorized
a. Requested by the employee in writing, causes.
b. Substantial evidentiary disputes exist
c. A company rule or practice requires it, NO YES INVALID Reinstatement
or or separation
d. When similar circumstances warrant. pay (if
3. The “ample opportunity to be heard” reinstatement
standard in the Labor Code prevails over is not
the “hearing or conference” requirement in possible) + full
the implementing rules and regulations. backwages
[Perez v. PT&T, supra]
NO NO INVALID Reinstatement
PROCEDURE FOR TERMINATION CASES or separation
pay (if
Just Cause Authorized Cause
reinstatement
1. First notice Notice to: is not
specifying 1. Employee and possible) + full
grounds of 2. DOLE backwages
dismissal
YES NO VALID Liable for
2. Hearing or At least 1 month prior
damages due
opportunity to to the date of
to procedural
be heard termination of
infirmity
3. Second notice employment.
(nominal
of decision to
damages).
dismiss
Separation
pay if for
Guidelines authorized
1. Notice is NOT NEEDED when employee cause.
consented to the retrenchment or
voluntarily applied for one. [International
Hardware Inc v. NLRC, GR No. 80770 2. Preventive Suspension
(1989)]
2. Notice must be individual, not collective. Definition
[Shoppers Gain Supermart v. NLRC, GR Preventive suspension is a disciplinary
No. 110731 (1996)] measure for the protection of the company’s
3. Voluntary arbitration satisfies notice property pending investigation of any alleged
requirement for authorized causes. malfeasance or misfeasance committed by the
[Revidad v. NLRC, GR No. 11105 (1995)] employee. [Gatbonton v. NLRC, G.R. No.
146779 (2006)]
Page 113 of 262

It is important to note that preventive Note: The portion on preventive suspension

suspension is not a penalty, but a part of a under the cited Book V, Rule XXIII, Secs. 8-9
process to investigate a questioned action of are no longer in existence. The current IRR of
an employee. Preventive suspension does not the Labor Code (as of 2020) has replaced Rule
in itself prove that the employer already finds XXIII with “Rule XXIII Contempt” and does not
the employee guilty of the charges he is asked contain provisions on preventive suspension.
to answer and explain [Soriano v. NLRC et. al.,
G.R. No. 75510, (1987)]. It is curious to note, however, that in a 2018
case [Consolidated Building Maintenance, Inc.
When imposed v. Asprec, Jr., G.R. No. 217301, (June 6,
Preventive suspension may be legally imposed 2018)], the Court stated that “preventive
on employee whose alleged violation is the suspension shall not last for more than 30
subject of an investigation. days” HOWEVER, in stating so, the Court cited
an OLD provision of the IRR of the Labor Code.
The employer may place the worker concerned In fact, it is a recurring theme in a number of
under preventive suspension if his continued more recent cases that the Court would cite old
employment poses a serious and imminent provisions of the IRR of the labor code which
threat to the life or property of the employer or have long been amended or repealed.
of his co-workers. When, however, it is
determined that there is no sufficient basis to When preventive suspension is deemed
justify an employee’s preventive suspension, dismissal
the latter is entitled to the payment of salaries When preventive suspension exceeds the
during the time of preventive suspension.” maximum period allowed without reinstating
[Gatbonton v. NLRC, G.R. No. 146779 (2006)] the employee either by actual or payroll
reinstatement or when preventive suspension
Purpose is for an indefinite period, only then will
The purpose of his suspension is to prevent constructive dismissal set in.
him from causing harm or injury to the company
as well as to his fellow employees. [Sec. 8, Not entitled to pay
Rule XXIII, IRR]. Employee placed under preventive suspension
is not entitled to the payment of wages.
Period of suspension However, if the basis for suspension is later
No preventive suspension shall last longer than proven to be unfounded or invalid, the said
thirty (30) days. employee is entitled to his salary during the
whole period of his suspension. [Gatbonton v.
Upon the expiry of such period, the employer NLRC, G.R. No. 146779 (2006)]
shall thereafter:
1. Reinstate the worker in his former or in a 3. Illegal Dismissal
substantially equivalent position; or
2. The employer may extend the period of a. Kinds
suspension provided that:
a. During the period of extension, he pays i. No just or authorized cause
the wages and other benefits due to the
worker For the dismissal of an employee to be valid,
b. The worker shall not be bound to the dismissal must be for any of the causes
reimburse the amount paid to him provided for in Art. 297-299.
during the extension if the employer
decides, after completion of the An employer who dismisses an employee
hearing, to dismiss the worker. [Sec. 9, without just or authorized cause is liable for:
Rule XXIII, Book V, IRR] 1. Reinstatement or separation pay if
reinstatement is not possible; and
Page 114 of 262

2. Full backwages. (3) The action is not motivated by

discrimination, made in bad faith, or
ii. Constructive dismissal effected as a form of punishment or
demotion without sufficient cause.
Constructive dismissal is cessation of work
because continued employment is either: Otherwise, the transfer could be considered as
1. rendered impossible, unreasonable or constructive dismissal. [The Philippine
unlikely; American Life and General Insurance Co. v.
2. when there is a demotion in rank or Angelita S. Gramaje, G.R. No. 156963 (2004)]
diminution in pay or both; or
3. when a clear discrimination, insensibility, or Forced resignation is constructive
disdain by an employer becomes dismissal
unbearable to the employee. [Dusit Hotel Mere allegations of threat or force do not
Nikko v. NUHWRAIN-Dusit Hotel Chapter, constitute evidence to support a finding of
G.R. No. 160391 (2005)] forced resignation.
The Test of Constructive Dismissal In order for intimidation to vitiate consent, the
Whether a reasonable person in the following requisites must concur:
employee’s position would have felt compelled 1. that the intimidation caused the consent to
to give up his position under the be given;
circumstances. [Tuazon v. Bank of Commerce, 2. that the threatened act be unjust or
G.R. No. 192076 (2012)] unlawful;
3. that the threat be real or serious, there
It is an act amounting to dismissal but made to being evident disproportion between the
appear as if it were not. Constructive dismissal evil and the resistance which all men can
is, therefore, a dismissal in disguise. As such, offer, leading to the choice of doing the act
the law recognizes and resolves this situation which is forced on the person to do as the
in favor of employees in order to protect their lesser evil; AND
rights and interests from the coercive acts of 4. that it produces a well-grounded fear from
the employer. In fact, the employee who is the fact that the person from whom it
constructively dismissed may be allowed to comes has the necessary means or ability
keep on coming to work. [McMer Corp., Inc. v. to inflict the threatened injury to his person
NLRC, G.R. No. 193421 (2014)] or property. [Mandapat v. Add Force
Personnel, G.R. No. 180285 (2010)]
Unlawful withholding of wages for a long time (a) Burden of proof
could be tantamount to an illegal constructive
dismissal. [Gilles v. CA, G.R. No. 149273 The burden of proving that the termination was
(2009)] for a valid or authorized cause shall rest on the
employer. [Art. 292 (b)]
A bona fide suspension of work is allowed for
as long as it does not exceed 6 months. In illegal dismissal cases, the onus of proving
Failure of the employer to recall the suspended that the employee was not dismissed or, if
employees in the 6-month period amounts to dismissed, that the dismissal was not illegal,
constructive dismissal. [SKM Art. Craft Corp. v. rests on the employer, failure to discharge
Bauca, G.R. No. 171282 (2013)] which would mean that the dismissal is not
justified and, therefore, illegal. [Macasero v.
For a transfer to be a valid exercise of Southern Industrial Gases Philippines, GR No.
management prerogative: 198656 (2014)]
(1) There is no demotion in rank;
(2) There is no diminution of salary, benefits,
and other privileges;
Page 115 of 262

Degree of Proof b. Constructively reinstate them in the

In labor cases, as in other administrative payroll.
proceedings, substantial evidence is required 3. Backwages
and it is such relevant evidence as a 4. Damages and Attorney’s Fees
reasonable mind might accept as adequate to 5. Separation Pay
support a conclusion. [Andrada v. Agemar
Manning Agency, GR No. 194758 (2012)] (1) Reinstatement
Substantial evidence is necessary for an Reinstatement means restoration to a state or

employer to effectuate any dismissal. condition from which one had been removed or
Uncorroborated assertions and accusations by separated. The person reinstated assumes the
the employer do not suffice; otherwise the position he had occupied prior to his dismissal.
constitutional guarantee of security of tenure of [Asian Terminals, Inc. v. Villanueva, G.R. No.
the employee would be jeopardized. [Kulas 143219 (2006)]
Ideas & Creations et. al. v. Alcoseba & Arao
Arao, GR No. 180123 (2010)] General Rule: Reinstatement and backwages
Exceptions:
(b) Liability of officers a. Separation pay
b. Closure of business [Retuya v. Hon.
Art. 219(e) defines “employer” as including any Dumarpa, G.R. No. 148848 (2003)]
person acting in the interest of an employer, c. Economic business conditions [Union of
directly or indirectly. Supervisors v. Secretary of Labor, G.R.
No. L-39889 (1981)]
Note that the provision does not expressly d. Employee’s unsuitability [Divine Word High
make a corporate officer personally liable for School v. NLRC, G.R. No. 72207 (1986)]
the liabilities of a corporation. However, in e. Employee’s retirement/ overage [New
Lozada vs Mendoza [GR No. 196134, 12 Philippine Skylanders, Inc. v. Dakila, G.R.
October 2016], the Court ruled that, as a No. 199547 (2012)]
general rule, officers are not personally liable f. Antipathy and antagonism [Wensha Spa
for corporate obligation, with the exception that Center v. Yung, G.R. No. 185122 (2010)]
in order to hold a director or officer personally g. Job with a totally different nature [DUP
liable occurs when the following requisites are Sound Phils. v. CA, G.R. No. 168317
present: (2011)]
1. the complaint must allege that the director h. Long passage of time
or officer assented to the patently unlawful i. Inimical to the employer's interest
acts of the corporation, or that the director j. When supervening facts have transpired
or officer was guilty of gross negligence or which make execution on that score unjust
bad faith; and or inequitable or, to an increasing extent
2. there must be proof that the director or [Emeritus Security & Maintenance
officer acted in bad faith. Systems, Inc. v. Dailig, G.R. No. 204761
(2014)]
(c) Reliefs from illegal
dismissal Prescription Period
An action for reinstatement by reason of illegal
The following reliefs are cumulative and not dismissal is one based on an injury, which may
alternative: be brought within 4 years from the time of
1. Reinstatement dismissal. [Art. 1146, CC]
2. Options Given to Employers
a. Actually reinstate the dismissed In any event, the decision of the Labor Arbiter
employees or, reinstating a dismissed or separated
employee, insofar as the reinstatement aspect
Page 116 of 262

is concerned, shall immediately be executory, restitution of wages paid due to reinstatement

pending appeal. The employee shall either be pending appeal.
admitted back to work under the same terms
and conditions prevailing prior to his dismissal SEPARATION PAY IN LIEU OF
or separation or, at the option of the employer, REINSTATEMENT
merely reinstated in the payroll. The posting of
a bond by the employer shall not stay the Kinds of separation pay (SP)
execution for reinstatement provided herein. 1. SP as a statutory requirement for
[Art. 229] authorized causes
2. SP as financial assistance found in the next
(2) Options Given to Employers section
a. Actually reinstate the dismissed 3. SP in lieu of reinstatement where
employees or, reinstatement is not feasible; and
b. Constructively reinstate them in the 4. SP as a benefit in the CBA or company
payroll. policy
Either way, this must be done immediately Instances when the award of separation pay, in
upon the filing of their appeal, without need of lieu of reinstatement to an illegally dismissed
any executory writ. employee, is proper:
a. When reinstatement is no longer possible,
If the order of reinstatement of the Labor Arbiter in cases where the dismissed employee's
is reversed on appeal, it is obligatory on the position is no longer available;
part of the employer to reinstate and pay the b. The continued relationship between the
wages of the dismissed employee during the employer and the employee is no longer
period of appeal until reversal by the higher viable due to the strained relations
court. between them; and
c. When the dismissed employee opted not to
The Labor Arbiter's order of reinstatement is be reinstated, or the payment of separation
immediately executory and the employer has to benefits would be for the best interest of the
either re-admit them to work under the same parties involved. [Sec. 4(b), Rule I, Book VI,
terms and conditions prevailing prior to their IRR]
dismissal, or to reinstate them in the payroll,
and that failing to exercise the options in the Separation Pay and Reinstatement,
alternative, employer must pay the employee's Exclusive Remedies
salaries [Magana v. Medicard Philippines, Inc., The payment of separation pay and
G.R. No. 174833 (2010)] reinstatement are exclusive remedies. The
payment of separation pay replaces the legal
No refund doctrine consequences of reinstatement to an
An employee cannot be compelled to employee who was illegally dismissed. [Bani
reimburse the salaries and wages he received Rural Bank, Inc. v. De Guzman, G.R. No.
during the pendency of his appeal, 170904 (2013)]
notwithstanding the reversal by the NLRC of
the LA's order of reinstatement. [College of the Doctrine of Strained Relations
Immaculate Conception v. NLRC, G.R. No. Where reinstatement is not feasible, expedient
167563 (2010)] or practical, as where reinstatement would only
exacerbate the tension and strained relations
Note: However, Rule XI, Sec. 14 of the 2011 between the parties or where the relationship
NLRC Rules of Procedure provide for between the employer and employee has been
restitution of amounts paid pursuant to unduly strained by reason of their irreconcilable
execution of awards during pendency of the differences, particularly where the illegally
appeal. However, it expressly disallows dismissed employee held a managerial or key
Page 117 of 262

position in the company, it would be more 3. In the nature of a command to the employer
prudent to order payment of separation pay to make a public reparation for illegally
instead of reinstatement. [Quijano v. Mercury dismissing an employee.
Drug Corp., G.R. No. 126561 (1998)] a. It is not private compensation or
damages;
Computation b. Nor is it a redress of a private right. [St.
SP as a statutory requirement is computed by Theresa's School of Novaliches
integrating the basic salary with regular Foundation v. NLRC, G.R. No. 122955
allowances employee has been receiving (1998)]
[Planters Products, Inc. v. NLRC, G.R. No.
78524, 78739 (1989)]; allowances include Backwages and reinstatement are two reliefs
transportation and emergency living that should be given to an illegally dismissed
allowances [Santos v. NLRC, G.R. No. 76721 employee. They are separate and distinct from
(1987)] each other.
In an illegal dismissal case involving An illegally dismissed employee is entitled to

salespersons, the Court took judicial notice of (1) either reinstatement, if viable, or separation
the fact that the nature of the work of a pay if reinstatement is no longer viable, and (2)
salesperson and the reason for such type of backwages. [Aurora Land Projects Corp. v.
remuneration for services rendered, NLRC, G.R. No. 114733 (1997)]
demonstrate clearly that commissions are part
of salespersons' wage or salary. If the Court Effect of failure to order backwages
adopted the opposite view that commissions A “plain error” which may be rectified, even if
do not form part of wage or salary, then, in employee did not bring an appeal regarding the
effect, the Court will be saying that matter. [Aurora Land Projects Corp. v. NLRC,
salespersons do not receive any salary and supra.]
therefore, not entitled to separation pay in the
event of discharge from employment. This Extent of Entitlement
narrow interpretation is not in accord with the General rule: An illegally dismissed employee
liberal spirit of our labor laws and considering is entitled to full backwages.
the purpose of separation pay which is, to
alleviate the difficulties which confront a Exceptions
dismissed employee thrown to the streets to a. The Court awarded limited backwages
face the harsh necessities of life. [Songco v. where the employee was illegally
NLRC, G.R. Nos. 50999-51000 (1990)] dismissed but the employer was found to
be in good faith. [San Miguel Corporation v.
A dismissed employee who has accepted Javate, Jr., G.R. No. L-54244 (1992)]
separation pay is not necessarily estopped b. Delay of the EE in filing the case for illegal
from challenging the validity of his or her dismissal [Mercury Drug Co., Inc. v. CIR,
dismissal. Neither does it relieve the employer supra]
of legal obligations. [Anino v. NLRC, G.R. No.
123226 (1998)] COMPUTATION OF BACKWAGES
Full backwages means exactly
(3) Backwages that, i.e., without deducting from backwages
the earnings derived elsewhere by the
Definition concerned employee during the period of his
Backwages are: illegal dismissal. [Bustamante v. NLRC, G.R.
1. Earnings lost by a worker due to his illegal No. 111651 (1996)]
dismissal;
2. A form of relief that restores the income lost The formula of awarding reasonable net
by reason of such unlawful dismissal; backwages without deduction or
Page 118 of 262

qualification relieves the employees from Indemnity of Employer

proving or disproving their earnings during their Validity
Doc-
lay-off and the employers from submitting of Liability
Period trine in
counterproofs, and obviates the twin evils of: dismis- of ER
effect
1. Idleness on the part of the employee who sal
would "with folded arms, remain inactive in Reinstate-
the expectation that a windfall would come Prior Pre- ment +
to him" [Itogon Suyoc Mines, Inc. v. Illegal
1989 Wenphil Back-
Sangilo-Itogon Workers Union, G.R. No. L- wages
24189 (1968), as cited in Diwa ng Dismiss
Pagkakaisa v. Filtex International Corp., Feb.
now,
G.R. No. 23960-61 (1972)]; and 1989- Wenphil Valid
indemnity
2. Attrition and protracted delay in satisfying 1999
pay later
such award on the part of unscrupulous Full back-
employers who have seized upon the wages up
further proceedings to determine the actual Jan.
to
earnings of the wrongfully dismissed or 2000 – Ineffec-
Serrano reinstate-
laid-off employees [See La Campana Food Oct. tual
ment
Products, Inc. v. CIR, G.R. No. L-27907 2004
finality of
(1969); and Kaisahan ng Mga decision
Manggagawa v. La Campana Food Nov.
Products, Inc., G.R. No. L-30798 (1970)]. Nominal
2004 – Agabon Valid
damages
present
The salary base properly used should be the
basic salary rate at the time of dismissal plus (4) Damages and Attorney’s Fees
the regular allowances; allowances include:
a. Emergency cost of living allowances In cases of unlawful withholding of wages: the
(ECOLA), transportation allowances, 13th culpable party may be assessed attorney’s
month pay. [Paramount Vinyl Product fees
Corp. v. NLRC, G.R. No. 81200 (1990)]
b. Also included are vacation leaves, service Amount: equivalent to 10% of the amount of
incentive leaves, and sick leaves. wages recovered.
The effects of extraordinary inflation are not to It shall be unlawful for any person to demand
be applied without an official declaration or accept, in any judicial or administrative
thereof by competent authorities. [Lantion v. proceedings for the recovery of wages,
NLRC, G.R. No. 82028 (1990)] attorney’s fees which exceed 10% percent of
the amount of wages recovered. [Art. 111, CC]
Note that according to Nacar v. Gallery
Frames, when the judgment of the court General Rule: attorney's fees and expenses of
awarding a sum of money becomes final and litigation, other than judicial costs, cannot be
executory, the rate of legal interest …. shall be recovered
6% per annum from such finality until its
satisfaction, this interim period being deemed Exception: stipulation to the contrary xxx in
to be by then an equivalent to a forbearance of actions for the recovery of wages of household
credit. [Nacar v. Gallery Frames, G.R. No. helpers, laborers and skilled workers [Art.
189871, (2013)] 2208(7), CC]
The employee is entitled to moral damages

when the employer acted
a. in bad faith or fraud;
Page 119 of 262

b. in a manner oppressive to labor; or in a devices or year of service,

manner contrary to morals, good customs, redundancy whichever is higher
or public policy [Montinola v. PAL, G.R. No. Art. 289:
198656 (2014). Retrenchment to
prevent losses or
Equivalent to at least
In labor cases, the court may award exemplary closure or cessations
1 month pay or ½
damages "if the dismissal was effected in a of operations of
wanton, oppressive or malevolent manner." month pay for every
establishments or
year of service*,
[Garcia v. NLRC, GR. No. 110518 (1994)] undertaking not due
whichever is higher
to serious business
(5) Separation Pay losses or financial
reverses
[Arts. 289 & 290; DOLE Handbook on Worker’s Art. 290: Disease
Statutory Monetary Benefits (2018)] when continued Equivalent to at least
employment is 1 month pay or ½
Separation pay is defined as the amount that prohibited by law or month pay for every
an employee receives at the time of his is prejudicial to his year of service*,
severance from the service and is designed to health or health of whichever is higher
provide the employee with the wherewithal co-employees
during the period that he is looking for another Art. 291: Termination
employment. [A’ Prime Security Services v. by employee whether
NLRC, G.R. No. 107320 (1993)] None
with or without just
cause
COVERAGE *A fraction of at least 6 months shall be
General Rule: considered 1 whole year
Cause for
Entitlement
Termination Exceptions: Considerations of equity as in
Art. 288: Termination the cases of Filipro, Inc. v. NLRC [G.R. No.
by Employer 70546 (1986)]; Metro Drug Corp. v. NLRC
a. Serious [G.R. No. 72248 (1986)]; Engineering
misconduct or Equipment, Inc. v. NLRC [G.R. No. L-59221
willful (1984)]; and San Miguel Corp v. NLRC [G.R.
disobedience of No. 80774 (1988)] [PLDT v. NLRC, G.R. No.
lawful orders 80609 (1988)].
b. Gross and An employee who voluntarily resigns is not
habitual neglect entitled to separation pay unless stipulated in
of duties the employment contract, or the collective
c. Fraud or willful None bargaining agreement, or is sanctioned by
breach of trust established practice or policy of the employer.
d. Commission of a [Phimco Industries v. NLRC, G.R. No. 118041
crime against (1997); Hinatuan Mining Corp v. NLRC, G.R.
employer or No. 117394 (1997) cited in JPL Marketing
immediate Promotions v. CA, G.R. No. 151966 (2005)]
member of his
family or AMOUNT
representative One-Half (½) Month Pay per Year of Service
e. Analogous An employee is entitled to receive separation
causes pay equivalent to ½ month pay for every year
Equivalent to at least of service, a fraction of at least six (6) months
Art. 289: Installation
1 month pay or 1 being considered as one whole year, if his/her
of labor-saving
month pay for every
Page 120 of 262

separation from the service is due to any of the on the employee and the DOLE through its
following authorized causes: regional office having jurisdiction over the
a. Retrenchment to prevent losses (i.e. place of business at least 1 month before the
reduction of personnel effected by intended date thereof. [DOLE Handbook on
management to prevent losses) [Art. 298]; Workers’ Statutory Monetary Benefits, 2018
b. Closure or cessation of operation of an ed.]
establishment not due to serious losses or
financial reverses [Art. 298]; Basis of Separation Pay
c. When the EE is suffering from a disease The computation of separation pay of an
not curable within a period of six (6) months employee shall be based on his/her latest
and his/her continued employment is salary rate. [DOLE Handbook on Workers’
prejudicial to his/her health or to the health Statutory Monetary Benefits, 2018 ed.]
of his/her co-employees [Art. 299]; and,
d. Lack of service assignment of security Inclusion of Regular Allowance in the
guard for a continuous period of six (6) Computation
months [D.O. 150, s. 2016] In the computation of separation pay, it would
be error not to integrate the allowance with the
In no case will an employee get less than one basic salary. The salary base properly used in
(1) month separation pay if the separation is computing the separation pay should include
due to the above stated causes. [DOLE not just the basic salary but also the regular
Handbook on Workers’ Statutory Monetary allowances that an employee has been
Benefits, 2018 ed.] receiving. [Planters’ Products, Inc. v. NLRC,
G.R. No. 78524 (1989); DOLE Handbook on
One-Month Pay per Year of Service Workers’ Statutory Monetary Benefits, 2018
An employee is entitled to separation pay ed.]
equivalent to his/her one-month pay for every
year of service, a fraction of at least 6 months Non-taxable
being considered as one whole year, if his/her In case of separation of an official or employee
separation from service is due to any of the from the service of the employer due to death,
following: sickness or other physical disability or for any
a. Installation by employer of labor-saving cause beyond the control of the said official or
devices; employee, any amount received by him or by
b. Redundancy, as when the position of the his heirs from the employer as a consequence
employee has been found to be excessive of such separation shall likewise be exempt
or unnecessary in the operation of the from tax. [Last proviso of par. 1, Sec. 1, RA
enterprise; 4917]
c. Impossible reinstatement of the employee
to his/her former position or to a 4. Money Claims arising from
substantially equivalent position for Employer-Employee Relationship
reasons not attributable to the fault of the
employer [Gaco v. NLRC, G.R. No. 104690 Money claims must have arisen from
(1994)] employment
d. Lack of service assignment of security Money claims of workers which do not arise out
guard by reason of age. [D.O. 150, s. 2016; of or in connection with their employer-
DOLE Handbook on Workers’ Statutory employee relationship fall within the general
Monetary Benefits, 2018 ed.] jurisdiction of regular courts of justice. [San
Jose vs. NLRC and Ocean Terminal Services,
Notice of Termination Inc., G.R. No. 121227 (1998)]
The employer may terminate the employment
of any employee due to the above-mentioned
authorized causes by serving a written notice
Page 121 of 262

Illustrative cases A money claim arising from employer-

In Pepsi-Cola Bottling Co. v. Martinez [G.R. employee relations, excepting SSS/
No. L-5887 (1982)], where an employee won ECC/Medicare claims, is within the jurisdiction
an award for his performance as top salesman of a Labor Arbiter —
of the year, the Court held that the claim for a. if the claim, regardless of amount, is
said prize unquestionably arose from an accompanied with a claim for
employer-employee relationship and, reinstatement; or
therefore, falls within the coverage of Art. 217 b. if the claim, whether or not accompanied
(now 224), which speaks of "all claims arising with a claim for reinstatement, exceeds five
from employer-employee relations." Indeed, thousand pesos (P5,000) per claimant.
the employee would not have qualified for the
contest, much less won the prize, if he was not Money claims cognizable by the Secretary
an employee of the company at the time of the of Labor or its duly authorized
holding of the contest. representative
The Secretary of Labor and Employment or his
But, in San Miguel Corp. vs. NLRC [G.R. No. duly authorized representatives shall have the
80774 (1988)], where SMC sponsored an power to:
innovation program granting cash awards to 1. issue compliance orders to give effect to
employees who would submit ideas and the labor standards provisions of this Code
suggestions beneficial to the corporation, the and other labor legislation
Court ruled that such undertaking, though 2. Issue writs of execution to the appropriate
unilateral in origin, could nonetheless ripen into authority for the enforcement of their
an enforceable contractual obligation on the orders, except in cases where the
part of SMC under certain circumstances. employer contests the findings of the labor
Thus, whether or not an enforceable contract employment and enforcement officer and
had arisen, and if so, whether or not it had been raises issues supported by documentary
reached, are preeminently legal questions on proofs which were not considered in the
contracts, questions not to be resolved by course of inspection. [Art. 128]
referring to labor legislation.
The visitorial and enforcement powers of the
Money claims cognizable by the Labor DOLE Regional Director to order and enforce
Arbiter compliance with labor standard laws can be
The Labor Arbiter shall have original and exercised even where the individual claim
exclusive jurisdiction to hear and decide, the exceeds P5,000.00. [Cireneo Bowling Plaza
following cases involving all workers: Inc. v. Sensing, G.R. 146572 (2005)]
1. Those cases that workers may file See discussion on Part VIII. G. 1. Visitorial
involving wages, rates of pay, hours of powers of the SOLE.
work and other terms and conditions of
employment, if accompanied with a claim Money claims cognizable by the Regional
for reinstatement Director
2. All other claims arising from employer- The Regional Director or any of the duly
employee relations, including those of authorized hearing officers is empowered to
persons in domestic or household service, hear and decide any matter involving the
involving an amount exceeding P5,000.00 recovery of:
regardless of whether accompanied with a 1. Wages and other monetary claims and
claim for reinstatement. benefits arising from employer-employee
a. Except claims for Employees relations
Compensation, Social Security, 2. Including legal interest
Medicare and maternity benefits [Art. Owing to an employee or person employed in
224(a)(3)(6)] domestic or household service or househelper
under this Code
Page 122 of 262

the employee of a military or civic duty shall

Provided, That: not terminate employment. [Art. 301]
1. Such complaint does not include a claim
for reinstatement; During this time, employees are considered on
2. The aggregate money claims of each "floating status". [Art. 301; International
employee or househelper does not Hardware, Inc. vs. NLRC, G.R. No. 80770
exceed [Art. 129] (1989)]
SUMMARY OF RULES ON MONEY CLAIMS Floating Status in Security Agencies

Art. 224 - Art. 128 - Temporary “off-detail” or “floating status” is the
Art. 129 - RD
LA SOLE period of time when security guards are in
Past or Past or between assignments or when they are made
Existing ER- to wait after being relieved from a previous post
present ER- present ER-
EE relation-
EE relation- EE relation- until they are transferred to a new one.
ship
ship ship
Monetary The power Monetary Dire exigency of the employer’s bona fide
claims of the SOLE claims below suspension of operation, business or
below 5k to order and 5k without a undertaking takes place when:
arising from enforce claim for a. The security agency’s clients decide not to
terms and compliance reinstate- renew their contracts with the agency; and
conditions of with labor ment b. Contracts for security services stipulate
employment, standard that the client may request the agency for
if it is with a laws can be the replacement of the guards assigned to
claim for exercised it
reinstate- even where
ment the The employer should prove that there are no
individual posts available to which the employee
Monetary claim temporarily out of work can be assigned. [Peak
claims exceeds Ventures Corp v. Nestor Villareal, G.R. No.
exceeding P5,000.00 184618 (2014)]
5k, whether [Cireneo
or not it is Bowling Requirement to be Reinstated
with a claim Plaza, Inc. The employee on floating status must indicate
for reinstate- v. Sensing] his desire to resume his work not later than one
ment, (1) month from the resumption of operations of
except his employer or from his relief from the military
those or civic duty.
involving
SSS, Thereafter, the employer shall reinstate the
Medicare employee to his former position without loss of
and seniority rights. [Art. 301]
maternity
benefits When deemed constructive dismissal
When that "floating status" of an employee
5. When Not Deemed Dismissed; lasts for more than six months, he may be
considered to have been illegally dismissed
Employee on Floating Status
from the service. Thus, he is entitled to the
corresponding benefits for his separation, and
The bona fide suspension of the operation of a
this will apply to the two types of work
business or undertaking for a period not
suspension, that is, either of the entire
exceeding six (6) months, or the fulfillment by
Page 123 of 262

business or of a specific component thereof. service, such that he has no other choice but to
[Valdez v. NLRC, G.R. No. 125028 (1998)] disassociate himself from his employment.
[Cervantes v. PAL Maritime Corp., G.R. No.
175209 (2013)]
C. TERMINATION BY
EMPLOYEE To constitute a resignation:
1. It must be unconditional and with the intent
to operate as such;
1. With notice to the employer
2. There must be an intention to relinquish a
portion of the term of office accompanied
An employee may terminate without just cause
by an act of relinquishment.
the employer-employee relationship
a. By serving a written notice on the employer
The fact that the employee signified his desire
at least one (1) month in advance
to resume his work when he went back to
b. The employer upon whom no such notice
AZCOR after recuperating from his illness, and
was served may hold the employee liable
actively pursued his case for illegal dismissal
for damages [Art. 300]
before the labor courts when he was refused
admission by his employer, negated any
Notice is required when termination is without
intention on his part to relinquish his job at
just cause. Written notice to resign must be
AZCOR. [Azcor Manufacturing Inc. v. NLRC,
submitted one (1) month in advance. [Art. 300]
G.R. No. 117963 (1999)]
2. Without notice to the employer Well-entrenched is the rule that resignation is
inconsistent with the filing of a complaint for
An employee may put an end to the illegal dismissal. [Blue Angel Manpower and
relationship without serving any notice on the Security Services Inc. v Court of Appeals, G.R.
employer for any of the following requirements: No. 161196 (2008)]
1. Serious insult by the employer or his
representative on the honor and person of The rule requiring an employee to stay or
the employee; complete the 30-day period prior to the
2. Inhuman and unbearable treatment effectivity of his resignation becomes
accorded the employee by the employer or discretionary on the part of management, as an
his representative; employee who intends to resign may be
3. Commission of a crime or offense by the allowed a shorter period before his resignation
employer or his representative against the becomes effective. [Hechanova Bugay Vilchez
person of the employee or any of the Lawyers v. Matorre, G.R. No. 198261 (2013)]
immediate members of his family; and
4. Other causes analogous to any of the Requisites of a valid resignation
foregoing. [Art. 300] 1. Voluntary, unconditional, and intentionally
to relinquish a portion of a term of
Notice is NOT required when termination is employment;
with just cause. [Art. 300] 2. Accompanied by an act of relinquishment.
3. Distinguish voluntary resignation Intent to Relinquish

and constructive dismissal As the intent to relinquish must concur with the
overt act of relinquishment, the acts of the
Definition of Resignation employee before and after the alleged
Resignation is the voluntary act of an employee resignation must be considered in determining
who finds himself in a situation where he whether he or she, in fact, intended to sever his
believes that personal reasons cannot be or her employment. [Saudi Arabian Airlines v.
sacrificed in favor of the exigency of the Rebesencio, G.R. No. 198587 (2015)]
Page 124 of 262

Resignation is voluntary when the act of D. RETIREMENT

resignation and the intention to resign concur.
If the resignation was done because of
oppressive conditions set by the employer, [Art 302, LC; RA 7641 (The Retirement Pay
such is tantamount to constructive dismissal. Law)]
[Saudi Arabian Airlines v. Rebesencio, G.R.
No. 198587 (2015)] What is Retirement
It is the result of a bilateral act of the parties, a
Constructive voluntary agreement between the employer
Resignation
Dismissal and the employee whereby the latter, after
reaching a certain age agrees to sever his or
Voluntary act of an Involuntary or forced her employment with the former.
employee who is in resignation due to
a situation where the harsh, hostile, Three kinds of retirement schemes
one believes that and unfavorable 1. Mandated by law: Compulsory and
personal reasons conditions set by the contributory in character
cannot be sacrificed employer. It is 2. CBA and other agreements: Agreement
in favor of the essentially quitting between the employer and the employees
exigency of the or cessation of work 3. Voluntarily given by the employer:
service. It is a formal because continued expressly as in an announced company
pronouncement or employment is policy or impliedly as in a failure to contest
relinquishment of an rendered impossible, the employee's claim for retirement
office, with the unreasonable or benefits. [Gerlach v. Reuters Limited, PH,
intention of unlikely; when there G.R. No. 148542 (2005)]
relinquishing the is a demotion in rank
office accompanied or a diminution of Requisites for Retroactive Application
by the act of pay and other 1. The claimant for retirement benefits was
relinquishment. [Gan benefits. It exists if still in the employ of the employer at the
v. Galderma an act of clear time the statute took effect; and
Philippines, Inc.] discrimination, 2. The claimant had complied with the
insensibility, or requirements for eligibility for such
disdain by an retirement benefits under the statute.
employer becomes [Universal Robina Sugar Milling Corp. v.
so unbearable on Caballeda, G.R. No. 156644 (2008)]
the part of the
employee that it 1. Eligibility and Coverage
could foreclose any
choice by him Who are covered
except to forego his All employees in the private sector, regardless
continued of their position, designation, or status, and
employment. [Gan v. irrespective of the method by which their
Galderma wages are paid [Sec. 1, IRR, RA 7641]
Philippines, Inc.]
Exceptions:
Valid termination of Illegal dismissal 1. Employees covered by the Civil Service
employment by the
Law;
employee. 2. Employees in retail, service and
agricultural establishments or operations
Page 125 of 262

regularly employing not more than ten Employee may still work after retirement
employees [Sec. 2, IRR, RA 7641] Upon retirement of an employee, whether
optional or compulsory, his services may be
Note: Domestic helpers and those in the continued or extended on a case to case basis
personal service of others used to be upon the agreement of the employer and
exempted but such was deleted by D.O. 20 employee. [Sec. 4, IRR, RA 7641]
(1994).
2. Amount of Retirement Pay
When the provisions of RA 7641 apply
RA 7641 only applies in a situation where there Minimum Retirement Pay [Sec. 5, IRR, RA
is: 7641]
a. No CBA or other applicable employment
contract providing for retirement benefits; Minimum Components
OR ½ month salary for “One-half month
b. Retirement benefits provided by CBA or every year of service salary” shall include
other employment contract fall below the all of the following:
requirements set by law. [Oxales v. Unilab, NOTE: a fraction of Fifteen (15) days
G.R. No. 152991 (2008)] at least 6 months salary based on the
shall be considered latest salary rate;
Age of retirement a year
In the absence of a retirement plan or
Cash equivalent of
agreement: “one-half month five (5) days of
a. Compulsory retirement: 65 years old [Sec.
salary” is equivalent service incentive
4, IRR, RA 7641] to 22.5 days. leave;
b. Optional retirement: 60 years or more (but [Capitol Wireless,
below 65) and having served the
Inc. v. Sec. One-twelfth (1/12) of
establishment for at least 5 years. [Sec. 1,
Confessor, G.R. No. the 13th month pay.
IRR, RA 7641]
117174 (1996); (1/12 x 365/12 =
Reyes v. NLRC, .083 x 30.41 = 2.52)
An employer is free to impose a retirement age G.R. No. 160233
less than 65 for as long as it has the (2007)] All other benefits
employees’ consent. [Jaculbe v. Silliman that the employer
University, G.R. No. 156934 (2007)] and employee may
agree upon
For surface mine workers:
a. Compulsory retirement age: 60 years old
b. Optional retirement age is 50 and having Retirement pay under RA 7641 vis-à-vis
served the establishment for at least 5 retirement benefits under SSS and GSIS
years. [Sec. 2, RA 10757] laws
The benefits under RA 7641 are other than
Forfeiture of Benefits those granted by the SSS or the GSIS. [Secs.
Employees dismissed for just cause are not 1 & 2, RA 7641]
entitled to retirement benefits and other
privileges including reinstatement and Retirement Benefits under a CBA or
backwages. To rule otherwise would be to Applicable Contract
reward acts of willful bread of trust by Any EE may retire or be retired by his/her ER
employees. [Sy v. Metropolitan Bank, G.R. No upon reaching the age established in the CBA
160618 (2006)] or other applicable agreement/contract and
shall receive the retirement benefits granted
therein; provided, however, that such
retirement benefits shall not be less than the
Page 126 of 262

retirement pay required under RA 7641, and 5. Non-Taxable

provided further that if such retirement benefits
under the agreement are less, the ER shall pay General Rule: Exempt from all taxes, not liable
the difference. [Art. 302; Sec. 3.2, IRR] to attachment
Where both the ER and the EE contribute to a The retirement benefits received by officials
retirement fund pursuant to the applicable and employees of private firms in accordance
agreement, the ER’s total contributions and the with a reasonable private benefit plan
accrued interest thereof should not be less maintained by the employer:
than the total retirement benefits to which the a. shall be exempt from all taxes and
EE would have been entitled had there been no b. shall not be liable to attachment,
such retirement benefits’ fund. If such total garnishment, levy or seizure by or under
portion from the ER is less, the ER shall pay any legal or equitable process whatsoever.
the deficiency. [Sec. 3.3, IRR, RA 7641] [Sec. 1, RA 4917]
3. Retirement Benefits for Workers Exception: payment of debts

Paid by Results The benefits may be subject of attachment,
garnishment, levy or seizure to cover a debt of
Basis for computation of salary for 15 days the official or employee concerned to the
Average Daily Salary (ADS): The ADS is private benefit plan or that arising from liability
derived by dividing the total salary for the last imposed in a criminal action. [Sec. 1, RA 4917]
12 months reckoned from the date of
retirement by the number of actual working Requirements to Avail of Exemption
days in that particular period, provided that the 1. That the retiring official or employee has
determination of rates of payment by results been in the service of the same employer
are in accordance with established regulations. for at least 10 years
[Sec. 5.3, IRR, RA 7641] 2. He is not less than fifty years of age at the
time of his retirement;
4. Retirement Benefit of Part-Time 3. That the retirement benefits shall be
availed of by an official or employee only
Workers
once [Sec. 1, RA 4917]
Requisites 4. The benefit plan must be approved by the
BIR [Sec. 6, IRR, RA 7641]
Part-time workers are also entitled to
retirement pay of “one-half month salary” for
Coverage of Exemption from Income Tax
every year of service under RA 7641 after
satisfying the following conditions precedent Exempted from taxation are:
a. The retirement benefits received under RA
for optional retirement:
a. There’s no retirement plan between the ER 7641;
b. Those received by officials and employees
and the EE; and,
b. The EE should have reached the age of 60 of private firms, whether individual or
corporate, in accordance with a reasonable
years, and should have rendered at least 5
years of service with the ER. private benefit plan maintained by the
employer [Handbook on Workers’ Statutory
Applying the foregoing principle, the Monetary Benefits, 2018 ed.];
c. Amount received by the official/employee
components of retirement benefit of part-time
workers may likewise be computed at least in or his heirs as a consequence of
separation due to death, sickness, or other
proportion to the salary and related benefits
physical disability or for any cause beyond
due them. [DOLE Handbook on Workers’
Statutory Monetary Benefits, 2018 ed.] the control of the said official or employee.
[Sec. 1, RA 4917]
Page 127 of 262

Reasonable Private Benefit Plan Defined

It refers to a pension, gratuity, stock bonus or
profit-sharing plan:
a. Maintained by an employer for the benefit
of some or all of his officials and
employees,
b. Wherein contributions are made by such
employer or officials and employees, or
both, for the purpose of distributing to such
officials and employees the earnings and
principal of the fund thus accumulated, and
c. Wherein it is provided in said plan that at
no time shall any part of the corpus or
income of the fund be used for, or be
diverted to, any purpose other than for the
exclusive benefit of the said officials and
employees. [Sec. 1, RA 4917; Handbook
on Workers’ Statutory Monetary Benefits,
2018 ed.
Page 128 of 262

LABOR LAW 2
LABOR LAW
Page 129 of 262

American Employees Association, G.R.

