G.R. No.

202639

FEDERATED LPG DEALERS ASSOCIATION, Petitioner

vs.
MA. CRISTINA L. DEL ROSARIO, CELSO E. ESCOBIDO II, SHIELA M. ESCOBIDO, and RESTY
P. CAPILI, Respondents

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari assails the April 27, 2012 Decision1 and July 6, 2012
Resolution2 of the Court of Appeals (CA) in CA-G.R SP No. 115750, which respectively dismissed
the Petition for Certiorari filed therewith by petitioner Federated LPG Dealers Association and denied
the motion for reconsideration thereto.

Factual Antecedents

On June 1, 2006, petitioner, through counsel Atty. Genesis M. Adarlo (Atty. Adarlo) of Joaquin
Adarlo and Caoile, sought assistance from the Criminal Investigation and Detection Group, Anti-
Fraud and Commercial Crimes Division (CIDG-AFCCD) of the Philippine National Police3 in the
surveillance, investigation, apprehension, and prosecution of certain persons and establishments
within Metro Manila reportedly committing acts violative of Batas Pambansa Blg. 33 (BP 33),4 as
amended by Presidential Decree No. 1865 (PD 1865),5 to wit: (1) refilling of Liquefied Petroleum Gas
(LPG) cylinders branded as Shellane, Petron Gasul, Caltex, Totalgaz and Superkalan Gaz without
any written authorization from the companies which own the said brands in violation of Section
2(a),6 in relation to Sections 37 and 4;8 (2) underfilling of LPG products or possession of underfilled
LPG cylinders for the purpose of sale, distribution, transportation, exchange or barter in violation of
Section 2(c),9 in relation to Sections 310 and 4; and (3) refilling LPG cylinders without giving any
receipt therefor, or giving out receipts without indicating the brand name, tare weight, gross weight
and/or price thereof, among others, again in violation of Section 2(a) in relation to Sections 3(b)11 and
4.

A few days later or on June 8, 2006, Atty. Adarlo again wrote the CIDG-AFCCD informing the latter
of its confirmation that ACCS Ideal Gas Corporation (ACCS), which allegedly has been refilling
branded LPG cylinders in its refilling plant at 882 G. Araneta Avenue, Quezon City, has no authority
to refill per certifications from gas companies owning the branded LPG cylinders.12

Acting on the same, a group composed of P/Supt. Francisco M. Esguerra (P/Supt. Esguerra) and
PO2 Joseph R. Faeldonia (PO2 Faeldonia), both of the CIDG-AFCCD, and a team of paralegal
investigators having extensive training and experience in LPG matters led by Bernabe C. Alajar
(Alajar), mapped out a plan for the surveillance and investigation of ACCS.13 After a series of
surveillance, the group observed that various vehicles and individuals carrying branded LPG
cylinders have been going in and out of ACCS refilling plant. Hence, on July 15, 2006, they
conducted a test-buy operation, the details of which were uniformly narrated by P/Supt. Esguerra,
PO2 Faeldonia, and Alajar as follows:

x x x On 15 July 2006, using an investigation pre-text we went undercover and

executed our test-buy operations. In order for us to successfully execute our test-buy
operation and avoid suspicion, we decided to separately and successively bring
FOUR (4) empty branded LPG cylinders to the ACCS Refilling Plant.
 x x x It is worthy to emphasize that while we were bringing with us the FOUR (4)
empty branded LPG cylinders, we observed that other individuals were
simultaneously bringing in for refilling various empty unbranded and branded LPG
cylinders, including Shellane, Petron Gasul, Totalgaz, and Superkalan Gaz LPG
cylinders.

x x x In particular, we were able to conduct our test-buy operation in the following

manner:

(a) We first brought one (1) empty Petron Gasul 11 kg. LPG cylinder and one (1)
empty Shellane 11 kg. LPG cylinder for refilling. An employee of the ACCS Refilling
Plant got our empty branded LPG cylinders, brought them to the refilling platform
inside, and refilled them. From our location, we witnessed the actual refilling of our
empty branded cylinders. We were thereafter required to pay the total amount of
NINE HUNDRED FIFTY-FOUR PESOS (Php954.00) for the refilled branded LPG
cylinders. We made the necessary payment and, in turn, we were issued ACCS
Control Receipt No. 12119 dated 15 July 2006 x x x.

(b) Lastly, we brought one (1) empty Totalgaz 11 kg. LPG cylinder and one (1)
Superkalan Gaz 2.7 kg. LPG cylinder for refilling. An employee of the ACCS Refilling
Plant got our empty branded LPG Cylinders, brought them to the refilling platform
inside, and refilled them. Again, from our location, we witnessed the actual refilling of
our empty branded LPG cylinders. We were thereafter required to pay the amount of
FIVE HUNDRED NINETY PESOS (php590.00). We made the necessary payment,
and in turn, we were issued ACCS Control No. 12120 dated 15 July 2006 x x x

x x x Thereafter, we left the premises of ACCS Refilling Plant and brought with us the
abovementioned refilled branded LPG Cylinders, which all did not have any LPG
valve seals. Immediately, we proceeded to the CIDG-AFCCD Headquarters and
made the proper identification markings on the branded LPG cylinders, such as the
name of ACCS Refilling Plant where they were refilled and the date when they were
refilled. x x x14

Inspection and evaluation of the refilled LPG cylinders further revealed that they were underfilled by
0.4 kg to 1.3 kg.15

having reasonable grounds to believe that ACCS was in violation of BP 33, P/Supt. Esguerra filed
with the Regional Trial Court (RTC) of Manila applications for search warrant against the officers of
ACCS, to wit: Antonio G. Del Rosario (Antonio) and, respondents Ma. Cristina L. Del Rosario, Celso
E. Escobido II, and Shiela M. Escobido. Pursuant to search warrants16 accordingly issued by the said
court on August 1, 2006, a search and seizure operation was conducted on August 3, 2006 at No.
882 G. Araneta Avenue, Quezon City. This resulted in the seizure of an electric motor, a hose with
filling head, scales, v-belt, vapor compressor, booklets of various receipts, and 73 LPG cylinders of
various brands and sizes, four of which were filled, i.e., two Superkalan 3.7 kg. LPG cylinders, one
Shellane 11 kg. LPG cylinder, and one Totalgaz 11 kg. cylinder.17 Inspection and evaluation of the
said filled LPG cylinders showed that they were underfilled by 0.5 kg. to 0.9 kg.18

On December 14, 2006, P/Supt Esguerra filed with the Department of Justice (DOJ) Complaints-
Affidavits against Antonio and respondents for illegal trading of petroleum products and for
underfilling of LPG cylinders under Section 2(a) and 2(c), respectively, of BP 33, as amended.19
In his Counter-Affidavit,20 Antonio admitted that he was the General Manager of ACCS but denied
that the company was engaged in illegal trading and underfilling. He clai1ned that ACCS was merely
a dealer of LPG products to various retailers in Quezon City and that the alleged refilling plant in G.
Araneta Avenue, Quezon City was only being used by ACCS as storage of LPG products intended
for distribution. He also denied that ACCS has anything to do with the persons allegedly in-charge of
refilling activities in the said compound since they were not its employees. Likewise, the properties
seized during the search and seizure operation were not owned by ACCS but by third parties who
were bringing in LPG tanks for refilling with which, as mentioned, ACCS has nothing to do. Antonio
likewise asserted that the herein respondents were merely incorporators of ACCS who have no
active participation in the operation of the business of the corporation.