V. LABOR RELATIONS No. L-25094 (1969)]
6. Recognition of the tenets of the sect should
not infringe on the basic right of self-
A. RIGHT TO SELF- organization granted by the [C]onstitution
ORGANIZATION to workers, regardless of religious
affiliation. [Kapatiran sa Meat and Canning
Division v. Calleja, G.R. No. 82914 (1988)]
Right to Self-Organization: A Fundamental
Right 1. Who May or May Not Exercise the
Self-organization is a fundamental right
guaranteed by the Philippine Constitution and
Right
the Labor Code. Employees have the right to
a. All employees
form, join or assist labor organizations for the
b. Government employees of corporations
purpose of collective bargaining or for their
created under the Corporation Code
mutual aid and protection. [UST Faculty Union
c. Supervisory Employees
v. Bitonio, G.R. No. 131235 (1999)]
d. Aliens with valid working permits
e. Security personnel
Infringement of the right to self-
organization
(a) All Employees
It shall be unlawful for any person to restrain,
coerce, discriminate against or unduly interfere
All persons employed in commercial, industrial
with employees and workers in their exercise
and agricultural enterprises and in religious,
of the right to self-organization [Art. 257]
charitable, medical or educational institutions,
whether operating for profit or not, shall have
Scope of right to self-organization
the right to self-organization and to form, join or
1. Right to form, join or assist labor
assist labor organizations of their own
organizations of their own choosing for the
choosing for purposes of collective bargaining.
purpose of collective bargaining through
(Presumes an employer-employee
representatives of their own choosing [Art.
relationship)
257];
2. Right to engage in lawful concerted
Ambulant, intermittent and itinerant workers,
activities for the same purpose (collective
self-employed people, rural workers and those
bargaining) or for their mutual aid and
without any definite employers may form labor
protection [Art. 257]
organizations for their mutual aid and
3. The right of any person to join an
protection. [Art. 253]
organization also includes the right to leave
that organization and join another one.
Any employee, whether employed for a definite
[Heritage Hotel Manila v. PIGLAS-
period or not, shall, beginning on his first day of
Heritage, G.R. No. 177024 (2009)]
service, be considered an employee for
4. The right to form or join a labor organization
purposes of membership in any labor union.
necessarily includes the right to refuse or
[Art. 292(c)]
refrain from exercising said right. [Reyes v.
Trajano, G.R. No. 84433 (1992)]
Employee […] shall include any individual
5. The freedom to form organizations would
whose work has ceased as a result of or in
be rendered nugatory if they could not
connection with any current labor dispute or
choose their own leaders to speak on their
because of any unfair labor practice if he has
behalf and to bargain for them. [Pan-
not obtained any other substantially equivalent
American World Airways, Inc v. Pan-
and regular employment. [Art. 219(f)]
Page 130 of 262

Employees of non-profit organizations are now (d) Aliens with valid working permits
permitted to form, organize or join labor unions
of their choice for purposes of collective General Rule: All aliens, natural or juridical,
bargaining [FEU-Dr. Nicanor Reyes Medical […] are strictly prohibited from engaging
Foundation Inc. v. Trajano, G.R. No. 76273 directly or indirectly in all forms of trade union
(1987)] activities. [Art. 284]
(b) Government employees of corporations Exception: Aliens may exercise the right to
created under the Corporation Code self-organization and join or assist labor unions
for purposes of collective bargaining, provided
The right to self-organization shall not be the following requisites are fulfilled:
denied to government employees. [Sec. 2(5), 1. With valid working permits issued by the
Art. IX-B, Constitution] DOLE; and
2. They are nationals of a country which
Employees of government corporations grants the same or similar rights to Filipino
established under the Corporation Code shall workers [Art. 284]
have the right to organize and to bargain a. As certified by DFA; OR
collectively with their respective employers b. Has ratified either ILO Conventions No.
87 and 98 [Sec. 2, Rule II, Book V, IRR]
All other employees in the civil service shall
have the right to form associations for (e) Security personnel
purposes not contrary to law. [Art. 254]
The security guards and other personnel
All government employees can form, join or employed by the security service contractor
assist employees’ organizations of their own shall have the right:
choosing for the furtherance and protection of 1. To form, join, or assist in the formation of a
their interests. They can also form, in labor organization of their own choosing for
conjunction with appropriate government purposes of collective bargaining and
authorities, labor-management committees, 2. To engage in concerted activities which are
work councils and other forms of workers’ not contrary to law including the right to
participation schemes to achieve the same strike. [D.O. No. 14 Series of 2001
objectives. [E.O. 180, Sec. 2 (1987)] (Guidelines Governing the Employment
and Working Conditions of Security Guards
(c) Supervisory Employees and Similar Personnel in the Private
Security Industry)]
Supervisory employees are those who, in the
interest of the employer, effectively On Dec. 24, 1986, President C. Aquino issued
recommend such managerial actions if the EO No. 111 which eliminated the provision
exercise of such authority is not merely which made security guards ineligible to join
routinary or clerical in nature but requires the any labor organization. In 1989, Congress
use of independent judgment. [Art. 219(m)] passed RA 6715 which also did not impose
limitations on the ability of security guards to
What is essential is the nature of the join labor organizations. Thus, security guards
employee’s function and not the nomenclature “may now freely join a labor organization of the
or title given to the job which determines rank-and-file or that of the supervisory union,
whether the employee has rank-and-file or depending on their rank.” [Manila Electric Co.
managerial status or whether he is a v. SOLE, G.R. No. 91902 (1991)]
supervisory employee. [Tagaytay Highlands
International Golf Club, Inc. v. Tagaytay
Highlands Employees Union-PTGWO, G.R.
142000 (2003)]
Page 131 of 262

Ineligibility of Managerial Employees; a. Doctrine of Necessary

Rights of Supervisory Employees Implication
Managerial employees are not eligible to join, While Art. 245 [now 255] of the Labor Code
assist or form any labor organization. [Art. 255] singles out managerial employees as ineligible
to join, assist or form any labor organization,
Supervisory employees shall not be eligible for under the doctrine of necessary implication,
membership in the collective bargaining unit of confidential employees are similarly
the rank-and-file employees but may join, disqualified. This doctrine states that what is
assist or form separate collective bargaining implied in a statute is as much a part thereof as
units and/or legitimate labor organizations of that which is expressed. [Metrolab Industries
their own. The rank and file union and the Inc. v. Roldan-Confessor, G.R. No. 108855
supervisors' union operating within the same (1996)]
establishment may join the same federation or
national union. Nature of Access Test
Confidential employees, by the nature of their
Rationale: Supervisory employees, while in functions, assist and act in a confidential
the performance of supervisory functions, capacity to, or have access to confidential
become the alter ego of the management in the matters of, persons who exercise managerial
making and the implementing of key decisions functions in the field of labor relations.
at the sub-managerial level. Certainly, it would
be difficult to find unity or mutuality of interests Requisites
in a bargaining unit consisting of a mixture of 1. The confidential relationship must exist
rank-and-file and supervisory employees. between the employees and his
[Toyota Motor Phil. Corp. v. Toyota Motor Phil. supervisor, and
Corp. Labor Union, G.R. No. 121084 (1997)] 2. The supervisor must handle the prescribed
responsibilities relating to labor relations.
Supervisor and Rank and File Union [San Miguel Supervisors and Exempt
Affiliation Union v. Laguesma, G.R. No. 110399
The rank and file union and the supervisors’ (1997)]
union operating within the same establishment
may join the same federation or national union. Function Test: Nomenclature is not
[Art. 255] controlling
The mere fact that an employee is designated
Note also: Prior to the enactment of RA 9481, “manager” does not ipso facto make him one.
which inserted a new provision [Art. 245-A, Designation should be reconciled with the
now Art. 256], the Court held in De La Salle actual job description of the employee. [Paper
University v. Laguesma that a local Industries Corp. of the Philippines. v.
supervisors’ union is not allowed to affiliate with Laguesma, G. R. No.101738 (2000)]
a national federation of unions of rank and file
employees only where two conditions concur: Confidential information: Must relate to
1. The rank-and-file employees are directly labor relations and not from a business
under the authority of supervisory standpoint
employees An employee must assist or act in a confidential
2. The national federation is actively involved capacity and obtain confidential information
in union activities in the company. [De La relating to labor relations policies. Exposure to
Salle University Medical Center and internal business operations of the company is
College of Medicine v. Laguesma, G.R. No. not per se a ground for the exclusion in the
102084 (1998)] bargaining unit. [Coca-Cola Bottlers v. IPTEU,
G.R. No. 193798 (2015)]
Page 132 of 262

Rationale of Exclusion of Confidential Irrespective of the degree of their participation

Employees in the actual management of the cooperative,
If confidential employees could unionize in all members thereof cannot form, assist or join
order to bargain for advantages for a labor organization for the purpose of
themselves, then they could be governed by collective bargaining. [Benguet Electric
their own motives rather than the interest of the Cooperative v. Ferrer-Calleja, G.R. No. 79025
employers. (1989)]
Moreover, unionization of confidential Exception: Employees who withdrew their

employees for the purpose of collective membership from the cooperative are entitled
bargaining would mean the extension of the to form or join a labor union for the negotiations
law to persons or individuals who are supposed of a Collective Bargaining Agreement. [Central
to act in the interest of the employers. It is not Negros Electric Cooperative, Inc. v. DOLE,
far-fetched that in the course of collective G.R. No. 94045 (1991)]
bargaining, they might jeopardize that interest
which they are duty bound to protect. [Metrolab (c) Employees of International
Industries Inc. v. Roldan-Confessor, G.R. No. Organizations
108855 (1996)]
International organizations are endowed with
Other People Who Cannot Form, Join or some degree of international legal personality.
Assist Labor Organizations They are granted jurisdictional immunity, as
provided in their organization’s constitutions, to
(a) New Employees safeguard them from the disruption of their
functions.
[Persons who] are not employees of [a
company] are not entitled to the constitutional Immunity […] is granted to avoid interference
right to join or form a labor organization for by the host country in their internal workings.
purposes of collective bargaining. […] The The determination [by the executive branch]
question of whether employer-employee has been held to be a political question
relationship exists is a primordial consideration conclusive upon the Courts in order not to
before extending labor benefits under the embarrass a political department of
workmen's compensation, social security, Government. [Hence], a certification election
Medicare, termination pay and labor relations cannot be conducted in an international
law. [Singer Sewing Machine Co. v. Drilon, organization to which the Philippine
G.R. No. 91307, 1991] Government has granted immunity from local
jurisdiction. [International Catholic Migration
But employees of the contractor can still form a Commission v. Calleja, G.R. No. 85750 (1990)]
labor union; the labor union can be established
to bargain with the contractor but not with the (d) Members of the AFP, Policemen, Police
principal employer. [Prof. Battad] Officers, Firemen, and Jail Guards
(b) Employee-member of a Cooperative Members of the AFP, Policemen, Police

Officers, Firemen and Jail Guards are
General Rule: An employee of a cooperative expressly excluded by EO 180, Sec. 4 from the
who is a member and co-owner thereof cannot coverage of the EO 180 which provides
invoke the right to collective bargaining for guidelines for the exercise of the right to
certainly an owner cannot bargain with himself organize of government employees.
or his co-owners. [Batangas-I Electric
Cooperative Labor Union v. Romeo A. Young, SUMMARY - Who Cannot Form, Join or
G.R. No. 62386 (1988)] Assist Labor Organizations
a. Managerial employees
Page 133 of 262

b. Confidential employees oppressive fine and forfeiture be imposed. [Art.

c. Non-employees 250(e)]
d. Member-employee of a cooperative
e. Employees of international organizations Prohibition on subversive activities or
f. High-level government employees membership
g. Members of the AFP, police officers, No labor organization shall knowingly admit as
policemen, firemen and jail guards members or continue in membership any
individual who:
2. Commingling or Mixture of 1. Belongs to a subversive organization; or
Membership 2. Who is engaged directly or indirectly in any
subversive activity;
Effect of Inclusion of Employees Outside
the Bargaining Unit or Commingling Unions cannot arbitrarily exclude qualified
General Rule: It shall not be a ground for the applicants
cancellation of the registration of the union. Unions are not entitled to arbitrarily exclude
Said employees are automatically deemed qualified applicants for membership, and a
removed from the list of membership of said closedshop provision would not justify the
union. [Art. 256] employer in discharging, or a union in insisting
upon the discharge of, an employee whom the
Exception: Unless such mingling was brought union thus refuses to admit to membership,
about by misrepresentation, false statement or without any reasonable ground therefor.
fraud under Art. 247 (Grounds for cancellation Needless to say, if said unions may be
of Union Registration) of the Labor Code. compelled to admit new members, who have
[SMCC-Super v. Charter Chemical and the requisite qualifications, with more reason
Coating Corporation, G.R. No. 169717 (2011)] may the law and the courts exercise the
coercive power when the employee involved is
a long-standing union member, who, owing to
3. Rights and Conditions of provocations of union officers, was impelled to
tender his resignation which he forthwith
Membership withdrew or revoked. [Salunga v. CIR, G.R.
No. L-22456 (1967)]
a. Nature of Relationship
Members who seek destruction of union
i. Member-Labor Union lose right to remain as members
Inherent in every labor union, or any
The nature of the relationship between the organization for that matter, is the right of self-
union and its members is fiduciary in nature,
preservation. When members of a labor union,
which arises from the dependence of the therefore, sow the seeds of dissension and
employee on the union, and from the
strife within the union; when they seek the
comprehensive power vested in the union with disintegration and destruction of the very union
respect to the individual. The union may be
to which they belong, they thereby forfeit their
considered but the agent of its members for the rights to remain as members of the union which
purpose of securing for them fair and just
they seek to destroy. [Villar v. Inciong, G.R. No.
wages and good working conditions. [Heirs of L-50283-84 (1983)]
Cruz v. CIR, G.R. No. L-23331-32 (1969)]
ii. Labor Union-Federation
Admission and Discipline of Members
No arbitrary or excessive initiation fees or fines.
Local unions do not owe their creation and
No arbitrary or excessive initiation fees shall be existence to the national federation to which
required of the members of a legitimate labor
they are affiliated but, instead, to the will of their
organization nor shall arbitrary, excessive or members, […] The local unions remain the
Page 134 of 262

basic units of association, free to serve their

own interests subject to the restraints imposed The chapter shall be entitled to all other rights
by the constitution and by-laws of the national and privileges of a legitimate labor organization
federation, and free also to renounce the only upon the submission of the following
affiliation upon the terms laid down in the documents in addition to its charter certificate:
agreement which brought such affiliation into 1. The names of the chapter's officers, their
existence. [Philippine Skylanders, Inc. v. addresses, and the principal office of the
NLRC, G.R. No. 127374 (2002)] chapter; and
2. The chapter's constitution and by-laws:
Union Chartering Provided, That where the chapter's
Affiliate constitution and by-laws are the same as
An independent union affiliated with a that of the federation or the national union,
federated, national union or a chartered local this fact shall be indicated accordingly.
which was subsequently granted independent
registration but did not disaffiliate from its The additional supporting requirements shall
federation, reported to the Regional Office and be:
the Bureau in accordance with Rule III, Secs. 6 1. Certified under oath by:
and 7 [Sec. 1(b), Rule I, Book V, IRR] a. Secretary; or
b. Treasurer
Independent Union 2. Attested by: Its president [Art. 241]
A labor organization operating at the enterprise
level that acquired legal personality through Lesser requirements for Chartered locals
independent registration under Art. 234 of the The intent of the law in imposing less
Labor Code and Rule III, Sec. 2-A [Sec. 1(x), requirements in the case of a branch or local of
Rule I, Book V] a registered federation or national union is to
encourage the affiliation of a local union with a
National Union or Federation federation or national union in order to increase
A group of legitimate labor unions in a private the local unions’ bargaining powers respecting
establishment organized for collective terms and conditions of labor. [SMCEU-
bargaining or for dealing with employers PTGWO v. SMPEU-PDMP, G.R. No. 171153
concerning terms and conditions of (2007)]
employment for their member union or for
participating in the formulation of social and Trade Union Centers cannot create locals
employment policies, standards and programs, or chapters
registered with the BLR in accordance with Art. 241 mentions only “a duly registered
Rule III Sec. 2-B [Sec. 1(ll), Rule I, Book V, federation or national union.”
IRR]
The solemn power and duty of the Court to
Chartered Local (Local Chapter) interpret and apply the law does not include the
A labor organization in the private sector power to correct by reading into the law what is
operating at the enterprise level that acquired not written therein. [SMCEU-PTGWO v.
legal personality through registration with SMPEU-PDMP, G.R. No. 171153 (2007)]
Regional Office [Sec. 1(j), Rule I, Book V, IRR]
National Union or Federation v. Trade
A duly registered federation or national union Unions
may directly create a local chapter by issuing a National Union or
Trade Unions
charter certificate indicating the establishment Federation
of the local chapter. The chapter shall acquire With at least ten Composed of a
legal personality only for purposes of filing a (10) locals or group of registered
petition for certification election from the date it chapters (or national unions or
was issued a charter certificate. independent unions federations
Page 135 of 262

[Sec. 2-B(5), Rule Mere affiliation does not divest the local union
III, Book V, IRR], of its own personality, neither does it give the
each of which must mother federation the license to act
be a duly independently of the local union. It only gives
recognized rise to a contract of agency, where the former
collective bargaining acts in representation of the latter. Hence, local
agent [Art. 244] unions are considered principals while the
Can directly create Cannot directly federation is deemed to be merely their agent.
local chapter [Art. create local chapter [Insular Hotel Employees Union NFL v.
241] [SMCEU-PTGWO v. Waterfront Insular Hotel, G.R. No. 174040-41
SMPEU-PDMP, (2010)]
G.R. No. 171153
(2007)]
(a) Disaffiliation
Purpose of Affiliation
To foster the free and voluntary organization of In the absence of specific provisions in the
a strong and united labor movement [Art. 218- federation’s constitution prohibiting
A(c)] disaffiliation or the declaration of autonomy of
a local union, a local may dissociate with its
The sole essence of affiliation is to increase, by parent union. [Malayang Manggagawa sa M.
collective action, the common bargaining Greenfield v. Ramos, G.R. No. 113907 (2000)]
power of local unions for the effective
enhancement and protection of their interests. Local unions have the right to separate from
Admittedly, there are times when without their mother federation on the ground that as
succor and support local unions may find it separate and voluntary associations, local
hard, unaided by other support groups, to unions do not owe their creation and existence
secure justice for themselves. [Philippine to the national federation to which they are
Skylanders, Inc. v. NLRC, G.R. No. 127374 affiliated but, instead, to the will of their
(2002)] members. [Philippine Skylanders, Inc. v.
NLRC, G.R. No. 127374 (2002)]
Nature of Relationship: Agency
The mother union, acting for and on behalf of A local union is free to serve the interests of all
its affiliate, had the status of an agent while the its members, including the freedom to
local union remained the basic unit of the disaffiliate or declare its autonomy from the
association, free to serve the common interest federation to which it belongs when
of all its members subject only to the restraints circumstances warrant, in accordance with the
imposed by the constitution and by-laws of the constitutional guarantee of freedom of
association. [...] The same is true even if the association. [Malayang Samahan ng mga
local is not a legitimate labor organization. Manggagawa sa M. Greenfield, Inc. v. Ramos,
[Filipino Pipe and Foundry Corp v. NLRC, G.R. G.R. No. 113907 (2000)]
No. 115180 (1998)]
Period of Disaffiliation
Effect of Affiliation Generally, a labor union may disaffiliate from
Inclusion of [the federation’s initials] in the the mother union to form a local or independent
registration is merely to stress that they are its union only during the 60-day freedom period
affiliates at the time of registration. It does not immediately preceding the expiration of the
mean that said local unions cannot stand on CBA. However, even before the onset of the
their own. [Adamson v. CIR, G.R. No. L-35120 freedom period, disaffiliation may be carried
(1984)] out when there is a shift of allegiance on the
part of the majority of the members of the
union. [Alliance of Nationalist and Genuine
Page 136 of 262

Labor Organization v. Samahan ng mga The “substitutionary” doctrine provides that the
Manggagawang Nagkakaisa sa Manila Bay employees cannot revoke the validly executed
Spinning Mills, G.R. No. 118562 (1996)] collective bargaining contract with their
employer by the simple expedient of changing
[A] local union which has affiliated itself with a their bargaining agent.
federation is free to sever such affiliation
anytime and such disaffiliation cannot be It is in the light of this that the phrase “said new
considered disloyalty. [Malayang Manggagawa agent would have to respect said contract”
sa M. Greenfield v. Ramos, G.R. No. 113907 must be understood. It only means that the
(2000)] employees, thru their new bargaining agent,
cannot renege on their collective bargaining
Effect of Disaffiliation contract, except of course to negotiate with
On legal personality management for the shortening thereof.
A registered independent union retains its legal [Benguet Consolidated v. BCI Employees and
personality while a chartered local loses its Workers Union-PAFLU, G.R. No. L-24711
legal personality unless it registers itself. (1968)]
No effect on CBA Conditions to apply the doctrine

A disaffiliation does not disturb the 1. Change of bargaining agent (through
enforceability and administration of a collective affiliation, disaffiliation, or other means);
agreement; it does not occasion a change of and
administrators of the contract nor even an 2. Existing CBA with the previous bargaining
amendment of the provisions thereof. agent [Benguet Consolidated v. BCI
[Volkschel Labor Union v. BLR, No. L-45824 Employees and Workers Union-PAFLU,
(1985)] G.R. No. L-24711 (1998)]
Obligation to pay union dues is Effects

coterminous with membership 1. New bargaining agent cannot revoke and
“The employees’ check-off authorization, even must respect the existing CBA; and
if declared irrevocable, is good only as long as 2. It may negotiate with management to
they remain members of the union concerned”. shorten the existing CBA’s lifetime.
A contract between an employer and the
parent organization as bargaining agent for the
employees is terminated by the disaffiliation of B. BARGAINING UNIT
the local of which the employees are members.
[Volkschel Labor Union v. BLR, No. L-45824
(1985)] Definition
“Bargaining Unit” refers to a group of
Power to represent principal severed employees sharing mutual interests within a
By [the local union’s disaffiliation from the given employer unit, comprised of all or less
federation], the vinculum that previously bound than all of the entire body of employees in the
the two entities was completely severed. [The employer unit or any specific occupational or
federation] was divested of any and all power geographical grouping within such employer
to act in representation of the union. Thus, any unit. [Sec. 1(e), Rule I, Book V, IRR]
act performed by [the federation] affecting the
interests and affairs of the [local union] is It is a group of employees of a given employer,
rendered without force and effect. [ANGLO v. comprised of all or less than all of the entire
Samana, G.R. No. 118562 (1996)] body of employees, which the collective
interests of all the employees indicate to be
(b) Substitutionary Doctrine best suited to serve reciprocal rights and duties
of the parties consistent with equity to the
Page 137 of 262

employer. [Belyca Corp. v. Calleja, G.R. No. University v. DLSU Employees Association EA,
77395 (1988) citing Rothenberg] G.R. No. 109002, (2000)]
Functions of an Appropriate Bargaining Rationale

Unit A prior agreement as to the exclusion of
1. An ELECTORAL DISTRICT. – It marks the monthly-paid rank-and-file employees from the
boundaries of those who may participate in bargaining union of the daily-paid rank-and-file
a certification election. can never bind subsequent federations and
2. An ECONOMIC UNIT. – They are a group unions. as employees were not privy to that
of employees with community of interests. agreement. And even if [they were privy, it can
3. A SOVEREIGN BODY. – It selects the sole never bind subsequent federations and unions
and exclusive bargaining agent. because it is a curtailment of the right to self-
organization guaranteed by the labor laws
Role of a bargaining unit [General Rubber & Footwear Corp. v. BLR,
The labor organization designated or selected G.R. No. 74262 (1987)]
by the majority of the employees in an
appropriate collective bargaining unit shall be Corporate Entities
the exclusive representative of the employees General Rule: Two companies having
in such unit for the purpose of collective separate juridical personalities shall NOT be
bargaining. [Art. 267] treated as a single bargaining unit. [Diatagon
Labor Federation Local v. Ople, G.R. No. L-
Right of individual or group of employees to 44493-94 (1980)]
present grievances
An individual employee or group of employees Exception: Pervasive Unitary Aspect of
shall have the right at any time to present Management Doctrine
grievances to their employer. [Art. 267] The cross-linking of the agencies’ command,
control, and communication systems indicate
CBA Coverage their unitary corporate personality. Accordingly,
It is a well-settled doctrine that the benefits of a the veil of corporate fiction [...] should be lifted
collective bargaining agreement extend to the for the purpose of allowing the employees of
laborers and employees in the collective the three agencies to form a single labor union.
bargaining unit, including those who do not A settled formulation of the doctrine of piercing
belong to the chosen bargaining labor the corporate veil is that when two business
organization. [Mactan Workers Union v. enterprises are owned, conducted, and
Aboitiz, G.R. No. L-30241 (1972)] controlled by the same parties, both law and
equity will, when necessary to protect the rights
Note: An employee employed, whether for a of third parties, disregard the legal fiction that
definite period is not, is an EE for purposes of these two entities are distinct and treat them as
joining a union [Art. 292(c)]. But, whether or not identical or as one and the same. [Ang Lee v.
a union member, an EE part of the CBU is Samahang Manggagawa ng Super
entitled to CBA benefits unless excluded under Lamination, G.R. No. 193816 (2016)]
the CBA.
Determining whether or not to establish
Effect of Prior Agreement separate bargaining units
A prior CBA excluding a group of employees The fact that the businesses are related, that
from the bargaining unit of rank-and-file some of the employees are the same persons
employees does not bar the parties from working in the other company and the physical
renewing the existing CBA and proposing and plants, offices and facilities are in the same
discussing modifications or amendments compound are NOT sufficient to justify piercing
thereto during the freedom period. [De La Salle the corporate veil. [Indophil Textile Mills
Page 138 of 262

Workers Union v. Calica, G.R. No. 96490 the several categories to select the group
(1992)] which each chooses as a bargaining unit.
[Kapisanan ng mga Manggagawa sa Manila
Spun-off corporations Road Co. v. Yard Crew Union, G.R. Nos. L-
The transformation of the companies is a 16292-94 (1960)]
management prerogative and business
judgment which the courts cannot look into Rationale: Highly skilled or specialized
unless it is contrary to law, public policy or technical workers may choose to form their
morals. [...] Considering the spin-offs, the own bargaining unit because they may be in
companies would consequently have their better position to bargain with the employer
respective and distinctive concerns in terms of considering the market value of their skills.
the nature of work, wages, hours of work and
other conditions of employment. [...] The nature Community or Mutuality of Interests
of their products and scales of business may The basic test in determining the appropriate
require different skills, volumes of work, and bargaining unit is that a unit, to be appropriate,
working conditions which must necessarily be must affect a grouping of employees who have
commensurate by different compensation substantial, mutual interests in wages, hours,
packages. [San Miguel Union v. Confesor, working conditions, and other subjects of
G.R. No. 111262 (1996)] collective bargaining. [UP v. Ferrer-Calleja,
G.R. No. 96189, (1992)]
TEST TO DETERMINE THE CONSTITUENCY
OF AN APPROPRIATE BARGAINING UNIT – Rationale: There are greater chances of
4 Factors: success for the collective bargaining process.
1. Will of the Employees (Globe Doctrine) The bargaining unit is designed to maintain the
2. Affinity and unity of employees’ interest mutuality of interest among the employees in
(Substantial Mutual Interests Rule) such unit.
3. Prior collective bargaining history
4. Employment status [Democratic Labor When the interest between groups has
Association v. Cebu Stevedoring Co. Inc, changed over time, there is reason to dissolve,
G.R. No. L-10321 (1958); University of the change or expand a certain bargaining unit.
Philippines v. Ferrer-Calleja, G.R. No.
96189 (1992)] Prior Collective Bargaining History
The existence of a prior collective bargaining
Note: Where the employment status was not at history is neither decisive nor conclusive in the
issue but the nature of work of the employees determination of what constitutes an
concerned; the Court stressed the importance appropriate bargaining unit. [Sta. Lucia East
of the 2nd factor. [Belyca Corp. v. Calleja, G.R. Commercial Corporation v. SOLE, G.R. No.
No. 77395 (1988)] 162355 (2009)]
Other factors: Employment Status