Respondents, for their part, filed a Joint Counter-Affidavit21corroborating the statements of Antonio
that they were merely incorporators/stockholders of ACCS who have no active participation in the
operation, management, and control of the business; that ACCS was only engaged in the distribution
of LPG products and not in the refilling of LPG cylinders; and, that ACCS did not commit any
violation of BP 33 as amended.

P/Supt. Esguerra filed a Reply-Affidavit22 wherein he pointed out that during the test-buy operation,
his team was issued ACCS Control Receipts. To him, this negated the claim of Antonio and
respondents that ACCS was not engaged in the refilling of cylinder tanks and that the persons in-
charge thereof were not ACCS' employees. P/Supt. Esguerra likewise stressed that pursuant to
Section 4 of BP 33, the President, General Manager, Managing Partner, or such other officer
charged with the management of the business affairs of the corporation, or the employee
responsible for the violation shall be criminally liable. Thus, Antonio, being the General Manager, is
criminally liable. Anent the respondents, P/Supt. Esguerra averred that the Articles of Incorporation
(AOI) of ACCS provides that there shall be five incorporators who shall also serve as the directors.
Considering that respondents were listed in the AOI as incorporators, they are thus deemed as the
directors of ACCS. And since the By-Laws of ACCS provides that all business shall be conducted
and all property of the corporation controlled and held by the Board of Directors, and also pursuant
to Section 2323 of the Corporation Code, respondents are likewise criminally liable.

In their Joint Rejoinder-Affidavit,24 Antonio and respondents reiterated that ACCS was only a dealer
and distributor of petroleum products and not engaged in refilling activities. They also stressed,
among others, that respondents cannot be held liable under BP 33 as amended since the AOI of
ACCS did not state that they were the President, General Manager, Managing Partner, or such other
officer charged with the management of business affairs. What the AOI plainly indicated was that
they were the incorporating stockholders of the corporation and nothing more.

However, P/Supt. Esguerra in his Sur-Rejoinder Affidavit25 insisted that ACCS committed illegal
trading of petroleum products and underfilling and that Antonio and respondents are criminally liable
for the same.

Ruling of the Department of Justice

In a Joint Resolution26 dated June 25, 2008, Chief State Prosecutor Jovencito R. Zuno approved the
finding of probable cause by Senior State Prosecutor Edwin S. Dayog, albeit only against Antonio
and only for the charge of illegal trading, viz.:

The pieces of documentary evidence on record, notably the receipts issued to the
operatives of the PNP, CIDG, who conducted the 'test-buy' operations on 15 July
2006, and the inventory of the items they seized pursuant to the search warrant
issued by the Regional Trial Court of Manila, tend to suggest that ACCS Ideal Gas
 Corporation did engage in refilling LPG cylinders bearing the brands Shellane,
Petron Gasul, Totalgaz, and Superkalan Gas. There is no dispute that ACCS Ideal
Gas was not duly authorized by Pilipinas Shell, Petron, and Total (Philippines) Inc. to
refill their respective LPG cylinders with LPG. Consequently, the act of ACCS Ideal
Gas in refilling the LPG cylinders constitutes 'illegal trading in petroleum and/or
petroleum products' under Section 2(a) of Batas Pambansa Bilang 33 as amended
by Presidential Decree No. l 986, for which respondent Antonio G. Del Rosario, the
general manager of ACCS Ideal Gas Corporation, should be prosecuted. The
offense of underfilling of LPG cylinders under Section 2(c) may not be considered a
distinct offense, the very same act being involved. We hold that underfilling of LPG
cylinders under Section 2(c) presupposes that the person or entity who committed it
is duly authorized to refill LPG cylinders.

The other respondents may not be prosecuted for the offense, The law specifies the
persons to be charged in case where violations of B.P. Blg. 33 are committed by a
corporation, to wit, the president, general manager, officer charged with the
management of the business affairs thereof, or employee responsible therefor
(Section 4, B.P. Blg. 33). The record fails to disclose who among the respondents
was the president, officer charged with the management of the business affairs of
ACCS Ideal Gas, or the employee responsible for the commission of the offense. It is
simply improper to charge all respondents for the offense based solely on the fact
that they were the directors of ACCS Ideal Gas at the time the alleged violation was
committed. A member of the board of directors of a corporation is not necessarily an
'officer charged with the management of the business affairs thereof.'

WHEREFORE, it is respectfully recommended that Antonio G. Del Rosario be

charged with illegal refilling of LPG cylinders penalized under Section 2(a) of Batas
Pambansa Bilang 33 as amended by Presidential Decree No. 1865 and that the
complaints as against Ma Cristina L. Del Rosario, Celso E. Escobido II, Sheila M.
Escobido, and Resty P. Capili be dismissed.

SO RESOLVED.27

The respective motions for reconsideration of P/Supt. Esguerra and Antonio were denied in another
Joint Resolution28 dated November 11, 2008.

P/Supt. Esguerra, now joined by petitioner, filed a Petition for Review29 before the Secretary of
Justice assailing the aforen1entioned Joint Resolutions. The Secretary of Justice, however, upheld
the said issuances and dismissed the Petition in a Resolution30 dated September 4, 2009. The
Motion for Reconsideration31 thereto was likewise denied in a Resolution32dated June 23, 2010.

Ruling of the Court of Appeals

P/Supt. Esguerra and petitioner elevated the matter to the CA through a certiorari petition. They
contended that the Secretary of Justice acted with grave abuse of discretion amounting to lack of or
in excess of jurisdiction in affirming the dropping of respondents from the complaints and the ruling
out of the offense of underfilling.

The CA, however, sustained the Secretary of Justice and on April 27, 2012 rendered a
Decision,33 the dispositive portion of which reads as follows:
 WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the
petition. The assailed Resolutions are hereby AFFIRMED. No costs.
1âw phi 1

SO ORDERED.34

The Motion for Reconsideration35 thereto having been denied in a Resolution36 dated July 6, 2012,
petitioner comes to this Court through this Petition for Review on Certiorari.

Issues

Essentially at fore in this Petition are the following questions:

1. Can respondents, as members of the Board of Directors of ACCS, be criminally

prosecuted for the latter's alleged violation/s of BP 33 as amended?

2. Are the offenses of illegal trading of petroleum products under Section 2(a) and
underfilling under Section 2(c), both of BP 33 as amended, distinct offenses?

Our Ruling

There is partial merit in the Petition.

Respondents cannot be prosecuted for
ACCS' alleged violations of BP 33. They
were thus correctly dropped as
respondents in the complaints.

The CA ratiocinated that by the election or designation of Antonio as General Manager of ACCS, the
daily business operations of the corporation were vested in his hands and had ceased to be the
responsibility of respondents as members of the Board of Directors. Respondents, therefore, were
not officers charged with the management of the business affairs who could be held liable pursuant
to paragraph 3, Section 4 of BP 33, as amended, which states that:

When the offender is a corporation, partnership, or other juridical person, the

president, the general manager, managing partner, or such other officer charged with
the management of the business affairs thereof, or employee responsible for the
violation shall be criminally liable. x x x

Petitioner, on the other hand, insists that the Board of Directors, by law, is responsible for the
general management of the business affairs of a corporation. Conversely, respondents as members
of the Board of Directors of ACCS fall under the classification of officers charged with the
management of business affairs.