1. Geography and Location Among the factors to be considered [is the]
2. Policy of avoiding fragmentation of the employment status of the employees to be
bargaining unit affected [regular, casual, seasonal,
probationary, etc.], that is the positions and
Globe Doctrine categories of work to which they belong [....]
A practice designated as the “Globe doctrine,” [Belyca Corp. v. Calleja, G.R. No. 77395
sanctions the holding of a series of elections, (1988)]
not for the purpose of allowing the group
receiving an overall majority of votes to Geography and Location
represent all employees, but for the specific Geography and location only play a significant
purpose of permitting the employees in each of role if:
Page 139 of 262

a. The separation between the camps [...] and

the different kinds of work in each [...] all
militate in favor of the system of separate C. BARGAINING
bargaining units; REPRESENTATIVE
b. [When] the problems and interests of the
workers are peculiar in each camp or The labor organization designated or selected
department; by the majority of the employees in an
c. The system of having one collective appropriate collective bargaining unit shall be
bargaining unit in each camp [...] [has the exclusive representative of the employees
operated satisfactorily in the past.] in such unit for the purpose of collective
[Benguet Consolidated Inc. and Balatok bargaining. [Art. 267]
Mining Co. v. Bobok Lumberjack
Association, G.R. No. L-11029 (1958)] Labor Management Council
Any provision of law to the contrary
Policy of Avoiding Fragmentation of the notwithstanding, workers shall have the right:
Bargaining Unit a. To participate in policy and decision-
It bears noting that the goal of the DOLE is making processes of the establishment
[geared] towards “a single employer wide unit where they are employed insofar as said
which is more to the broader and greater processes will directly affect their rights,
benefit of the employees working force.” benefits and welfare.
b. To form labor-management councils, for
The philosophy is to avoid fragmentation of the this purpose [Art. 267]
bargaining unit so as to strengthen the
employees’ bargaining power with the Selection of Representatives
management. To veer away from such goal In organized establishments,
would be contrary, inimical and repugnant to • the workers’ representatives to the council
the objectives of a strong and dynamic
shall be nominated by the exclusive
unionism. [Phil. Diamond Hotel and Resort Inc
bargaining representative.
v. Manila Diamond Hotel and Employees In establishments where no legitimate labor
Union, G.R. No. 158075 (2006)] organization exists,
• the workers representative shall be elected
Confidential employees lumped with
directly by the employees at large. [Sec. 2,
management
Rule XXI, Book V, IRR]
Since the confidential employees are very few
in number and are, by practice and tradition,
Qualification of Voters
identified with the supervisors in their role as
Eligible Voter
representatives of management, such identity
Eligible voter refers to a voter belonging to the
of interest has allowed their inclusion in the
appropriate bargaining unit that is the subject
bargaining unit of supervisors-managers for
of the petition for certification election [Sec.
purposes of collective bargaining in turn as
1(q), Rule VIII, Book V, IRR]
employees in relation to the company as their
employer. [Filoil Refinery Corp. v. Filoil
All employees who are members of the
Supervisory and Confidential Employees
appropriate bargaining unit three (3) months
Union, G.R. No. L-26736 (1972)]
prior to the filing of the petition shall be eligible
to vote. [Sec. 6, Rule IX, Book V, IRR]
Note: Rule VIII, Sec. 14 (f) and Rule IX, Sec. 6

refer to employees as those employed 3
months prior to the issuance of the order/the
filing of the petition for certification election
Page 140 of 262

while Rule IX, Sec. 2 reckon the period of Non-participation in previous election has
employment from the “time of filing the no effect
petition”. This difference has not been resolved [Failure to take part in previous elections is no
in any case before the Supreme Court. bar to the right to participate in future elections.]
No law, administrative rule or precedent
All rank and file employees in the appropriate prescribes forfeiture of the right to vote by
bargaining unit, whether probationary or reason of neglect to exercise the right in past
permanent are entitled to vote. The Code certification elections. [Reyes v. Trajano, G.R.
makes no distinction as to their employment No. 84433 (1992)]
status. [...] All they need to be eligible to
support the petition is to belong to a bargaining 1. Determination of Representation
unit. [Airtime Specialists, Inc. v. Ferrer-Calleja, Status
G.R. No. 80612-16 (1990)]
Methods of Establishing Majority Status
Rationale for Non-Distinction Policy a. Sole and Exclusive Bargaining Agent
Collective bargaining covers all aspects of the (SEBA) Certification
employment relation and the resultant CBA b. Consent Election
binds all employees in the bargaining unit. All c. Certification Election
rank and file employees, probationary or d. Run-Off Election
permanent, have a substantial interest in the e. Re-Run election
selection of the bargaining representative.
[Airtime Specialists, Inc. v Ferrer-Calleja, Note: D.O. No. 40-I-15 replaced Voluntary
supra.] Recognition with SEBA certification, as of
September 7, 2015.
Dismissed employees [Sec. 6, Rule IX, Book
V, IRR] a. SEBA Certification
General Rule: [Dismissed] employees [who]
contested legality of the dismissal in a forum of PROCEDURE [RULE VII, BOOK V, IRR]
appropriate jurisdiction at the time of the 1. File Request for SEBA Certification [Sec.
issuance of the order for conduct of a 1]
certification election
Who: Any legitimate labor organization
Exception: Dismissal was declared valid in a
final judgment at the time of the conduct of the File where: Regional Office which issued
certification election. its certificate of registration or certificate of
creation of chartered local
Disagreement over voters’ list over
eligibility of voters 2. Indicate in the request [Sec. 2]:
All contested voters shall be allowed to vote a. Name and address of the requesting
[but] their votes shall be segregated and sealed legitimate labor organization;
in individual envelopes. [Sec. 6, Rule IX, Book b. Name and address of the company
V, IRR] where it operates;
c. Bargaining unit sought to be
Voting List and Voters represented;
The basis of determining voters may be agreed d. Approximate number of employees in
upon by the parties (i.e. the use of payroll). the bargaining unit; and
[Acoje Workers Union v. NAMAWU, G.R. No. e. Statement of the existence/non-
L-18848 (1963)] existence of other labor
organization/CBA.
Page 141 of 262

certification shall be referred to the election

Certificate of Duly Certified by
officer for the conduct of election pursuant
Registration President of to Rule IX of this rules.
requesting union
Note: If there is more than one Legitimate
Creation of chartered President of the Labor Organization, Art. 269 applies
local local federation of
the local If Organized Establishment [Sec. 6]
If the Regional Director finds the establishment
organized he/she shall refer it to the mediator-
Both certificates should be attached to the
arbitrator for determination and propriety of
request
conducting a certification election.
3. Regional Director shall act on the request
4. Regional Director shall act on the
[Sec. 3]
submission [Sec. 4.1]
When: Within one (1) day from submission
of request Incomplete The request shall be
requirements referred to Election Officer
Action: for the conduct of election
a. Determine whether request is pursuant to Rule IX.
compliant with Sec. 2 and whether the
bargaining unit sought to be Complete Regional Director shall
represented is organized or not; and requirements issue a certification as
b. Request a copy of the payroll SEBA
If the Regional Director finds it deficient, 5. Regional Director shall post the SEBA
he/she shall advise the requesting union or Certification [Sec. 4.1]
local to comply within ten (10) days from
notice. Failure to comply within the Period: Fifteen (15) consecutive days
prescribed period shall be deemed
withdrawal of the request. Where: At least two (2) conspicuous
places in the establishment or covered
If Unorganized Establishment [Sec. 4] bargaining unit.
a. Finding of only 1 legitimate labor
organization – Regional Director shall call EFFECT OF SEBA CERTIFICATION [Sec.
a conference within five (5) working days 4.2]
for the SUBMISSION of: Upon the issuance of the [SEBA Certification],
1. Names of employees in the covered the certified union or local shall enjoy all the
bargaining unit who signify support for rights and privileges of an exclusive bargaining
certification; [and these] employees agent of all the employees in the covered
comprise at least majority of the bargaining unit.
number of employees in the covered
bargaining unit; and The certification shall bar the filing of a [PCE]
2. Certification under oath by the by any labor organization for a period of one (1)
president of the requesting union or year from the date of its issuance.
local that all documents submitted are
true and correct based on personal Upon expiration of this one-year period, any
knowledge legitimate labor organization may file a [PCE]
b. Failure to Complete Requirements for in the same bargaining unit represented by the
SEBA Certification - the request for SEBA certified labor organization, unless a [CBA]
Page 142 of 262

between the employer and the certified labor organization. [Reyes v. Trajano, G.R. No.
organization was executed and registered with 84433 (1992)]
the Regional Office in accordance with Rule
XVII. BARS TO A CERTIFICATE ELECTION
Petition for certification may be filed:
b. Consent Election General Rule: Anytime
Exceptions:
Consent Election means the election 1. One-year bar rule
voluntarily agreed upon by the parties with or 2. Negotiation bar rule
without the intervention by DOLE [Sec. 1(i), 3. Deadlock bar rule
Rule I, Book V, IRR] 4. Contract bar rule
Procedure [Sec. 11, Rule VIII, Book V, IRR] See Grounds for denying a Petition for
1. The parties may agree to hold a consent Certification Election
election
a. Where no petition for certification (1) One-Year Bar Rule
election was filed; or
b. Where a petition for certification No certification election may be held within 1
election had been filed, and upon the year from the time a valid certification, consent
intercession of Med-Arbiter [Sec. 25, or run-off election has been conducted within
Rule VIII, Book V, IRR] the bargaining unit.
2. Mediator-Arbiter shall call for the consent
election, reflecting the parties’ agreement [If the order of the Med-Arbiter certifying the
and the call in the minutes of the results of the election has been appealed], the
conference. Regional Director or running of the one-year period shall be
authorized representative shall determine suspended until the decision on the appeal
the Election Officer by raffle in the becomes final and executory. [Sec. 3(a), Rule
presence of representatives of the VIII, Book V]
contending unions if they so desire
3. First pre-election conference is scheduled Note: This bar also applies to a SEBA
within ten (10) days from the date of the Certification under Rule VII. “The certification
agreement. Subsequent conferences may shall bar the filing of a petition for certification
be called to expedite and facilitate the election by any labor organization for a period
holding of the consent election. of one (1) year from the date of its issuance.”
[Sec. 4.2, Rule VII, Book V, IRR]
c. Certification Election
(2) Negotiation Bar Rule
Certification Election is the process of
determining, through secret ballot, the sole and No certification of election may be filed when:
exclusive representative of the employees in 1. Within 1 year after the valid certification
an appropriate bargaining unit for purposes of election
collective bargaining or negotiation. [Sec. 1(i), 2. The DULY CERTIFIED union has
Rule I, Book V, IRR] COMMENCED AND SUSTAINED
negotiations in good faith with the employer
PURPOSE 3. In accordance with Art. 261 of the Labor
The purpose of a certification election is Code Sec. 3(b), Rule VIII, Book V
precisely the ascertainment of the wishes of
the majority of the employees in the
appropriate bargaining unit: to be or not to be
represented by a labor organization, and in the
affirmative case, by which particular labor
Page 143 of 262

(3) Deadlock Bar Rule The five-year representation status acquired by

an incumbent bargaining agent either through
No certification of election may be filed when: single enterprise collective bargaining or multi-
1. The incumbent or certified bargaining employer bargaining shall not be affected by a
agent is a party; subsequent [CBA] executed between the same
2. A bargaining deadlock had been: bargaining agent and the employer during the
a. Submitted to conciliation or arbitration same five-year period. [Sec. 7, Rule XVII, Book
or; V, IRR]
b. Had become the subject of a valid
notice of strike or lockout [Sec. 3(c), Despite an agreement for a CBA with a life of
Rule VIII, Book V, IRR] more than five years, either as an original
provision or by amendment, the bargaining
A “deadlock” is defined as the “counteraction of union’s exclusive bargaining status is effective
things producing entire stoppage; only for five years and can be challenged within
• a state of inaction or of neutralization sixty (60) days prior to the expiration of the
caused by the opposition of persons or of CBA’s first five years. [FVC Labor Union-
factions (as in government or voting body): PTGWO v. SANAMA-FVC-SIGLO, G.R. No.
standstill.” [...] 176249 (2009)]
• The word is synonymous with the word
impasse which [...] “presupposes The rule is that despite the lapse of the formal
reasonable effort at good faith bargaining effectivity of the CBA the law still considers the
which, despite noble intentions, does not same as continuing in force and effect until a
conclude in agreement between the new CBA shall have been validly executed.
parties” [Divine World University v. SOLE, Hence, the contract bar rule still applies.
G.R. No. 91915 (1992)] [Colegio de San Juan de Letran v. Association
of Employees, G.R. No. 141471 (2000)]
(4) Contract Bar Rule
Petition for cancellation of union
BLR shall not entertain any petition for registration DOES NOT suspend or prevent
certification election or any other action which filing of certification election
may disturb the administration of DULY A petition for cancellation of union registration
REGISTERED existing collective bargaining shall not:
agreements affecting the parties, except under 1. suspend the proceedings for certification
Arts. 264, 265, and 268 [(60-day freedom election; nor
period)]. [Art. 238] 2. prevent the filing of a petition for
certification election. [Art. 246]
No petition for certification election may be filed
when a [CBA] between the employer and a A certification election can be conducted
SEBA has been registered in accordance with despite pendency of a petition to cancel the
Art. 237. union registration certificate. For the fact is that
at the time the [union], whose registration
Where such [CBA] is registered, the petition certificate is sought to be cancelled, filed its
may be filed only within sixty (60) days prior to petition for certification, it still had the legal
its expiry. [Sec. 3(d), Rule VIII, Book V, IRR]. personality to perform such act absent an order
directing its cancellation. [Association of Court
The Contract-Bar Rule shall apply in any of the of Appeals Employees v. Calleja, G.R. No.
following: (1) when there exists an unexpired 94716, (1991)]
registered CBA; or (2) when there is no
challenge on the representation status of the
incumbent union during the freedom period.
[D.O. No. 40-1-15]
Page 144 of 262

Allegation of company union a prejudicial management. [Port Workers Union v.

question to a petition for certification Laguesma, G.R. Nos. 94929-30, (1992)]
election
A complaint for unfair labor practice may be
Certification Union Election
considered a prejudicial question in a
Election
proceeding for certification election when it is
charged therein that one or more labor unions To determine the To elect union
participating in the election are being aided, or Exclusive Bargaining officers
are controlled, by the company or employer Agent
[company union] [United CMC Textile Worker’s
Union v. BLR, G.R. No. 51337(1984)]. All members of the Only union members
appropriate may vote
Rationale: The certification election may lead bargaining unit
to the selection of an employer-dominated or
company union as the employees’ bargaining
WHO MAY VOTE [Sec. 6, Rule IX, Book V,
representative, and when the court finds that
IRR]
said union is employer-dominated in the unfair
All employees who are members of the
labor practice case, the union selected would
appropriate bargaining unit three (3) months
be decertified and the whole election
prior to the filing of the petition/request shall be
proceedings would be rendered useless and
eligible to vote.
nugatory. [B.F. Goodrich Phils. Marikina v. B.F.
Goodrich Confidential and Salaried Employees
An employee who has been dismissed from
Union, G.R. No. L-34069-70 (1973)]
work but has contested the legality of the
dismissal in a forum of appropriate jurisdiction
NATURE OF PROCEEDING
at the time of the issuance of the order for the
Certification election is the most effective and
conduct of a certification election shall be
the most democratic way of determining which
considered a qualified voter, unless his/her
labor organization can truly represent the
dismissal was declared valid in a final judgment
working force in the appropriate bargaining unit
at the time of the conduct of the certification
of a company [Samangang Manggagawa sa
election.
PERMEX v SOLE, G.R. No. 107792 (1998)].
In case of disagreement over the voters’ list or
[It] is not a ‘litigation’ [...] but a mere
over the eligibility of voters, all contested voters
investigation of a non-adversary, fact-finding
shall be allowed to vote. But their votes shall be
character. [...]
segregated and sealed in individual envelopes.
The determination of the proceeding does not
WHO MAY FILE [Sec. 1, Rule VIII, Book V,
entail the entry of remedial orders or redress of
IRR]
rights, but culminates solely in an official
1. Legitimate labor organization [Art. 219
designation of bargaining units and an
(h)]
affirmation of the employees’ expressed choice
2. Local/chapter that has been issued a
of bargaining agent. [Angat River Irrigation
charter certificate
System v. Angat River Worker’s Union
The chapter shall acquire legal personality
(PLUM), G.R. Nos. L-10943 and L-10944
only for purposes of filing a petition for
(1957)]
certification election from the date it was
issued a charter certificate. [Art. 241]
Technical rules and objections should not
3. National union or federation that has
hamper the correct ascertainment of the labor
issued a charter certificate to its
union that has the support or confidence of the
local/chapter [in behalf of the latter]
majority of the workers and is thus entitled to
represent them in their dealings with
Page 145 of 262

4. A group of legitimate labor unions in a The employer is not a party to a certification

private establishment organized for election, which is the sole or exclusive concern
collective bargaining or for dealing with of the workers. [...]
employers concerning terms and
conditions of employment for their member The only instance when the employer may be
unions or for participating in the formulation involved in that process is when it is obliged to
of social and employment policies, file a petition for certification election on its
standards and programs, registered with workers’ request to bargain collectively
the BLR in accordance with Rule III Sec. 2- pursuant to Art. 258 [now Art. 270]. [Hercules
B. [Sec. 1 (ll), Rule I, Book V, IRR] Industries, Inc. v. Sec. of Labor, G.R. No.
5. Employer (when requested to bargain 96255 (1992)]
collectively and no existing CBA)
Requisites: [The employer] did not possess the legal
a. Employer is requested to bargain personality to file a motion to dismiss the
collectively; AND petition for certification election even if based
b. No existing registered CBA in the unit on the ground that its supervisory employees
[Art. 270] are in reality managerial employees.
BYSTANDER RULE It is well-settled that an employer has no

In all cases, whether the petition for standing to question a certification election
certification election is filed by an employer or since this is the sole concern of the workers.
a legitimate labor organization, the employer The only exception to this rule is Art. 258 [now
shall not be considered a party thereto with a Art. 270]. [PT&T v. Laguesma, G.R. No.
concomitant right to oppose a petition for 101730 (1993)]
certification election. [Art. 271]
[A] company’s interference in the certification
The employer’s participation shall be election below by actively opposing the same
limited to: [...] unduly creates a suspicion that it intends to
a. Being notified or informed of petitions of establish a company union. [Oriental Tin Can
such nature Labor Union v. Secretary of Labor, G.R. No.
b. Submitting the list of employees during the 116751 (1998)]
pre-election conference, should the Med-
Arbiter act favorably on the petition [Art. VENUE FOR FILING PETITION
271] File with the Regional Office which issued the
petitioning union’s certificate of registration or
The principle of the employer as by-stander certificate of creation of chartered local.
shall be strictly observed throughout the
conduct of certification election. At [petitioner’s option], [it may file] the petition
and its supporting documents [...] online. [Sec.
The employer shall not harass, intimidate, 2, Rule VIII, Book V, IRR]
threat[en], or coerce employees before, during
and after elections. [Sec. 1, Rule IX, Book V, Where two or more petitions involving the
IRR] same bargaining unit [Sec. 2, Rule VIII, Book
V, IRR]:
However, manifestation of facts that would aid
Filed in Automatically consolidated with
the [Med-Arbiter] in expeditiously resolving the
one [Med-Arbiter] who first acquired
petition such as existence of a contract-bar,
Regional jurisdiction.
one year bar or deadlock bar may be
Office
considered. [Sec. 1, Rule VIII, Book V, IRR]
Page 146 of 262

2. It must be filed within the 60-day period

Filed in The Regional Office in which
before expiration of CBA (freedom period).
different the petition was first filed shall
3. Supported by written consent of at least
Regional exclude all others; [...] the latter
25% of ALL employees in the bargaining
Offices shall indorse the petition to the
unit (substantial support).
former for consolidation.
4. Med-Arbiter shall automatically order an
election.
Procedure: CERTIFICATION ELECTION IN
AN UNORGANIZED ESTABLISHMENT WHEN PETITION MUST BE FILED
Freedom Period
Unorganized Establishment Within the sixty (60)-day period before the
[It is an] establishment where there is no expiration of the collective bargaining
certified bargaining agent. [Art. 269] agreement. [Art. 271]
Procedure [Art. 269] Note: The expiration referred to is the

1. File a petition for certification election. expiration of the 5-year period for the
2. Upon filing of the petition, the Med-Arbiter representation aspect. (see Art. 265) [Prof.
shall automatically conduct a certification Battad]
election.
Rationale of Prohibition of Filing Outside
Filing of petition is by a legitimate labor the Freedom Period
organization To ensure industrial peace between the
It cannot be filed by an unregistered labor employer and its employees during the
organization. Art. 251 enumerates the rights existence of the CBA. [Republic Planters Bank
granted to a legitimate labor organization and Union v. Laguesma, G.R. No. 119675 (1996)]
one of those rights is the right to be chosen as
the exclusive bargaining representative. This is SIGNING OF AUTHORIZATION IS MERELY
one way the law encourages union registration. PREPARATORY
What is prohibited is the filing of the petition for
Note: Art. 269 should be related to SEBA certification election outside the 60-day
Certification. If there are multiple LLOs in an freedom period. [...] The signing of the
unorganized establishment, Art. 269 applies. If authorization to file was merely preparatory to
there is only one LLO in an unorganized the filing of the Petition for Certification
establishment, Rule VII on SEBA Certification Election, or an exercise of [the] right to self-
applies. Under this rule, when there is failure to organization. [PICOP Resources Inc. v.
complete requirements, the Regional Director Ricardo Dequita, G.R. No. 172666 (2011)]
will refer it to the Election Officer.
25% SUBSTANTIAL SUPPORT RULE
Procedure: CERTIFICATION ELECTION IN In organized establishments, the incumbent
AN ORGANIZED ESTABLISHMENT sole bargaining agent should not be easily
replaced for that would disturb industrial peace.
Organized Establishment To justify the disturbance, it must appear that
Refers to an enterprise where there exists a at least a substantial number (25%
recognized or certified sole and exclusive requirement) seeks to have a new exclusive
bargaining agent. [Sec. 1(ll), Rule I, Book V, bargaining unit.
IRR]
DISCRETIONARY RULE
Procedure [Art. 268] The [Med-Arbiter], in the exercise of sound
1. File a verified petition questioning the discretion, may order a certification election
majority. notwithstanding the failure to meet the [25%]
requirement [in petitions for certification
Page 147 of 262

election in an organized establishment]. [Scout Unorganized establishment: any time prior to

Albano Memorial College v. Noriel, G.R. No. L- the decision of the Med-Arbiter [Sec. 9, Rule
48347 (1978)] VIII, Book V, IRR]
INAPPLICABLE TO MOTIONS FOR EFFECT OF WITHDRAWAL OF

INTERVENTION SIGNATURES
[The] requisite written consent of at least 20% The employees’ withdrawal from a labor
(now 25%) of the workers in the bargaining unit union made
applies to certification election only, and not to 1. Before the filing of the petition for
motions for intervention. Nowhere in the legal certification election is presumed voluntary
provisions [and in the Omnibus Rules] does it 2. After the filing of such petition is considered
appear that a motion for intervention in a to be involuntary and does not affect the
certification election must be accompanied by [petition]. [S.S. Ventures International v.
a similar written consent. [PAFLU v. Calleja, S.S. Ventures Labor Union, G.R. No.
G.R. No. 79347 (1989)] 161690 (2008)]
INTERVENORS
1. Incumbent bargaining agent as forced
intervenor: The incumbent bargaining
agent shall automatically be one of the
choices in the certification election as
forced intervenor. [Sec. 8, Rule VIII, Book
V, IRR]
2. Legitimate labor union other than the
incumbent bargaining agent operating
within the bargaining unit: When a
petition for certification election was filed in
an organized establishment, any legitimate
labor union other than the incumbent
bargaining agent operating within the
bargaining unit may file a motion for
intervention with the Med-Arbiter during the
freedom period of the collective bargaining
agreement.
In an unorganized establishment, the motion

shall be filed at any time prior to the decision of
the Med-Arbiter. The motion shall be resolved
in the same decision issued in the petition for
certification election.
In both cases, the form and contents of the

motion shall be the same as that of a petition
for certification election. [Sec. 9, Rule VIII,
Book V, IRR]
WHEN TO FILE MOTION FOR

INTERVENTION
Organized establishment: during the freedom
period of the collective bargaining agreement
Page 148 of 262

Organized v. Unorganized Establishments

Art. 268: Organized Art. 269: Unorganized
Sole and exclusive Existing None

bargaining agent
Petition filed Must be VERIFIED No need to be verified
Freedom period No petition for certification election Not applicable (i.e. no

EXCEPT within 60 days before freedom period; petition can
the expiration of the collective be filed anytime)
bargaining agreement (See Arts.
264 and 265)
Rationale: To keep industrial

peace in organized establishments
Substantial support rule Must be duly supported by 25% of NO substantial support rule
ALL THE MEMBERS OF THE
APPROPRIATE BARGAINING Rationale: Intention of law is
UNIT to bring in the union, to
implement policy behind Art.
Rationale: Law wants to know the 218A.
intention of the employees – if they
really want a certification election,
since they already have a
bargaining agent
Certification Election v. Consent Election

Certification Election Consent Election
Purpose "Certification Election" or "Consent Election" refers to the process of

determining through secret ballot the sole and exclusive representative of
the employees in an appropriate bargaining unit for purposes of collective
bargaining or negotiation. A certification election is ordered by the
Department, while a consent election is voluntarily agreed upon by the
parties, with or without the intervention by the Department [Book V, Rule
1, Sec. 1(h)]
General Procedure Rule IX Rule VII, Sec. 11, pars. 1, 2
SECTION 2. Raffle of the Case. — The contending unions may agree

Within twenty-four (24) hours from to the holding of an election, in
receipt of the notice of entry of final which case it shall be called a
judgment granting the conduct of a consent election. The mediator-
certification election, the Regional arbiter shall forthwith call for the
Director shall cause the raffle of the consent election, reflecting the
case to an Election Officer who parties' agreement and the call in
Page 149 of 262

shall have control of the pre- the minutes of the conference. The
election conference and election mediator-arbiter shall immediately
proceedings. (1a) forward the records of the petition
to the regional director or his/her
authorized representative for the
determination of the election officer
who shall be chosen by raffle in the
presence of representatives of the
contending unions if they so desire.
With the exception of aforementioned provisions that specifically apply

only for Certification Election or Consent Election respectively, Rule IX,
on the Conduct of Certification, Secs. 3 – 21, applies to both certification
and consent elections
Conduct Ordered by the DOLE Voluntarily agreed upon by the

parties, with or without the
intervention of DOLE
d. Run-Off Election run-off will be between the labor unions

receiving “the two highest number of votes.”
Run-Off Election refers to an election Pursuant to Art. 268, when an election which
between the labor unions receiving the two (2) provides for three or more choices results in no
highest number of votes in a certification or choice receiving a majority of the valid votes
consent election when the following requisites cast, a run-off election shall be conducted
have been complied with: between the labor unions receiving the two
1. Valid election; highest number of votes. Thus, the run-off will
2. The certification or consent election be among Union “A”, “B”, and “C.” [Azucena]
provides for three (3) or more choices
(Note: “No Union” is considered one choice Procedure for Run-Off Election
– Prof. Battad); Election Officer shall motu proprio conduct a
3. None of the contending UNIONS received run-off election within ten (10) days from the
a majority of the VALID VOTES cast; close of the election proceedings between the
4. No objections or challenges which if labor unions receiving the two highest number
sustained, can materially alter the results; of votes.
and
5. The total number of votes for all contending “No Union” shall not be a choice in the run-off
UNIONS is at least fifty (50%) of the election [Sec. 1, Rule X, Book V, IRR].
number of VOTES cast [Art. 268; Sec.
1(uu), Rule I, Book V, IRR; Sec. 1, Rule X, Same voters’ list used in the certification
Book V, IRR] election shall be used in the run-off election.
Illustration The labor union receiving the GREATER

The CBU has 100 members and 80 of which number of VALID VOTES cast shall be certified
voted. Union “A”= 30; Union “B”= 15; Union as the winner [Sec. 2, Rule X, Book V, IRR].
“C”=15 and No Union= 20. There were no
invalid votes. Since none got the majority of the Note: Please note the difference between valid
80 valid votes (40) and the contending unions votes cast versus votes cast – valid votes
obtained 60 votes (which is at least 50% of the excludes spoiled votes.
VOTES cast), a run-off election is proper. The
Page 150 of 262

e. Re-Run Election The Regional Director or his/her duly

authorized representative shall immediately
Re-run Election refers to an election assign it by raffle to a [Med-Arbiter]. The raffle
conducted to break a tie between contending shall be done in the presence of the petitioner
unions, including between "no union" and one if the latter so desires. [Sec. 5, Rule VIII, Book
of the unions. It shall likewise refer to an V, IRR]
election conducted after a failure of election
has been declared by the election officer (2) Preliminary Conference
and/or affirmed by the mediator-arbiter. [Sec.
1(tt), Rule 1, Book V, as amended by DO 40-I- Med-Arbiter shall conduct a preliminary
15] conference and hearing within ten (10) days
from receipt of the petition to determine the
Situations Contemplated following:
1. A tie between two (2) choices. 1. The bargaining unit to be represented;
2. Failure of Elections [see Definition] 2. Contending labor unions
3. Possibility of a consent election
Duty of Election Officer 4. Existence of any of the bars to certification
1. Notify parties of a re-run election election under Sec. 3[, Rule VIII]; and
2. Cause posting of notice within five (5) days 5. Such other matters as may be relevant for
from said election. the final disposition of the case [Sec. 10,
Rule VIII, Book V, IRR]
When will re-run be conducted
Within ten (10) days after the posting of the Note: If contending unions agree to holding of
notice of the union declared as winner and an election, [...] it shall be called a consent
certified choice receiving the HIGHEST election. [Sec. 11, Rule VIII, Book V, IRR]
VOTES CAST.
(3) Med-Arbiter to Conduct Hearings
PROCEDURE AFTER FILING PETITION FOR
CERTIFICATION ELECTION If contending unions fail to agree to a consent
1. Raffling of case to Med-Arbiter election during the preliminary conference
2. Preliminary Conference and hearing • the Med-Arbiter may conduct as many
3. Conduct of hearings hearings as he/she may deem necessary
4. Determine if petition should be dismissed ○ but in no case shall the conduct thereof
on grounds stated in Sec. 15 exceed fifteen (15) days from date of
5. Order/Decision on the petition scheduled preliminary conference/
6. Appealing the order/decision on the hearing, after which the petition shall
petition be considered submitted for decision.
7. Raffling of the case to an Election Officer [...]
8. Pre-Election Conference
9. Conduct of election Within the same 15-day period [...], the
10. Challenging of votes and on the spot contending labor unions may file such
questions pleadings as they may deem necessary for the
11. Protesting immediate resolution of the petition.
12. Canvassing of votes Extensions of time shall not be entertained.
13. Nullification of Election Results [Sec. 12, Rule VIII, Book V, IRR]
14. Proclamation and Certification of the result
of the election
15. Appeal from Certification Election Order
(1) Raffling of Case to Med-Arbiter
Page 151 of 262

(4) Determine if Petition should be (5) Order or Decision on the Petition

dismissed based on Grounds Stated in
Sec. 15 [Med-Arbiter] shall issue a ruling granting or
denying the petition
The grounds to dismiss the petition are:
1. Petitioning union or national union/ When:
federation is: General rule: Within ten (10) days from last
a. Not listed in DOLE’s registry of hearing
legitimate labor unions; or
b. Registration certificate has been Exception: In organized establishments, grant
cancelled with finality of the petition can only be made after the lapse
2. Failure of a local/chapter or national of the freedom period [Sec. 14, Rule VIII, Book
union/federation to submit a duly issued V, IRR]
charter certificate upon filing of the petition
for certification election How:
3. Contract Bar rule 1. Personally to the parties
4. One-Year Bar rule 2. Copy furnished to the employer [Sec. 18,
5. Negotiation and Deadlock Bar Rule Rule VIII, Book V, IRR]
6. In an organized establishment, the failure
to submit the 25% signature requirement to The ruling for the conduct of a certification
support the filing of the petition. election shall state the following:
7. Non-appearance of the petitioner for two 1. Name of the employer or establishment;
(2) consecutive scheduled conferences 2. Description of the bargaining unit;
before the [Med-Arbiter] despite due 3. Statement that none of the grounds for
notice; and dismissal [...] in Sec. 14 exists;
8. Absence of employer-employee 4. Names of the contending labor unions [...]
relationship between all the members of in the following order:
the petitioning unit and the establishment a. Petitioner unions in the order of the
where the proposed bargaining unit is date of filing of their respective
sought to be represented. petitions
b. The forced intervenor
Note: See Bars to Certification Election under c. “No union”
“c. Certification Election” 5. [If] the local/chapter is one the contending
unions, a directive to an unregistered
Commingling is not a ground local/chapter or a federation/national union
The inclusion as union members of employees representing all unregistered local/chapter
outside the bargaining unit [is] not a ground for to personally submit to the Election Officer
cancellation of the registration of the union. its certificate of creation at least five (5)
Said employees are automatically deemed working days before the actual conduct of
removed from the list of membership. [Sec. 16, the certification election. [This is to afford
Rule VIII, Book V, IRR] an individual employee-voter an informed
choice.]
Posting of notice of Petition for Certificate 6. Non-submission of this requirement as
Election certified by Election Officer shall disqualify
The Regional Director or his/her authorized the local/ chapter from participating in the
DOLE personnel, and/or the petitioner shall be certification election
responsible for the posting of the notice of 7. Directive to the employer and the
petition for certification election. [Sec. 7, Rule contending unions to submit within ten (10)
VIII, Book V, IRR] days from receipt of order:
a. The certified list of employees in the
bargaining unit, or where necessary,
Page 152 of 262

b. Payrolls covering the members of the Decision of the Secretary

bargaining unit for the last three (3) Period to decide: Fifteen (15) days from receipt
months prior to the issuance of the of entire records of the petition to decide the
order appeal.
(6) Appealing the Order Granting or Secretary’s decision shall be final and
Denying the Conduct of Certification executory within ten (10) days from receipt by
Election [Sec. 19-20, RULE VIII, BOOK V, parties. [Sec. 23, Rule VIII, Book V, IRR]
IRR]
Note: No motion for reconsideration of decision
Form of appeal shall be entertained. [Sec. 23, Rule VIII, Book
1. Verified under oath V, IRR]
2. Consists of a memorandum of appeal
specifically stating the grounds relied upon Implementation of decision
by appellant with the supporting arguments General Rule: Shall not be stayed
and evidence Exception: Restrained by appropriate court
[Sec. 24, Rule VIII, Book V, IRR]
Dismissed
Organized or denied (7) Raffling of the Case to an Election
Appeal to Officer
Granted Office of
Secretary Regional Director shall cause the raffle of the
Dismissed
or denied case to an Election Officer who shall have
Unorganized control of:
Granted Unappealable 1. Pre-election conference; and
2. Election proceedings
When: Within ten (10) days from receipt of the
When: Within twenty-four (24) hours from
order [of the Med-Arbiter].
receipt of notice of entry of final judgment
granting the conduct of a certification election
Where: Regional Office where the petition
[Sec. 2, Rule IX, Book V, IRR]
originated
(8) Pre-Election Conference
Effect of Filing Memorandum of Appeal
Stays the holding of any certification election.
Notice of Pre-Election Conference [Sec. 3,
Rule IX, Book V, IRR]
The Election Officer shall cause the issuance
Reply to Appeal
of notice of pre-election conference upon the
Reply by any party to the petition shall be filed
contending unions
within ten (10) days from receipt of the
memorandum of appeal […] and filed directly
When: Within twenty-four (24) hours from the
with the office of the Secretary. [Sec. 22, Rule
[Election Officer’s] receipt of assignment for the
VIII, Book V, IRR]
conduct of a certification election
When no appeal is filed
Schedule of pre-election conference
The decision shall be final and executory if no
When: Within ten (10) days from receipt of the
appeal is filed within the ten (10) day period.
assignment
Completed within thirty (30) days from the date
of the first hearing [Sec. 5, Rule IX, Book V,
IRR]
Page 153 of 262

Employer to Submit: [Sec. 3, Rule IX, Book 1. Date and time of the election;
V, IRR] 2. Names of all contending unions;
1. Certified list of employees in the bargaining 3. Description of the bargaining unit;
unit; or where necessary, 4. List of eligible and challenged voters.
2. Payrolls covering the members of the
bargaining unit at the time of the filing of Posting of the list of employees comprising the
petition bargaining unit shall be done by the DOLE
personnel.
Failure of party to appear during pre-
election conference despite notice [Sec. 4, What cannot be waived by contending
Rule IX, Book V, IRR] unions or employer:
This shall be considered a waiver of right to: 1. Posting of the notice of election
1. To be present; and 2. Information required to be included therein
2. To question or object to any of the 3. Duration of the posting
agreements reached in the pre-election
conference The parties agreed to conduct the election on
[...] a regular business day but a strike was held
Shall NOT deprive the non-appearing party of on that day. The alleged strike and/or picketing
the right to: of some employees at the company’s premises
1. Be furnished notices; and which coincided with the actual conduct of
2. To attend subsequent pre-election certification election might, perhaps have
conferences affected the actual performance of works by
some employees but did not necessarily make
Minutes of pre-election conference [Sec. 5, said date an irregular business day of the
Rule IX, Book V, IRR] company. [Asian Design and Manufacturing
Election Officer shall keep the minutes of Corp. v. Ferrer-Calleja, G.R. No. L-77415
matters raised and agreed upon. (1989)]
Parties shall acknowledge the completeness (9) Conduct of Election

and correctness of entries in the minutes by
affixing their signatures. Inspection to ensure secrecy and sanctity
When parties refuse to sign the minutes, the of ballot [Sec. 8, Rule IX, Book V, IRR]
Election Officer shall note such fact in the By whom:
minutes, including the reason for refusal to sign 1. Election Officer, together with
the same. 2. Contending unions’ authorized
representative; and
In all cases, parties shall be furnished a copy 3. Employer
of the minutes.
When: Before start of actual voting
Posting of Notices [Sec. 7, Rule IX, Book V,
IRR] Shall inspect:
Who: Election Officer and/or authorized DOLE 1. Polling place;
personnel shall cause the posting 2. Ballot boxes; and
What: Notice of election 3. Polling booths
Where: 2 most conspicuous places in the
company premises Prohibition on certain devices
When: At least ten (10) days before the actual General Rule: No device that could record or
[election date] identify the voter or otherwise undermine the
secrecy and sanctity of the ballot shall be
Contents of Notice [Sec. 7, Rule IX, Book V, allowed within the premises
IRR]
Page 154 of 262

Exception: Devices brought in by the Election 2. Have custody of all envelopes containing
Officer the challenged votes
Consequence: Any other device found within Opening of envelopes and question of
the premises shall be confiscated by the eligibility
Election Officer and returned to its owner after Shall be passed upon by the Med-Arbiter only
conduct of the certification election. if the number of segregated votes will
materially alter the results of the election.
Spoiled Ballots
A ballot that is torn, defaced, or contains On-the-spot Questions
marking which can lead another to clearly What the Election Officer shall rule on: Any
identify the voter who casts such vote [Sec. question relating to and raised during the
1(ww), Rule I, Book V, IRR] conduct of election
If the voter inadvertently spoils a ballot, he shall What the Election Officer SHALL NOT rule
return it to the Election Officer who shall on: Question of eligibility which shall be
destroy it and give him/her another ballot. [Sec. decided by the Mediator-Arbiter
10, Rule IX, Book V, IRR]
Failure of representative/s of the
Member unintentionally omitted in the master contending unions to appear [Sec. 15, Rule
list of voters may either be: IX, Book V, IRR]
1. May be allowed to vote if both parties Considered a waiver of the right to be present
agree; [OR] and to question the conduct thereof
2. Allowed to vote but the ballot is segregated
(11) Protest [Sec. 13, Rule IX, Book V, IRR]
(10) Challenging of Votes and on the Spot
Questions [Sec. 11-12, Rule IX, Book V, Who may file: Any party-in-interest
IRR]
Ground: On the conduct or mechanics of the
Ballot of the voter who has been properly election
challenged during the pre-election conferences
shall be: When Protest is Perfected:
1. Placed in an envelope sealed by Election 1. [Record the protest] in the minutes of the
Officer in the presence of: election proceedings; AND
a. the voter; and 2. Formalize [the] protest with the Med-
b. representatives of the contending Arbiter, with specific grounds, arguments
unions. and evidence within five (5) days after the
2. Election Officer shall indicate on the close of the election proceedings
envelope the:
a. Voter’s name; Protests deemed dropped
b. Union challenging the voter; and Protests [which are]:
c. Ground for the challenge 1. Not recorded in the minutes; AND
3. Sealed envelope shall be signed by: 2. Formalized within the prescribed period
a. Election Officer; and
b. Representatives of the contending General reservation to file protest
unions prohibited
Protesting party shall specify the grounds for
Election Officer shall: protest.
1. Note all challenges in the minutes of the
election proceedings; and
Page 155 of 262

Failure to formalize within 5-days cannot be Procedure [Sec. 14, Rule IX, Book V, IRR]
taken against the union 1. Election Officer shall count and tabulate
[The petitioner union misrepresented that they the votes in the presence of the
were independent which caused the members representatives of the contending unions.
to disaffiliate and form a new union and their 2. Upon completion of canvass, the Election
protest was not filed within the 5-day period. Officer shall give each representative a
The] failure to follow strictly the procedural copy of the minutes of the election
technicalities regarding the period for filing their proceedings and results of the election.
protest should not be taken against them. 3. Ballots and tally sheets shall be sealed in
an envelope and signed by the Election
Mere technicalities should not be allowed to Officer and the representatives of the
prevail over the welfare of the workers. What contending unions and transmitted to the
is essential is that they be accorded an Med-Arbiter together with the minutes and
opportunity to determine freely and intelligently results of the election within twenty-four
which labor organization shall act on their (24) hours from the completion of the
behalf. [DHL-URFA-FFW v. BMP, G.R. No. canvass.
152094 (2004)]
Election conducted in more than one region
Note: "Election Proceedings" refer to the period Consolidation of results shall be made within
during a certification election, consent or run- fifteen (15) days from the conduct thereof.
off election and election of union officers,
starting from the opening to the closing of the Double Majority Rule
polls, including the counting, tabulation and It is well-settled that under the so-called
consolidation of votes, but excluding the period "double majority rule,” for there to be a valid
for the final determination of the challenged certification election, majority of the bargaining
votes and the canvass thereof. [Book V, Rule unit must have voted AND the winning union
1, Sec. 1 (q)] must have garnered majority of the valid votes
cast. [NUWHRAIN-Manila Pavilion Hotel
Included: Chapter v. Secretary of Labor and
1. Starting from the opening to the closing of Employment, G.R. No. 181531 (2009)]
the polls
2. Counting, tabulation and consolidation of Requisites:
votes 1. There must be a valid certification or
consent election
Excluded:
1. Period for the final determination of the Valid Election: At least majority of the
challenged votes number of eligible voters have cast their
2. Canvass of the challenged votes [Sec. votes (VOTES CAST) [Sec. 17, Rule IX,
1(q), Rule I, Book V, IRR] Book V, IRR]
(12) Canvassing of Votes [Sec. 15, Rule IX, 2. The winning union must garner majority of
Book V, IRR] the VALID VOTES CAST [Sec. 16, Rule IX,
Book V, IRR]
Election precincts shall open and close on the
date and time agreed upon during the pre- Winning union certified as SEBA if there is
election conference. no protest [Sec. 16, Rule IX, Book V, IRR]
The [winning union] shall be certified as the
The opening and canvass of votes shall [SEBA] in the appropriate bargaining unit within
proceed immediately after the precincts have five (5) days from date of election, provided no
closed. protest is recorded in the minutes of the
election.
Page 156 of 262