The Court finds no need to belabor this point as it has already made a definite pronouncement on an
identical issue in Ty v. NBI Supervising Agent De Jemil.37

In the said case, therein petitioners were members of the Board of Directors of Omni Gas
Corporation (Omni), which was found by operatives of the National Bureau of Investigation (NBI) as
allegedly engaged in illegal trading of LPG and underfilling of LPG cylinders. While the State
Prosecutor found probable cause against therein petitioners, the Secretary of Justice, however,
reversed and set aside the said finding. On certiorari petition by the Office of the Solicitor General,
the CA granted the same and consequently reinstated the finding of probable cause of the State
Prosecutor. Naturally, petitioners brought the matter to this Court through a Petition for Review
on Certiorari where one of the core issues raised was whether therein petitioners could be held liable
for the corporation's alleged violations of BP 33. In resolving the same, the Court ratiocinated, viz.:

Sec. 4 of BP 33. as amended, provides for x x x persons who are criminally liable,
thus:

xxxx

When the offender is a corporation, partnership, or other juridical

person, the president, the general manager, managing partner,
or such other officer charged with the management of the
business affairs thereof, or employee responsible for the
violation shall be criminally liable; x x x

xxxx

Relying on the x x x above statutory proviso, petitioners argue that they cannot be
held liable for any perceived violations of BP 33, as amended; since they are mere
directors of Omni who are not in charge of the management of its business affairs.
Reasoning that criminal liability is personal, liability attaches to a person from his
personal act or omission but not from the criminal act or negligence of another. Since
Sec. 4 of BP 33, as amended, clearly provides and enumerates who are criminally
liable, which do not include member of the board of directors of a corporation,
petitioners, as mere members of the board of directors who are not in charge of
Omni's business affairs, maintain that they cannot be held liable for any perceived
violation of BP 33, as amended. To bolster their position, they attest to being full-time
employees of various firms as shown by the Certificates of Employment they
submitted tending to show that they are neither involved in the day-to-day business
of Omni nor managing it. Consequently, they posit that even if BP 33, as amended,
had been violated by Omni they cannot be held criminally liable [therefor, they] not
being in any way connected with the commission of the alleged violations, and,
consequently, the criminal complaints filed against them based solely on their being
members of the board of directors as per the [General Information Sheet (GIS)]
submitted by Omni to SEC are grossly discriminatory.

On this point, we agree with petitioners except as to petitioner Arnel U. Ty who is

undisputably the President of Omni.

It may be noted that Sec. 4 above enumerates the persons who may be held liable
for violations of the law, viz[.]: (1) the president, (2) general manager, (3) managing
partner, (4) such other officer charged with the management of the business affairs
of the corporation or juridical entity, or (5) the employee responsible for such
violation. A common thread of the first four enumerated officers is the fact that they
manage the business affairs of the corporation or juridical entity. In short, they are
operating officers of a business concern, while the last in the list is self-explanatory.

It is undisputed that petitioners are members of the board of directors of Omni at the
time pertinent. There can be no quibble that the enumeration of persons who may be
held liable for corporate violators of BP 33, as amended, excludes the members of
the board of directors. This stands to reason for the board of directors of a
corporation is generally a policy making body. Even if the corporate powers of a
 corporation are reposed in the board of directors under the first paragraph of Sec. 23
of the Corporation Code, it is of common knowledge and practice that the board of
directors is not directly engaged or charged with the running of the recurring
business affairs of the corporation. Depending on the powers granted to them by the
Articles of Incorporation, the members of the board generally do not concern
themselves with the day-to-day affairs of the corporation, except those corporate
officers who are charged with running the business of the corporation and are
concomitantly members of the board, like the President. Section 25 of the
Corporation Code requires the president of a corporation to be also a member of the
board of directors.

Thus, the application of the legal maxim expressio unius est exclusion alterius, which
means the mention of one thing implies the exclusion of another thing not mentioned.
If a statute enumerates the thing upon which it is to operate, everything else must
necessarily and by implication be excluded from its operation and effect The fourth
officer in the enumerated list is the catch-all 'such other officer charged with the
management of the business affairs' of the corporation or juridical entity which is a
factual issue which must be alleged and supported by evidence.

A scrutiny of the GIS reveals that among the petitioners who are members of the
board of directors are the following who are likewise elected as corporate officers of
Omni: (1) Petitioner Arnel U. Ty (Arnel) as President; (2) petitioner Mari Antonette Ty
as Treasurer; and (3) petitioner Jason Ong as Corporate Secretary. Sec. 4 of BP 33,
as amended, clearly indicated firstly the president of a corporation or juridical entity
to be criminally liable for violations of BP 33, as amended.

Evidently, petitioner Arnel, as President, who manages the business affairs of Omni,
can be held liable for probable violations by Omni of BP 33, as amended. The fact
that petitioner Arnel is ostensibly the operations manager of Multi-Gas Corporation, a
family owned business, does not deter him from managing Omni as well. It is well-
settled that where the language of the law is clear and unequivocal, it must be taken
to mean exactly what it says. As to the other petitioners, unless otherwise shown that
they are situated under the catch-all ‘such other officer charged with the
management of the business affairs’ they may not be held liable under BP 33, as
amended, for probable violations. Consequently, with the exception of petitioner
Arnel, the charges against other petitioners must perforce be dismissed or dropped.38

As clearly enunciated in Ty, a member of the Board of Directors of a corporation, cannot, by mere
reason of such membership, be held liable for the corporation’s probable violation of BP 33. If one is
not the President, General Manager or Managing Partner, it is imperative that it first be shown that
he/she falls under the catch-all "such other officer charged with the management of the business
affairs," before he/she can prosecuted. However, it must be stressed, that the matter of being an
officer charged with the management of the business affairs is a factual issue which must be alleged
and supported by evidence. Here, there is no dispute that neither of the respondents was the
President, General Manager, or Managing Partner of ACCS. Hence, it becomes incumbent upon
petitioner to show that respondents were officers charged with the management of the business
affairs. However, the Complaint-Affidavit39 attached to the records merely states that respondents
were members of the Board of Directors based on the AOI of ACCS. There is no allegation
whatsoever that they were in-charge of the management of the corporation’s business affairs.

At any rate, the Court has gone through the By-Laws of ACCS and found nothing therein which
would suggest that respondents were directly involved in the day-to-day operations of the
corporation. True, Section 140 of Article ID thereof contains a general statement that the corporate
powers of ACCS shall be exercised, all business conducted, and all property of the corporation
controlled and held by the Board of Directors. Notably, however, the same provision likewise
significantly vests the Board with specific powers that were generally concerned with policy making
from which it can reasonably be deduced that the Board only concerns itself in the business affairs
by setting administrative and operational policies. It is actually the President under Section 2,41 Article
IV of the said by-laws who is vested with wide latitude in controlling the business operations of the
corporation. Among others, the President is specifically empowered to supervise and manage the
business affairs of the corporation, to implement the administrative and operational policies of the
corporation under his supervision and control, to appoint, remove, suspend or discipline employees
of the corporation, prescribe their duties, and determine their salaries. With these functions, the
President appears to be the officer charged with the management of the business affairs of ACCS.
But since there is no allegation or showing that any of the respondents was the President of ACCS,
none of them, therefore, can be considered as an officer charged with the management of the
business affairs even in so far as the By-Laws of the subject corporation is concerned.

Clearly, therefore, it is only Antonio, who undisputedly was the General Manager - a position among
those expressly mentioned as criminally liable under paragraph 4, Section 3 of BP 33, as amended -
can be prosecuted for ACCS' perceived violations of the said law. Respondents who were mere
members of the Board of Directors and not shown to be charged with the management of the
business affairs were thus correctly dropped asrespondents in the complaints.