Motion for another election after failure of

When winning choice is local chapter election [Sec. 20, Rule IX, Book V, IRR]
without certificate of creation of chartered Within twenty-four (24) hours from receipt of
local the motion, the Election Officer shall:
It must submit its DOLE issued certificate of 1. Immediately schedule another election
creation within five (5) days from the within fifteen (15) days from receipt of
conclusion of election motion
2. Cause posting of the notice of election
Note: Please note that valid votes differ from a. At least ten (10) days prior to the
mere votes as the former excludes spoiled scheduled date of election
ballots. b. In two (2) most conspicuous places in
the establishment
Abstention: refers to a blank or unfilled ballot
validly cast by an eligible voter. It is not Same guidelines and list of voters shall be
considered as a negative vote. However, it used.
shall be considered a valid vote for purposes of
determining a valid election. [Sec. 1(a), Rule I, Nullification of Election Results
Book V, IRR] It is precisely because respect must be
accorded to the will of labor thus ascertained
Spoiled Ballot: Refers to a ballot that is torn, that a general allegation of duress is not
defaced, or contains markings which can lead sufficient to invalidate a certification election; it
another to clearly identify the voter who casts must be shown by competent and credible
such vote. [Sec. 1(ww), Rule I, Book V, IRR] proof. [United Employees Union of Gelmart
Industries Philippines (UEUGIP) v. Noriel, No.
(13) Failure of Election [Sec. 17, Rule IX, L-40810 (1975)]
Book V, IRR]
(14) Proclamation and Certification of the
The Election Officer shall declare a failure of result of the election
election in the minutes of the election
proceedings when: Certification of the Collective Bargaining
1. Number of VOTES CAST is less than the Agent [Sec. 21, Rule IX, Book V, IRR]
majority of the number of eligible voters; Within 24 hours from final canvass of votes,
AND there being a VALID election, the Election
2. There are no material challenged votes Officer shall transmit the records of the case to
the Med-Arbiter.
Effect of Failure of Election [Sec. 19, Rule IX,
Book V, IRR] Within the same period from receipt of the
Shall not bar the filing of a motion for the minutes and results of election, [the Med-
immediate holding of a certification or consent Arbiter] shall issue an order proclaiming the
election within six (6) months from date of results of the election and certifying the union
declaration of failure of election. as the [SEBA] under any of the following
conditions:
Note: Under Sec. 1(tt), Rule I, Book V, a RE- 1. No protests were filed, or even if one was
RUN ELECTION “shall likewise refer to an filed, [it] was not perfected within the five-
election conducted after a failure of election day period
has been declared by the Election Officer 2. No challenge or eligibility issue was raised,
and/or affirmed by the [Med-Arbiter].” Thus, or even if one was raised, [its] resolution
under the Rules, this is the other definition of a will not materially change the results of the
Re-Run Election. elections.
Page 157 of 262

Winning union shall have the rights, privileges, The Bureau of Labor Relations has jurisdiction
and obligations of a duly certified collective to hear, decide and to mete out punishment
bargaining agent from the time the certification any violation under Art. 250 upon report of at
is issued. least 30% of the union membership OR
members specially concerned to the
Majority of valid votes cast results in “No Bureau.
Union” obtaining majority
Med-Arbiter shall declare such fact in the order Note: Secretary of Labor or his duly authorized
representative may inquire into financial
(15) Appeal from Certification Election activities of legitimate labor orgs
Orders [Art. 272] a. UPON filing of complaint under oath and
supported by written consent of at least
Who appeals: Any party to an election 20% of total membership,
b. Provided, such inquiry shall not be
What is appealed: Order or results of the conducted during (60)-day freedom period
election nor within the thirty (30) days immediately
preceding the date of election of union
Appeal to: Directly to SOLE officials. [Art. 289]
Ground: Rules and regulations established by ASSESSMENT

the SOLE for the conduct of the election have Special assessments are payments for a
been violated. special purpose, especially if required only for
a limited time. [Azucena]
No special assessment or other extraordinary
D. RIGHTS OF LABOR fees may be levied upon the members of a
ORGANIZATIONS labor organization
• unless authorized by a written resolution of
a majority of all the members at a general
1. Check off, Assessment, Agency
membership meeting duly called for the
Fees purpose. [Art. 250 (n)]
CHECK-OFF Other than for mandatory activities under the
A check-off is a process or device whereby the Code, the following may not be checked off
employer, on agreement with the Union, from any amount due to an employee without
recognized as the proper bargaining an individual written authorization duly signed
representative, or on prior authorization from by the employee:
the employees, deducts union dues or agency a. special assessments
fees from the latter’s wages and remits them b. attorney’s fees
directly to the Union. [Marino v. Gamilla, G.R. c. negotiation fees
No. 149763 (2009)] d. or any other extraordinary fees
The system of check-off is primarily for the The authorization should specifically state the
benefit of the Union and, only indirectly, for the amount, purpose and beneficiary of the
benefit of the individual employees. [Marino v. deduction. [Art. 250 (o)]
v Gamilla, G.R. No. 149763 (2009)]
Requisites for a Valid Special Assessment
Note: For a check-off to be valid, it must comply 1. Authorization by a written resolution of the
with the requirements of a valid special majority of ALL the members at the general
assessment. membership meeting called for the
purpose;
Jurisdiction over Check-off Disputes
Page 158 of 262

2. Secretary’s record of the minutes of the The legal basis of the union’s right to agency
meeting; AND fees is neither contractual nor statutory but
3. Individual written authorization for check off quasi-contractual, deriving from the
duly signed by the employees concerned established principle that non-union employees
which indicates the: may not unjustly enrich themselves by
a. Amount benefiting from employment conditions
b. Purpose negotiated by the bargaining union. [Holy
c. Beneficiary of deduction [Gabriel v. Cross of Davao College, Inc v. Hon. Joaquin,
SOLE, G.R. No. 115949 (2000)] G.R. No. 110007 (1996)]
Strict compliance for special assessment When Agency Fee Assessed

There must be strict and full compliance with If such non-union member accepts the benefits
the requisites. Substantial compliance is not under the collective bargaining agreement.
enough. [Palacol v. Ferrer-Calleja, G.R. No. [Art. 259(e)]
85333 (1990)]
Measure of Fee
AGENCY FEES A reasonable fee equivalent to the dues and
Art. 259 (e) [2nd sentence to last sentence] other fees paid by members of the recognized
Nothing in this Code or in any other law shall collective bargaining agent. [Art. 259(e)]
stop the parties from requiring membership in
a recognized collective bargaining agent as a Requirements:
condition for employment 1. Non-member of SEBA
2. Member of Collective Bargaining Unit
EXCEPTION: Those employees who are 3. Reasonable fee equivalent to the dues and
already members of another union at the time other fees paid by members
of the signing of the collective bargaining 4. Acceptance of CBA benefits
agreement
UNION DUES
Employees of an appropriate bargaining unit Union dues are payments to meet the union’s
who are not members of the recognized general and current obligations. The payment
collective bargaining agent may be assessed must be regular, periodic, and uniform.
a reasonable fee [Azucena]
• Amount of reasonable fee: equivalent to
the dues and other fees paid by members Every payment of fees, dues or other
of the recognized collective bargaining contributions by a member shall be evidenced
agent by a receipt:
• Condition for assessment: If such non- a. signed by the officer or agent making the
union members accept the benefits under collection and
the collective bargaining agreement: b. entered into the record of the organization
o Provided, That the individual to be kept and maintained for the purpose.
authorization required under Article [Art. 250 (h)]
242, paragraph (o) shall not apply to
the non-members of the recognized ATTORNEY’S FEES
collective bargaining agent; Payment of Attorney’s fees cannot be imposed
in individual member.
An amount, equivalent to union dues, which a
non-union member pays to the union because No attorney’s fees, negotiation fees, or similar
he benefits from the CBA negotiated by the charges of any kind arising from any collective
union. [Azucena] bargaining agreement or conclusion of the
collective agreement shall be imposed on any
Rationale for Allowing Agency Fees individual member. [Art. 228(b)]
Page 159 of 262

MANDATORY ACTIVITIES
Proper charging of attorney’s fees: Definition: A judicial process of settling
a. Charges against union funds; AND dispute laid down by the law. [Vengco v.
b. In an amount agreed upon by the parties Trajano, G.R. No. 74453 (1989)]
Any contract, agreement, or arrangement of Placement of re-negotiations for a CBA under

any sort to the contrary shall be void. [Art. compulsory arbitration does not make it a
228(b)] “mandatory activity”. [Galvadores v. Trajano,
G.R. No. 70067 (1986)]
Different types of Attorney’s Fees
Ordinary Extraordinary It dispenses with the requirement of the
Indemnity for individual written authorization duly signed by
Reasonable the employee [Art. 250(o)]
damages ordered by
compensation paid
the court to be paid
to a lawyer for legal
services rendered
by the losing party to 2. Collective Bargaining
the winning party
Agreed upon by the Awarded by the Definition, Nature, and Purpose
parties NLRC Collective bargaining is:
Payable to the • Defined as negotiations towards a
Payable to the client
lawyer collective agreement
Not limited • One of the democratic frameworks under
Limited by Art. 111
(freedom to the [Labor] Code
to 10%
contract) • Designed to stabilize the relations between
[Kaisahan at Kapatiran ng mga Manggagawa labor and management and to create a
at Kawani sa MWC-East Zone Union v. Manila climate of sound and stable industrial
Water, G.R. No. 174179 (2011)] peace.
• A mutual responsibility of the employer and
There are two concepts of attorney's fees: In the Union and is characterized as a legal
the ordinary sense, attorney's fees represent obligation. [Kiok Loy v. NLRC, G.R. No. L-
the reasonable compensation paid to a 54334 (1986)]
lawyer by his client for the legal services
rendered to the latter. a. Duty to Bargain Collectively
In its extraordinary concept, attorney's fees i. In General

may be awarded by the court as indemnity for
damages to be paid by the losing party to the Definition
prevailing party, such that, in any of the cases The duty to bargain collectively
provided by law where such award can be Meaning: the performance of a mutual
made, e.g., those authorized in Art. 2208 of the obligation to meet and convene promptly and
Civil Code, the amount is payable not to the expeditiously in good faith
lawyer but to the client, unless they have
agreed that the award shall pertain to the Purpose: negotiating an agreement with
lawyer as additional compensation or as part respect to:
thereof. [Masmud v. NLRC, G.R. No. 183385 1. wages
(2009)] 2. hours of work,
3. and all other terms and conditions of
In Masmud, the contingency agreement employment including:
between lawyer and client consisting of 39% of a. proposals for adjusting any grievances,
the monetary award was deemed not or
unconscionable by the SC. b. questions arising under such
agreement, and
Page 160 of 262

c. executing a contract incorporating such 2. The obligation to reach an agreement:

agreements, While the law makes it an obligation for the
d. if requested by either party, but such employer and the employees to bargain
duty does not compel any party to collectively with each other, such
agree to a proposal or to make any compulsion does not include the
concession. [Art. 263] commitment to precipitately accept or
agree to the proposals of the other. All it
Jurisdictional Preconditions on Duty To contemplates is that both parties should
Bargain approach the negotiation with an open
1. Possession of the status of majority mind and make reasonable effort to reach
representation of the employees’ a common ground of agreement. [Union of
representative in accordance with any of Filipro Employees v. Nestle, G.R. Nos.
the means of selection or designation 158930-31 (2008)]
provided for by the Code;
2. Proof of majority representation; AND Evading the Mandatory Subjects of
3. Demand to bargain under Art. 261(a) [Kiok Bargaining
Loy v. NLRC, G.R. No. L-54334 (1986)] The refusal to negotiate a mandatory subject of
bargaining is an unfair labor practice, although
Only the labor organization designated or either party has every desire to reach
selected by the majority of the employees in an agreement and earnestly and in all good faith
appropriate collective bargaining unit is the bargains to that end. However, the duty to
exclusive representative of the employees in bargain does not obligate the parties to make
such unit for the purpose of collective concessions or yield a position fairly held.
bargaining. [Phil. Diamond Hotel and Resort [Azucena]
Inc v. Manila Diamond Hotel and Employees
Union, G.R. No. 158075 (2006); Art. 267] The duty to bargain is limited to mandatory
bargaining subjects; as to other matters, he is
Meaning of Bargaining in Good Faith free to bargain or not to bargain.
There is no per se test of good faith in
bargaining. Over mandatory subjects, a party may insist
on bargaining, even to the point of deadlock,
Good faith or bad faith is an inference to be and his insistence will not be construed as
drawn from the facts. [Union of Filipino bargaining in bad faith.
Employees v. Nestle Philippines, Inc., G.R.
Nos. 158930-31 (2008)] Over a non-mandatory subject, on the other
hand, a party may not insist on bargaining to
[T]he failure to reach an agreement after the point of impasse, otherwise his insistence
negotiations continued for a reasonable period can be construed as bargaining in bad faith.
does not establish a lack of good faith.
Blue-Sky Bargaining
The laws invite and contemplate a collective Blue-Sky Bargaining is defined as "unrealistic
bargaining contract, but they do not compel and unreasonable demands in negotiations by
one. [Tabangao Shell Refinery Employees either or both labor and management, where
Association v. Pilipinas Shell Petroleum neither concedes anything and demands the
Corporation, G.R. No. 170007 (2014)] impossible." It actually is not collective
bargaining at all. [Roberts Dictionary of
Duty to Bargain does NOT include: Industrial Relations as cited in Standard Bank
1. Any legal duty [on the employer] to initiate Chartered Employees Union v. Confesor, G.R.
contract negotiation [Kiok Loy v. NLRC, No. 114974 (2004)]
G.R. No. L-54334 (1986)]
Page 161 of 262

Surface Bargaining ii. When there is an Absence of

Surface bargaining is defined as "going CBA
through the motions of negotiating," without
any real intent to reach an agreement. [Roberts Duty to bargain collectively in the absence
Dictionary of Industrial Relations as cited in of collective bargaining agreements
Standard Bank Chartered Employees Union v. Condition: In the absence of an agreement or
Confesor, supra.] other voluntary arrangement providing for a
more expeditious manner of collective
It violates the Act's requirement that parties bargaining
negotiate in "good faith." It is prohibited
because the bargaining status of a union can Who has the duty: Employer and the
be destroyed by going through the motions of representatives of the employees
negotiating almost as easily as by bluntly
withholding recognition […] As long as there What is their duty: To bargain collectively in
are unions weak enough to be talked to death, accordance with the provisions of this Code
there will be employers who are tempted to [Art. 262]
engage in the forms of collective bargaining
without the substance. [K-MART Corporation v. iii. When there is a CBA
NLRB, 1980 626 F.2d 704]
General Rule: The duty to bargain collectively
Individual Bargaining shall also mean that neither party shall
It is an unfair labor practice for an employer terminate nor modify such agreement during its
operating under a CBA to negotiate with his lifetime. [Art. 264]
employees individually.
Substitutionary Doctrine
That constitutes interference because the Note: See also discussion under V.b.2
company is still under obligation to bargain with
the union as the bargaining representative. General Rule: Even during the effectivity of a
collective bargaining agreement executed
Individual bargaining contemplates a situation between employer and employees [through]
where the employer bargains with the union their agent, the employees can change said
through the employees instead of the agent but the contract continues to bind them
employees through the union. [The Insular Life up to its expiration date. They may bargain,
Assurance Co. Ltd., Employees Assn. v. however, for the shortening of said expiration
Insular Life Assurance Co. Ltd, G.R. No. L- date. [Elisco-Elirol Labor Union v. Noriel, G.R.
25291 (1971)] No. L-41955 (1977)].
Boulwarism Exception: At least sixty (60) days prior to the

A take-it-or-leave-it approach in negotiation expiration of the collective bargaining
constitutes bad faith. "Although the law cannot agreement, either party can serve a written
open a man's mind, it can at least compel him notice to terminate or modify the agreement
to conduct himself as if he were trying to [Art. 264].
persuade and were willing to be persuaded. To
offer the union a contract saying 'Take it or Note: During this 60-day period, a verified
leave it,' is not bargaining collectively within the petition questioning the majority status of the
meaning of the act.” [Herald Delivery Carriers incumbent bargaining agent may also be filed
Union v. Herald Publication Inc., G.R. No. L- [Art. 268].
29966 (1974), citing NLRB v. Pilling and Son
Co. US, 119 F2D 32 (1941)]
Page 162 of 262

Effect on existing CBA 5. Voluntary arbitration. The [NCMB] shall

It shall be the duty of both parties to keep the exert all efforts to settle disputes amicably
status quo and to continue in full force and and encourage the parties to submit their
effect the terms and conditions of the existing case to a voluntary arbitrator.
agreement during the 60-day period and/or 6. Prohibition against disruptive acts.
until a new agreement is reached by the During the conciliation proceedings in the
parties. [Art. 264] Board, the parties are prohibited from
doing any act which may disrupt or impede
iv. Bargaining Procedure [Art. the early settlement of the disputes. [Book
262] V, IRR Rule XII, Sec. 1]
7. Deadlock. Any certified or duly recognized
General Rule: Private Procedure - The bargaining representative may file a notice
bargaining procedure shall be governed by [the or declare a strike or request for preventive
parties’] agreement or other voluntary mediation in cases of bargaining deadlocks
arrangement providing for a more expeditious and unfair labor practices. The employer
manner of collective bargaining [Art. 262] may file a notice or declare lockout or
request for preventive mediation in the
Rationale: It is the policy of the state to same cases. In the absence of certified or
promote and emphasize the primacy of free duly recognized bargaining representative,
collective bargaining and negotiations [Art. any legitimate labor organization in the
218-A(a)] establishment may file a notice, request
preventive mediation or declare a strike but
Exception only on grounds of unfair labor practice
Labor Code Procedure – In absence of a [NCMB Manual of Procedure, Rule IV, Sec.
private agreement, the collective bargaining 3]
procedure under Art. 261 shall be followed.
1. Written notice and statement of Period to Reply; Bad Faith
proposals. When a party desires to [The period to reply] is merely procedural, and
negotiate an agreement, it shall serve a non-compliance cannot be automatically
written notice upon the other party with a deemed to be an act of unfair labor practice.
statement of its proposals. [National Union of Restaurant Workers v. CIR,
2. Reply. The other party shall make a reply G.R. No. L-20044 (1964)]
thereto not later than ten (10) calendar
days from receipt of such notice. Failure to Reply as Indicia of Bad Faith
3. Conference. Should differences arise on [The employer’s] refusal to make a counter-
the basis of such notice and reply, either proposal [...] is an indication of its bad faith.
party may request for a conference which Where the employer did not even bother to
shall begin not later than ten (10) calendar submit an answer to the bargaining proposals
days from the date of request. of the union, there is a clear evasion of the duty
4. Board intervention and conciliation. If to bargain collectively, [...] making it liable for
the dispute is not settled, the [NCMB] shall unfair labor practice. [General Milling Corp. v.
intervene upon request of either or both CA, G.R. No. 146728 (2004)]
parties or at its own initiative and
immediately call the parties to conciliation v. Bargainable Issues
meetings. The [NCMB] shall have the
power to issue subpoenas requiring the Mandatory Bargainable Issues
attendance of the parties to such meetings. 1. Wages
It shall be the duty of the parties to 2. Hours of work
participate fully and promptly in the 3. All other terms and conditions of
conciliation meetings the Board may call. employment including proposals for
Page 163 of 262

adjusting any grievances or questions desired provision as to a matter which is a

arising under such agreement [Art. 263] mandatory subject of collective bargaining.
Examples: [But] a refusal to contract is in substance a

1. Vacations and holidays refusal to bargain about matters which are
2. Bonuses mandatory subjects of collective bargaining
3. Seniority, Transfer, and Layoffs unless the agreement covers a matter which is
4. Employee workloads not a mandatory subject.
5. Work rules and regulations
6. Union security arrangements It is no answer to the charge of refusal to
7. Pension and insurance benefits for active bargain in good faith that the insistence on the
employees disputed clause was not the sole cause of the
failure to agree or that agreement was not
Permissive Issues reached with respect to other disputed clauses.
Unilateral benefits extended by the employer Such refusal will not be deemed as an unfair
[cf. Union of Filipino Employees v. Nestle, G.R. labor practice.
Nos. 158930-31 (2008)]
However, if a party refuses to contract based
As in all other contracts, the parties in a CBA on an issue which is not a mandatory
may establish such stipulations, clauses, terms bargainable issue, the party will be guilty of
and conditions as they may deem convenient ULP. [Samahang Manggagawa sa Top Form v.
provided they are not contrary to law, morals, NLRC, G.R. No. 113856 (1998)]
good customs, public order or public policy.
[Manila Fashions v. NLRC, G.R. No. 117878 Minutes of Negotiation
(1996)] Where a proposal raised by a contracting party
does not find print in the CBA, it is not a part
Test for Mandatory Bargainable Issues thereof and the proponent has no claim
The nexus between the Nature of Employment whatsoever to its implementation. [...]
and the Nature of the Demand: For “other
terms and conditions of employment” to The Minutes [only] reflects the proceedings
become a mandatory bargainable issue, they and discussions undertaken in the process of
must have a connection between the proposal bargaining for worker benefits in the same way
and the nature of the work. that the minutes of court proceedings show
what transpired therein.
In order for a matter to be subject to mandatory
collective bargaining, it must materially or At the negotiations, it is but natural for both
significantly affect the terms and conditions of management and labor to adopt positions or
employment. Whether the agreement concerns make demands and offer proposals and
a mandatory subject of bargaining depends not counter-proposals.
on its form, but on its practical effect. [Azucena]
However, nothing is considered final until the
Importance of Determining the Character of parties have reached an agreement.
the Bargaining Issue [Samahang Manggagawa sa Top Form v.
The question as to what are mandatory and NLRC, G.R. No. 113856 (1998)]
what are merely permissive subjects of
collective bargaining is of significance on the Suspension of Bargaining Negotiations
right of a party to insist on his position to the In order to allow the employer to validly
point of stalemate. suspend the bargaining process there must be
a valid petition for certification election raising
A party may refuse to enter into a collective a legitimate representation issue.
bargaining contract unless it includes a
Page 164 of 262

Hence, the mere filing of a petition for [Pentagon Steel v. CA, G.R. No. 174141
certification election does not ipso facto justify (2009)]
the suspension of negotiation by the employer.
[Colegio de San Juan de Letran v. Association b. Collective Bargaining
of Employees, G.R. No. 141471 (2000)] Agreement
vi. Bargaining Deadlock Collective Bargaining Agreement or “CBA”

refers to the negotiated contract between a
Deadlock is defined as the “counteraction of legitimate labor organization and the employer
things producing entire stoppage: a state of concerning wages, hours of work and all other
inaction or of neutralization caused by the terms and conditions of employment in a
opposition of persons or of factions: a bargaining unit. [Sec. 1(k), Rule I, Book V, IRR]
standstill.
Nature of the CBA
There is a deadlock when there is a “complete The CBA is the law between the parties and
blocking or stoppage resulting from the action they are obliged to comply with its provisions.
of equal and opposed forces.” [Zuellig Pharma Corporation v. Alice Sibal,
G.R. No. 173587 (2013)]
The word is synonymous with the word
impasse which, “presupposes reasonable Although it is a rule that a contract freely
effort at good faith bargaining which, despite entered between the parties should be
noble intentions, does not conclude in respected, since a contract is the law between
agreement between the parties.” [Divine World the parties, said rule is not absolute. [... Citing
Tacloban v. Secretary of Labor, G.R. No. Art. 1700,] the relations between capital and
91915 (1992)] labor are not merely contractual. They are so
impressed with public interest that labor
Collective Bargaining Deadlock is defined as contracts must yield to the common good.
the situation between the labor and the [Halagueña v. Philippine Airlines, G.R. No.
management of the company where there is 172013 (2009)]
failure in the collective bargaining negotiations
resulting in a stalemate. [San Miguel Corp. v Beneficiaries of the CBA
NLRC, G.R. No. 99266 (1999)]. The labor organization
a. Designated, or
Privileged Communication in Conciliation b. Selected by the majority of the employees
Proceedings in an appropriate collective bargaining unit,
Information and statements made at shall be the exclusive representative of the
conciliation proceedings shall be treated as employees in such unit for the purpose of
privileged communication and shall not be collective bargaining. [Art. 267]
used as evidence in the Commission.
Conciliators and similar officials shall not testify When a collective bargaining contract is
in any court or body regarding any matters entered into by the union representing the
taken up at conciliation proceedings conducted employees and the employer, even the non-
by them. [Art. 233] member employees are entitled to the benefits
of the contract.
Rationale:
1. A person is entitled to ‘buy his or her peace’ To accord its benefits only to members of the
without danger of being prejudiced in case union without any valid reason would constitute
his or her efforts fail undue discrimination against non-members.
2. Offers for compromise are irrelevant [New Pacific Timber and Supply v. NLRC, G.R.
because they are not intended as No. 124224 (2000)]
admissions by the parties making them
Page 165 of 262

Contract Interpretation They shall establish a machinery for the

adjustment and resolution of grievances
Art. 1702, Civil Code. In case of doubt, all 1. Arising from the interpretation or
labor legislation and all labor contracts shall implementation of their Collective
be construed in favor of the safety and Bargaining Agreement, and
decent living for the laborer. 2. Those arising from the interpretation or
enforcement of company personnel
A CBA, as a labor contract within the policies.
contemplation of Art. 1700 of the Civil Code of
the Philippines which governs the relations All grievances submitted to the grievance
between labor and capital, [it] is not merely machinery which are not settled within seven
contractual in nature but impressed with public (7) calendar days from the date of its
interest, thus, it must yield to the common submission shall automatically be referred to
good. voluntary arbitration prescribed in the
Collective Bargaining Agreement.
As such, it must be construed liberally rather
than narrowly and technically. For this purpose, parties to a Collective
Bargaining Agreement shall:
The courts must place a practical and realistic 1. name and designate in advance a
construction upon it, giving due consideration Voluntary Arbitrator or panel of Voluntary
to the context in which it is negotiated, and Arbitrators, or
purpose which it is intended to serve. [Davao 2. include in the agreement a procedure for
Integrated Port Stevedoring Services v. the selection of such Voluntary Arbitrator or
Abarquez, G.R. No. 102132 (1993)] panel of Voluntary Arbitrators, preferably
from the listing of qualified Voluntary
General Rule: [W]here the CBA is clear and Arbitrators duly accredited by the Board.
unambiguous, it becomes the law between the
parties and compliance therewith is mandated In case the parties fail to select a Voluntary
by the express policy of the law. [Zuellig Arbitrator or panel of Voluntary Arbitrators, the
Pharma Corporation v. Alice Sibal, G.R. Board shall designate the Voluntary Arbitrator
No.173587 (2013)] or panel of Voluntary Arbitrators
• When: as may be necessary
Exception: If the words appear to be contrary • How: pursuant to the selection procedure
to the evident intention of the parties, the latter agreed upon in the Collective Bargaining
shall prevail over the former. [Kimberly Clark Agreement
Phils. v. Lorredo, G.R. No. 103090 (1993)] • Effect: designated Voluntary Arbitrator or
panel of Voluntary Arbitrators shall act with
i. Mandatory provisions in a the same force and effect as if the
Collective Bargaining Arbitrator or panel of Arbitrators have been
Agreement selected by the parties as described above.
Note: See also v. Bargainable Issues under “a. ii. Administration and
Duty to bargain collectively” Enforcement of CBA
Art. 273. Grievance Machinery and Substandard CBA

Voluntary Arbitration A CBA that falls below the minimum standards
The parties to a Collective Bargaining required by law is prohibited. Nonetheless, RA
Agreement shall include therein provisions that 9481 removed substandard CBAs as a ground
will ensure the mutual observance of its terms for the cancellation of registration of union
and conditions. registration.
Page 166 of 262

Note: A substandard CBA cannot bar a petition Labor Relations Commission, G.R. No. 78524
for certification election under the contract-bar (1989)]
rule. [Prof. Battad]
Note: Ratification of the CBA by the employees
Ratification in the bargaining unit is not needed when the
Within thirty (30) days from the execution of a CBA is a product of an arbitral award as a result
collective bargaining agreement of voluntary arbitration under Art. 275 or from
the secretary’s assumption of jurisdiction or
The parties shall submit copies of the same certification under Art. 278 (g).
directly to the Bureau or the Regional Offices
of the Department of Labor and Employment Registration
for registration, accompanied with: Within thirty (30) days from the execution of a
1. Verified proofs of its posting in two Collective Bargaining Agreement, the parties
conspicuous places in the place of work, shall submit copies of the same directly to the
and Bureau or the Regional Offices of the
2. Ratification by the majority of all the Department of Labor and Employment for
workers in the bargaining unit. [Art. 237; registration […]. [Art. 237]
Book V, IRR Rule XVII, Sec. 2 (c)]
iii. Requirements for Registration
[T]he posting of copies of the collective
bargaining agreement is the responsibility of The application for CBA registration shall be
the employer. accompanied by the original and two (2)
duplicate copies of the following documents
The fact that there were "no impartial members which must be certified under oath by the
of the unit" is immaterial. representative(s) of the employer(s) and labor
union(s) concerned:
The purpose of the requirement is precisely to 1. The collective bargaining agreement
inform the employees in the bargaining unit of 2. A statement that the collective bargaining
the contents of said agreement so that they agreement was posted in at least two (2)
could intelligently decide whether to accept the conspicuous places in the establishment or
same or not. [Associated Labor Unions v. establishments concerned for at least five
Ferrer-Calleja, G.R. No. L-77282 (1989)] (5) days before its ratification
3. A statement that the collective bargaining
Effect of Non-ratification agreement was ratified by the majority of
General Rule: The collective bargaining the employees in the bargaining unit of the
agreement should be ratified by the majority of employer or employees concerned. [Sec.
all the members of the bargaining unit. Non- 2, Rule XVII, Book V, IRR]
compliance with this requirement renders the
CBA ineffective. [Associated Trade Unions v. Specific information submitted in
Trajano, G.R. No. 75321 (1988)] confidence
General rule: Shall not be disclosed
Exception: Even if there was no ratification,
the CBA will not be invalid or void considering Exceptions:
that the employees have enjoyed benefits from 1. authorized by Secretary of Labor
it. 2. when it is at issue in any judicial litigation
3. public interest or national security requires
[The employees] cannot receive benefits under [Art. 237]
provisions favorable to them and later insist
that the CBA is void simply because other
provisions turn out not to the liking of certain
employees. [Planters Products Inc. v. National
Page 167 of 262

Effect of Unregistered CBA When there is a representational issue, the

An unregistered CBA is binding upon the status quo provision insofar as the need to
parties but cannot serve as a bar to a petition await the creation of a new agreement will not
for certification election under the contract-bar apply.
rule.
Otherwise, it will create an absurd situation
Sec. 3, Rule VIII, Book V states: A petition for where the union members will be forced to
certification election may be filed anytime, maintain membership by virtue of the union
except: [...] (d) when a collective bargaining security clause existing under the CBA and,
agreement between the employer and a duly thereafter, support another union when filing a
recognized or certified bargaining agent has petition for certification election.
been registered in accordance with Art. 231
[now 237] of the Labor Code. If we apply it, there will always be an issue of
disloyalty whenever the employees exercise
iv. CBA Effectivity their right to self-organization. The holding of a
certification election is a statutory policy that
If it is the first ever CBA, the effectivity date is should not be circumvented, or compromised.
whatever date the parties agree on. [PICOP Resources, Inc. v. Taneca et al., G.R.
No. 160828 (2010)]
If it is a renegotiated CBA, the retroactivity of Arbitrated CBA
the date of effectivity depends upon the In the absence of an agreement between the
duration of conclusion [Art. 265]: parties, an arbitrated CBA takes on the nature
1. If it is concluded within 6 months from the of any judicial or quasi-judicial award. [Manila
expiry date, the new CBA will retroact to the Electric Company v. Quisumbing, G.R. No.
date following the expiry date [Illustration: 127598 (1999)]
expiry date: December 13; renegotiations
concluded on November 30; effectivity [I]n the absence of the specific provision of law
date: December 14]. prohibiting retroactivity of the effectivity of the
2. If it is concluded beyond 6 months from arbitral awards issued by the Secretary of
the expiry date, the matter of retroaction Labor pursuant to Art. 263(g) of the Labor
and effectivity is left with the parties. Code, [the Secretary] is deemed vested with
plenary powers to determine the effectivity
Hold Over Principle thereof. [LMG Chemicals v. Secretary of Labor,
It shall be the duty of both parties to keep the G.R. No. 127422 (2001)]
status quo and to continue in full force and
effect the terms and conditions of the existing v. CBA Duration
agreement:
a. during the 60-day period and/or Art. 265. Terms of a Collective Bargaining
b. until a new agreement is reached by the Agreement – Any Collective Bargaining
parties. [Art. 264, last sentence] Agreement that the parties may enter into
shall, insofar as the representation aspect is
The last sentence of Art. 264, which provides concerned, be for a term of five (5) years. [...]
for automatic renewal [upon expiry], pertains All other provisions of the Collective
only to the economic provisions of the CBA Bargaining Agreement shall be renegotiated
and does not include representational aspect not later than three (3) years after its
of the CBA. execution. [...]
A [CBA which continues to take effect beyond CBA Duration for economic provisions
its expiration date] cannot constitute a bar to a 3 years
filing of petition for certification election.
Page 168 of 262

CBA Duration for non-economic provisions past unfair labor practices of the previous
5 years for representational or political issues; owner.
cannot be renegotiated to extend beyond 5
years. [FVC Labor Union-PTGWO v. Exception: When the liability therefore is
SANAMA-FVC-SIGLO, G.R. No. 176249 assumed by the new employer under the
(2009)] contract of sale, or when liability arises
because of the new owner's participation in
CBA Duration: Freedom Period thwarting or defeating the rights of the
No petition questioning the majority status of employees.
the incumbent bargaining agent shall be
entertained and no certification election shall The most that the transferee may do, for
be conducted by the DOLE outside of the reasons of public policy and social justice, is to
sixty-day period immediately before the give preference to the qualified separated
date of the expiry of such five-year term of employees in the filling of vacancies in the
the Collective Bargaining Agreement. [Art. facilities of the purchaser. [Manlimos v. NLRC,
265] G.R. No. 113337 (1995)]
CBA and 3rd Party Applicability The general rule applies only to the sale and
Labor contracts such as employment contracts purchase of asset. If the method of acquisition
and CBAs are not enforceable against a is by way of purchase of controlling shares, the
transferee of an enterprise, labor contracts employer remains the same and the new
being in personam, is binding only between the owners must honor the existing contracts.
parties.
As a general rule, there is no law requiring a E. UNFAIR LABOR

bona fide purchaser of the assets of an on- PRACTICES
going concern to absorb in its employ the
employees of the latter.
1. Nature, Aspects
However, although the purchaser of the assets
Unfair labor practice refers to acts that violate
or enterprise is not legally bound to absorb in
the workers’ right to organize. The prohibited
its employ the employees of the seller of such
acts are related to the workers’ right to self-
assets or enterprise, the parties are liable to the
organization and to the observance of a
employees if the transaction between the
CBA. Without that element, the acts, no matter
parties is colored or clothed with bad faith.
how unfair, are not unfair labor practices. The
[Sundowner Development Corporation v.
only exception is Art. 259(f) [i.e. to dismiss,
Drilon, G.R. No. 82341 (1989)]
discharge or otherwise prejudice or
discriminate against an employee for having
Where the change of ownership is in bad faith
given or being about to give testimony under
or is used to defeat the rights of labor, the
this Code]. [Philcom Employees Union v. Phil.
successor-employer is deemed to have
Global, G.R. No. 144315 (2006)]
absorbed the employees and is held liable for
the transgressions of his or her predecessor
Nature of ULP
[Philippine Airlines, Inc. v. NLRC, G.R. No.
a. inimical to the legitimate interests of both
125792 (1998)]
labor and management, including their
right to bargain collectively and otherwise
General Rule: An innocent transferee of a
deal with each other in an atmosphere of
business establishment has no liability to the
freedom and mutual respect
employees of the transferor to continue
b. disrupt industrial peace
employing them. Nor is the transferee liable for
Page 169 of 262

c. hinder the promotion of healthy and stable language, in light of infinite combinations of
labor-management relations events, which may be charged as constituting
d. violations of the civil rights of both labor and an unfair labor practice. [HSBC Employee
management but are also criminal offenses Union v. NLRC, G.R. No. 125038 (1997)]
[Art. 258]
Note: Bargaining in bad faith constitutes Unfair
Four forms of Unfair Labor Practice in Labor Practice, which may be committed by
Collective Bargaining either Employer or Labor Organization.
1. Failure or refusal to meet and convene
2. Evading the mandatory subjects of 2. By Employers
bargaining
3. Bargaining in bad faith a. Interference/Restraint/Coercion
4. Gross violation of the CBA b. Yellow Dog Contracts
c. Contracting Out Services which
Purpose of the Policy Against ULPs Discourage Unionism
Protection of right to self-organization and/or d. Company Union
collective bargaining: e. Discrimination to Encourage/ Discourage
a. The employee is not only protected from Unionism
the employer but also from labor f. Discrimination for having given or about to
organizations. give testimony
b. The employer is also protected from ULP g. Violation of Duty to Bargain Collectively
committed by a labor organization. h. Payment of Negotiation or Attorney’s Fees
i. Violation of a Collective Bargaining
The public is also protected because it has an Agreement
interest in continuing industrial peace.
a. Interference/Restraint/Coercion
Employer-Employee Relationship Required
General Rule: An unfair labor practice may be Art. 259(a). Unfair Labor Practices of
committed only within the context of an Employers. – To interfere with, restrain or
employer-employee relationship [American coerce employees in the exercise of their
President Lines v. Clave, G.R. No. L-51641 right to self-organization
(1982)]
The fact that the resignations of the union
Exception: “Yellow Dog” condition or members occurred during the pendency of the
contract: to require as a condition of case before the labor arbiter shows GMC’s
employment that a person or an employee desperate attempts to cast doubt on the
shall not join a labor organization or shall legitimate status of the union. The ill-timed
withdraw from one to which he belongs. [Art. letters of resignation from the union members
259 (b)] indicate that GMC had interfered with the right
of its employees to self-organization. [General
Parties Not Estopped from Raising ULP by Milling Corporation v. Court of Appeals, G.R.
Eventual Signing of the CBA 146728 (2004)]
The eventual signing of the CBA does not
operate to estop the parties from raising unfair Interrogation
labor practice charges against each other. General rule: employer may interrogate its
[Standard Chartered Bank Union v. Confesor, employees regarding their union affiliation for
G.R. No. 114974 (2004)] legitimate purposes and with the assurance
that no reprisals would be taken against the
Statutory Construction unionists.
The Labor Code leaves to the court the work of
applying the law's general prohibitory
Page 170 of 262