The offenses of illegal trading under

Section 2 (a) and underfilling under
Section 2(c) both under BP 33, as
amended, are distinct offenses.

The State Prosecutor held that the offense of illegal trading by means of unauthorized refilling is not
distinct from the offense of underfilling since these two offenses involve the very same act of refilling.
He likewise held that the offender in the latter offense must be an entity duly authorized to refill LPG
cylinders. And in view of his finding that ACCS probably committed illegal trading by refilling ''without
authority", the State Prosecutor impliedly held that the charge of underfilling could not prosper in this
case.

Petitioner, however, argues otherwise. It asserts that illegal trading of LPG products is committed
when an entity not authorized to refill a specified brand of LPG cylinder refills the same, regardless
of whether or not the LPG cylinder is underfilled. Underfilling, on the other hand, is committed when
an entity refills an LPG cylinder below the required quantity, regardless of whether or not such entity
is authorized to refill. Hence, the two offenses are separate and distinct.

The Court agrees with petitioner.

Illegal trading and underfilling are among the eight acts prohibited under Section 2 of BP 33, as
amended. 1âwphi1

By definition, the acts penalized by both offenses are essentially different. Under paragraph 1 (c) of
Section 3 of the said law, illegal trading in petroleum and/or petroleum products is committed by
refilling LPG cylinders without authority from the Bureau of Energy Utilization, or refilling of another
company's or firm's cylinder without such company's or firm's written authorization. Underfilling or
underdelivery, on the other hand, under paragraph 3 of the same section refers to a sale, transfer,
delivery or filling of petroleum products of a quantity that is actually below the quantity indicated or
registered on the metering device of a container. While it may be said that an act could be common
to both of them, the act of refilling does not in itself constitute illegal trading through unauthorized
refilling or that of underfilling. The concurrence of an additional requisite different in each one is
necessary to constitute each offense. Thus, aside from the act of refilling, the offender must have no
authority to refill from the concerned government agency or the company or firm owning the LPG
cylinder refilled for the act to be considered illegal trading through unauthorized refilling. Whereas in
underfilling, it is necessary that apart from the act of refilling, the offender must have refilled the LPG
cylinder below the authorized limits in the sale of petrolernn products. Moreover, the offense of
underfilling is not limited to the act of refilling below the authorized limits. Possession of an
underfilled LPG cylinder is another way of committing the offense. As therefore correctly argued by
petitioner, the offenses of illegal trading through unauthorized refilling and underfilling are separate
and distinct offenses.

Besides, it is not accurate to say that in this case the charges of illegal trading and underfilling were
based on the same act of refilling committed by ACCS during the test-buy operation. While it
appears from the records that the charge of illegal trading was principally based on ACCS' act of
refilling the four branded LPG cylinders without authority during the test buy, the Complaint-Affidavit
for underfilling would show that it was not solely based on the same. Aside from the four branded
LPG cylinders caused to be refilled by police operatives in the test buy which were later found to be
underfilled by 0.5 kg to 1.3 kg, the said complaint was likewise anchored on the other four branded
LPG cylinders seized during the search and seizure operation which were also found to be
underfilled, this time by 0.5 kg. to 0.9 kg. It is thus apparent that with respect to the last four
underfilled cylinders, the basis for the charge is not the act of refilling but ACCS' s possession of the
same since as already mentioned, the offense of underfilling is not limited to the act of refilling an
LPG cylinder below authorized limits but also contemplates possession of underfilled LPG cylinders
for the purpose of sale, distribution, transportation, exchange or barter.

In any event, the Court in Ty had impliedly upheld the filing of separate Informations for illegal
trading through unauthorized refilling and for underfilling even if the charges emanated from the
same act of refilling. There, the charge of underfilling was based on the fact that one of the eight
LPG cylinders illegally refilled during a test-buy operation turned out to be underfilled. Notably, the
same eight LPG cylinders illegally refilled, including the one underfilled, also formed part of the
bases for the charge of illegal trading.

Further, the Court finds without legal basis the conclusion of the State Prosecutor that the offense of
underfilling presupposes that the offender is a duly authorized refiller. Section 4 of BP 33, as
amended, clearly provides that any of the acts prohibited by the said law can be committed by any
person and not only by a duly authorized refiller, And while the same provision lays down an
additional penalty of cancellation of license in case the offender is an oil company, marketer,
distributor, refiller, dealer, sub-dealer, other retail outlets, or hauler, it cannot be deduced therefrom
that only a duly-licensed refiller can be held liable for underfilling. Verily, it can also be committed by
an authorized marketer, distributor, dealer, sub-dealer or hauler which so happened to have a
license to do business in such capacity but nevertheless commits underfilling. Plainly, the law does
not limit the commission of the offense of underfilling to offenders who/which are duly authorized to
refill. "It is [a] well recognized rule that where the law does not distinguish, courts should not
distinguish. Ubi lex non distinguit nec nos distinguere debemos. The rule, founded on logic, is a
corollary of the principle that general words and phrases in a statute should ordinarily be accorded
their natural and general significance. The rule requires that a general term or phrase should not be
reduced into parts and one part distinguished from the other so as to justify its exclusion from the
operation of the law. In other words, there should be no distinction in the application of a statute
where none is indicated."42

All told, the Court so holds that aside from illegal trading through unauthorized refilling, the State
Prosecutor should have also taken cognizance of the complaint for underfilling. Consequently, the
CA erred when it affirmed in full the Resolutions of the Secretary of Justice sustaining the ruling of
the State Prosecutor.

WHEREFORE, the Petition for Review on Certiorari is PARTLY GRANTED. 'The assailed April 27,
2012 Decision and July 6, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 115750
are AFFIRMED with MODIFICATION that the State Prosecutor is ORDERED to take cognizance of
the Complaint -Affidavit for Underfilling under Section 2(c), BP 33, as amended, docketed as I.S. No.
2006-1173, but only insofar as Antonio G. Del Rosario is concerned.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice
G.R. No. 168697 December 14, 2009

GINA M. TIANGCO and SALVACION JENNY MANEGO, Petitioners,

vs.
UNIWIDE SALES WAREHOUSE CLUB, INC. and JIMMY GOW,Respondents.

RESOLUTION

CORONA, J.:

This is a petition for review on certiorari1 of the February 9, 2005 decision2 and June 28, 2005
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 85474.

Petitioners Gina M. Tiangco and Salvacion Jenny Manego4 were employees of respondent Uniwide
Sales Warehouse Club, Inc. (USWCI), a domestic corporation. Respondent Jimmy N. Gow was the
president of the corporation.5

Petitioner Tiangco was employed by respondent USWCI on June 10, 1997 as concession manager.
In 1998, she was designated as group merchandising manager for the fashion and personal care
department with a monthly salary of ₱45,000. On the other hand, petitioner Manego was initially
employed as buyer on January 16, 1984 but was promoted as senior category head with a monthly
salary of ₱25,000.6

On July 5, 2001 and July 13, 2001, petitioners Tiangco and Manego respectively filed separate
complaints for illegal dismissal, payment of separation pay as well as award of moral and exemplary
damages in the National Labor Relations Commission (NLRC). The complaints, docketed as NLRC
NCR Case Nos. 00-09-03512-2001 and 00-09-04757-2001, were consolidated.7

In his order dated January 11, 2002, the labor arbiter8 considered the consolidated cases as
submitted for decision.9

On February 13, 2002, the respondents filed a manifestation and motion praying that the
proceedings on the consolidated cases be suspended on the ground that respondent USWCI had
been placed in a state of suspension of payments by the Securities and Exchange Commission
(SEC) as early as April 11, 2000 and a receivership committee had in fact been appointed.10

On February 26, 2002, the labor arbiter suspended the proceedings until further orders from the
SEC.11

On March 23, 2004, petitioners filed a motion to reopen case on the ground that the SEC, in its order
dated December 23, 2002, had already approved the second amendment to the rehabilitation plan
(SARP) of respondent USWCI.12

In their opposition to the motion, respondents argued that the proceedings in the consolidated cases
must remain suspended inasmuch as the mere approval of the SARP did not constitute a valid
ground for their reopening.13

On June 16, 2004, the labor arbiter issued an order directing the parties to file their memoranda. He
further stated that even without the memoranda, the cases would be ordered submitted for decision
after the lapse of the period for filing.14
This prompted respondents to file a petition for certiorari15 with prayer for a temporary restraining
order (TRO) in the CA, imputing grave abuse of discretion on the part of the labor arbiter.