Exception: when interrogation interferes with Blooming Mills Co., Inc., G.R. No. L-31195
or restrains employees' right to self- (1973)]
organization. [Phil. Steam Navigation Co. v.
Phil. Marine Officer’s Guild, G.R. Nos. L-20667 b. Yellow Dog Contracts
and 20669 (1965)]
Art. 259(b). Unfair Labor Practices of
Note: The interrogation of the ER should not be Employers. – To require as a condition of
persistent and/or hostile employment that a person or an employee
shall not join a labor organization or shall
Speech withdraw from one to which he belongs;
The acts of a company which subjects a union
to vilification and its participation in soliciting Yellow dog contracts require, as a condition of
membership for a competing union are also employment, that a person or an employee
acts constituting a ULP. [Phil. Steam shall not join a labor organization or shall
Navigation Co. v. Phil. Marine Officer’s Guild, withdraw from one to which he belongs.
G.R. Nos. L-20667 and 20669 (1965)]
Requisites of a Yellow Dog Contract:
An employer may not send letters containing 1. A representation by the employee that he
promises or benefits, nor of threats of obtaining is not a member of a labor organization
replacements to individual workers while the 2. A promise by the employee that he will not
employees are on strike due to a bargaining join a union
deadlock. This is tantamount to interference 3. A promise by the employee that upon
and is not protected by the Constitution as free joining a labor organization, he will quit his
speech. [Insular Life Assurance Co. employment [Azucena]
Employees Assn. v. Insular Life Assurance
Co. Ltd, G.R. No. L-25291 (1971)] c. Contracting Out Services which
Discourage Unionism
Espionage
Espionage and/or surveillance by the employer Art. 259(c). Unfair Labor Practices of
of union activities are instances of interference, Employers. – To contract out services or
restraint or coercion of employees in functions being performed by union
connection with their right to organize, form members when such will interfere with,
and join unions as to constitute unfair labor restrain or coerce employees in the exercise
practice. […] The information obtained by of their right to self-organization;
means of espionage is invaluable to the
employer and can be used in a variety of cases General Rule: contracting out is not a ULP, but
to break a union. [Insular Life Assurance Co. is covered by the employer’s management
Employees Assn. v. Insular Life Assurance prerogative.
Co. Ltd, G.R. No. L-25291 (1971)]
Exception [Art. 259 (c)]:
Concerted Activities 1. contracted-out services or functions are
The mass demonstration and stoppage of work performed by union members AND
of the Union is not ULP. They didn’t 2. contracting out will interfere with, restrain,
demonstrate against the employer, but against or coerce employees in the exercise of their
the Pasig police for alleged human rights right to self-organization.
abuses. This is merely an exercise of their
freedom of expression, assembly, and right to d. Company Union
redress of grievances enshrined in the
Constitution. [Philippine Blooming Mills Art. 259(d). Unfair Labor Practices of
Employment Organization v. Philippine Employers. – To initiate, dominate, assist or
otherwise interfere with the formation or
Page 171 of 262

administration of any labor organization, their own, must, however, suffer the
including the giving of financial or other consequences of their separation from the
support to it or its organizers or supporters; union under the security clause of the CBA.
[Villar v. Inciong, G.R. No. L-50283-84 (1983)].
Company union means any labor
organization whose formation, function or Statutory Basis and Rationale
administration has been assisted by any act
defined as unfair labor practice by this Code. Art. 259(e). Unfair Labor Practices of
[Art. 219(i)] Employers. – Nothing in this Code or in any
other law shall stop the parties from requiring
The employer commits ULP if it initiates, membership in a recognized collective
dominates, or otherwise interferes with the bargaining agent as a condition for
formation or administration of any labor employment, except those employees who
organization. are already members of another union at the
time of the signing of the collective
Example: giving out financial aid to any union's bargaining agreement.
supporters or organizers.
The law has allowed stipulations for 'union
e. Discrimination to Encourage/ shop' and 'closed shop' as means of
Discourage Unionism [Art. 259 encouraging workers to join and support the
(e)] union of their choice in the protection of their
rights and interests vis-a-vis the employer. [Del
General Rule: it is ULP to discriminate in Monte Philippines v. Salvidar, G.R. No. 158620
regard to wages, hours of work, and other (2006)]
terms and conditions of employment in order to
encourage or discourage membership in any Purpose
labor organization. To safeguard and ensure the existence of the
union and thus, promote unionism in general
Exception: Union security clauses as a state policy.
Union security is a generic term which is It is the policy of the State to promote unionism
applied to and comprehends “closed shop,” to enable the workers to negotiate with the
“union shop,” “maintenance of membership” or management on the same level and with more
any other form of agreement which imposes persuasiveness than if they were to individually
upon employees the obligation to acquire or and independently bargain for the
retain union membership as a condition improvement of their respective conditions. […]
affecting employment. [NUWHRAIN v. NLRC, For this reason, the law has sanctioned
G.R. No. 179402 (2008)] stipulations for the union shop and closed shop
as a means of encouraging the workers to join
[Union security clause] is an indirect restriction and support the labor union of their own choice
on the right of an employee to self- vis-à-vis the employer. [Liberty Flour Mills
organization. It is a solemn pronouncement of Employees v. Liberty Flour Mills, G.R. No.
a policy that while an employee is given the 58768-70 (1989)]
right to join a labor organization, such right
should only be asserted in a manner that will Coverage
not spell the destruction of the same General Rule: All employees in the bargaining
organization. [Tanduay Distillery Labor Union unit covered by the union security clause are
v. NLRC, G.R. No. 75037 (1987)] subject to its terms
[Employees], although entitled to disaffiliation

from their union to form a new organization of
Page 172 of 262

Exception: workers whom the union is supposed to protect

1. Employees who are already members of in the first place. Hence, any doubt as to the
another union at the time of the signing of existence of a closed shop provision in the CBA
the collective bargaining agreement may will be resolved in favor of the nonexistence of
not be compelled by any union security the closed shop provision. [Azucena]
clause to join any union. [Art. 254 (e)]
2. Employees already in service at the time 2. Maintenance of membership shop
the closed shop union security clause took
effect. Condition for continued employment
A closed shop provision in a CBA is not to An agreement where present and future
be given a retroactive effect as to preclude employees are not compelled to join the SEBA,
its being applied to employees already in but once so joined, they must maintain their
service. [Guijarno v. CIR, G.R. No. L- membership as a condition for continued
28791-93 (1973)] employment until they are promoted or
3. Any employee who, at the time the union transferred out of the bargaining unit or the
security clause took effect, is a bona fide agreement is terminated.
member of religious organization which
prohibits its members from joining labor There is maintenance of membership shop
unions on religious grounds [Reyes v. when employees, who are union members as
Trajano, 209 SCRA 484 (1992)]. of the effective date of the agreement, or who
4. Confidential employees who are excluded thereafter become members, must maintain
from the rank-and-file bargaining unit. union membership as a condition for [their]
5. Employees excluded from the union continued employment until they are promoted
security provisions by express terms of the or transferred out of the bargaining unit or the
agreement [BPI v. BPI Employees Union- agreement is terminated. [General Milling
Davao Chapter, G.R. No. 164301 (2010)]. Corporation (GMC) v. Casio, G.R. No. 149552
(2010)]
TYPES OF UNION SECURITY CLAUSE
3. Union shop
1. Closed shop
Condition for continued employment
Condition for employment There is union shop when all new regular
An agreement where only union members may employees are required to join the union within
be employed and, for the duration of the a certain period as a condition for their
agreement, remains a member in good continued employment. [General Milling
standing of a union. Corporation (GMC) v. Casio, G.R. No. 149552
(2010)]
A closed shop may be defined as an enterprise
in which, by agreement between the employer Non-members may be hired, but to retain
and his employees or their representatives, no employment, they must become union
person may be employed in any or certain members after a certain period. The
agreed departments of the enterprise unless requirement applies to present and future
he or she is, becomes, and, for the duration of employees. [Azucena]
the agreement, remains a member in good
standing of a union entirely comprised of or of 4. Modified union shop
which the employees in interest are a part.
[General Milling Corporation (GMC) v. Casio, Condition for continued employment of
G.R. No. 149552 (2010)] future employees
Employees who are not union members at the
The closed shop provision can also be a potent time of signing the contract need not join the
weapon wielded by the union against the
Page 173 of 262

union, but all workers hired thereafter must Company must conduct separate
join. [Azucena] investigation or hearing
The enforcement of union security clauses is
5. Agency shop authorized by law provided such enforcement
is not characterized by arbitrariness, and
Employees belonging to an appropriate always with due process. Even if there are
collective bargaining unit who are not members valid grounds to expel the union officers, due
of the recognized collective bargaining agent process requires that these union officers be
may be assessed a reasonable fee equivalent accorded a separate hearing by respondent
to the dues and other fees paid by members of company. [Malayang Samahan ng
the recognized collective bargaining agent, if Manggagawa sa M. Greenfield v. Ramos, G.R.
such non-union members accept the benefits No. 113907 (2000)]
under the collective agreement.
Requirement of Due Process
Provided, That the individual authorization The requirements laid down by the law in
required under Art. [250], paragraph (o) of [the determining whether or not an employee was
Labor] Code shall not apply to non-members of validly terminated must still be followed even if
the recognized collective bargaining agent [Art. it is based on a [union security clause] of a
259(e)]. CBA, i.e. the substantive as well as the
procedural due process requirements. [Del
ENFORCEMENT OF UNION SECURITY Monte v. Saldivar, G.R. No. 158620 (2006)]
CLAUSE
Obligations and Liabilities
Termination due to Union Security Where the employer dismissed his employees
Provision in the belief in good faith that such dismissal
Termination of employment by virtue of a union was required by the [union security provision]
security clause strengthens the union and of the collective bargaining agreement with the
prevents disunity in the bargaining unit within union, he may not be ordered to pay back
the duration of the CBA. The authorized compensations to such employees although
bargaining representative gains more numbers their dismissal is found to be illegal.
and strengthens its position as against other [Confederated Sons of Labor v. Anakan
unions which may want to claim majority Lumber Co., G.R. No. L-12503 (1960)]
representation. [Alabang Country Club v.
NLRC, G.R. No. 170287 (2008)] As dictated by fairness, […] the union shall be
liable to pay their backwages. This is because
Requisites for the enforcement of Union management would not have taken the action
Security Clauses it did, had it not been for the insistence of the
In terminating the employment of an employee labor union seeking to give effect to its
by enforcing the union security clause, the interpretation of a closed shop provision.
employer needs only to determine and prove [Guijarno v. CIR, G.R. No. L-28791-93 (1973)]
that:
1. The union security clause is applicable; f. Discrimination for having given
2. The union is requesting for the or about to give testimony
enforcement of the union security provision
in the CBA; Art. 259(f). Unfair Labor Practices of
3. There is sufficient evidence to support the Employers. — To dismiss, discharge or
union’s decision to expel the employee otherwise prejudice or discriminate against
from the union. [Alabang Country Club v. an employee for having given or being about
NLRC, G.R. No. 170287 (2008)] to give testimony;
Page 174 of 262

Note: This is broader than the prohibition under the Union and the school management, […]
Art. 118 because Art. 259 (f) covers testimony SJCI in effect admitted that it wanted to end the
under the whole Code, while Art. 118 only bargaining deadlock and eliminate the problem
covers testimony under Book I: Pre- dealing with the demands of the union. [St.
Employment, Title II: Wages. John Colleges Inc. v. St. John Academy
Faculty and Employees Union, G.R. No.
Note further: Includes not giving testimony 167892 (2006)]
[Azucena].
3. Implied refusal
g. Violation of Duty to Bargain
Collectively The school is guilty of unfair labor practice
when it failed to make a timely reply to the
Art. 259(g). Unfair Labor Practices of proposals of the union more than one month
Employers — To violate the duty to bargain after the same were submitted by the union. In
collectively as prescribed by this Code; explaining its failure to reply, the school merely
offered a feeble excuse that its Board of
Collective bargaining does not end with the Trustees had not yet convened to discuss the
execution of an agreement. Being a continuous matter. Clearly, its actuation showed a lack of
process, the duty to bargain necessarily sincere desire to negotiate. [Colegio de San
imposes on the parties the obligation to live up Juan de Letran v. Association of Employees
to the terms of such a collective bargaining and Faculty of Letran, G.R. No. 141471 (2000)]
agreement if entered into, it is undeniable that
non-compliance therewith constitutes an unfair ACTS NOT DEEMED REFUSAL TO
labor practice. [Shell Oil Workers Union v. Shell BARGAIN
Co., G.R. No. L-28607 (1971)] 1. Adoption of an adamant bargaining
position in good faith, particularly where the
Note: See ULP in Collective Bargaining above. company is operating at a loss
2. Refusal to bargain over demands for
ACTS DEEMED AS REFUSAL TO BARGAIN commission of unfair labor practices
3. Refusal to bargain during period of illegal
1. Refusal to bargain when there is an strike
unresolved petition for union 4. Not initiating the bargaining
cancellation 5. Refusal to bargain where the union
demands for recognition and bargaining
“That there is a pending cancellation within the year following a certification
proceedings against the union is not a bar to election, and the clear choice is no union
set in motion the mechanics of collective and no ad interim significant change has
bargaining. […] Unless [the union’s] certificate taken place in the unit
of registration and status as the certified 6. Refusal to bargain because the other party
bargaining agent is revoked, [the employer], by is making unlawful bargaining demands
express provision of the law, is duty bound to
collectively bargain with the Union.” [Capitol h. Payment of Negotiation or
Medical Center v. Trajano, G.R. No. 155690 Attorney’s Fees
(2005)]
Art. 259(h). Unfair Labor Practices of
2. Employer’s suspension of operations in Employers — To pay negotiation or
order to forestall a demand for attorney's fees to the union or its officers or
collective bargaining agents as part of the settlement of any issue
in collective bargaining or any other dispute;
By admitting that the closure [of the business]
was due to irreconcilable differences between
Page 175 of 262

Sweetheart contracts are favorable both to the An employer cannot be considered to have
union and the employer at the expense of the committed a gross and economic violation of
employees. The settlement of bargaining the CBA when it, in good faith, withheld union
issues must be made by fair bargaining in good dues and death benefits from the union upon
faith, and not through the payment of written request of the union members in light of
negotiation or attorney's fees which will the conflict between the members and the
ultimately lead to sweetheart contracts. union officers and instead deposited such
amount to the DOLE. [Arellano University
i. Violation of a Collective Employees and Workers Union v. Court of
Bargaining Agreement [Art. 259 Appeals, G.R. 139940 (2006)]
(i)]
Motive, Conduct, Proof
Art. 259(i) Unfair Labor Practices of To constitute ULP, the dismissals by the ER
Employers — To violate a collective need not be entirely motivated by union
bargaining agreement. activities or affiliations. It is enough that
discrimination was a factor. [Me-Shurn Corp. v.
Flagrant and/or Malicious Refusal to Me-Shurn Workers Union-FSM, G.R. No.
Comply with Economic Provisions 156292 (2005)]
Required
Art. 274. Jurisdiction of Voluntary Note: The basic inspiration of the dismissals
Arbitrators. – Accordingly, violations of a should concern the right to self-organization.
Collective Bargaining Agreement, except
those which are gross in character, shall no Totality of Evidence
longer be treated as unfair labor practice and Where the attendant circumstances, the history
shall be resolved as grievances under the of the employer's past conduct and like
Collective Bargaining Agreement. considerations, coupled with an intimate
connection between the employer's action and
For purposes of this Art., gross violations of the union affiliations or activities of the
Collective Bargaining Agreement shall mean particular employee or employees, taken as a
flagrant and/or malicious refusal to comply whole, raise a suspicion as to the motivation for
with the economic provisions of such the employer's action, the failure of the
agreement. employer to ascribe a valid reason therefor
may justify an inference that his unexplained
Violations of collective bargaining agreements, conduct in respect of the particular employee
except flagrant and/or malicious refusal to or employees was inspired by the latter's union
comply with its economic provisions, shall not membership or activities. [Royal Undergarment
be considered unfair labor practice and shall Corporation of the Philippines v. CIR, G.R. No.
not be strikeable. [Book V, Rule XXII, Sec. 5] L-39040 (1990)]
Note: The list in Art. 259 is not exhaustive. 3. By Labor Organizations

Other acts which are analogous to those
enumerated can be ULPs. a. Restraint or Coercion
b. Discrimination: Encourage/Discourage
The alleged violation of the CBA, even Unionism
assuming it was malicious and flagrant, is not c. Violation of Duty, or Refuse to Bargain
a violation of an economic provision, thus d. Illegal Exaction (Featherbedding)
not an Unfair Labor Practice. [BPI Employees e. Asking or Accepting Negotiation and other
Union-Davao FUBU v. BPI, G.R. No. 174912 Attorney's Fees
(2013)] f. Violation of a Collective Bargaining
Agreement
Page 176 of 262

a. Restraint or Coercion d. Illegal Exaction

(Featherbedding)
Art. 260(a). Unfair Labor Practices of
Labor Organizations — To restrain or Art. 260(d). Unfair Labor Practices of
coerce employees in the exercise of their Labor Organizations — To cause or
right to self-organization. However, a labor attempt to cause an employer to pay or
organization shall have the right to prescribe deliver or agree to pay or deliver any money
its own rules with respect to the acquisition or other things of value, in the nature of an
or retention of membership; exaction, for services which are not
performed or not to be performed, including
“Interfere” is not included in Art. 260 simply the demand for fee for union negotiations;
because any act of a labor organization
amounts to interference to the right of self- The practice of the labor organization to cause
organization. or attempt to cause an employer to pay or
deliver or agree to pay or deliver money or
b. Discrimination: Encourage/ other things of value, in the nature of an
Discourage Unionism exaction, for services which are not performed
or are not to be performed, including the
Art. 260(b). Unfair Labor Practices of demand for a fee for union negotiations.
Labor Organizations — To cause or
attempt to cause an employer to discriminate e. Asking or Accepting
against an employee, including Negotiation and other
discrimination against an employee with Attorney's Fees
respect to whom membership in such
organization has been denied; or terminate Art. 260(e). Unfair Labor Practices of
an employee on any ground other than the Labor Organizations — To ask for or
usual terms and conditions under which accept negotiation or attorney's fees from
membership or continuation of membership employers as part of the settlement of any
is made available to other members; issue in collective bargaining or any other
dispute
General rule: It is a ULP for a labor
organization to cause an employer to See counterpart in ULP by Employers
discriminate against an employee. (sweetheart contracts).
Exception: Provisions of a valid union security f. Violation of a Collective

clause and other company policies applicable Bargaining Agreement
to all employees.
Art. 260(f). Unfair Labor Practices of
c. Violation of Duty, or Refuse to Labor Organizations — To violate a
Bargain collective bargaining agreement.
Art. 260(c) Unfair Labor Practices of Gross Violations of the CBA

Labor Organizations — To violate the duty, Art. 274. Jurisdiction of Voluntary
or refuse to bargain collectively with the Arbitrators. – Accordingly, violations of a
employer, provided it is the representative of Collective Bargaining Agreement, except
the employees; those which are gross in character, shall no
longer be treated as unfair labor practice and
Note: See ULP in Collective Bargaining above. shall be resolved as grievances under the
Note further: See discussion under 2(g). Collective Bargaining Agreement.
Page 177 of 262

For purposes of this Art., gross violations of workers it is supposed to protect. [Batangas
Collective Bargaining Agreement shall mean Laguna Tayabas Bus Co. v. NLRC, G.R. No.
flagrant and/or malicious refusal to comply 101858 (1992)]
with the economic provisions of such
agreement. FORMS OF CONCERTED ACTIVITIES
Concerted Activities by Labor
See counterpart in ULP by Employers. Organization:
a. Strike (includes slow downs, mass leaves,
sitdowns, attempts to damage destroy or
F. PEACEFUL CONCERTED sabotage plant equipment and similar
ACTIVITIES activities)
b. Picketing
c. Boycott
Definition
A concerted activity is one undertaken by two
Response to Concerted Activities available
or more employees to improve their terms and
to Employers:
conditions of work.
a. Lockout
Nature of the Right to Strike and Lockout
The right to strike is a constitutional and legal
right of the workers, as the employers have the 1. By Labor Organization
inherent and statutory right to lockout within the
context of labor relations and collective a. Strike
bargaining.
Definition
It is a means of last resort and presupposes Any temporary stoppage of work by the
that the duty to bargain in good faith has been concerted action of employees as a result of an
fulfilled and other voluntary modes of dispute industrial or labor dispute. [Art. 219(o)]
settlement have been tried and exhausted.
[Guidelines Governing Labor Relations (1987)] Labor Dispute
Includes any controversy or matter concerning
Non-abridgment of right to self- terms and conditions of employment or the
organization association or representation of persons in
It shall be unlawful for any person to restrain, negotiating, fixing, maintaining, changing or
coerce, discriminate against or unduly interfere arranging the terms and conditions of
with employees and workers in their exercise employment, regardless of whether or not the
of the right to self-organization. Such right shall disputants stand in the proximate relation of
include the right to (…) engage in lawful employers and employees. [Solidbank Corp. v.
concerted activities for the same purpose or for EU Gamier, G.R. No. 159460 and G.R. No.
their mutual aid and protection, subject to the 159461 (2010)]
provisions of Art. [279] of this Code. [Art. 257]
Strikes not limited to work stoppages
Limitation: Concerted activities must be in The term “strike” shall comprise not only
accordance with law concerted work stoppages, but also
The strike is a powerful weapon of the working slowdowns, mass leaves, sit-downs, attempts
class. Thus, it must be declared only after the to damage, destroy or sabotage plant
most thoughtful consultation among them, equipment and facilities, and similar activities.
conducted in the only way allowed; that is, [Samahang Manggagawa v. Sulpicio Lines,
peacefully, and in every case conformably to G.R. No. 140992 (2004)]
reasonable regulation. Any violation of the
legal requirements and strictures will render As coercive measure by employees
the strike illegal, to the detriment of the very A strike is a coercive measure resorted to by
laborers to enforce their demands. The idea
Page 178 of 262

behind a strike is that a company engaged in a reinstatement are entitled to the losses of pay
profitable business cannot afford to have its they may have suffered by reason of the
production or activities interrupted, much less, employer’s discriminatory acts from the time
paralyzed. [Phil. Can Co. v. CIR, G.R. No. L- they were refused reinstatement. [Philippine
3021 (1950)] Marine Officers’ Guild v. Compania Maritima,
G.R. Nos. L-20662 and L-20663 (1968)]
Who may declare a strike
1. The certified or duly recognized bargaining No Strike No Lockout Clause
representative A "no strike, no lock-out" provision in the [CBA]
2. Any legitimate labor organization in the is a valid stipulation, although the clause may
absence of a certified or duly recognized be invoked by an employer only when the strike
bargaining representative, but only on is economic in nature or one which is
grounds of ULP [Sec. 6, Rule XXII, Book V, conducted to force wage or other concessions
IRR] from the employer that are not mandated to be
granted by the law itself.
No severance of employer-employee
relationship during lawful strike It would be inapplicable to prevent a strike
Although during a strike the worker renders no which is grounded on unfair labor practice.
work or service and receives no compensation, [Panay Electric Co. v. NLRC, G.R. No. 102672
yet his relationship as an employee with his (1995); Malayang Samahan ng mga
employer is not severed or dissolved. [Elizalde Manggagawa sa Greenfield v. Ramos, G.R.
Rope Factory, Inc. v. SSS, G.R. No. L-15163 No. 113907 (2000)]
(1962)]
Other Forms of Strike
Payment of wages during lawful strikes
General rule: Striking employees are not AS TO GROUNDS
entitled to the payment of wages for un-worked 1. Economic strike – one staged by workers
days during the period of the strike pursuant to to force wage or other economic
the “no work-no pay” principle. concessions from the employer which he is
not required by law to grant; not a
Exception: If there is no work performed by the strikeable ground [Consolidated Labor
employee there can be no wage or pay unless Association of the Phil. v. Marsman and
the laborer was able, willing and ready to work Company, G.R. No. L-17038 (1964)]
but was illegally locked out, suspended or 2. ULP strike – called against a company's
dismissed or otherwise illegally prevented from unfair labor practice to force the employer
working. For this exception to apply, it is to desist from committing such practices.
required that the strike be legal. [Visayas
Community Medical Center v. Yballe, G.R. No. AS TO HOW COMMITTED
196156 (2014)] 1. Slowdown strike – one by which workers,
without a complete stoppage of work,
Reinstatement after a lawful strike retard production or their performance of
When strikers abandon the strike and apply for duties and functions to compel
reinstatement despite the existence of valid management to grant their demands.
grounds, but the employer either:
a. refuses to reinstate them or A slowdown is inherently illicit and
b. imposes upon their reinstatement new unjustifiable because while the employees
conditions, continue to work, they, at the same time,
then the employer commits an act of ULP. select what part of their duties they
perform. In essence, they work on their
The strikers who refuse to accept the new own terms. It is a strike on installment
conditions and are consequently refused
Page 179 of 262

basis. [Ilaw at Buklod ng Manggagawa v.

NLRC, G.R. No. 91980 (1991)] Strike cannot be converted to a lockout by
a return to work offer
2. Wild-cat strike – one declared and staged A strike cannot be converted into a pure and
without filing the required notice of strike simple lockout by the mere expedient filing
and without the majority approval of the before the trial court a notice of offer to return
recognized bargaining agent [NUWHRAIN to work during the pendency of the labor
– The Peninsula Manila Chapter v. NLRC, dispute between the union and the employer.
G.R. No. 125561 (1998)] [Rizal Cement Workers Union v. CIR, G.R. No.
L-18442 (1962)]
3. Sit-down strike – one wherein workers
take over possession of the property of Requisites for a Valid Strike
such business to cease production and to A valid strike must have a lawful ground and
refuse access to owners. [Sukhothai must conform with the procedural requirements
Cuisine & Restaurant v. CA, G.R. No. set by law.
150437 (2006)]
Substantial Requirements/Grounds
4. Sympathetic strike – one in which the A strike or lockout may be declared in cases of:
striking workers have no demands of their 1. Bargaining deadlocks
own, but strike to make common cause 2. ULP [Art. 278(c)]
with other strikers in other establishments
(ex. Welga ng Bayan). This is illegal Note: A strike, justified by the employees’ belief
because there is no labor dispute between in good faith that ULP was done by the
workers who are joining the workers [Biflex employer at the time the strikers went on strike,
Phils. Inc. Labor Union v. Filflex Industrial is presumed valid even if the fact of ULP was
and Manufacturing Corporation, G.R. No. later found to be untrue [Master Iron Labor v.
155679 (2006)] NLRC, 219 SCRA 47 (1993)].
5. Mass leave – one in which workers Procedural Requirements for Strike [Art.
collectively abandon or boycott regular 278]
work causing temporary stoppage of work 1. Effort to bargain (for bargaining deadlock
[Solidbank Corp. v. E.U. Gamier, G.R. No. strikes)
159460-61 (2010)] 2. Filing and service of notice of strike
3. Observance of cooling-off period
Conversion from economic to ULP strike a. 15 days for ULP
It is possible for a strike to change its character No cooling-off period when the ULP
from an economic to a ULP strike. can be considered union busting
(dismissal of duly elected union officers
In the instant case, initially, the strike staged by from employment)
the Union was meant to compel the Company b. 30 days for bargaining deadlock
to grant it certain economic benefits set forth in 4. Notice of strike vote meeting to NCMB
its proposal for collective bargaining. However, within 24 hours before the strike vote [Sec.
the strike changed its character from the time 10, Rule XXII, Book V, IRR]
the Company refused to reinstate 5. Strike vote
complainants because of their union activities 6. Strike vote report sent to NCMB
after it had offered to admit all the strikers and 7. Observance of the waiting period (7-day
in fact did readmit the others. It was then strike ban)
converted into an unfair labor practice strike.
[Consolidated Labor Association of the Phil. v.
Marsman and Company, G.R. No. L-17038
(1964)]
Page 180 of 262

(1) EFFORT TO BARGAIN the union constitution and by-laws, which may
constitute union-busting, where the existence
No labor organization […] shall declare a strike of the union is threatened, the 15-day cooling-
[…] without first having bargained collectively off period shall not apply and the union may
in accordance with Title VII of this Book […] take action immediately.
[Art. 279(a)]
Notice to the Employer
In case of bargaining deadlocks, the notice In case of unfair labor practice and/or union
shall, as far as practicable: busting, the notice must be served to the
a. Further state the unresolved issues in the employer. Failure to do so will constitute
bargaining negotiations; and noncompliance with the procedural
b. Be accompanied by the written proposals requirements and will result to an illegal strike.
of the union, the counter-proposals of the [Filipino Pipe and Foundry Corp v. NLRC, G.R.
employer and the proof of a request for No. 115180 (1999)]
conference to settle differences.
Rationale: Due process. [IRR]
In cases of unfair labor practices, the notice
shall, as far as practicable, state the acts Contents of Notice of Strike
complained of, and efforts taken to resolve the 1. Names and addresses of the employer and
dispute amicably. [Sec. 4, Rule XXII, Book V, the union involved
IRR] 2. Nature of the industry to which the
employer belongs
The Implementing Rules use the words as far 3. Number of union members and of workers
as practicable. In this case, attaching the in the bargaining unit
counter-proposal of the company to the notice 4. Such other relevant data as may facilitate
of strike of the union was not practicable. It was the settlement of the dispute.
absurd to expect the union to produce the
company’s counter-proposal which it did not Additional Requirements
have. [Club Filipino, Inc. v. Bautista, G.R. No. In case of Bargaining Deadlocks:
168406 (2009)] 1. Statement of unresolved issues in the
bargaining negotiations
(2) FILING AND SERVICE OF NOTICE OF 2. Written proposals of the union
STRIKE 3. Counter-proposals of the employer
4. Proof of a request for conference to settle
Ground: Bargaining Deadlocks [Art. 278(c)] the differences. [Sec. 4, Rule XXII, Book V,
Filed by: The duly certified or recognized IRR]
bargaining agent may file a notice of strike
Filed with: With the Ministry [now DOLE] In cases of ULP:
When: At least 30 days before the intended 1. Statement of acts complained of
date of the strike 2. Efforts taken to resolve the dispute
amicably. [Sec. 4, Rule XXII, Book V, IRR]
Ground: Unfair Labor Practice [Art. 278(c)]
Filed by: The duly certified or recognized Action on Notice:
bargaining agent, or in the absence of such 1. Upon receipt of a valid notice of strike or
agent, any legitimate labor organization in lockout, the NCMB, through its Conciliator-
behalf of its members may file a notice of strike Mediators, shall call the parties to a
Filed with: With the Ministry [now DOLE] conference the soonest possible time in
When: The period of notice shall be 15 days order to actively assist them to explore all
possibilities for amicable settlement.
Note: In case of dismissal from employment of 2. The Conciliator-Mediator may
union officers duly elected in accordance with suggest/offer proposals as an alternative
Page 181 of 262

avenue for the resolution of their

disagreement/conflict which may not (5) STRIKE VOTE
necessarily bind the parties.
3. If conciliation/mediation fails, the parties Art. 278 (f). Strikes, Picketing and
shall be encouraged to submit their dispute Lockouts. – A decision to declare a lockout
for voluntary arbitration. must be approved by a majority of the board
of directors of the corporation or association
(3) OBSERVANCE OF COOLING-OFF or of the partners in a partnership, obtained
PERIODS by secret ballot in a meeting called for that
Cooling off periods purpose […]
1. Bargaining deadlock – 30 days
2. ULP but not union busting – 15 days Requirements for a declaration of a strike in
3. ULP and union busting – no cooling-off a strike vote
period 1. approval by a majority of the total union
membership in the bargaining unit
Purpose of Cooling Off Period concerned
During the cooling-off period, it shall be the 2. approval is obtained by secret ballot in a
duty of the Ministry [now DOLE] to exert all meeting/referendum called for the purpose
efforts at mediation and conciliation to effect a
voluntary settlement. Duration of the Validity of the Strike-Vote
Art. 278 (f). Strikes, Picketing and
Should the dispute remain unsettled until the Lockouts. – [T]he decision shall be valid for
lapse of the requisite number of days from the the duration of the dispute based on
mandatory filing of the notice, the labor union substantially the same grounds considered
may strike or the employer may declare a when the strike or lockout vote was taken.
lockout. [Art. 278 (e)] […]
The purpose of the cooling-off period is to (6) STRIKE VOTE REPORT

provide an opportunity for mediation and
conciliation. [National Federation of Sugar Art. 278 (f). Strikes, Picketing and
Workers v. Ovejera, G.R. No. L-59743 (1982)] Lockouts. – [I]n every case, the union or the
employer shall furnish the Department the
(4) NOTICE OF STRIKE-VOTE MEETING results of the voting at least 7 days before
the intended strike or lockout, subject to
Art. 278 (f). Strikes, Picketing and the cooling-off period herein provided.
Lockouts. – [T]he Department may, at its
own initiative or upon the request of any (7) OBSERVANCE OF THE 7-DAY WAITING
affected party, supervise the conduct of the PERIOD
secret balloting. […]
7 Day Observance of the Strike Ban
Sec. 10, Rule XXII, Book V. Strike or The waiting period, on the other hand, is
Lockout Vote. – In every case, the union or intended to provide opportunity for the
the employer shall furnish the regional members of the union or the management to
branch of the Board the notice of meetings take the appropriate remedy in case the strike
referred to in the preceding paragraph at or lockout vote report is false or inaccurate.
least twenty-four (24) hours before such [National Federation of Sugar Workers v.
meetings […] Ovejera, G.R. No. L-59743 (1982)]
The purpose of the notice is to allow the NCMB The waiting period is intended to give the
to decide whether or not they will send a DOLE an opportunity to verify whether the
representative to supervise the strike vote. projected strike really carries the imprimatur of
Page 182 of 262

the majority of the union members. [Lapanday b. Illegal strike – one staged for a purpose
Workers Union v. NLRC, G.R. Nos. 95494-97 not recognized by law, or if for a valid
(1995)] purpose, conducted through means not
sanctioned by law.
Compliance with Both Cooling-off and
Waiting Periods EFFECT OF ILLEGALITY / LIABILITY OF
The observance of both periods must be PARTICIPATING MEMBERS/OFFICERS OF
complied with, although a labor union may take THE UNION
a strike vote and report the same within the a. Ordinary Striking Worker – cannot be
statutory cooling-off period. The cooling-off and terminated for mere participation in an
7-day strike ban provisions of law constitute a illegal strike; proof must be adduced
valid exercise of police power of the State. showing that he or she committed illegal
[National Federation of Sugar Workers v. acts during the strike.
Ovejera, G.R. No. L-59743 (1982)] b. Participating Union Officer – may be
terminated, not only when he actually
Mutually exclusive periods (used in the commits an illegal act during a strike, but
NCMB Manual) also if he knowingly participates in an
The cooling off period and the 7-day period are illegal strike [Phimco Industries, Inc. v.
mutually exclusive. Thus, in the case of Capitol PILA, G.R. No. 170830 (2010)]
Medical Center v. NLRC [G.R. No. 147080
(2005)], the Court held that when the strike vote Prohibited Grounds for Strike
is conducted within the cooling-off period, the 1. Labor standards cases such as wage
7-day requirement shall be counted from the orders
day following the expiration of the cooling off 2. Issues involving wage distortion caused by
period. legislated wage orders
3. Inter or intra union disputes
Improved Offer Balloting 4. Execution and enforcement of final orders
In case of a strike, the regional branch of the or awards of cases pending at the DOLE
Board shall, at its own initiative or upon the Regional Offices, BLR, NLRC, VA, CA and
request of any affected party, conduct a SC and related offices
referendum by secret balloting on the improved 5. Violations of the CBA which are not gross
offer of the employer on or before the 30th day in character (not ULP) [BPI Employees
of strike. Union-Davao FUBU v. BPI, G.R. No.
174912 (2013)]
When at least a majority of the union members Gross in character shall mean flagrant
vote to accept the improved offer: and/or malicious refusal to comply with the
a. The striking workers shall immediately economic provisions of such agreement.
return to work and; [Art. 274]
b. The employer shall thereupon re-admit
them upon the signing of the agreement PROHIBITED ACTIVITIES IN STRIKE
[Sec. 12, Rule XXII, Book V] 1. By anyone. No person shall obstruct,
impede, or interfere with, by force,
i. Valid Strikes as violence, coercion, threats, or intimidation,
distinguished from Illegal any peaceful picketing by employees [Art.
Strikes 279(b)];
a. Blocking the free ingress to/ egress
VALID v. ILLEGAL STRIKE from work premises for lawful purposes
a. Legal strike – one called for a valid b. Obstruction of public thoroughfares
purpose and conducted through means c. Threatening, coercing and intimidating
allowed by law. non-striking employees, officers,
suppliers and customers
Page 183 of 262

d. Resistance and defiance of Intra-union and inter-union disputes are not

assumption of jurisdiction by the Labor proper grounds to strike.
Secretary or an injunction
e. Acts of violence [Association of Note: Good faith strike
Independent Unions in the Philippines Good faith may be used as a defense if the
(AIUP), et. al. v. NLRC, G.R. No. strike is held on the basis of an act of ULP by
120505 (1999)] the employer even if it turned out that there was
no act of ULP. However, the mandatory
The violence must be pervasive and procedural requirements cannot be dispensed
widespread, consistently and deliberately with (notice of strike, cooling-off period, strike
resorted to as a matter of policy [Shell Oil vote, strike vote report). [Grand Boulevard
Workers v. Shell Company of the Phil., 39 Hotel v. GLOWHRAIN, G.R. No. 153664
SCRA 276 (1971)] (if violence was resorted (2003)]
to by both sides, such violence cannot be a
ground for declaring the strike as illegal) Good faith strike requires rational basis
[Malayang Samahan ng Manggagawa sa A mere claim of good faith would not justify the
M. Greenfield v. Ramos, 357 SCRA 77 holding of a strike under the aforesaid
(2000)] exception as, in addition thereto, the
circumstances must have warranted such
2. By employer. No employer shall use or belief. It is, therefore, not enough that the union
employ any strike-breaker, nor shall any believed that the employer committed acts of
person be employed as a strike-breaker. ULP when the circumstances clearly negate
[Art. 279(c)] even a prima facie showing to sustain such
belief. [Interwood Employees Assoc. v. Int’l
3. By public official or police force. No Hardwood, G.R. No. L-7409 (1956)]
public official or employee, including
officers and personnel of the New Armed 3. Noncompliance with Procedural
Forces of the Philippines or the Integrated Requirements
National Police, or armed person, shall
bring in, introduce or escort in any manner, See: Procedural requirements of a valid strike
any individual who seeks to replace strikers previously discussed
in entering or leaving the premises of a
strike area, or work in place of the strikers. A strike which does not strictly comply with the
[Art. 279(d)] procedural requirements set by law and the
rules is an unlawful/illegal strike. [Sta. Rosa
CATEGORIES OF ILLEGAL STRIKE Coca-Cola Plant Employees Union v. Coca-
Cola Bottlers Philippines, Inc., G.R. Nos.
1. Prohibited by Law (e.g. Strike By 164302-03 (2007)]
Government Employees)
Note: Good faith strike must still comply
Government employees with procedural requirements.
While the Constitution guarantees the right of Even if the union acted in good faith in the
government employees to organize, they are belief that the company was committing an
not allowed to strike. unfair labor practice, if no notice of strike and a
strike vote were conducted, the said strike is
2. Improper Grounds (e.g. Intra or Inter illegal. [Grand Boulevard Hotel v.
Union Dispute, Wage Distortion) GLOWHRAIN, G.R. No. 153664 (2003)]
A legal strike must be based on a bargaining General Rule: A strike based on a non-
deadlock and/or a ULP act only. strikeable ground is an illegal strike; a strike
Page 184 of 262

grounded on ULP is illegal if no such acts 2. Care is to be taken especially where an

actually exist. unfair labor practice is involved, to avoid
stamping it with illegality just because it is
Exception: Even if no ULP acts are committed tainted by such acts. To avoid rendering
by the employer, if the employees believe in illusory the recognition of the right to strike,
good faith that ULP acts exist so as to responsibility in such a case should be
constitute a valid ground to strike, then the individual and not collective.
strike held pursuant to such belief may be legal. 3. A different conclusion would be called for if
[NUWHRAIN v. NLRC, G.R. No. 125561 the existence of force while the strike lasts
(1998)] is pervasive and widespread, consistently
and deliberately resorted to as a matter of
4. Unlawful Means and Methods policy. It could be reasonably concluded
then that even if justified as to ends, it
Purpose and means test becomes illegal because of the means
There must be concurrence between the employed.
validity of the purpose of the strike and the 4. This is not by any means to condone the
means of conducting it. utilization of force by labor to attain its
objectives. It is only to show awareness
To be valid, a strike must be pursued within that in labor conflicts, the tension that fills
legal bounds. The right to strike as a means the air as well as the feeling of frustration
for the attainment of social justice is never and bitterness could break out in sporadic
meant to oppress or destroy the employer. acts of violence.
The law provides limits for its exercise. Among It would be unjustified, considering all the facts
such limits are the prohibited activities under disclosed, to stamp the strike with illegality. It is
Art. [279], particularly paragraph (e), which enough that individual liability be incurred by
states that no person engaged in picketing those guilty of such acts of violence that call for
shall: loss of employee status. [Shell Oil Workers
1. commit any act of violence, coercion, or Union v. Shell Co. of the Phils, G.R. No. L-
intimidation or 28607 (1971)]
2. obstruct the free ingress to or egress from
the employer's premises for lawful It bears stressing that the requirements of
purposes or strike notice and strike-vote report are
3. obstruct public thoroughfares. mandatory, meaning, non-compliance
therewith makes the strike illegal. The evident
A legal strike may turn into an illegal strike intention of the law in requiring these is to
Even if the strike is valid because its objective reasonably regulate the right to strike.
or purpose is lawful, the strike may still be [Stamford Mark Corp. v. Julian, G.R. No.
declared invalid where the means employed 145496 (2004)]
are illegal. [Phil. Diamond Hotel and Resort,
Inc. v. Manila Diamond Hotel Employees 5. Violation of Injunction Order
Union, G.R. No. 158075 (2006)]
An automatic injunction under Art. 278(g) or a
Examples of unlawful means and methods valid injunction order under the exceptions to
1. Acts of violence and terrorism Art. 279 must be complied with. Otherwise, the
2. Destruction of property strike becomes illegal.
Guidelines and balancing of Interest

1. A strike, otherwise valid, if violent in
character, may be placed beyond the pale.
Page 185 of 262

6. Those Contrary to an Existing under the circumstances to justify the penalty

Agreement of dismissal [Toyota Motors Philippines
Workers Association v. NLRC, 537 SCRA 171
(e.g. No strike/lockout provisions in the CBA) (2007)].
[Citing Ludwig Teller in Toyota Motors v.
NLRC, G.R. Nos. 158786 & 158787 (2007)] Note: The mere fact that the criminal
complaints against terminated Union members
No Strike/Lockout Provisions in the CBA were subsequently dismissed does not
A “no strike, no lock-out” is a valid provision in extinguish their liability under the Labor Code
the CBA. However, it only applies to economic [C. Alcantara & Sons, Inc. v. CA, G.R. No.
provisions. It cannot prevent a strike which is 155109 (2011)].
grounded on unfair labor practice. [Malayang
Samahan ng mga Manggagawa sa Greenfield Liability of Employer
v. Ramos, G.R. No. 113907 (2000)] Any worker whose employment has been
terminated as a consequence of any unlawful
7. The Strikers do not belong to a lockout shall be entitled to reinstatement with
Legitimate Labor Organization [Magdala full backwages. [Art. 279(a)]
Multipurpose & Livelihood Coop. v.
Kilusang Manggagawa Ng LGS, G.R. Nos. WAIVER OF ILLEGALITY OF STRIKE/
191138-39 (2011)] CONDONATION DOCTRINE
Liabilities of Parties When defense of illegality of strike is

Any union officer who knowingly participates in deemed waived
an illegal strike and any worker or union officer An employer can be deemed to have waived
who knowingly participates in the commission the defense that a strike is illegal. In one case,
of illegal acts during a strike may be declared the Court held that: “Admitting for the sake of
to have lost his employment status. [Art. argument that the strike was illegal for being
279(a)] premature, this defense was waived by the
[Company], when it voluntarily agreed to
Note: Mere participation in an illegal strike by a reinstate the radio operators.” [Bisaya Land
union officer is sufficient ground to terminate Transportation Co., Inc. v. CIR, G.R. No. L-
his employment. In case of a lawful strike, the 10114 (1957)]
union officer must commit illegal acts during a
strike for him to be terminated. [Art. 279(a)] When defense of illegality of strike is not
deemed waived
Procedural due process is still required for The ruling cited in the Bisaya case that the
dismissing union officers/ordinary workers. employer waives his defense of illegality of the
Where an opportunity to be heard either strike upon reinstatement of strikers is
through oral arguments or through pleadings is applicable only to strikers who signified their
accorded, there is no denial of procedural due intention to return to work and were accepted
process. [Equitable PCI Banking Corp. v. back. […]
RCBC Capital Corp, 574 SCRA 858 (2004)]
Condonation shall apply only to strikers who
Liability of Ordinary Workers signified their intention to return, and did return
General rule: Participation by a worker in a to work, since these strikers took the initiative
lawful strike is not ground for termination of his in normalizing relations with their employer and
employment. [Art. 279(a)] thus helped promote industrial peace.
However, as regards the strikers who
Exception: When the worker participated in decided to pursue with the case, […] the
illegal acts during the strike; needs clear, employer could not be deemed to have
substantial and convincing proof available condoned their strike, because they had not
Page 186 of 262

shown any willingness to normalize relations Inc. v. Phimco Industries Labor Association
with it. [Philippine Inter-Fashion, Inc. v. NLRC, (PILA), et al., 628 SCRA 119 (2010)].
G.R. No. L-59847 (1982)]
PROHIBITED ACTIVITIES IN PICKETING
However, the mere act of entering into a 1. By any person. No person shall obstruct,
compromise agreement cannot be deemed to impede, or interfere with, by force,
be a waiver of the illegality of the strike, unless violence, coercion, threats or intimidation,
such a waiver is clearly shown in the any peaceful picketing by employees
agreement. [Filcon Manufacturing Corp v. during any labor controversy or in the
Lakas Manggagawa sa Filcon – Lakas exercise of the right to self-organization or
Manggagawa Labor Center, G.R. No. 150166 collective bargaining, or shall aid or abet
(2004)] such obstruction or interference. [Art.
279(b)]
b. Picket 2. By police force. The police force shall
keep out of the picket lines unless actual
The right of legitimate labor organizations to violence or other criminal acts occur
strike and picket and of employers to lockout, therein: Provided, That nothing herein shall
consistent with the national interest, shall be interpreted to prevent any public officer
continue to be recognized and respected. [Art. from taking any measure necessary to
278(b)] maintain peace and order, protect life and
property, and/or enforce the law and legal
Picketing involves merely the marching to and orders. [Art. 279(d)]
fro at the premises of the employer, usually 3. By person engaged in picketing. No
accompanied by the display of placards and person engaged in picketing shall commit
other signs making known the facts involved in any act of violence, coercion or intimidation
a labor dispute. or obstruct the free ingress to or egress
from the employer’s premises for lawful
As applied to a labor dispute, to picket means purposes, or obstruct public thoroughfares.
the stationing of one or more persons to [Art. 279(e)]
observe and attempt to observe. The purpose
of pickets is said to be a means of peaceable Picketing as Part of Freedom of
persuasion. [Sta. Rosa Coca-Cola Plant Speech/Expression
Employees Union v. Coca-Cola Bottlers General rule: picketing enjoys constitutional
Philippines, Inc., G.R. Nos. 164302-03 (2007)] protection as part of freedom of speech and/or
expression.
Peaceful Picketing is the right of workers
during strikes consisting of marching to and fro Exceptions/limitations:
before an establishment involved in a labor a. When picketing is coercive rather than
dispute generally accompanied by the carrying persuasive [Security Bank Employees
and display of signs, placards and banners Union v. Security Bank, G.R. No. L-28536
intended to inform the public about the dispute. (1968)]
[Guidelines Governing Labor Relations, b. When picketing is achieved through illegal
October 19, 1987; NCMB Manual, Sec. 1] means [Mortera v. CIR, G.R. No. L-1340
(1947)]
Purpose c. Courts may confine the communication/
The purpose of the picket line is to persuade demonstration to the parties to the labor
employers peacefully by publicizing the labor dispute [PCIB v. Philnabank Employees
dispute to inform the public of what is Association, G.R. No. L-29630 (1981)]
happening and thus cause other workers not to d. Innocent bystander rule. Courts may
work in the establishment and for customers insulate establishments or persons with no
not to do business there [Phimco Industries, industrial connection or having interest
Page 187 of 262

totally foreign to the context of the dispute Procedural Requirements

[PCIB v. Philnabank Employees 1. Effort to bargain (in case of bargaining
Association, G.R. No. L-29630 (1981)] deadlock)
2. Filing and service of notice of lockout to the
Picketing and Libel NCMB
Libel laws are not applied strictly considering 3. Observance of cooling-off period
that there is emotional tension in the picket 4. 15 days for ULP
lines and expected discourteous and impolite 5. 30 days for bargaining deadlock
exchanges between the employees and the 6. Notice of lockout vote meeting within 24
employer. [PCIB v. Philnabank Employees hours before the intended vote [Sec. 10,
Association, G.R. No. L-29630 (1981)] Rule XXII, Book V, IRR]
7. Lockout vote
Peaceful picketing is legal even in the 8. Report of lockout vote
absence of employer-employee 9. Observance of the waiting period (7-day
relationship strike ban)
Picketing, peacefully carried out, is not illegal
even in the absence of employer-employee (1) Effort to Bargain
relationship, for peaceful picketing is a part of No employer shall declare a […] lockout
the freedom of speech guaranteed by the without first having bargained collectively in
Constitution. [De Leon v. National Labor Union, accordance with Title VII of this Book. [Art.
G.R. No. L-7586 (1957)] 279(a)]
2. By Employer (2) Filing and Service of Notice of Lockout

Filed by: The duly certified or recognized
a. Lockout bargaining agent may file notice of lockout
Lockout is the temporary refusal of an Filed with: With the Department

employer to furnish work as a result of an
industrial or labor dispute. [Art. 219 (p)] When: At least 30 days before the intended
date of the lockout [Art. 278(c)]
Illegal strike and illegal lockout/In Pari
Delicto Doctrine Note: The notice must be served to the
When the employer engaged in illegal lockout employees through the SEBA or the legitimate
and the employee engaged in illegal strike, labor organization (if no SEBA).
both parties are in pari delicto, and such
situation warrants the restoration of the status Contents of notice
quo ante and bringing the parties back to the 1. Names and addresses of the employer and
respective positions before the illegal strike the union involved
and illegal lockout. [Philippines Inter-Fashion 2. Nature of the industry to which the
Inc. v. NLRC, G.R. No. L-59847 (1982)] employer belongs
3. Number of union members and of workers
Similar to a strike, the proper grounds for a in the bargaining unit
lockout are 4. Such other relevant data as may facilitate
1. Bargaining deadlock the settlement of the dispute.
2. ULP by labor organizations
Additional Requirements [Sec. 8, Rule XXII,
Art. 278 (b). Strikes, Picketing and Book V, IRR]
Lockouts. – [N]o employer may declare a In cases of bargaining deadlocks
lockout on grounds involving inter-union and 1. Statement of unresolved issues in the
intra-union disputes. bargaining negotiations
2. Written proposals of the union
Page 188 of 262

3. Counter-proposals of the employer substantially the same grounds considered

4. Proof of a request for conference to settle when the strike or lockout vote was taken.
the differences.
(6) Report of Lockout Vote
In cases of ULP
1. Statement of acts complained of Art. 278 (f). Strikes, Picketing and
2. Efforts taken to resolve the dispute Lockouts. – In every case, the union or the
amicably. employer shall furnish the Ministry the
results of the voting at least seven days
Action on notice before the intended strike or lockout, subject
1. Upon receipt of a valid notice of strike or to the cooling-off period herein provided.
lockout, the NCMB, through its Conciliator-
Mediators, shall call the parties to a (7) Observance of Waiting Period (7 Days)
conference the soonest possible time in
order to actively assist them to explore all See notes under Strike.
possibilities for amicable settlement.
2. The Conciliator-Mediator may suggest/ Effect of Illegal Lockout
offer proposals as an alternative avenue for
the resolution of their disagreement/conflict Par. 3, Art. 279 (a). Prohibited Activities. –
which may not necessarily bind the parties. Any worker whose employment has been
3. If conciliation/mediation fails, the parties terminated as a consequence of any
shall be encouraged to submit their dispute unlawful lockout shall be entitled to
for voluntary arbitration. [Sec. 9, Rule XXII, reinstatement with full backwages.
Book V, IRR]
3. Assumption of Jurisdiction by
(3) Observance of Cooling-off Periods
Secretary of Labor and
Lockout cooling-off periods:
1. Based on bargaining deadlock – 30 days Employment
2. Based on ULP – 15 days [Art. 278(c)]
When May the SOLE Assume Jurisdiction
(4) Notice of Lockout Vote Meeting When in his opinion, there exist a labor dispute
causing or likely to cause a strike or lockout in
Sec. 10, Rule XXII, Book V. Strick or an industry indispensable to the national
Lockout Vote – In every case, the union or interest, the SOLE may assume jurisdiction
the employer shall furnish the regional over the dispute and decide it or certify the
branch of the Board the notice of meetings same to the Commission for compulsory
referred to in the preceding paragraph at arbitration. [Art. 278(g)]
least twenty-four (24) hours before such
meetings [...] Requisites for Assumption of Jurisdiction
1. Both parties have requested the SOLE to
assume jurisdiction; or
(5) Lockout Vote
2. After a conference called by the Office of
the SOLE on the propriety of its issuance,
Art. 278 (f). Strikes, Picketing and
motu proprio or upon a request or petition
Lockouts. – A decision to declare a lockout
by either parties to the labor dispute [Book
must be approved by a majority of the board
V, IRR Rule XXII, sec. 15, IRR as amended
of directors of the corporation or association
by D.O. No. 40-H-13 s 2013]
or of the partners in a partnership, obtained
by secret ballot in a meeting called for that
Immediately Executory
purpose. The decision shall be valid for the
The assumption and certification orders are
duration of the dispute based on
executory in character and must be strictly
Page 189 of 262

complied with by the parties. [Allied Banking v.

NLRC, G.R. No. 116128 (1996)] In such cases, therefore, the Secretary of
Labor and Employment may immediately
Effect of defiance of assumption or assume, within twenty-four (24) hours from
certification orders knowledge of the occurrence of such a strike or
No strike or lockout shall be declared after lockout, jurisdiction over the same or certify it
assumption of jurisdiction by the President or to the Commission for compulsory arbitration.
the Minister or after certification or submission [Art. 278, par. 2]
of the dispute to compulsory or voluntary
arbitration or during the pendency of cases Rationale: The highest respect is accorded to
involving the same grounds for the strike or the right of patients to life and health.
lockout. [Art. 279(a), par. 2]
b. Effects of Assumption of
A strike undertaken despite the issuance by the Jurisdiction
Secretary of Labor of an assumption or
certification order becomes a prohibited activity Automatic Injunction of Intended of
and thus, illegal, pursuant to Art. 279(a) of the Impending Strike or Lockout
Labor Code. [Allied Banking v. NLRC, G.R. No. The assumption of jurisdiction by the SOLE
116128 (1996)] automatically enjoins intended or impending
strike or lockout. [Art. 278 (g)]
a. Industry Indispensable to the
National Interest Return-to-work and readmission if strike or
lockout has already taken place
1. Hospital sector If strike or lockout has already taken place at
2. Electric power industry the time of assumption or certification,
3. Water supply service, to exclude small 1. All striking or locked out employees shall
water supply services, such as bottling and immediately return-to-work; and
refilling stations 2. The employer shall immediately resume
4. Air traffic control operations and readmit all workers under
5. Other industries as may be recommended the same terms and conditions prevailing
by the National Tripartite Industrial Peace before the strike or lockout. [Art. 278 (g)]
Council (TIPC) [Sec. 16, Rule XXII, Book
V, IRR as amended by D.O. No. 40-H-13] The SOLE may also determine the retroactivity
of arbitral awards pursuant to power to assume
Who determines industries indispensable jurisdiction as part of his/her plenary powers to
to the national interest [Art. 278(g)] determine the effectivity thereof in absence of
1. Secretary of Labor and Employment specific provision of law [LMG Chemicals Corp.
2. President v. Sec. of Labor and Employment, 356 SCRA
577 (2001)]
Strikes and lockouts in hospitals, clinics
and similar medical institutions Nature of return-to-work order
It shall be the duty of the striking union or The return-to-work order not so much confers
locking-out employer to provide and maintain a right as it imposes a duty; and while as a right
an effective skeletal workforce of medical and it may be waived, it must be discharged as a
other health personnel, whose movement and duty even against the worker's and/or
services shall be unhampered and employers’ will.
unrestricted, as are necessary to insure the
proper and adequate protection of the life and The worker must return to his job together with
health of its patients, most especially his co-workers so the operations of the
emergency cases, for the duration of the strike company can be resumed and it can continue
or lockout. serving the public and promoting its interest.
Page 190 of 262

That is the real reason such return can be Definition

compelled. So imperative is the order in fact “Management Prerogative” is the right of an
that it is not even considered violative of the employer to regulate all aspects of
right against involuntary servitude. [Kaisahan employment.
ng Mga Manggagawa sa Kahoy v. Gotamco
Sawmills, G.R. No. L-1573 (1948)] Courts often decline to interfere in legitimate
business decisions of employers. In fact, labor
Note: It must be strictly complied with even laws discourage interference in employers’
during the pendency of any petition questioning judgment concerning the conduct of their
its validity. [Manila Hotel Employees business.
Association and its Members v. Manila Hotel
Corp., 517 SCRA 349 (2007)] Scope
Management prerogative gives employers the
The purpose of SOLE’s extraordinary power is freedom to regulate, according to their
aimed at arriving at a peaceful and speedy discretion and best judgment, all aspects of
solution to labor disputes without jeopardizing employment, including:
national interest [Union of Filipro Employees- a. Work assignment
Drug v. Nestle, 499 SCRA 521 (2006)] b. Working methods,
c. Processes to be followed,
d. Working regulations,
VI. MANAGEMENT e. Transfer of employees,
PREROGATIVE f. Work supervision, lay-off of workers and
the discipline, dismissal and recall of
Basis workers.
The State recognizes the indispensable role of
the private sector, encourages private Limits to Management Prerogative
enterprise, and provides incentives to needed 1. Good faith - So long as a company’s
investments. [Sec. 20, Art. II, 1987 management prerogatives are exercised in
Constitution] good faith for the advancement of the
employer’s interest and not for the purpose
The State shall regulate the relations between of defeating or circumventing the rights of
workers and employers, recognizing the right the employees under special laws or under
of labor to its just share in the fruits of valid agreements, this Court will uphold
production and the right of enterprises to them. [Ernesto G. Ymbong v. ABS-CBN
reasonable returns to investments, and to Broadcasting Corp.]
expansion and growth. [Sec. 3, pars. 4, Art.
XIII, 1987 Constitution] It is incumbent upon the company to show
that decisions made under management
The law in protecting the rights of the prerogative are in good faith and not
employees authorizes neither oppression nor intended to circumvent employees’ rights.
self-destruction of the employer. It should be [San Miguel Brewery Sales Force Union
made clear that when the law tilts the scale of (PTGWO) v. Ople, G.R. No. L-53515
justice in favor of labor, it is but a recognition of (1989)]
the inherent economic inequality between labor
and management. Never should the scale be The exercise of management prerogative
so tilted if the result is an injustice to the is valid, provided it is not performed in a
employer. [Panuncillo v. CAP, G.R. No. malicious, harsh, oppressive, vindictive or
161305 (2007)] wanton manner or out of malice or spite.
[Magdadaro v. PNB, G.R. No. 166198
(2009)]
Page 191 of 262

2. Without grave abuse of discretion - The

managerial prerogative to transfer 5. Equity and/or Substantial Justice – The
personnel must be exercised without grave Court should still ensure that the employer
abuse of discretion, bearing in mind the exercises the prerogative to discipline
basic elements of justice and fair play. humanely and considerately, and that the
Having the right should not be confused sanction imposed is commensurate to the
with the manner in which the right is offense involved and to the degree of the
exercised. [Tinio v. CA, G.R. No. 171764 infraction. [Dongon v. Rapid Movers and
(2007)] Forwarders Co., Inc., G.R. No. 163431
(2013)]
3. Law – The privilege of management
prerogative is not absolute, but subject to
limitations imposed by law. A. DISCIPLINE
Management prerogative is limited by Sec.
236(g), which gives the Secretary the Management has the prerogative to discipline
power to assume jurisdiction and resolve its employees and to impose appropriate
labor disputes involving industries penalties on erring workers pursuant to
indispensable to national interest. The company rules and regulations. [Jose P.
company’s management prerogatives are Artificio v. NLRC, G.R. No. 172988 (2010)]
not being unjustly curtailed but duly
tempered by the limitations set by law, Among the employer’s management
taking into account its special character prerogatives is the right to prescribe
and the particular circumstances in the reasonable rules and regulations necessary or
case at bench. [Metrolab Industries, Inc. v. proper for the conduct of its business or
Roldan-Confesor, G.R. No. 108855 (2013); concern, to provide certain disciplinary
University of Immaculate Concepcion Inc. measures to implement said rules and to
v. Sec. of Labor, G.R. No. 151379 (2005)] assure that the same would be complied with.
[St. Luke’s Medical Center, Inc. v. Sanchez,
Although management prerogative refers G.R. 212054 (2015)]
to the right to regulate all aspects of
employment, it cannot be understood to The employer’s right to conduct the affairs of
include the right to temporarily withhold his business, according to its own discretion
salary/wages without the consent of the and judgment, includes the prerogative to instill
employee. To sanction such an discipline in its employees and to impose
interpretation would be contrary to Art. 116 penalties, including dismissal, upon erring
of the Labor Code. [SHS Perforated employees. [Consolidated Food Corporation v.
Materials, Inc. v. Diaz, G.R. No. 185814 NRLC, G.R. No. 118647 (1999))]
(2010)]
Right to dismiss or otherwise impose
4. Collective Bargaining – The CBA disciplinary sanctions upon an employee for
provisions agreed upon by the Company just and valid cause, pertains in the first place
and the Union delimit the free exercise of to the employer, as well as the authority to
management prerogative. The parties in a determine the existence of said cause in
CBA may establish such stipulations, accordance with the norms of due process.
clauses, terms and conditions as they may [Makati Haberdashery, Inc. v. NLRC, G.R. Nos.
deem convenient provided these are not 83380-81 (1989)]
contrary to law, morals, good customs,
public order or public policy. [Goya Inc. v.
Goya, Inc., Employees Union-FFW, G.R.
No. 170054 (2013)]
Page 192 of 262

Corollary Duty of Employees another, or one office to another or in pursuit of

The employee has the corollary duty to obey all its legitimate business interest.
reasonable rules, orders, and instructions of
the employer; and willful or intentional Management has the prerogative on whether
disobedience thereto, as a general rule, or not to renew the contract of a fixed-term
justifies termination of the contract of service employee. [Fonterra Brands Phils., Inc. v.
and the dismissal of the employee. [St. Luke’s Largado, G.R. No. 205300 (2015)]
Medical Center, Inc. v. Sanchez, G.R. 212054
(2015)] Criteria
Provided there is no demotion in rank or
Criteria diminution of salary, benefits and other
The policies, rules and regulations on work- privileges and not motivated by discrimination
related activities of the employees must or made in bad faith, or effected as a form of
always be fair and reasonable and the punishment or demotion without sufficient
corresponding penalties, when prescribed, cause. [Westin Phil. Plaza Hotel v. NLRC, G.R.
commensurate to the offense involved and No. 121621 (1999)]
to the degree of the infraction. [Consolidated
Food Corporation v. NRLC, G.R. No. 118647 When the transfer is not unreasonable, or
(1999); St. Michael’s Institute v. Santos, G.R. inconvenient, or prejudicial to the employee,
No. 145280 (2001)] and it does not involve a demotion in rank or
diminution of salaries, benefits, and other
Although the right of employers to shape their privileges, the employee may not complain that
own work force is recognized, this it amounts to a constructive dismissal. [Bisig ng
management prerogative must not curtail the Manggagawa sa TRYCO v. NLRC, G.R. No.
basic right of employees to security of 151309 (2008)]
tenure. [Alert Security & Investigation Agency,
Inc. v. Saidali Pasawilan, et. al., G.R. No. It is management prerogative for employers to
182397 (2011)] transfer employees on just and valid grounds
such as genuine business necessity. [William
Disciplinary action against an erring employee Barroga v. Data Center College of the
is a management prerogative which, generally, Philippines, G.R. No. 174158 (2011)]
is not subject to judicial interference. However,
this policy can be justified only if the disciplinary Re-assignments
action is dictated by legitimate business Re-assignments made by management
reasons and is not oppressive. [Areno v. pending investigation of irregularities allegedly
Skycable, G.R. No 180302 (2010)] committed by an employee fall within the ambit
of management prerogative. The purpose of
reassignments is no different from that of
B. TRANSFER OF preventive suspension which management
EMPLOYEES could validly impose as a disciplinary measure
for the protection of the company's property,
pending investigation of any alleged
An employee’s right to security of tenure does malfeasance or misfeasance committed by the
not give him such a vested right in his position, employee. [Ruiz v. Wendel Osaka Realty
as would deprive the company of its Corp., G.R. No. 189082 (2012)]
prerogative to change his assignment or
transfer him where he will be most useful. Employer Bears the Burden of Proof
In cases of a transfer of an employee, the rule
The employer has the right to transfer or assign is settled that the employer is charged with the
employees from one area of operation to burden of proving that its conduct and action
are for valid and legitimate grounds such as
Page 193 of 262

genuine business necessity and that the

transfer is not unreasonable, inconvenient or D. BONUS
prejudicial to the employee. If the employer
cannot overcome this burden of proof, the
employee’s transfer shall be tantamount to
A bonus is "a gratuity or act of liberality of the
unlawful constructive dismissal. [Jonathan
giver which the recipient has no right to
Morales v. Harbor Centre Port Terminal Inc.,
demand as a matter of right" [Philippine
G.R. No. 174208 (2012)]
National Construction Corp. v. National Labor
Relations Commission, 345 Phil. 324, 331
C. PRODUCTIVITY (1997)]. It is something given in addition to
what is ordinarily received by or strictly due the
STANDARDS recipient.
The employer has the right to demote and The granting of a bonus is basically a
transfer an employee who has failed to observe management prerogative which cannot be
proper diligence in his work and incurred forced upon the employer "who may not be
habitual tardiness and absences and indolence obliged to assume the onerous burden of
in his assigned work. [Petrophil Corporation v. granting bonuses or other benefits aside from
NLRC, G.R. No. L-64048 (1986)] the employee's basic salaries or wages" xxx.
[Kamaya Point Hotel v. National Labor
In the consolidated cases of Leonardo v. NLRC Relations Commission, Federation of Free
[G.R. No. 125303 (2000)] and Fuerte v. Aquino Workers and Nemia Quiambao, G.R. No.
[G.R. No. 126937 (2000)], the employer 75289, (1989); Traders Royal Bank v. NLRC,
claimed that the employee was demoted G.R. No. 120592 (1990)]
pursuant to a company policy intended to foster
competition among its employees. Under this The matter of giving a bonus over and above
scheme, its employees are required to comply the worker’s lawful salaries and allowances is
with a monthly sales quota. Should a entirely dependent on the financial capability of
supervisor such as the employee fail to meet the employer to give it. [Kimberly-Clark
his quota for several consecutive months, he Philippines, Inc. v. Dimayuga, G.R. No. 177705
will be demoted, whereupon his supervisor’s (2009)]
allowance will be withdrawn and be given to the
individual who takes his place. When the
employee concerned succeeds in meeting the E. CHANGE OF WORKING
quota again, he is re-appointed supervisor and HOURS
his allowance is restored.
Management retains the prerogative,
The Supreme Court held that this arrangement whenever exigencies of the service so require,
is an allowable exercise of company rights to change the working hours of its employees.
since an employer is entitled to impose So long as such prerogative is exercised in
productivity standards for its workers. In fact, good faith for the advancement of the
non-compliance may be visited with a penalty employer’s interest and not for the purpose of
even more severe than demotion. defeating or circumventing the rights of the
employees under special laws or under valid
agreements, this Court will uphold such
exercise. [Sime Darby Pilipinas Inc. v. NLRC,
G.R. No. 119205 (1998)]
Page 194 of 262

Glaxo only aims to protect its interests against

F. BONA FIDE OCCUPATIONAL the possibility that a competitor company will
QUALIFICATIONS gain access to its secrets and procedures.
[Star Paper Corp. v. Simbol, G.R. No. 164774
General Rule: Employment in particular jobs (2006)]
may not be limited to persons of a particular
sex, religion, or national origin unless the A requirement that a woman employee must
employer can show that sex, religion, or remain unmarried could be justified as a "bona
national origin is an actual qualification for fide occupational qualification," or BFOQ,
performing the job. where the particular requirements of the job
would justify the same, but not on the ground
Exception: The exception is called a bona fide of a general principle, such as the desirability
occupational qualification (BFOQ). of spreading work in the workplace. A
requirement of that nature would be valid
In the United States, there are a few federal provided it reflects an inherent quality
and many state job discrimination laws that reasonably necessary for satisfactory job
contain an exception allowing an employer to performance. [Phil. Telegraph and Telephone
engage in an otherwise unlawful form of Company v. NLRC, G.R. No. 118978 (1997)]
prohibited discrimination when the action is
based on a BFOQ necessary to the normal G. POST-EMPLOYMENT
operation of a business or enterprise. BFOQ is
valid "provided it reflects an inherent quality
RESTRICTIONS
reasonably necessary for satisfactory job
performance." [Yrasuegui v. PAL, G.R. No. In cases where an employee assails a contract
168081 (2008)] containing a provision prohibiting him or her
from accepting competitive employment as
BFOQ in Philippine Jurisdiction against public policy, the employer has to
The concept of a bona fide occupational adduce evidence to prove that the restriction is
qualification is not foreign in our jurisdiction. reasonable and not greater than necessary to
We employ the standard of reasonableness of protect the employer’s legitimate business
the company policy which is parallel to the interests. The restraint may not be unduly
bona fide occupational qualification harsh or oppressive in curtailing the
requirement. employee’s legitimate efforts to earn a
livelihood, and must be reasonable in light of
In Duncan Association of Detailman-PTGWO sound public policy. [Rivera v. Solidbank, G.R.
and Pedro Tecson v. Glaxo Wellcome No. 163269 (2006)]
Philippines, Inc., we passed on the validity of
the policy of a pharmaceutical company
prohibiting its employees from marrying H. MARRIAGE BETWEEN EMPLOYEES
employees of any competitor company. We OF COMPETITOR-EMPLOYERS
held that Glaxo has a right to guard its trade
secrets, manufacturing formulas, marketing See F. Bonafide Occupational Qualifications,
strategies and other confidential programs and above
information from competitors. We considered
the prohibition against personal or marital
relationships with employees of competitor
companies upon Glaxo’s employees
reasonable under the circumstances because
relationships of that nature might compromise
the interests of Glaxo. In laying down the
assailed company policy, we recognized that
Page 195 of 262