On September 17, 2004, the CA granted the application for a TRO.16 In its February 9, 2005
decision, it granted the petition and reversed the June 16, 2004 order of the labor arbiter. It ruled that
proceedings on the cases should remain suspended until further orders from the SEC
citing Rubberworld (Phils.), Inc. v. NLRC17 and Sections 6(b), 11 and 27, Rule 4 of the 2000 Interim
Rules of Procedure on Corporate Rehabilitation.18 It denied reconsideration on June 28, 2005.

Hence, this petition.

The issue determinative of this case is whether the consolidated illegal dismissal cases can be
reopened at this point of the SEC proceedings for respondent USWCI’s rehabilitation.

This issue is far from novel. We resolved the same question as early as 1999 in Rubberworld
(Phils.), Inc. v. NLRC19 and since then, we have reiterated the ruling in several other cases.20

The relevant law dealing with the suspension of payments for money claims against corporations
under rehabilitation is Presidential Decree No. (PD) 902-A,21 as amended. Section 6 (c) thereof
provides:

Sec. 6. In order to effectively exercise such jurisdiction, the [SEC]22 shall possess the following
powers:

xxx xxx xxx

c) To appoint one or more receivers of the property, real and personal, which is the subject of the
action pending before the [SEC] in accordance with the pertinent provisions of the Rules of Court in
such other cases whenever necessary in order to preserve the rights of the parties-litigants and/or
protect the interest of the investing public and creditors: xxx Provided, finally, that upon
appointment of a management committee, rehabilitation receiver, board, or body, pursuant to
this Decree, all actions for claims against corporations, partnerships or associations under
management or receivership pending before any court, tribunal, board or body shall be
suspended accordingly. (Emphasis supplied) 1avvphi1

The term "claim," as contemplated in Section 6 (c), refers to debts or demands of a pecuniary
nature.23 It is the assertion of rights for the payment of money.24 Here, petitioners have pecuniary
claims—the payment of separation pay and moral and exemplary damages.

In Rubberworld, we held that a labor claim is a "claim" within the contemplation of PD 902-A, as
amended. This is consistent with the Interim Rules of Procedure on Corporate Rehabilitation which
came out in 2000.25 Section 1, Rule 2 of the Interim Rules defines "claims" as follows:

Sec. 1. Definition of Terms - For purposes of these Rules:

xxx xxx xxx

"Claim" shall include all claims or demands of whatever nature or character against a debtor or its
property, whether for money or otherwise.
Thus, labor claims are included among the actions suspended upon the placing under rehabilitation
of employer-corporations. We stated in Rubberworld:

It is plain from the foregoing provisions of law that "upon the appointment [by the SEC] of a
management committee or a rehabilitation receiver," all actions for claims against the corporation
pending before any court, tribunal or board shall ipso jure be suspended. The justification for the
automatic stay of all pending actions for claims "is to enable the management committee or the
rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial
interference that might unduly hinder or prevent the 'rescue' of the debtor company. To allow such
other actions to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its restructuring and rehabilitation."

xxx xxx xxx

The law is clear: upon the creation of a management committee or the appointment of a
rehabilitation receiver, all claims for actions "shall be suspended accordingly." No exception in
favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions,
neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. Allowing labor cases
to proceed clearly defeats the purpose of the automatic stay and severely encumbers the
management committee's time and resources. The said committee would need to defend against
these suits, to the detriment of its primary and urgent duty to work towards rehabilitating the
corporation and making it viable again. To rule otherwise would open the floodgates to other
similarly situated claimants and forestall if not defeat the rescue efforts. Besides, even if the NLRC
awards the claims of private respondents, as it did, its ruling could not be enforced as long as the
petitioner is under the management committee.

xxx xxx xxx

Article 217 of the Labor Code26 should be construed not in isolation but in harmony with PD 902-A,
according to the basic rule in statutory construction that implied repeals are not favored. Indeed, it is
axiomatic that each and every statute must be construed in a way that would avoid conflict with
existing laws. True, the NLRC has the power to hear and decide labor disputes, but such authority is
deemed suspended when PD 902-A is put into effect by the [SEC].

xxx xxx xxx

This Court notes that PD 902-A itself does not provide for the duration of the automatic stay. Neither
does the Order of the SEC. Hence, the suspensive effect has no time limit and remains in force as
long as reasonably necessary to accomplish the purpose of the Order.27 (Emphasis supplied)

In Philippine Airlines, Inc. v. Zamora,28 we emphasized that "this Court’s adherence to the
abovestated rule has been resolute and steadfast as evidenced by its oft-repeated application in a
plethora of cases."29

Petitioners seek to have the suspension of proceedings lifted on the ground that the SEC already
approved respondent USWCI’s SARP. However, there is no legal ground to do so because the
suspensive effect of the stay order is not time-bound. As we held in Rubberworld, it continues to be
in effect as long as reasonably necessary to accomplish its purpose.30 This is clarified in the Interim
Rules:

Rule 4
 xxx xxx xxx

Sec. 6. Stay Order. – If the court finds the petition to be sufficient in form and substance, it shall, not
later than five (5) days from the filing of the petition, issue an Order (a) appointing a Rehabilitation
Receiver and fixing his bond; (b) staying enforcement of all claims, whether for money or
otherwise and whether such enforcement is by court action or otherwise, against the debtor,
its guarantors and sureties not solidarily liable with the debtor; xxx

xxx xxx xxx

Sec. 11. Period of the Stay Order. – The stay order shall be effective from the date of issuance
until the dismissal of the petition or the termination of the rehabilitation proceedings.

xxx xxx xxx

Sec. 27. Termination of Proceedings. – In case of the failure of the debtor to submit the
rehabilitation plan, or the disapproval thereof by the court, or the failure of the rehabilitation of the
debtor because of failure to achieve the desired targets or goals as set forth therein, or the failure of
the said debtor to perform its obligations under the said plan, or a determination that the
rehabilitation plan may no longer be implemented in accordance with its terms, conditions,
restrictions, or assumptions, the court shall upon motion, motu proprio, or upon the recommendation
of the Rehabilitation Receiver, terminate the proceedings. The proceedings shall also terminate
upon the successful implementation of the rehabilitation plan. (Emphasis supplied)

We ruled in Sobrejuanite v. ASB Development Corporation31 that the Interim Rules, under Section 1,
Rule 1 thereof, are applicable although (as in this case) the petition for declaration of suspension of
payments was filed prior to the effectivity of such rules:32

Section 1. Scope — These Rules shall apply to petitions for rehabilitation filed by corporations,
partnerships, and associations pursuant to [PD 902-A], as amended.

We note that the Rules of Procedure on Corporate Rehabilitation was approved on December 2,
2008 and took effect on January 16, 2009. Section 2, Rule 9 thereof provides:

Sec. 2. Transitory Provision. – Unless the court orders otherwise to prevent manifest injustice, any
pending petition for rehabilitation that has not undergone the initial hearing prescribed under the
Interim Rules or Procedure for Corporate Rehabilitation at the time of effectivity of these Rules shall
be governed by these Rules.

Considering that respondent USWCI’s SARP had already been approved before then, the 2000
Interim Rules still govern this case.

In sum, when the labor arbiter proceeded with the consolidated cases despite the SEC suspension
order, he exceeded his jurisdiction to hear and decide illegal dismissal cases and the CA correctly
reversed his June 16, 2004 order.

WHEREFORE, the petition is hereby DENIED.

No costs.

SO ORDERED.
G.R. No. 155282 January 17, 2005

MOVIE AND TELEVISION REVIEW AND CLASSIFICATION BOARD (MTRCB), petitioner,

vs.
ABS-CBN BROADCASTING CORPORATION and LOREN LEGARDA,respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the petition for review on certiorari under Rule 45 of the 1997 Rules of Court, as
amended, filed by petitioner Movie and Television Review and Classification Board (MTRCB)
against ABS-CBN Broadcasting Corporation (ABS-CBN) and former Senator Loren Legarda,
respondents, assailing the (a)Decision dated November 18, 1997,1 and (b) Order dated August 26,
20022 of the Regional Trial Court, Branch 77, Quezon City, in Civil Case No. Q-93-16052.

The facts are undisputed.

On October 15, 1991, at 10:45 in the evening, respondent ABS-CBN aired "Prosti-tuition," an
episode of the television (TV) program "The Inside Story" produced and hosted by respondent
Legarda. It depicted female students moonlighting as prostitutes to enable them to pay for their
tuition fees. In the course of the program, student prostitutes, pimps, customers, and some faculty
members were interviewed. The Philippine Women’s University (PWU) was named as the school of
some of the students involved and the facade of PWU Building at Taft Avenue, Manila conspicuously
served as the background of the episode.

The showing of "The Inside Story" caused uproar in the PWU community. Dr. Leticia P. de Guzman,
Chancellor and Trustee of the PWU, and the PWU Parents and Teachers Association filed letter-
complaints3 with petitioner MTRCB. Both complainants alleged that the episode besmirched the
name of the PWU and resulted in the harassment of some of its female students.

Acting on the letter-complaints, the MTRCB Legal Counsel initiated a formal complaint with the
MTRCB Investigating Committee, alleging among others, that respondents (1) did not submit "The
Inside Story" to petitioner for its review and (2)exhibited the same without its permission, thus,
violating Section 74 of Presidential Decree (P.D.) No. 19865 and Section 3,6 Chapter III and Section
7,7 Chapter IV of the MTRCB Rules and Regulations.8

In their answer,9 respondents explained that the "The Inside Story" is a "public affairs program, news
documentary and socio-political editorial," the airing of which is protected by the constitutional
provision on freedom of expression and of the press. Accordingly, petitioner has no power,
authority and jurisdiction to impose any form of prior restraint upon respondents.

On February 5, 1993, after hearing and submission of the parties’ memoranda, the MTRCB
Investigating Committee rendered a Decision, the decretal portion of which reads:

"WHEREFORE, the aforementioned premises, the respondents are ordered to pay the sum
of TWENTY THOUSAND PESOS (₱20,000.00) for non-submission of the program, subject of this
case for review and approval of the MTRCB.
Heretofore, all subsequent programs of the ‘The Inside Story’ and all other programs of the ABS-
CBN Channel 2 of the same category shall be submitted to the Board of Review and Approval
before showing; otherwise the Board will act accordingly."10 1awphi 1.nét

On appeal, the Office of Atty. Henrietta S. Mendez, Chairman of the MTRCB, issued a Decision
dated March 12, 1993 affirming the above ruling of its Investigating Committee.11 Respondents filed
a motion for reconsideration but was denied in a Resolution dated April 14, 1993.12

Respondents then filed a special civil action for certiorari with the Regional Trial Court (RTC),
Branch 77, Quezon City. It seeks to: (1)declare as unconstitutional Sections
3(b),13 3(c),14 3(d),15 4,167,17 and 1118 of P. D. No. 1986 and Sections 3,19 7,20 and 2821 (a) of the
MTRCB Rules and Regulations;22 (2) (in the alternative) exclude the "The Inside Story" from the
coverage of the above cited provisions; and (3) annul and set aside the MTRCB Decision dated
March 12, 1993 and Resolution dated April 14, 1993. Respondents averred that the above-cited
provisions constitute "prior restraint" on respondents’ exercise of freedom of expression and of the
press, and, therefore, unconstitutional. Furthermore, the above cited provisions do not apply to the
"The Inside Story" because it falls under the category of "public affairs program, news documentary,
or socio-political editorials" governed by standards similar to those governing newspapers.

On November 18, 1997, the RTC rendered a Decision23 in favor of respondents, the dispositive
portion of which reads:

"WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

1. ANNULLING AND SETTING ASIDE the assailed Decision and Resolution of MTRCB
dated March 12, 1993;

2. DECLARING AND DECREEING that Sections 3 (b), (c), and (d), 4, 7, and 11 of P.D. No.
1986 and Sections 3, 7, 28 (a) of its Implementing Rules do not cover the TV Program "The
Inside Story" and other similar programs, they being public affairs programs which can be
equated to newspapers; and

3. MAKING PERMANENT the Injunction against Respondents or all persons acting in their
behalf.

SO ORDERED."

Petitioner filed a motion for reconsideration but was denied.24

Hence, this petition for review on certiorari.

Petitioner MTRCB through the Solicitor General, contends inter alia: first, all television programs,
including "public affairs programs, news documentaries, or socio-political editorials," are subject to
petitioner’s power of review under Section 3 (b) of P.D. No. 1986 and pursuant to this Court’s ruling
in Iglesia ni Cristo vs. Court of Appeals ;25 second, television programs are more accessible to the
public than newspapers, thus, the liberal regulation of the latter cannot apply to the
former; third,petitioner’s power to review television programs under Section 3(b) of P. D. No. 1986
does not amount to "prior restraint;" and fourth, Section 3(b) of P. D. No. 1986 does not violate
respondents’ constitutional freedom of expression and of the press.

Respondents take the opposite stance.

The issue for our resolution is whether the MTRCB has the power or authority to review the "The
Inside Story" prior to its exhibition or broadcast by television.

The petition is impressed with merit.