(2) Self-employed persons as may be

VII. SOCIAL LEGISLATION determined by the Commission,
including but not limited to:
a. All self-employed professionals
A. SOCIAL SECURITY b. Partners and single proprietors of
SYSTEM LAW businesses
c. Actors and actresses, directors,
scriptwriters and news correspondents
[Republic Act 8282, as amended by RA 11199] who do not fall within the definition of
the term “employee” under Sec. 8 (d) of
1. Coverage and Exclusions this Act;
a. Compulsory Employee [Sec 8(d), RA 11199] - Any

person who performs services for an
(1) Employees not over 60 years old and employer in which either or both mental
their employers, including domestic or physical efforts are used and who
helpers [Sec. 9(1), RA 11199] receives compensation for such
services, where there is an employer-
Provided, That any benefit already earned by employee relationship: Provided, That
the employees under private benefit plans a self-employed person shall be an
existing at the time of the approval of this Act employer and employee at the same
shall not be discontinued, reduced or otherwise time.
impaired.
d. Professional atheism coaches, trainers
Private plans which are existing and in force at and jockeys
the time of compulsory coverage shall be e. Individual farmers and fishermen [Sec.
integrated with the plan of the SSS, in such a 9-A, RA11199]
way where the employer’s contribution to his
private plan is more than required of him in (3) All sea-based and land-based Overseas
this Act: Filipino Workers (OFWs) not over 60
a. He shall pay to the SSS only the years of age [Sec. 9-B, RA 11199]
contribution required of him; and
b. He shall continue his contribution to such b. Voluntary
private plan less his contribution to the SSS
c. So that the employer’s total contribution to 1. Spouses who devote full time to managing
his benefit plan and to the SSS shall be the household and family affairs, unless they
same as his contribution to his private are also engaged in another vocation or
benefit plan before the compulsory employment (in which case, coverage will
coverage. [Sec. 9(1), RA 11199] be mandatory). [Sec. 9(b), RA 11199]
2. Employees previously under compulsory
Domestic workers or “kasambahays” as coverage) already separated from
defined under RA10361 or the Batas employment or those self-employed (under
Kasambahay, who are receiving a monthly compulsory coverage) with no realized
income lower than minimum salary credit income for a given month, who chose to
prescribed under this Act, shall pay continue with contributions to maintain the
contributions based on their actual monthly right to full benefit. [Sec. 11, RA 11199]
salary. [Sec. 4(a)(9), RA 11199] 3. Self-employed members realizing no
income in any given month, who choose to
continue paying contributions under the
same rules and regulations applicable to a
Page 196 of 262

separated employee member. [Sec. 11-A, legitimate children, the illegitimate children
RA 11199] get 100%.
Note: Foreign governments and international Secondary

organizations or their wholly owned 1. Receives only when the primary
instrumentality employing workers in the beneficiaries are absent
Philippines or employing Filipinos outside of 2. Dependent parents
the Philippines, may enter into an agreement
with the Philippine Government for the Others
inclusion of such employees in the SSS, except 1. Receives only when primary and
those already covered by their civil service secondary beneficiaries are absent
retirement system. [Sec. 8(j)(3), RA 11199] 2. Any other person designated by member
as his/her secondary beneficiary. [Sec. 8
c. Exclusions (k), RA 11199]
1. Services where there is no employer- 3. Benefits

employee relationship in accordance with
existing labor laws, rules, regulations and a. Monthly Pension [Sec. 12, RA
jurisprudence; 11199]
2. Service performed in the employ of the
Philippine Government or instrumentality The monthly pension shall be the highest of the
or agency thereof; following amounts:
3. Service performed in the employ of a 1. P300 + [20% x (average monthly credit)] +
foreign government or international [2% x (average monthly credit) x (# of cash
organization, or their wholly-owned credit years of service in excess of 10
instrumentalities; and years)]
2. 40% x [average monthly credit]
Note: Foreign governments and international 3. P1000, provided that the monthly pension
organizations may enter into an agreement shall in no case be paid for an aggregate
with the PH government to include their amount of less than 60 months [Sec. 12 (a)]
employees in the Philippines in the SSS. 4. Notwithstanding the above mentioned,
minimum pension is:
4. Services performed by temporary and a. P1,200 - members with at least 10
other employees which may be excluded years credit service
by regulation of the Social Security b. P 2,400 - members with at least 20
Commission. Employees of bona fide years
independent contractors shall not be
deemed employees of the employer b. Dependents' Pension [Sec. 12-
engaging the services of said contractors. A, RA 11199]
[Sec. 8(j), RA 11199]
1. Paid on account of members’
2. Dependents and Beneficiaries a. Death
b. Permanent total disability, or
Primary c. Retirement
1. Dependent spouse - until remarriage 2. Paid to each child conceived on or prior to
2. Dependent children [legitimate, contingency, but not exceeding 5,
legitimated, legally adopted and beginning with the youngest and preferring
illegitimate] - Illegitimate children are the legitimate
entitled only to 50% of the share of 3. Amount is either P250 or 10% of the
legitimate children. Where there are no monthly pension as computed above,
whichever is higher.
Page 197 of 262

c. Retirement benefits [Sec. 12-B, Monthly pension

RA 11199] The monthly pension of a member who retires
after reaching age 60 shall be the highest of
Requisites for Eligibility either:
1. 120 monthly contributions 1. The monthly pension computed at the
2. Age earliest time he could have retired had he
a. Has reached the age of 60 years and is been separated from employment or
already separated from employment or ceased to be self-employed plus all
has ceased to be self-employed; or adjustments thereto; or
b. Has reached the age of 65 years 2. The monthly pension computed at the time
when he actually retires.
Period of entitlement - From retirement until
death d. Permanent disability benefits
[Sec. 13-A, RA 11199]
The monthly pension shall be suspended upon
the reemployment or resumption of self- Eligibility
employment of a retired member who is less 1. 36 monthly contributions prior to the
than 65 years old. semester of disability
In Case of Death of Member Note: This is the same as death benefit, but
1. His/her primary beneficiaries as of the date permanent disability pension is paid
of his/her retirement shall be entitled to directly to the member.
receive the monthly pension;
2. If he/she has no primary beneficiaries AND 2. In case the permanently disabled member
he/she dies within 60 months from the start dies, he/she is given the same treatment as
of his/her monthly pension, his/her a retiree dying.
secondary beneficiaries shall be entitled to
a lump sum benefit equivalent to the total 3. For permanent partial disability, the
monthly pensions corresponding to the pension is not lifetime. It shall be paid in
balance of the 5 year guaranteed period, lump sum if the period is less than 12
excluding the dependents’ pension. months.
Lump Sum Alternative Ex. loss of thumb entitles member to 10

The member may opt to receive the first 8 months of pension; loss of arm entitles
monthly pensions in lump sum but such is member to 50 months.
discounted at a preferential rate of interest to
be determined by the SSS. 4. For multiple partial disabilities, they shall
be additive when related or deteriorating -
Lump Sum Eligibility (Equal to total the percentage shall be equal to the
contributions) number of months the partial disability is
A covered member who is 60 years old at entitled to, divided by 75 months.
retirement and who does not qualify for
pension benefits (see requisites for eligibility) Ex. loss of sight in 1 eye - 25/75; loss of
shall be entitled to a lump sum benefit equal to arm = 50/75
the total contributions paid by him and on his
behalf: Provided, That he is separated from If both occur due to same cause then 25/75
employment and is not continuing payment of + 50/75 = 100% (as if it were a permanent
contributions to the SSS on his own. total disability)
Page 198 of 262

Lump Sum Alternative b. (monthly pension) x (# of monthly

A member is entitled to a lump sum benefit contributions)
equivalent to the monthly pension x number of
monthly contributions paid to the SSS or 12 f. Funeral benefits [Sec. 13-B, RA
times the monthly pension, whichever is 11199]
higher. To be entitled, he must not have paid at
least 36 monthly contributions. P12,000 in cash or in kind, upon the death of
member.
Subject to compulsory coverage again
A member who: g. Loan
1. Received a lump sum benefit, and
2. Is reemployed or resumed self- Social Security Commission Reso. No. 669,
employment not earlier than 1 year from SSS Circular No. 21-P and 52 pertain to
date of disability , treatment of salary loans, which sometimes
shall be subject to compulsory coverage and provide for more flexible payment terms or
considered a new member. condonation for delinquent payers.
Death of Member h. Sickness benefits [Sec. 14, RA

1. His/her primary beneficiaries as of the date 11199]
of his/her retirement shall be entitled to
receive the monthly pension; Eligibility
2. If he/she has no primary beneficiaries AND 1. Inability to work due to sickness or injury,
he/she dies within 60 months from the start 2. Confined for more than 3 days either in a
of his/her monthly pension, his/her hospital or elsewhere with SSS approval
secondary beneficiaries shall be entitled to 3. At least 3 months of contribution paid in the
a lump sum benefit equivalent to the total 12 month period immediately before the
monthly pensions corresponding to the semester of sickness or injury
balance of the 6 year guaranteed period, 4. All company sick leaves with pay for the
excluding the dependents’ pension. current year have been used up;
5. Maximum of 120 days per 1 calendar year
e. Death Benefits [Sec. 13, RA (i.e. max permissible for the same sickness
11199] and confinement is 240 days for 2
consecutive years)
Eligibility 6. Employer has been notified, or, if a
36 monthly contributions prior to the semester separated, voluntary or self-employed
of death member, the SSS has been directly notified
within 5 days from confinement.
Benefit
1. Monthly pension to primary beneficiaries, Notice to employers or SSS is not needed
or when confinement is in a hospital.
2. If no primary beneficiaries, lump sum
equivalent to 36 times the monthly pension Notice to employer is not required when
to secondary beneficiaries employee became sick or injured while working
or within the premises of the employer.
If ineligible/has not paid 36 monthly
contributions Benefit
A lump sum benefit which shall be that which is Daily cash allowance paid for the number of
higher between the ff. will be given to the days a member is unable to work due to
beneficiaries: sickness of injury equivalent to 90% x (average
a. (monthly pension) x 12, or daily salary credit)
Page 199 of 262

Reimbursement of SSS to Employer Full payment shall be advanced by the

Upon satisfactory proof of payment and legality employer within 30 days from filing the
of sickness benefits, reimbursement shall be maternity leave application.
made by the SSS if the following conditions are
met: SSS shall reimburse the employer of 100% of
1. Employer notified SSS of the confinement the amount of maternity benefits advanced
within 5 calendar days after receipt of the upon receipt of satisfactory proof of payment
notification from the employee-member - and legality thereof.
100% reimbursement
2. If the notification to SSS is made beyond 5 Note: All benefits herein mentioned are tax-
calendar days after receipt of notification exempt.
from the employee-member -
reimbursement only for each day of j. Unemployment Insurance or
confinement starting from the 10th Involuntary Separation Benefits
calendar day immediately preceding the [Sec. 14-B, RA 11199]
date of notification to SSS
Eligibility
SSS shall reimburse the employer or pay the 1. Not over 60 years of age
unemployed member only for confinement 2. At least 36 months contributions, 12
within the 1 year period immediately preceding months of which should be in the 18th
the date the claim for benefit/reimbursement is month period immediately preceding the
received by SSS. involuntary unemployment or separation
Exception: Confinement in a hospital - the Benefit

claim for benefit or reimbursement must be Monthly cash payments equivalent to 50% of
filed within 1 year from the last day of the average monthly salary credit for a
confinement maximum of 2 months
i. Maternity Leave benefits [Sec. Frequency of claiming benefit

14-A, RA 11199] An employee who is involuntarily unemployed
can only claim unemployment benefits once
Eligibility every 3 years.
1. Female member
2. Paid at least 3 monthly contributions in the In case of concurrence of 2 or more
12-month period immediately preceding compensable contingencies, only the highest
the semester of her childbirth or benefit shall be paid, subject to the rules and
miscarriage regulations that the Commission may
3. Member notified her employer of her prescribe.
pregnancy and probable date of childbirth,
which notice shall be transmitted to the
SSS B. GOVERNMENT SERVICE
INSURANCE SYSTEM LAW
Full payment shall be advanced by the [Republic Act 8291]
employer within 30 days from filing the
maternity leave application.
1. Coverage and Exclusions
Coverage
Coverage
Covers only the first four deliveries or
All public sector employees below the
miscarriages.
compulsory retirement age of 65, irrespective
of employment status. [Sec. 3]
Employer’s reimbursement
Page 200 of 262

Exclusions a. Monthly Pension [Sec. 9]

1. AFP and PNP
2. Members of the Judiciary and The amount shall be [37.5% x (revalued
Constitutional Commissions who are average monthly compensation)] + [2.5 x
covered only by life insurance as they have (revalued average monthly compensation) x
separate retirement schemes (years in service in excess of 15 years)]
3. Contractual employees with no employer-
employee relationship [Sec. 3] Provided, the monthly pension shall not exceed
90% of the average monthly compensation.
2. Dependents and Beneficiaries
It shall not be less than P24,000 for those with
Primary 20 years of service and not less than P1,300
1. Dependent spouse - until remarriage for everyone else.
2. Dependent children (legitimate,
legitimated, legally adopted and b. Retirement Benefits [Sec. 13]
illegitimate)
Eligibility
Note: Unlike the SSS law, the GSIS law does 1. At least 15 years of service
not distinguish between the share of legitimate 2. At least 60 years of age
and illegitimate children. 3. Not receiving pension benefit from
permanent total disability
Secondary
In the absence of primary beneficiaries, Compulsory Retirement [Sec. 13-A]
1. Dependent parents Retirement is compulsory for employees:
2. Legitimate descendants (excluding 1. 60 years of age
dependent children) 2. Who have rendered at least 15 years of
service
3. Benefits
If employee has less than 15 years of service,
Computation of service [Sec. 10] he may be allowed to continue in accordance
From date of original appointment/election with civil service laws.
including periods of service at different times
under 1 or more employers, those performed Benefit [Sec. 13]
overseas under the authority of the Republic of The member may choose between
the Philippines, and those that may be 1. 60 x (basic monthly pension) lump sum
prescribed by the GSIS in coordination with the payment at the time of retirement + basic
Civil Service Commission. monthly pension payable monthly for life
after expiry of the 5-year guaranteed period
In case of reinstatement in the service of an which is already covered by the lump sum,
employer and subsequent retirement or or
separation which is compensable under this 2. Cash payment equal to 18 x (basic monthly
Act, all service credited for retirement, pension) + monthly pension for life
resignation or separation for which immediately but with no 5-year guarantee
corresponding benefits have been awarded
under this Act or other laws shall be excluded
in the computation.
GSIS may prescribe rules for the inclusion of

part time and other services with
compensation.
Page 201 of 262

c. Permanent Disability Benefits

Ineligible members
If member has rendered at least 3 years of
Total and Partial and
service, he shall receive cash payment equal
Permanent Permanent
to 100% of average monthly compensation for
[Sec. 16] [Sec. 17]
each year of service (essentially total amount
1. Complete loss of 1. Complete and of contributions made) or P12,000 whichever is
sight of both permanent loss higher [Sec. 16].
eyes of the use of
2. Loss of 2 limbs a. Any finger Partial Disability
at or above the b. Any toe Paid according to GSIS prescribed schedule.
ankle or wrist c. One arm Member must satisfy conditions regarding the
3. Permanent d. One hand disability not being due to his own fault and
complete e. One foot regarding employment status and services
paralysis of 2 f. One leg rendered.
limbs g. One/both
4. Brain injury ears d. Death benefits [Sec. 21]
resulting in h. Hearing of
incurable one/both When member dies, the primary beneficiaries
imbecility or ears are entitled to only ONE of the following:
insanity i. Sight of one 1. Survivorship pension
5. Other cases as eye a. He was in service when he died, or
determined by 2. Other cases as b. Even if separated from service, he has
GSIS determined by at least 3 years of service and has paid
GSIS 36 monthly contributions within the 5
years preceding death, or
c. Even if separated from the service, he
Eligibility for Permanent Total Disability has paid 180 monthly contributions
1. Disability not due to employee’s own grave prior to death.
misconduct, notorious negligence, habitual 2. Survivorship pension + cash payment of
intoxication, or willful intention to kill himself 100% of average monthly compensation
for another [Sec. 15] for every year of service [pension + total
2. Employee is: contributions made]
a. In service at time of disability a. He was in service when he died, and
b. Even if separated, has paid at least 36 b. With 3 years of service
monthly contributions within the 5-year 3. Cash payment equivalent to 100% average
period immediately prior to disability or monthly compensation for each year of
has paid a total of at least 180 monthly service he paid contributions or P12,000
contributions prior to disability whichever is higher
c. Not enjoying old-age retirement benefit a. With 3 years of service
[Sec. 16]. b. He has failed to qualify in the prior 2
schemes.
Benefit for Permanent Total Disability
1. Monthly income benefit for life equal to e. Funeral Benefits [Sec. 23]
basic monthly pension, from date of
disability Eligibility
2. If member is in service at time of disability 1. Active member
and has paid at least 180 monthly 2. Member separated from service but still
contributions, he receives an additional entitled to the benefit
cash payment of 18 x basic monthly 3. Pensioner
pension
Page 202 of 262

4. Retiree who at time of retirement was of i. Unemployment Benefits [Sec.

pensionable age but opted to retire under 12]
RA 1616
Eligibility
f. Loan 1. Employee separated from service due to
abolition of his office or position and
The following are the loans provided: 2. Employee has been paying integrated
1. Consolidated Loan contributions for at least 1 year prior to
2. Policy loan separation
3. Emergency loan
4. Pension loan Benefit
Monthly cash payments of 50% x average
g. Temporary Disability Benefits monthly compensation for a duration which is
[Sec. 18] proportional to years rendered, ranging from 2
to 6 months.
Eligibility
1. Employee must be: j. Survivorship Benefits
a. In service at time of disability, or
b. If separated, he has rendered at least Benefit
3 years of service and paid at least 6 1. Basic survivorship pension - 50% x basic
monthly contributions in the 12 month monthly pension (see Death Benefits) and
period immediately prior to disability 2. Dependent children’s pension not
2. All sick leave credits including those in the exceeding 50% of the basic monthly
CBA for the current year have been used pension
3. Maximum of 120 days per 1 calendar year
k. Life Insurance Benefits
Ex. maximum for the same sickness and
confinement is 240 days for 2 consecutive Members of the Judiciary and Constitutional
years Commissions are only entitled to life insurance.
Benefit
75% x current daily compensation for every
day or fraction thereof of disability OR P70.00,
whichever is higher.
h. Separation Benefits [Sec. 11]
Eligibility and benefit received

1. 60 years of age, or separation from service
with at least 3 years but not over 15 years
served – cash payment of 100% of ave.
monthly compensation for each year of
service (total amount of all contributions
paid) or P12,000 whichever is higher
2. Below 60 years of age, but at least 15 years
of service rendered – cash payment of 18
x (monthly pension) at time of
resignation/separation + old age pension
benefit (equal to basic monthly pension)
Page 203 of 262

SSS GSIS
RA 1161 as amended by RA 8282 or the PD 1146 as amended by RA 8291

Enabling
Social Security Act of 1997, and RA11199
law
or the Social Security Act of 2018
Employer – any person, natural or Employer – National government, its

juridical, domestic or foreign, who carries political subdivisions, branches, agencies
on in the Philippines any trade business, or instrumentalities, including
industry, undertaking, and uses the government- owned or controlled
services of another person who is under his corporations and financial institutions
orders as regards the employment, except with original charters [GOCCs];
those considered as employer under the constitutional commissions; and judiciary
GSIS. A self- employed person shall be
both employer and employee at the same
time.
Employee – any person who performs Employee – any person receiving

services for an employer in which either or compensation while in service of an
both mental and physical efforts are used employer whether by election or
and who receives compensation for such appointment, irrespective of status of
services, where there is an employer— appointment; barangay officials; and
employee relationship; also, a self- sanggunian officials
employed person who is both employee
and employer at the same time.
Self-employed - any person whose No counterpart

Definition
income is not derived from employment,
of terms
including but not limited to
a. Self-employed professionals
b. Partners and single proprietors of
businesses
c. Actors, directors, scriptwriters, news
correspondents not considered as
employees under the above definition
d. Individual farmers and fishers
Dependents Same, except child here is below 18

a. Legal spouses entitled by law to years old.
receive support
b. Child - unmarried, not gainfully
employed, and below 21 or
c. Child over 21 if he or she became
permanently incapacitated and
incapable of self-support, physically or
mentally; child may be legitimate,
legitimated, legally adopted or
illegitimate
d. Parent who is receiving legal support
Page 204 of 262

Beneficiaries Same except no distinction in the share

Primary of legitimate and illegitimate children
1. Dependent spouse - until remarriage
2. Dependent children [legitimate,
legitimated, legally adopted and
illegitimate] - Illegitimate children are
entitled only to 50% of the share of
legitimate children. Where there are no
legitimate children, the illegitimate
children get 100%
Secondary
1. Receives only when the primary
beneficiaries are absent
2. Dependent parents
Others
1. Receives only when primary and
secondary beneficiaries are absent
2. Any other person designated by
member as his/her secondary
beneficiary.
Compensation – all actual remuneration Compensation – basic pay received

for employment, including mandated cost- excluding per diems, bonuses, overtime,
of-living allowance, as well as the cash honoraria, allowances and other
value of any remuneration paid in any emoluments not integrated into the basic
medium other than cash except that portion pay under existing laws.
already above the max salary credit as
provided in this Act.
Compulsory Public sector employees below the

1. Employers as defined above compulsory retirement age of 65.
2. Employees not over 60 years including
household helpers Exceptions:
3. Self-employed 1. AFP & PNP
2. Members of Judiciary and
Voluntary Constitutional Commissions who are
1. Spouses who devote full time to covered only by life insurance
managing household and family affairs 3. Contractual employees with no EER
2. Employers already separated form with the agency they serve
employment or those self-employed
with no realized income for a given
month, who chose to continue with
contributions to maintain right to full
benefit
Note: Foreign governments, international
organizations or their wholly owned
instrumentality employing workers in the
Philippines may enter into an agreement
with the Philippine government to include
their employees in the SSS except those
Page 205 of 262

already covered by their civil service

retirement system.
1. Monthly pension 1. Monthly pension

2. Dependents’ pension 2. Dependents’ pension
3. Retirement benefits 3. Retirement benefits
4. Permanent disability benefits 4. Permanent disability benefits
5. Death benefits 5. Death benefits
6. Funeral benefits 6. Funeral benefits
Summary 7. Loan 7. Loan
of 8. Sickness benefits 8. Separation benefits
Benefits 9. Maternity leave benefits 9. Unemployment benefits
10. Unemployment benefit 10. Survivorship benefits
11. Life insurance benefits
Note: Members of the Judiciary and

Constitutional Commissions are entitled
to life insurance only.
1. Employer’s contribution, and Continued membership for the

Effects of employee’s obligation to pay unemployed member, and entitlement to
separa- contribution both cease at the end of whatever benefits he has qualified to in
tion from the month of separation the event of any compensable
employ- 2. Employee shall be credited with all contingency.
ment contributions paid on his behalf and
entitled to all benefits set forth by law.
Dispute Social Security Commission à CA (Rule GSIS à CA (Rule 43) à SC (Rule 45);
settle- 43, questions of law & fact) à SC (Rule 45, appeal does not stay execution
ment questions of law only)
Prescrip- 20 years 4 years

tive
period
conditions by providing benefits for their long

C. LIMITED PORTABILITY years of contribution to the national economy.
LAW Towards this end, the State shall institute a
scheme for totalization and portability of social
[RA 7699: “An Act Instituting Limited Portability security benefits, with the view of establishing
Scheme in the Social Security Insurance within a reasonable period a unitary social
Systems by Totalizing the Workersʹ Creditable security system [Section 1, RA 7699].
Services or Contributions in each of the
Systems”] Coverage
All worker‐members of the Government
Policy declaration Service Insurance System (GSIS) and/or
To promote the welfare of our workers by Social Security System (SSS) who transfer
recognizing their efforts in productive from one sector to another, and who wish to
endeavors and to further improve their retain their membership in both Systems.
Page 206 of 262

Portability purposes of eligibility and computation of

Refers to the transfer of funds for the account benefits [Rule V, Sec. 1, RA 7699 Rules and
and benefit of a worker who transfers from one Regulations].
system to the other [Section 2(b), RA 7699].
Totalization shall apply in the following
Provisions of any general or special law or instances:
rules and regulations to the contrary a. If a worker is not qualified for any benefits
notwithstanding, a covered worker shall have from both Systems;
his credible services or contributions in both b. If a worker in the public sector is not
Systems credited to his service or contribution qualified for any benefits in the GSIS; or
record in each of the Systems and shall be c. If a worker in the private sector is not
totalized for purposes of old-age, disability, qualified for any benefits from the SSS.
survivorship and other benefits in case the
covered member does not qualify for such For the purpose of computation of benefits,
benefits in either or both Systems without totalization shall apply in all cases so that the
totalization. contributions made by the worker‐member in
both Systems shall provide maximum benefits
Provided: That overlapping periods of which otherwise will not be available. In no
membership shall be credited only once for case shall the contribution be lost or forfeited
purposes of totalization [Section 4, RA 7699]. [Rule V, Sec. 3, RA 7699 Rules and
Regulations].
Totalization
Refers to the process of adding up the period If after totalization the worker‐member still
of creditable services or contributions under does not qualify for any benefit listed in Rule III,
each of the Systems, for purposes of eligibility Section 1 (j), the member will then get whatever
and computation of benefits [Section 2(e), RA benefits correspond to his/her contributions in
7699]. either or both Systems [Rule V, Sec. 4, RA
7699 Rules and Regulations].
Totalization of service credits is only resorted
to when the retiree does not qualify for benefits If a worker qualifies for benefits in both
in either or both of the System. In this case, Systems, totalization shall not apply [Rule V,
since the petitioner may be entitled to some Sec. 5, RA 7699 Rules and Regulations].
benefits from the GSIS, he cannot avail of the
benefits under RA 7699 [Gamogamo v. PNOC The process of totalization of creditable
Shipping and Transport Corp, G.R. No. 141707 services or periods of contributions and
(2002)]. computation of benefits provided for under the
Act shall be the joint responsibility of the GSIS
All contributions paid by such member and the SSS [Rule V, Sec. 6, RA 7699 Rules
personally, and those that were paid by his and Regulations].
employers to both Systems shall be considered
in the processing of benefits which he can Overlapping periods of creditable services or
claim from either or both Systems: Provided, contributions in both Systems shall be credited
however, that the amount of benefits to be paid only once for purposes of totalization [Rule V,
by one System shall be in proportion to the Sec. 7, RA 7699 Rules and Regulations].
number of contributions actually remitted to
that System. [Section 4, RA 7699].
All creditable services or periods of

contributions made continuously or in the
aggregate of a worker under either of the
Sectors shall be added up and considered for
Page 207 of 262

equivalent of ninety percent (90%) of the

D. DISABILITY AND DEATH average salary credit, provided:
BENEFITS 1. The daily income benefit is not less than
Ten (10) pesos nor more than Ninety (90)
pesos, nor paid for a continuous period
1. Labor Code longer than 120 days. [Art. 197]
2. The monthly income benefit shall be
Under the Labor Code, employees' suspended if the employee fails to submit
compensation (EC) benefits are granted to a monthly medical report certified by its
employees or their dependents for work- attending physician [Art.194]
connected disability or death, or those
resulting from accident arising out of and in Period of Entitlement
the course of employment. [Art. 166, LC in The employee is entitled to the benefit from the
rel. to Sec. 1, Rule III, IRR] day of the start of the disability. It shall not be
paid longer than 120 consecutive days except
Types of disability where such injury or sickness still requires
1. Temporary Total Disability [Art. 197] medical attendance beyond 120 days but not
2. Permanent Total Disability [Art. 198] to exceed 240 days from onset of disability.
3. Permanent Partial Disability [Art. 199]
When after the period of temporary total
a. Disability Benefits disability had ceased, an employee was found
to be suffering from a permanent partial
Disability does not refer to the injury nor to the disability, he was entitled to an award based
pain and suffering it has occasioned, but to the upon partial disability permanent in character.
loss and impairment of earning capacity. [Cañete v. Insular Lumber Co., 61 Phil. 592
There is disability when there is a loss or (1935)]
diminution of earning power because of actual
absence from work due to injury or illness PERMANENT TOTAL DISABILITY
arising out of and in the course of employment. A disability is total and permanent if as a result
The basis of compensation is reduction of of the injury or sickness the employee is unable
earning power. [Azucena, p. 525] to perform any gainful occupation for a
continuous period exceeding 120 days. [Art.
TEMPORARY TOTAL DISABILITY 198 in rel. to Sec. 2(b), Rule VII]
A total disability is temporary if as a result of
the injury or sickness, the employee is unable The test of whether or not an employee suffers
to perform any gainful occupation for a from ‘permanent total disability’ is a showing of
continuous period not exceeding 120 days the capacity of the employee to continue
[Art. 197 in rel. to Sec. 2(a), Rule VII, Amended performing his work notwithstanding the
Rules on Employees’ Compensation]. disability he incurred. It does not mean an
absolute helplessness but rather an incapacity
The object of the law in allowing compensation to perform gainful work which is expected to be
during temporary disability is to compensate permanent. [Vicente vs. ECC, G.R. No. 85024,
the laborer or employee for what he might have (1991)]
earned during the period of the treatment of his
injury. [Cañete v. Insular Lumber Co., 61 Phil. The Labor Code enumerates six instances
592 (1935)] considered to be a permanent total disability:
1. Temporary total disability lasting
Amount of benefit continuously for more than one hundred
An employee suffering from temporary total twenty days, except as otherwise provided
disability shall be paid by the System an for in the Rules;
2. Complete loss of sight of both eyes;
Page 208 of 262

3. Loss of two limbs at or above the ankle or period of diagnosis and treatment shall be
wrist; extended to 240 days. The employer has
4. Permanent complete paralysis of two the burden to prove that the company-
limbs; designated physician has sufficient
5. Brain injury resulting in incurable imbecility justification to extend the period; and
or insanity; and 4. If the company-designated physician still
6. Such cases as determined by the Medical fails to give his assessment within the
Director of the System and approved by the extended period of 240 days, then the
Commission. [Art. 197(c)] seafarer's disability becomes permanent
and total, regardless of any justification.
Rules for the determination of disability
(120-day or 240-day) It must be emphasized that the company-
Initially, there was confusion as to the designated physician must:
application of the 120-day period found in 1. ISSUE a final medical assessment of the
Article 192 (c) (1) of the Labor Code vis-à-vis seafarer's medical condition; AND
the application of the 240-day period found in 2. GIVE his assessment to the seafarer
Section 2, Rule X of the Amended Rules on concerned.
Employees' Compensation Implementing Title
II, Book IV of the Labor Code. That is to say that the seafarer must be fully
and properly informed of his medical
Permanent disability: condition.
Article 192(c)(1): Temporary total disability
lasting continuously for more than one hundred The results of his/her medical examinations,
twenty days, except as otherwise provided in the treatments extended to him/her, the
the Rules. diagnosis and prognosis, his/her disability
grading must be fully explained to him/her by
Section 2, Rule X: …where such injury or no less than the company-designated
sickness still requires medical attendance physician.
beyond 120 days but not to exceed 240 days
from onset of disability. The company-designated physician is
mandated to issue a medical certificate,
To reconcile these provisions, the Supreme which should be personally received by the
Court laid down the following rules in the case seafarer, or, if not practicable, sent to him/her
of Dagasdas v. Grand Placement and General by any other means sanctioned by present
Services Corporation. [G.R. No. 205727, rules.
(2017)]
1. The company-designated physician must To require the seafarer to seek the decision of
issue a final medical assessment on the a neutral third-party physician without primarily
seafarer's disability grading within a period being informed of the assessment of the
of 120 days from the time the seafarer company-designated physician is a clear
reported to him; violation of the tenets of due process.
2. If the company-designated physician fails
to give his assessment within the period of Amount of Benefit
120 days, without any justifiable reason, The employee suffering from a permanent total
then the seafarer's disability becomes disability shall be entitled to an amount
permanent and total; equivalent to the monthly income benefit, plus
3. If the company-designated physician fails ten percent thereof for each dependent child,
to give his assessment within the period of but not exceeding five, beginning with the
120 days with a sufficient justification (e.g. youngest and without substitution: Provided,
seafarer required further medical treatment That the monthly income benefit shall be the
or seafarer was uncooperative), then the
Page 209 of 262

new amount of the monthly benefit for all

One big toe 6
covered pensioners. [Art. 198]
Period of Entitlement One toe 3

An employee with permanent total disability
shall be entitled to receive benefits monthly for One arm 50
five (5) years.
One hand 39
However, Art. 198(b) provides that the benefits
may be suspended if the employee is gainfully One foot 31
employed, or recovers from his permanent total
disability, or fails to present himself for One leg 46
examination at least once a year.
One ear 10
PERMANENT PARTIAL DISABILITY
A disability is partial and permanent if as a
result of the injury or sickness the employee Both ears 20
suffers a permanent partial loss of the use of
any part of his body. [Art. 199 in rel. to Sec. Hearing of one ear 10
2(c), Rule VII, Amended Rules on Employees’
Compensation]. Hearing of both ears 50
The object of the law in granting compensation

Sight of one eye 25
for a permanent partial disability is to
compensate the injured laborer or employee
for the actual and permanent loss of a member Notes:
of the body, or the use thereof. [Cañete v. 1. A loss of a wrist shall be considered as a
Insular Lumber Co., 61 Phil. 592 (1935)] loss of the hand, and a loss of an elbow
shall be considered as a loss of the arm.
Amount of benefits 2. A loss of an ankle shall be considered as
For an employee who has suffered a loss of a foot, and a loss of a knee shall be
permanent partial disability, the amount of considered as a loss of the leg.
benefits, as well as the period of entitlement to 3. A loss of more than one joint shall be
receive such benefits is based upon the degree considered as a loss of one-half of the
of disability, as well as the lost body part. The whole finger or toe: Provided, That such a
body parts and the corresponding period of loss shall be either the functional loss of the
equivalent disability are specified in Art 199. use or physical loss of the member. [Art.
199(c)]
Table of benefits [Art. 199(b)]
Body part/s Number of months In case of permanent partial disability less
than the total loss of the member specified
One thumb 10 in Art. 199(b), the same monthly income
benefit shall be paid for a portion of the period
One index finger 8 established for the total loss of the member, in
accordance with the proportion that the partial
One middle finger 6 loss bears to the total loss. If the result is a
decimal fraction, the same shall be rounded off
One ring finger 5 to the next higher integer [Art. 199(d)].
In cases of simultaneous loss of more than

One little finger 3
one member or a part thereof as specified
Page 210 of 262

in Art. 199(b) the same monthly income factors. [Central Azucarera Don Pedro v. C. de
benefit shall be paid for a period equivalent to Leon, in his capacity as Workmen’s
the sum of the periods established for the loss Compensation Commissioner and L. Alla, G.R.
of the member or the part thereof. If the result No. L-10036 (1957)].
is a decimal fraction, the same shall be
rounded off to the next higher integer [Art. b. Death Benefits
199(e)].
Monthly Income Benefit
In cases of injuries or illnesses resulting in Under such regulations as the Commission
a permanent partial disability not listed in may approve, the System shall pay to the
the Art. 199(b), the benefit shall be an income primary beneficiaries:
benefit equivalent to the percentage of the 1. Upon the death of the covered
permanent loss of the capacity to work [Art. employee under this Title:
199(f)]. a. An amount equivalent to his monthly
income benefit;
Distinguished from permanent total b. Plus 10% thereof for each dependent
disability child, but not exceeding five, beginning
While “permanent total disability” invariably with the youngest and without
results in an employee’s loss of work or inability substitution, except as provided for in
to perform his usual work, “permanent partial par. (j) of Article 167 hereof: Provided,
disability,” on the other hand, occurs when an That –
employee loses the use of any particular i. The monthly income benefit shall
anatomical part of his body which disables him be guaranteed for five years;
to continue with his former work. [Vicente v. ii. If he has no primary beneficiary,
ECC, G.R. No. 85024, (1991)] the System shall pay to his
secondary beneficiaries the
Conversion from permanent partial monthly income benefit but not to
disability to permanent total disability exceed sixty months; and
A person’s disability may not manifest fully at iii. The minimum death benefit shall
one precise moment in time but rather over a not be less than fifteen thousand
period of time. It is possible that an injury which pesos. (As amended by Section 4,
at first was considered partial disability may Presidential Decree No. 1921).
become totally and permanently disabled from 2. Upon the death of a covered employee
the same cause. There is nothing in the law who is under permanent total disability
that prohibits the conversion of permanent under this Title: 80% of the monthly
partial disability benefit to permanent total income benefit and his dependents to the
disability benefit, if it is shown that the dependents’ pension: Provided, That –
employee’s ailment qualifies as such. [GSIS v. a. The marriage must have been validly
Court of Appeals and R. Balais, G.R. No. subsisting at the time of disability;
117572 (1998)]. b. If he has no primary beneficiary, the
System shall pay to his secondary
When salary is higher after the injury beneficiaries the monthly pension
In a case where the employee filed a claim for excluding the dependents’ pension, of
permanent partial disability but the ECC denied the remaining balance of the five-year
the claim because in fact his salary was higher guaranteed period; and
than before, the Court ruled that the fact of c. The minimum death benefit shall not be
higher earning capacity fact would not in itself less than fifteen thousand pesos. (As
necessarily affect the laborer’s claim for amended by Section 4, Presidential
compensation for a permanent partial Decree No. 1921).
disability. The amount of his salary may be
affected by various extraneous matters or
Page 211 of 262

Note: The monthly income benefit provided Dependents

herein shall be the new amount of the monthly "Dependent" means:
income benefit for the surviving beneficiaries 1. The legitimate, legitimated or legally
upon the approval of this decree. [Art. 200 (a)- adopted or acknowledged natural child
(c)] who is:
a. Unmarried,
Condition to entitlement b. Not gainfully employed, and
The beneficiaries of a deceased employee c. Not over twenty-one (21) years of age
shall be entitled to an income benefit if all of the or over twenty-one (21) years of age
following conditions are satisfied: provided he is incapacitated and
1. The employee has been duly reported to incapable of self-support due to a
the System; physical or mental defect which is
2. He died as a result of an injury or sickness; congenital or acquired during minority;
and 2. The legitimate spouse living with the
3. The System has been duly notified of his employee and the parents of said
death, as well as the injury or sickness employee wholly dependent upon him for
which caused his death. His employer shall regular support. [Art. 173(i)]
be liable for the benefit if such death
occurred before the employee is duly The test of dependency is not merely whether
reported for coverage to the System. [Sec. the contributions were necessary to bare
1(a), Rule XIII, IRR] subsistence. Dependency may exist if such
contributions were relied on by claimant for
Notes: his/her means of living as determined by
1. If the employee has been receiving his/her position in life. [Malate Taxicab v. Del
monthly income benefit for permanent total Villar, G.R. No. L-7489 (1956)]
disability at the time of his death, the
surviving spouse must show that the Period of entitlement
marriage has been validly subsisting at the For primary beneficiaries
time of his disability. The income benefit shall be paid beginning at
2. In addition, the cause of death must be a the month of death and shall continue to be
complication or natural consequence of the paid for as long as the beneficiaries are entitled
compensated Permanent Total Disability. thereto. [Sec. 2, Rule XII, IRR]
[Sec. 1(b), Rule XIII, IRR]
For secondary beneficiaries
Beneficiaries The income benefit shall be sixty (60) times the
The beneficiaries are: monthly income benefit of a primary beneficiary
1. Primary beneficiaries: which in no case be less than P 15,000.00,
a. Dependent spouse until he/she which shall likewise be paid in monthly
remarries; pension. [Sec. 2(a), Rule XII, IRR]
b. Dependent children (legitimate,
legitimated, natural-born, or legally Manner of payment
adopted). Death benefits are paid in the form of cash
2. Secondary beneficiaries: monthly pension:
1. Illegitimate children and legitimate 1. For life to the primary beneficiaries,
descendants; guaranteed for five years;
2. Parents, grandparents, grandchildren. 2. For not more than 60 months to the
[Azucena, p. 541] secondary beneficiaries in case there are
no primary beneficiaries;
3. In no case shall the total benefit be less
than P15,000. [Art. 200]
Page 212 of 262

Amount of benefits receiving permanent total disability benefit,

For primary beneficiaries dies.
Monthly income benefit shall be equivalent to
the monthly income benefit for permanent total Prescription of claims
disability, which shall be guaranteed for five All money claims arising from employer-
years, increased by ten percent for each employee relations shall be filed within three
dependent child but not exceeding 5, beginning (3) years from the time the cause of action
with the youngest and without substitution. accrued; otherwise they shall forever be
[Sec. 3, Rule XII, IRR] barred. [Art. 306]
Notes: 2. Employees Compensation and

1. The aggregate monthly benefit payable in State Insurance Fund
the case of the GSIS shall in no case
exceed the monthly wage or salary actually Policy
received by the employee at the time of his To promote and develop a tax-exempt
death; employees’ compensation program whereby
2. The minimum income benefit shall not be employees and their dependents, in the
less than Fifteen Thousand Pesos event of work-connected disability or death,
(P15,000.00). [Sec. 3, Rule XII, IRR] may promptly secure adequate income
benefit and medical related benefits [Art.
For secondary beneficiaries 172 [166]]
Income benefit is payable in monthly pension
which shall not exceed the period of 60 months "Dependent" means:
and the aggregate income benefit shall not be 1. The legitimate, legitimated or legally
less than P15, 000.00. [Sec. 3, Rule XII, IRR] adopted or acknowledged natural child
who is:
Death benefits after retirement are allowed a. Unmarried,
Generally, the term “covered employees” b. Not gainfully employed, and
refers to an employee who, at the time of his c. Not over twenty-one (21) years of age
death, is still covered by the GSIS. However, or over twenty-one (21) years of age
the implementing rules and regulations of the provided he is incapacitated and
Employees’ Compensation Commission allows incapable of self-support due to a
death benefits to those retired employees physical or mental defect which is
whose retirement was brought about by congenital or acquired during minority;
permanent disability. 2. The legitimate spouse living with the
employee and the parents of said
The Court is aware that death benefits must be employee wholly dependent upon him for
granted to the primary beneficiaries of the regular support. [Art. 173(i)]
decedent to help the family of a permanent and
totally disabled person who was so disabled The beneficiaries are:
because of causes that are work-oriented. The 1. Primary beneficiaries:
rule applies all the more when the disabled a. Dependent spouse until he/she
person later dies because of the same cause remarries;
or related cause. [Manuzon v. ECC, G.R. No. b. Dependent children (legitimate,
88573, (1990)] legitimated, natural-born, or legally
adopted).
Death of a person receiving permanent total 2. Secondary beneficiaries:
disability benefits a. Illegitimate children and legitimate
Under Art. 200(b), death benefit shall be paid descendants;
to the beneficiaries if an employee, while b. Parents, grandparents, grandchildren.
[Art. 173(j)]
Page 213 of 262

Compulsory coverage remit to the System a contribution

Coverage in the State Insurance Fund shall be equivalent to one percent of his monthly
compulsory upon all employers and their salary credit.
employees not over sixty (60) years of age: b. The rate of contribution shall be reviewed
Provided, That an employee who is over (60) periodically and subject to the limitations
years of age and paying contributions to qualify herein provided, may be revised as the
for the retirement or life insurance benefit experience in risk, cost of administration
administered by the System shall be subject to and actual or anticipated as well as
compulsory coverage [Art. 174[168]] (“System” unexpected losses, may require.
- SSS or GSIS, as the case may be). c. Contributions under this Title shall be paid
in their entirety by the employer, and any
Foreign employment - Filipino employees contract or device for the deductions of any
employed abroad shall be adequately covered, portion thereof from the wages or salaries
subject to regulations as the Commission may of the employees shall be null and void.
prescribe [Art. 175[169]] (“Commission” - d. When a covered employee dies, becomes
Employees Compensation Commission) disabled or is separated from employment,
his employer’s obligation to pay the
Limitation of liability monthly contribution arising from that
The State Insurance fund shall be liable for employment shall cease at the end of the
compensation to the employee or his month of contingency and during such
dependents, except when the disability or months that he is not receiving wages or
death was occasioned by the employees’ salary [Art. 189[183]].
intoxication, willful intention to injure or kill
himself or another, notorious negligence, or Medical benefits
otherwise provided in this title. [Art. 178 [172]] Immediately after an employee contracts
sickness or sustains an injury, he shall be
Extent of liability provided by the System during the subsequent
Unless otherwise provided, the liability of the period of his disability with such medical
State Insurance Fund under this Title shall be services and appliances as the nature of his
exclusive and in place of all other liabilities of sickness or injury and progress of his recovery
the employer to the employee, his dependents may require, subject to the expense limitation
or anyone otherwise entitled to receive prescribed by the Commission [Art. 191[185]]
damages on behalf of the employee or his
dependents. The payment of compensation Rehabilitation services
under this Title shall not bar the recovery of The System shall establish:
benefits as provided for in Section 699 of the a. A continuing program, for the
Revised Administrative Code, Republic Act rehabilitation of injured and handicapped
Numbered Eleven hundred sixty-one, as employees who shall be entitled to
amended, Republic Act Numbered Forty-eight rehabilitation services, which shall consist
hundred sixty-four as amended, and other laws of medical, surgical or hospital treatment,
whose benefits are administered by the including appliances to help them become
System or by other agencies of the government physically independent.
[Art. 179 [173]]. b. Centers equipped and staffed to provide a
balanced program of remedial treatment,
Employer’s contributions vocational assessment and preparation
a. Under such regulations as the System may designed to meet the individual needs of
prescribe, beginning as of the last day of each handicapped employee to restore him
the month when an employee’s to suitable employment, including
compulsory coverage takes effect and assistance to help each rehabilitee to
every month thereafter during his develop his mental, vocational or social
employment, his employer shall prepare to potential. [Art. 196 [190]]
Page 214 of 262

3. Philippine Overseas Employment LIABILITIES OF EMPLOYER IN CASE OF

Administration-Standard WORK-RELATED INJURY OR ILLNESS
Employment Contract
1. Medical expenses
As part of a seafarer's deployment for overseas
If the injury or illness requires medical and/or
work, he/she and the vessel owner or its
dental treatment in a foreign port, the employer
representative local manning agency are
shall be liable for the full cost of such medical,
required to execute the POEA-SEC.
Containing the standard terms and conditions serious dental, surgical and hospital treatment
as well as board and lodging until the seafarer
of seafarers' employment, the POEA-SEC is
is declared fit to work or to be repatriated.
deemed included in their contracts of
employment in foreign ocean-going vessels.
However, if after repatriation, the seafarer still
[Sharpe Sea Personnel Inc. v. Mabunay, G.R.
No. 206113 (2017)] requires medical attention arising from said
injury or illness, he/she shall be so provided at
cost to the employer until such time he/she is
a. Compensation and benefits for
declared fit or the degree of his/her disability
injury or illness
has been established by the company-
designated physician. [Sec. 20, A.2, POEA-
There are two requisites for a seafarer’s injury
or disability to be considered compensable: (1) SEC]
“the injury or illness must be work-related;” and
2. Sickness allowance
(2) “the work-related injury or illness must have
existed during the term of the seafarer's
employment contract.” [Magsaysay Maritime The seafarer shall also receive sickness
allowance from his/her employer in an amount
Services v. Laurel, 707 Phil. 210 (2013)]
equivalent to his/her basic wage computed
from the time he/she signed off until he is
Work-related injury or illness
declared fit to work, or the degree of disability
For an illness to be compensable, "it is not
has been assessed by the company-
necessary that the nature of the employment
be the sole and only reason for the illness designated physician.
suffered by the seafarer."
The period within the seafarer shall be entitled
to sickness allowance shall not exceed 120
It is enough that there is "a reasonable linkage
days. Payment of the sickness allowance shall
between the disease suffered by the employee
and his work to lead a rational mind to conclude be made on a regular basis, but not less than
once a month. [Sec. 20. A.3, POEA-SEC]
that his work may have contributed to the
establishment or, at the very least, aggravation
3. Cost of medicines, mode of
of any pre-existing condition he might have
had.” [Madridejos v. NYK-FIL Ship transportation and accommodation
Management, Inc., 810 Phil. 704 (2017)]
The seafarer shall be entitled to reimbursement
of the cost of medicines prescribed by the
See Sec. 32 of POEA-SEC for the schedule of
disability or impediment for injuries suffered company-designated physician.
and diseases including occupational diseases
of illness contracted in the course of work. In case treatment of the seafarer is on an out-
patient basis as determined by the company-
designated physician, the company shall
Those illnesses not listed in Sec. 32 are
disputably presumed as work-related. [Sec. 20, approve the appropriate mode of transportation
and accommodation.
A.4, POEA-SEC]
Page 215 of 262

The reasonable cost of actual traveling Rationale: It is understandable that a company-

expenses and/or accommodation shall be paid designated physician is more positive than that
subject to liquidation and submission of official of a physician of the seafarer's choice. It is on
receipts and/or proof of expenses. [Sec. 20, this account that a seafarer is given the option
A.3, POEA-SEC] by the POEA Standard Employment Contract
to seek a second opinion from his preferred
Mandatory post-employment medical physician [Abante v. KJGS Fleet Management
examination; strict compliance Manila, G.R. No. 182430 (2009)]
General rule: The seafarer shall submit
himself/herself to a post-medical examination Mandatory reporting requirement
by a company-designated physician within In the course of the treatment, the seafarer
three working days upon his return. shall also report regularly to the company-
designated physician specifically on the dates
Exceptions: as prescribed by the company-designated
a. When the seafarer is physically physician and agreed to by the seafarer.
incapacitated to do so. In which case, a Failure of the seafarer to comply with the
written notice to the agency within the mandatory reporting requirement shall result in
same period is deemed as compliance. his forfeiture of the right to claim the above
[Sec. 20, A.3, POEA-SEC] benefits. [Sec. 20, A.3, POEA-SEC]
b. When the non-compliance with the
mandatory post-employment medical GUIDELINES FOR THE CLAIM OF
examination was “not due to the seafarer’s PERMANENT TOTAL DISABILITY
fault but to the inadvertence or deliberate BENEFITS
refusal of the [employer].” [Interorient The employer must also compensate the
Maritime Enterprises, Inc. v. Remo, 636 seafarer for his/her permanent total disability
Phil. 240 (2010)] as finally determined by the company-
designated physician.
Rationale
The rationale for the rule [on the mandatory The following guidelines shall govern
post-employment medical examination] is that seafarers' claims for permanent and total
reporting the illness or injury within three days disability benefits:
from repatriation fairly makes it easier for a 1. The company-designated physician must
physician to determine the cause of the illness issue a final medical assessment on the
or injury. To ignore the rule might set a seafarer's disability grading within a period
precedent with negative repercussions, like of 120 days from the time the seafarer
opening floodgates to a limitless number of reported to him.
seafarers claiming disability benefits. [Wallem 2. If the company-designated physician fails
Maritime Services, Inc. v. Tanawan, 693 Phil. to give his/her assessment within the
416 (2012)] period of 120 days, without any justifiable
reason, then the seafarer's disability
Third Doctor Opinion Rule becomes permanent and total;
If a doctor appointed by the seafarer disagrees 3. If the company-designated physician fails
with the assessment [of the company- to give his/her assessment within the
designated physician], a third doctor may be period of 120 days with a sufficient
agreed jointly between the employer and the justification, then the period of diagnosis
seafarer. and treatment shall be extended to 240
days. The employer has the burden to
The third doctor’s decision shall be final and prove that the company-designated
binding on both parties. [Sec. 20, A.4, POEA- physician has sufficient justification to
SEC] extend the period; and
Page 216 of 262

4. If the company-designated physician still Other liabilities of the employer when the
fails to give his assessment within the seafarer dies as a result of work-related injury
extended period of 240 days, then the or illness during the term of employment are as
seafarer's disability becomes permanent follows:
and total, regardless of any justification. a. The employer shall pay the deceased’s
[Jebsens Maritime Inc. v. Rapiz, G.R. No. beneficiary all outstanding obligations due
218871 (2017)] the seafarer under this Contract.
b. The employer shall transport the remains
b. Compensation and benefits for and personal effects of the seafarer to the
death Philippines at employer’s expense, except
if the death occurred in a port where local
In case of work-related death of the seafarer, government laws or regulations do not
during the term of his contract, the employer permit the transport of such remains. In
shall pay his/her beneficiaries the Philippine case death occurs at sea, the disposition of
currency equivalent to the amount of Fifty the remains shall be handled or dealt with
Thousand US dollars (US$50,000) and an in accordance with the master’s best
additional amount of Seven Thousand US judgment. In all cases, the
dollars (US$7,000) to each child under the age employer/master shall communicate with
of twenty-one (21) but not exceeding four (4) the manning agency to advise for
children, at the exchange rate prevailing during disposition of seafarer’s remains.
the time of payment. [Sec. 20, B.1, POEA- c. The employer shall pay the beneficiaries of
SEC] the seafarer the Philippine currency
equivalent to the amount of One Thousand
Requisites US dollars (US$1,000) for burial expenses
For death to be compensable, the claimant at the exchange rate prevailing during the
bears the burden to establish that: time of payment. [Sec. 20, B.4, POEA-
1. The seafarer died during the duration of SEC]
his/her contract, and
2. His/her illness was work-related. [Sec. 20, When compensation is not payable (applies
B.1, POEA-SEC] to both disability and death benefits)
No compensation and benefits shall be
Exception: When the seafarer’s death payable in respect of any injury, incapacity,
occurred after the termination of his/her disability or death of the seafarer resulting from
contract after medical repatriation repatriation his willful or criminal act or intentional breach of
on account of a work-related injury or illness his duties, provided however, that the employer
can prove that such injury, incapacity, disability
Rationale: The 2000 POEA-SEC must be or death is directly attributable to the seafarer.
liberally construed, as impelled by the plight of [Sec. 20, D, POEA-SEC]
the bereaved heirs who stand to be deprived of
a just and reasonable compensation for the Prescription of claims
seafarer’s death, notwithstanding its evident All claims arising from this contract shall be
work-connection. [Racelis v. United Philippine made within three (3) years from the date the
Lines, 746 Phil. 758 (2014)] cause of action arises, otherwise the same
shall be barred. [Sec. 30, POEA-SEC]
When compensation payable is double
Where death is caused by warlike activity while
sailing within a declared war zone or war risk
area, the compensation payable shall be
doubled. [Sec. 20, B.2, POEA-SEC]
Page 217 of 262

d. Critical incidence stress debriefing, which

includes preventive stress management
E. SOLO PARENTS strategy designed to assist solo parents in
coping with crisis situations and cases of
abuse;
[RA 8972: Solo Parents’ Welfare Act] e. Special projects for individuals in need of
protection which include temporary shelter,
See also III. C. 2. a. and III. E. 7. for work counseling, legal assistance, medical care,
entitlements of solo parents self-concept or ego-building, crisis
management and spiritual enrichment.
Non work-related support for solo parents [Sec. 15, IRR]
1. Comprehensive Package of Social
Development and Welfare Services [Sec. Educational benefits
5] The DepEd, CHED, and TESDA shall provide
2. Educational Benefits [Sec. 9] the following benefits and privileges:
3. Housing Benefits [Sec. 10] 1. Scholarship programs for qualified solo
4. Medical Assistance [Sec. 11] parents and their children in institutions of
basic, tertiary, and technical/skills
Criteria for Support education;
1. Solo parent, 2. Non-formal education programs
2. Income in the place of domicile falls below appropriate for solo parents and their
the poverty threshold as set by the NEDA, children. [Sec. 22, IRR]
and
3. Assessed by the DSWD. Housing benefits
Solo parents who meet the eligibility criteria for
Note: If the solo parent’s income is above the housing assistance under R.A. No. 7279
poverty threshold, he shall still enjoy the (Urban Development and Housing Act of 1992)
benefits of Flexible Work Schedule, Protection and other related rules and regulations of
against Work Discrimination, and Parental participating housing agencies shall be
Leave [Sec. 4]. provided with liberal terms of payment on
government low-cost housing projects, in
Comprehensive Package of Social accordance with housing law provisions,
Development and Welfare Services prioritizing applicants below the poverty line as
The package will initially include: declared by the NSCB. [Sec. 23, IRR]
a. Livelihood development services, which
include training on livelihood skills, basic The National Housing Authority shall make
business management, value orientation available housing units to solo parents in its
and the provision of seed capital or job housing projects, subject to existing disposition
placement; policies, or may refer them to other housing
b. Counseling services, which include projects, as appropriate, provided:
individual, peer group or family counseling. a. The identified solo parent must be eligible
These will focus on the resolution of for assistance under the provisions of this
personal relationship and role conflicts; Act;
c. Parent effectiveness services which b. Solo parents applying for housing benefits
include the provision and expansion of must meet the qualification criteria for
knowledge and skills of the solo parent on housing assistance under Republic Act
early childhood development, behavior 7279, or the Urban Development and
management, health care and proper Housing Act (UDHA) and other NHA
nutrition, rights and duties of parents and eligibility criteria under existing policies,
children; rules and regulations; and
Page 218 of 262

c. Eligible solo parents shall file their 1. The totality of factors and support services
application for housing unit directly with the designed to lift the economic status of the
concerned NHA Project Offices. [Sec. 24, beneficiaries; and
IRR] 2. All other arrangements alternative to the
physical redistribution of lands, such as:
Medical Assistance a. Production or profit-sharing,
The DOH shall develop a comprehensive b. Labor administration, and
health care program for solo parents and their c. The distribution of shares of stocks,
children. [Sec. 25, IRR] which will allow beneficiaries to receive
a just share of the fruits of the lands
Health/medical services shall be made they work. [Sec. 3(a), RA 6657]
available at all times, in all levels of health care
delivery system as mentioned in the previous 2. Existence and Concept of
section. [Sec. 26, IRR] Agricultural Tenancy
Agricultural tenancy – The physical

F. KASAMBAHAY possession by a person of land devoted to
agriculture belonging to, or legally possessed
by another:
[RA 10361: Batas Kasambahay or Domestic 1. For the purpose of production through the
Workers Act] labor of the former and of the members of
his immediate farm household
See III. E. 5. Kasambahays 2. In consideration of which the former agrees
to:
a. Share the harvest with the latter; OR
G. AGRARIAN RELATIONS b. Pay a price certain, either in produce or
in money, or both. [Sec. 3, RA 1199,
Agricultural Tenancy Act]
1. Concept of Agrarian Reform Tenancy relationship defined [Sec. 6,
RA1199]
Declaration of Policy Tenancy relationship is a juridical tie which
The agrarian reform program is founded on the arises between a landholder and a tenant,
right of farmers and regular farmworkers, who wherein:
are landless, to own directly or collectively the a. They agree, expressly or impliedly, to
lands they till or, in the case of other farm undertake jointly the cultivation of land
workers, to receive a just share of the fruits belonging to the former, either under the
thereof. share tenancy or leasehold tenancy
system;
To this end, the State shall encourage and b. The tenant acquires the right to continue
undertake the just distribution of all agricultural working on and cultivating the land, until
lands, subject to the payment of just and unless he is dispossessed of his
compensation. [Sec. 2, RA 6657, holdings for any of the just causes, or the
Comprehensive Agrarian Reform Law] relationship is terminated in accordance
with [the Agricultural Tenancy Act].
Definition
Agrarian Reform – The redistribution of lands, Requisites for the existence of agricultural
regardless of crops or fruits produced to tenancy relationship
farmers and regular farmworkers who are 1. The parties are landowner and the tenant
landless, irrespective of tenurial arrangement, or agricultural lessee;
including:
Page 219 of 262

2. The subject of the relationship is 3. Rights of Agricultural Tenants

agricultural land;
3. There is mutual consent to the tenancy Rights common to both share and
between the parties; leasehold tenants [Sec. 22, RA 1199, as
4. The purpose of the relationship is amended by RA 2263]
agricultural production; The tenant shall:
5. There is personal cultivation by the tenant 1. Be free to work elsewhere whenever the
or agricultural lessee; and nature of his farm obligation;
6. There is a sharing of harvests between the 2. Have the right to provide any of the
parties. [Fuentes v. Caguimbal, G.R. No. contributions for production, aside from his
150305 (2007)] labor, whenever he can do so adequately
and on time subject to the provisions of
Establishment of tenancy relationship [Sec. Sec. 14 of this Act
7, RA 1199]
Tenancy relationships may be established Sec. 14, RA 1199, as amended by RA 2263
either verbally or in writing, expressly or – The tenant shall have the right to change
impliedly. Once such relationship is the tenancy contract from one of share
established, the tenant shall be entitled to tenancy to leasehold tenancy and vice versa
security of tenure. and from one crop sharing arrangement to
another of the share tenancy. If the share
Types of agricultural tenancy [Sec. 4, RA tenancy contract is in writing and is duly
1199, as amended by RA 2263] registered, the right to change from one crop
1. Share tenancy exists when sharing arrangement to another or from one
a. Two persons agree on a joint tenancy system or another may be exercised
undertaking for agricultural production; at least one month before the beginning of
b. Wherein one party furnishes land and the next agricultural year after the expiration
the other his labor; of the period of the contract, the right may be
c. With either or both contributing any one exercised at least one month before the
or several of the items of production; agricultural year when the change shall be
d. The tenant cultivating the land effected.
personally with the aid of labor
available to members of his immediate 3. Have the right to demand for a home lot
farm household; suitable for dwelling with an area:
e. And the produce thereof to be divided a. not more than 3% of the area of his
between the landholder and the tenant landholding; provided
in proportion to their respective b. it does not exceed 1000 sq. m.; and
contributions. that
2. Leasehold tenancy exists when c. it shall be located at a convenient and
a. A person, who either personally or with suitable place within the land of the
the aid of labor available from the landholder to be designated by the
members of his immediate farm latter where the tenant shall construct
household; his dwelling and may raise vegetables,
b. Undertakes to cultivate a piece of poultry, pigs and other animals and
agricultural land susceptible of engage in minor industries, the
cultivation by a single person, together products of which shall accrue to the
with members of his immediate farm tenant exclusively.
household; d. The tenant’s dwelling shall not be
c. Belonging to or legally possessed by, removed from the lot already assigned
another, in consideration of a fixed to him by the landholder, except:
amount in money or in produce or in i. If the landholder designates
both. another site for the tenant’s home
Page 220 of 262

lot and the tenant agrees to the 2. Work the land according to his best
transfer [Sec. 26, RA1199, as judgment, provided this manner and
amended by RA2263] method of cultivation and harvest are in
ii. There is a severance of the accordance with proven farm practices.
tenancy relationship
iii. The tenant is ejected for cause Upon termination of the relationship, have ½ of
the value of the improvements made by him,
In any case, the tenant shall only be removed provided they are reasonable and adequate to
after the expiration of 45 days following such the purposes of the lease.
severance of relationship or dismissal for
cause. 4. Concept of Farmworkers
Specific rights of rice share tenants [Sec. A farmworker is a natural person who renders
36, RA 1199] services for value as an employee or laborer in
The rice share tenant shall have the right to: an agricultural enterprise or farm regardless of
1. Determine when to scatter the seeds, to whether his compensation is paid on a daily,
transplant the seedlings, and to reap the weekly, monthly or “pakyaw” basis.
harvest, provided they shall be in
accordance with proven farm practices and The term includes an individual whose work
after due notice to the landholder. has ceased as a consequence of, or in
2. Choose the thresher which shall thresh the connection with, a pending agrarian dispute
harvest whenever it is the best available in and who has not obtained a substantially
the locality and the best suited to the equivalent and regular farm employment. [Sec.
landholder’s and tenant’s needs and 3(g), RA 6657, Comprehensive Agrarian
provided that the rate charged by the Reform Law]
owner of other threshers under similar
circumstances. Types of farmworkers
1. Regular Farmworker - a natural person
If there are multiple tenants, the choice of who is employed on a permanent basis by
the majority of the tenants shall prevail. an agricultural enterprise or farm. [Sec.
3(h), RA 6657]
If the landholder is the owner of a thresher 2. Seasonal Farmworker - a natural person
and is ready and willing to grant equal or who is employed on a recurrent, periodic or
lower rates under the same conditions, the intermittent basis by an agricultural
use of the landholder’s thresher shall be enterprise or farm, whether as a permanent
given preference. or a non-permanent laborer, such as
“dumaan,” “sacada,” and the like. [Sec. 3(i),
3. Apply appropriate pest, insect, disease and RA 6657]
rodent control measures whenever in his 3. Other Farmworker - a farmworker who
judgment such action is necessary. does not fall under Sec. 3(g) (farmworker),
4. Apply fertilizer of the kind or kinds shown Sec. 3(h) (regular farmworker), and Sec.
by proven farm practices to be adapted to 3(i) (seasonal farmworker). [Sec. 3(j), RA
the requirements of the land, provided the 6657]
landholder has not exercised his right to
require the use of such fertilizer. Entitlements of different farmworkers under
the Constitution
Specific rights of leasehold tenants [Sec.
43, RA 1199] Sec. 4, Art. XIII, 1987 Constitution – The
The tenant-lessee shall have the right to: State shall, by law, undertake an agrarian
1. Enter the premises of the land, and to the reform program founded on the right of
adequate and peaceful enjoyment thereof; farmers and regular farm workers, who are
Page 221 of 262

landless, to own directly or collectively the of-society approach in the development,

lands they till on, or in the case of other farm implementation, monitoring, and
workers, to receive a just share of the fruits evaluation of health policies, programs and
thereof. plans; and
d. A people-oriented approach for the delivery
The 1987 Constitution distinguishes between of health services that is centered on
regular farmworkers and other farmworkers. people's needs and well-being, and
1. Farmers and regular farmworkers have the cognizant of the differences in culture,
right to own directly or collectively the lands values, and beliefs. [Sec. 2]
they till on.
2. Other farmworkers have the right to receive The Universal Health Care Act seeks to:
a just share of the fruits thereof. a. Progressively realize universal health care
in the country through a systemic approach
Seasonal farm workers have no and clear delineation of roles of key
constitutional right to own land agencies and stakeholders towards better
Seasonal farm workers, not having a performance in the health system; and
constitutional right to own land, do not have a b. Ensure that all Filipinos are guaranteed
legal or actual and substantial interest in the equitable access to quality and affordable
land subject of agrarian reform. They may not health care goods and services, and
be allowed to intervene in the case concerning protected against financial risk. [Sec. 3]
the land. [Fortich v. Corona, G.R. No. 131457
(1998)] 2. Coverage
Population coverage [Sec. 5]

H. UNIVERSAL HEALTH CARE Every Filipino citizen shall be automatically
included into the National Health Insurance
Program.
[RA 11223]
Service coverage [Sec. 6]
Every Filipino shall be granted immediate
1. Policy
eligibility and access to preventive, promotive,
curative, rehabilitative, and palliative care for
It is the policy of the State to promote and
medical, dental, mental and emergency health
protect the right to health of all Filipinos and
services, delivered either as population-based
instill health consciousness among them.
or individual-based health services.
Towards this end, the State shall adopt:
a. An integrated and comprehensive
Provided, That the goods and services to be
approach to ensure that all Filipinos are
included shall be determined through a fair and
health literate, provided with healthy living
transparent Health Technology Assessment
conditions, and protected from hazards
(HTA) Process. [Sec. 6(a)]
and risks that could affect their health;
b. A health care model that provides all
HTA - The systematic evaluation of properties,
Filipinos access to a comprehensive set of
effects, or impact of health-related
quality and cost-effective, promotive,
technologies, devices, medicines, vaccines,
preventive, curative, rehabilitative and
procedures and all other health-related
palliative health services without causing
systems developed to solve a health problem
financial hardship, and prioritizes the
and improve quality of lives and health
needs of the population who cannot afford
outcomes. [Sec. 4(n)]
such services;
c. A framework that fosters a whole-of-
Every Filipino shall register with a public or
system, whole-of-government, and whole-
private primary care provider of choice. The
Page 222 of 262

DOH shall promulgate the guidelines on the subsidized as a result of special laws [Sec.
licensing of primary care providers and the 4(o)]
registration of every Filipino to a primary care
provider. [Sec. 6(d)] Direct contributors
1. Employees with formal employment
Financial coverage [Sec. 7] characterized by the existence of an
Population-based health services shall be employer-employee relationship, which
financed by the National Government through include workers in the government and
the DOH and provided free of charge at point private sector, whether regular, casual, or
of service for all Filipinos. [Sec. 7(a)] contractual, are occupying either an
elective or appointive position, regardless
Population-based health service - of the status of appointment, whose
interventions such as health promotion, premium contribution payments are equally
disease surveillance, and vector control, which shared by the employee and the employer;
have population groups as recipients. [Sec. 2. Kasambahays, as defined in the
4(p)] Kasambahay Law;
3. All other workers who are not covered by
Individual-based health services shall be formal contracts or agreements or who
financed primarily through prepayment have no employee-employer relationship
mechanisms such as social health insurance, and whose premium contributions are self-
private health insurance, and HMO plans to paid, and with capacity to pay premiums,
ensure predictability of health expenditures. such as the following:
[Sec. 7(b)] a. Self-earning individuals; and
b. Professional practitioners;
Individual-based health services - services 4. Overseas Filipino Workers
which can be accessed within a health facility 5. Filipinos living abroad;
or remotely that can be definitively traced back 6. Filipinos with dual citizenship;
to 1 recipient, has limited effect at a population 7. Lifetime members as defined in RA 10606
level and does not alter the underlying cause of (National Health Insurance Act); and
illness such as ambulatory and inpatient care, 8. All Filipinos aged 21 years and above who
medicines, laboratory tests and procedures, have the capacity to pay premiums. [Sec.
among others [Sec. 4(p)] 8, IRR]
3. National Health Insurance Indirect contributors

Program 1. Indigents identified by the DSWD;
2. Beneficiaries of Pantawid Pamilyang
Membership into the NHIP falls under 2 Pilipino Program/Modified Conditional
categories [Sec. 8] Cash Transfer (4Ps/MCCT);
1. Direct contributors - Those who have the 3. Senior citizens who are not currently
capacity to pay premiums, are gainfully covered by the Program;
employed and are bound by an employer- 4. Persons with disability, as defined in RA
employee relationship, or are self-earning, 10754 (An Act Expanding the Benefits and
professional practitioners, migrant workers, Privileges of Persons with Disability);
including their qualified dependents, and 5. All Filipinos aged 21 years old and above
lifetime members [Sec. 4(f)] without the capacity to pay premiums;
2. Indirect contributors - All others not 6. Sangguniang Kabataan officials, as
included as direct contributors, as well as defined in RA 10742 (Sangguniang
their qualified dependents, whose premium Kabataan Reform Act); and
shall be subsidized by the national 7. Those previously identified at point-of-
government including those who are service (POS) or during registration,
members previously sponsored by LGUs
Page 223 of 262

and those who are not yet in the PhilHealth employers and not exceeding 1.5% for self-
database and are financially incapable to earning, professional practitioners, and
pay premiums. [Sec. 8, IRR] migrant workers.
Dependents
1. Legal spouse/s who is/are not an active VIII. JURISDICTION AND
member; REMEDIES
2. Unmarried and unemployed legitimate,
illegitimate children, and legally adopted or
stepchildren below twenty-one (21) years A. LABOR ARBITER
of age;
3. Foster children as defined in RA 10165
(Foster Care Act of 2012); and 1. Jurisdiction of the Labor Arbiter
4. Parents who are sixty (60) years old and as distinguished from the
above, not otherwise an enrolled member. Regional Director
[Sec. 8, IRR]
JURISDICTION OF THE LABOR ARBITER
Benefits [Sec. 9] Except as otherwise provided under the Code,
Every member shall be granted immediate the Labor Arbiters shall have original and
eligibility for health benefit package under the exclusive jurisdiction to hear and decide:
NHIP under the following rules: a. Unfair labor practices cases;
1. The PhilHealth ID Card shall not be b. Termination disputes;
required in the availing of any health c. Cases that workers may file involving
service. wages, rates of pay, hours of work and
2. No co-payment shall be charged for other terms and conditions of employment,
services rendered in basic or ward if accompanied with a claim for
accommodation. reinstatement;
3. Co-payments and co-insurance for d. Claims for actual, moral, exemplary and
amenities in public hospitals shall be other forms of damages arising from the
regulated by the DOH and PhilHealth employer-employee relations;
e. Cases arising from any violation of Art.
Co-payment - a flat fee or predetermined [279] of this Code, including questions
rate paid at point of service [Sec. 4(e)] involving the legality of strikes and
lockouts;
Co-insurance - a percentage of a medical f. Except claims for Employees
charge that is paid by the insured, with the Compensation, Social Security, Medicare
rest paid by the health insurance plan [Sec. [Philhealth] and maternity benefits, all other
4(d)] claims, arising from employer-employee
relations, including those of persons in
4. The current PhilHealth package for domestic or household service, involving
members shall not be reduced. an amount exceeding P5,000 regardless of
whether accompanied with a claim for
PhilHealth shall provide additional NHIP reinstatement. [Art. 224]
benefits for direct contributors, where g. Money claims arising out of employer-
applicable: Provided, employee relationship or by virtue of any
1. Failure to pay premiums shall not prevent law or contract, involving claims for actual,
the enjoyment of NHIP benefits. moral, exemplary and other forms of
2. Employers and self-employed direct damages, as well as employment
contributors shall be required to pay all termination of OFWs;
missed contributions with an interest,
compounded monthly, of at least 3% for
Page 224 of 262

h. Wage distortion disputes in unorganized to report back after a temporary detail,

establishments not voluntarily settled by assignment, or travel.
the parties. [Art. 124] b. In the case of field employees, ambulant or
i. Enforcement of compromise agreements itinerant workers, their workplace is (a)
when there is non-compliance by any of the where they are regularly assigned or (b)
parties. [Art. 233] where they are supposed to regularly
j. Other cases as may be provided by law. receive their salaries and wages or work
instructions from, and report the results of
Requisites of

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FOR UP CANDIDATES ONLY

FOR UP CANDIDATES ONLY

TABLE OF CONTENTS b. Local Initiative; Voter Requirements 28

a. Doctrine of Shifting Majority............... 35 C. Concept of Executive Privilege.................... 48

c. Requisites of Grant of Emergency c. Administrative supervision over .......... 81

c. Legislative Act ....................................... 98 CONSTITUTIONAL LAW 2 ............................ 115

a. Prior Restraint ................................. 131 2. Right to Counsel .........................153

II. MODES OF ACQUIRING TITLE TO X. DISTINGUISH: DE FACTO AND DE

d. Effects of Impeachment ................ 216 a. Supplementary Legislation ..................232

e. Not otherwise disqualified by law ..... 256 2. Regulations ................................................275

D. Pre-Proclamation Controversy .................. 285 (9) Autonomous Regions

6. Requirements for a Valid Tax C. Settlement of Boundary Disputes..............335

LAW 1 Self-executing clauses refer to those in the

1987 Constitution Revision broadly implies a change that alters a

(3) Those born before January 17, 1973, of Filipino

SECTION 1. The following are citizens of the Renunciation of Citizenship

c. Government Independence is the decisive criterion of

Police power, while incapable of an exact Taxation and Eminent Domain as

Not an instance of taking Possessory Taking vs. Regulatory Taking

"Generally accepted principles of

STATE POLICIES Personal Dignity and Human Rights

Doctrine of Parens Patriae The question of when life begins is a scientific

Autonomy of Local Governments

Section 25, Article II. The State shall ensure the

Section 27, Article II. The State shall maintain

Section 21, Article II. The State shall promote

Section 28, Article II. Subject to reasonable

Section 22, Article II. The State recognizes and

3. Delegation of Powers c. The extent reserved to the people by the

Formal/Procedural Limitations General Rule: Only Congress (as a body)

The provision is not self-executing [Defensor-

d. Limitations on Local Initiative

Senate House of 2. House of Representatives

b. Party-List System 4. Sectoral parties or organizations may either

C. Legislative Privileges, A Senator or Member of the House of

Preventive suspension is not a penalty. Order

a. Statements of Assets, Liabilities, and

Action Votes Required House Voting Basis

Punish for disorderly 2/3 Separately; All Section 16(3), Article VI

Override 2/3 Separately (House Section 27(1), Article VI

Grant Tax Exemption Majority Silent Section 28(4), Article VII

Elect President in case of Majority Separately Section 4(5), Article VII

Confirm appointment of VP Majority Separately Section 9, Article VII

Congress affirming that 2/3 Congress

Revoke or extend (a) Majority Jointly Section 18, Article VII

Amnesty Grant Majority Silent Section 19(2), Article VII

Action Votes Required House Voting Basis

Submit a question calling Majority (Silent) Section 3, Article XVII

Call for Constitutional 2/3 Section 3, Article XVII

Propose amendments as 3/4 Section 1(1), Article XVII

Other Cases (not out of all members)

Action Votes Required (All Basis

Determine President’s ⅔ of both houses, voting Section 11(4), Article VII

Validity of ⅔ members of Senate Section 21, Article VII

The conferees are not limited to reconciling the b. As to certain laws

SECTION 25, ARTICLE VI. (1) The Congress

(2) No provision or enactment shall be embraced

4. Second reading The bill undergoes the same legislative

SECTION 26(2), ARTICLE VI. No bill passed by Examples:

(4) The procedures in approving appropriations for

2. Legislative Inquiries v. Question However, in Gudani v. Senga [G.R. No.

The claim of privilege must be specific, e.g.,

Clearly, oversight concerns post-enactment More intense digging of facts, compared to

2. Notes on Initiation [Gutierrez v. 4. Periods Rule