The present controversy brings into focus the provisions of Section 3 of P. D. No. 1986, partly
reproduced as follows:

"SEC. 3. Powers and Functions. – The BOARD shall have the following functions, powers and
duties:

xxxxxx

b) To screen, review and examine all motion pictures as herein defined, television programs,
including publicity materials such as advertisements, trailers and stills, whether such motion pictures
and publicity materials be for theatrical or non-theatrical distribution, for television broadcast or for
general viewing, imported or produced in the Philippines, and in the latter case, whether they be for
local viewing or for export.
1a\^/phi 1.net

c) To approve or disapprove, delete objectionable portions from and/or prohibit the importation,
exportation, production, copying, distribution, sale, lease exhibition and/or television broadcast of the
motion pictures, television programs and publicity materials subject of the preceding paragraph,
which, in the judgment of the BOARD applying contemporary Filipino cultural values as standard,
are objectionable for being immoral, indecent, contrary to law and/or good customs, injurious to the
prestige of the Republic of the Philippines or its people, or with a dangerous tendency to encourage
the commission of violence or of a wrong or crime, such as but not limited to:

xxx

d) To supervise, regulate, and grant, deny or cancel, permits for the importation, exportation,
production, copying, distribution, sale, lease, exhibition, and/or television broadcast of all motion
pictures, television programs and publicity materials, to the end and that no such pictures, programs
and materials as are determined by the BOARD to be objectionable in accordance with paragraph
(c) hereof shall be imported, exported, produced, copied, reproduced, distributed, sold, leased,
exhibited and/or broadcast by television;

x x x x x x."

Vis-a-vis the foregoing provisions, our task is to decide whether or not petitioner has the power to
review the television program "The Inside Story." The task is not Herculean because it merely
resurrects this Court En Banc’s ruling in Iglesia ni Cristo vs. Court of Appeals.26 There, the Iglesia ni
Cristo sought exception from petitioner’s review power contending that the term "television
programs" under Sec. 3 (b) does not include "religious programs" which are protected under Section
5, Article III of the Constitution.27 This Court, through Justice Reynato Puno, categorically ruled that
P.D. No. 1986 gives petitioner "the power to screen, review and examine "all television
programs," emphasizing the phrase "all television programs," thus:

"The law gives the Board the power to screen, review and examine all ‘television
programs.’ By the clear terms of the law, the Board has the power to ‘approve, delete x x x and/or
prohibit the x x x exhibition and/or television broadcast of x x x television programs x x x.’ The law
also directs the Board to apply ‘contemporary Filipino cultural values as standard’ to determine those
which are objectionable for being ‘immoral, indecent, contrary to law and/or good customs, injurious
to the prestige of the Republic of the Philippines and its people, or with a dangerous tendency to
encourage the commission of violence or of a wrong or crime.’"

Settled is the rule in statutory construction that where the law does not make any exception, courts
may not except something therefrom, unless there is compelling reason apparent in the law to justify
it.28 Ubi lex non distinguit nec distinguere debemos. Thus, when the law says "all television
programs," the word "all" covers all television programs, whether religious, public affairs, news
documentary, etc.29 The principle assumes that the legislative body made no qualification in the use
of general word or expression.30

It then follows that since "The Inside Story" is a television program, it is within the jurisdiction of the
MTRCB over which it has power of review.

Here, respondents sought exemption from the coverage of the term "television programs" on the
ground that the "The Inside Story" is a "public affairs program, news documentary and socio-political
editorial" protected under Section 4,31 Article III of the Constitution. Albeit, respondent’s basis is not
freedom of religion, as in Iglesia ni Cristo,32 but freedom of expression and of the press, the ruling
in Iglesia ni Cristo applies squarely to the instant issue. It is significant to note that in Iglesia ni
Cristo, this Court declared that freedom of religion has been accorded a preferredstatus by the
framers of our fundamental laws, past and present, "designed to protect the broadest possible liberty
of conscience, to allow each man to believe as his conscience directs x x x." Yet despite the fact that
freedom of religion has been accorded a preferred status, still this Court, did not exempt the Iglesia
ni Cristo’s religious program from petitioner’s review power.

Respondents claim that the showing of "The Inside Story" is protected by the constitutional provision
on freedom of speech and of the press. However, there has been no declaration at all by the framers
of the Constitution that freedom of expression and of the press has a preferred status.

If this Court, in Iglesia ni Cristo, did not exempt religious programs from the jurisdiction and review
power of petitioner MTRCB, with more reason, there is no justification to exempt therefrom "The
Inside Story" which, according to respondents, is protected by the constitutional provision on
freedom of expression and of the press, a freedom bearing no preferred status.

The only exceptions from the MTRCB’s power of review are those expressly mentioned in Section 7
of P. D. No. 1986, such as (1)television programs imprinted or exhibited by the Philippine
Government and/or its departments and agencies, and (2)newsreels. Thus:

"SEC. 7. Unauthorized showing or exhibition. – It shall be unlawful for any person or entity to
exhibit or cause to be exhibited in any moviehouse, theatre, or public place or by television within the
Philippines any motion picture, television program or publicity material, including trailers, and stills
for lobby displays in connection with motion pictures, not duly authorized by the owner or his
assignee and passed by the BOARD; or to print or cause to be printed on any motion picture to be
exhibited in any theater or public place or by television a label or notice showing the same to have
been officially passed by the BOARD when the same has not been previously authorized, except
motion pictures, television programs or publicity material imprinted or exhibited by the
Philippine Government and/or its departments and agencies, and newsreels."

Still in a desperate attempt to be exempted, respondents contend that the "The Inside Story" falls
under the category of newsreels.

Their contention is unpersuasive.

P. D. No. 1986 does not define "newsreels." Webster’s dictionary defines newsreels as short motion
picture films portraying or dealing with current events.33 A glance at actual samples of newsreels
shows that they are mostly reenactments of events that had already happened. Some concrete
examples are those of Dziga Vertov’s Russian Kino-Pravda newsreel series (Kino-Pravdameans
literally "film-truth," a term that was later translated literally into the French cinema verite) and Frank
Capra’s Why We Fight series.34 Apparently, newsreels are straight presentation of events. They
are depiction of "actualities." Correspondingly, the MTRCB Rules and Regulations35 implementing
P. D. No. 1986 define newsreels as "straight news reporting, as distinguished from news
analyses, commentaries and opinions. Talk shows on a given issue are not considered
newsreels."36 Clearly, the "The Inside Story" cannot be considered a newsreel. It is more of a public
affairs program which is described as a variety of news treatment; a cross between pure television
news and news-related commentaries, analysis and/or exchange of opinions.37 Certainly, such kind
of program is within petitioner’s review power.

It bears stressing that the sole issue here is whether petitioner MTRCB has authority to review "The
Inside Story." Clearly, we are not called upon to determine whether petitioner violated Section 4,
Article III (Bill of Rights) of the Constitution providing that no law shall be passed abridging the
freedom of speech, of oppression or the press. Petitioner did not disapprove or ban the showing of
the program. Neither did it cancel respondents’ permit. Respondents were merely penalized for their
failure to submit to petitioner "The Inside Story" for its review and approval. Therefore, we need not
resolve whether certain provisions of P. D. No. 1986 and the MTRCB Rules and Regulations
specified by respondents contravene the Constitution.

Consequently, we cannot sustain the RTC’s ruling that Sections 3 (c) (d), 4, 7 and 11 of P. D. No.
1986 and Sections 3, 7 and 28 (a) of the MTRCB Rules and Regulations are unconstitutional. It is
settled that no question involving the constitutionality or validity of a law or governmental act may be
heard and decided by the court unless there is compliance with the legal requisites for judicial
inquiry, namely: (1) that the question must be raised by the proper party; (2) that there must be an
actual case or controversy; (3) that the question must be raised at the earliest possible opportunity;
and, (4) that the decision on the constitutional or legal question must be necessary to the
determination of the case itself.38

WHEREFORE, the instant petition is GRANTED. The assailed RTC Decision dated November 18,
l^vvphi1.net

1997 and Order dated August 26, 2002 are hereby REVERSED. The Decision dated March 12,
1993 of petitioner MTRCB is AFFIRMED. Costs against respondents.

SO ORDERED.

Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

G.R. No. 184397

ROSALINDA G. PAREDES, Petitioner,

vs.
FEED THE CHILDREN PHILIPPINES, INC. and/or DR. VIRGINIA LAO, HERCULES PARADIANG
and BENJAMIN ESCOBIA,Respondents.

DECISION

PERALTA, J.:

For this Court's resolution is a petition for review on certiorari, dated October 23, 2008, of petitioner
Rosalinda G. Paredes, seeking to reverse and set aside the Decision1 dated March 25, 2008 and
Resolution2 dated August 28, 2008 of the Court of Appeals (CA). The assailed Decision annulled and
set aside the rulings of the National Labor Relations Commission (NLRC) Fourth Division, Cebu City
and affirmed the rulings of the Labor Arbiter (LA), which held that petitioner voluntarily resigned and
was not constructively dismissed.

The antecedents are as follows:

Respondent Feed the Children Philippines, Inc. (FTCP) is a nonstock, non-profit, and non-
government organization duly incorporated under the Philippine laws in 1989. Its objective is to
provide food, clothing, educational supplies and other necessities of indigent children
worldwide.3 Respondents Dr. Virginia Lao, Hercules Paradiang and Benjamin Escobia were
members of the FTCP Board of Trustees (Board) and Executive Committee (Execom) of FTCP.4

Petitioner Rosalinda Paredes was FTCP's National Director. Her functions and duties include project
management, fund accessing, income generation, financial management, and administration of the
organization. She also signed all the FTCP checks and approved all requisitions and disbursements
of FTCP funds.5 As per FTCP's By-laws, it was also her duty to execute all resolutions and/or
decisions of the Board.6

Petitioner was first hired by FTCP in 1999 as Country Director. Her contract was renewed several
times until her last contract for the period from October 1, 2004 to September 30, 2007. Her initial
salary was US$1000.00 and then later, she was paid 70,000.00 aside from other benefits and
allowances.7

On August 12, 2005, forty-two (42) FTCP employees signed a petition letter addressed to the Board
expressing their complaints against alleged detestable practices of petitioner, to wit: seeking
exemption from policies which she herself had approved; withholding organization funds despite
approval of its release; procuring health insurance for herself without paying her share of the
premium; and receiving additional fees contrary to the terms of her contract.8

The next day, August 13, 2005, the staff of FTCP called Lao to a meeting to submit their petition.
They included Atty. Edgar Chatto, then Chairman of the Board, in the meeting when they realized
that it was only her and Escobia who were present. The group was edgy and demanded for outright
solution. However, the three Board members told them that they should follow a process.9

Petitioner learned from Atty. Chatto that Program Manager Primitivo Fostanes and his co-employees
prepared a petition questioning her leadership and management of FTCP. She filed an
administrative complaint against Fostanes on August 24, 2005, but the same was not acted upon.10
When the Board convened for a meeting on August 28, 2005, petitioner was not allowed to
participate. She was only allowed to join the meeting after three hours. As ex officio member of the
Board and as head of the secretariat, she was always present in every meeting to discuss her
reports, programs and proposals.11

During the meeting, the Board discussed the animosity between the petitioner and the staff of FTCP
and how they would address the issue since they have inadequate grievance mechanism for issues
involving top management.12 According to Lao, petitioner became combative in issuing memos and
filing of administrative charges.13 Atty. Chatto recounted that when petitioner heard about the
protesting senior management and staff, her initial reaction was to resign but then she asked that the
complaints be put in writing.14 After their discussion, they called the representatives of the
complaining staff and petitioner to air their side.

Consequently, the Board decided that: Acting Board Chair Lao will issue a back-to-work
memorandum and status quo to ensure that all the scheduled tasks be accomplished; there will be a
Supervisory Team, composing of Lao and Escobia, that will draw a definite work plan and be
compensated; the Supervisory Team will not replace the functions of the National Director; and
FTCP will hire an independent professional management and financial auditor.15

Petitioner sent letters to the Board inquiring about the scope of audit. When the Board did not
respond, her lawyers demanded Lao to address petitioner's concerns regarding the management
and financial audit and that the manual of operations be strictly followed.16 In another letter, her
lawyers informed individual respondents that petitioner raised the legality and propriety of the
conduct of the audit, thus, they requested that they desist from conducting the audit. The letter also
indicated that failure to do so would implead them as respondents in a preliminary injunction case
that they would file.17

While she was at an orientation for local government officials of Surigao del Norte at the Bohol
Tropics Resort on October 24, 2005, petitioner received a phone call from her staff at FTCP that the
auditors from SRD & Co. were already at their office. Lao also called to instruct her that she should
meet the auditors and accommodate them. She refrained from obeying the order and was adamant
that she should receive her requested information first.18

On October 26, 2005, the FTCP management executive committee, headed by petitioner, informed
the Board that they were not afraid of the audit. They wanted due process as provided by the by-
laws, manual of operations, and manual of financial policies and accounting procedures approved by
the Board itself. They also inquired about the meetings and processes of the Execom that they were
not aware of. Lastly, they asked for a dialogue to settle their differences.19

On the same date, petitioner wrote an electronic mail (e-mail) to Dr. Larry Jones, the founder of
Feed the Children International, Inc. and reported that Paradiang and two members of the Board
initiated a surprise and secret audit. She expressed that the management was upset to the manner
of conducting the audit. She also insinuated that Paradiang was always after her despite steering the
organization to development. She intimated that she would legally protect herself should she be
illegally dismissed and that they would seek relief from the harassment by Paradiang.20

The Board resolved to suspend petitioner because of her indifferent attitude and unjustified refusal to
submit to an audit.21Before it could be implemented, respondent FTCP received her resignation
letter.22 In her resignation letter, she wrote that she can only serve the organization up to December
31, 2005. She found it no longer tenable to work with the Board since she had differences with
majority of the members regarding resolutions, policies and procedures.23
On October 29, 2005, the Board accepted her resignation with the condition that its effectivity be
moved to November 30, 2005. She was not obliged to report for work and FTCP was willing to pay
her salary for the month of November to aid her while she looked for other employment.24

Petitioner wrote to the members of management and foreign funders informing them that she was no
longer connected with FTCP. She moved out all her belongings and even brought FTCP's
documents.25

On November 2, 2005, petitioner filed a Complaint for illegal dismissal, claiming that she was forced
to resign, thus, was constructively dismissed, and impleaded Lao, Paradiang and Escobia in their
personal capacities.26

Upon failure of the parties to settle amicably, the mandatory conference was terminated.

In her position paper, petitioner alleged that she was not included in the Supervisory Team which
performed her functions and issued memorandum directly to her subordinates. She also alleged that
she was excluded from Execom meetings.27

Respondents, on the other hand, claimed that petitioner was signatory to all the bank checks of
respondent FTCP and approved all requisitions and disbursements. She received an excess of
US$1,000.00 for her salary and did not return the same. They alleged that petitioner voluntarily
resigned from her position and removed all her belongings from the FTCP.28

The LA ruled in favor of the respondents, the dispositive portion of the Decision29 reads:

WHEREFORE, foregoing considered, the case is hereby DISMISSED for lack of merit and judgment
is hereby rendered ordering complainant Rosalinda G. Paredes to pay the following:

1. One Hundred Forty-Three Thousand Six Hundred [F]orty-Six and 73/100 (143,646.73)
representing her accountabilities to respondent FTCP in Philippine Currency;

2. One Thousand Dollars ($1,000.00) to respondent FTCP representing complainant's

accountability in US Currency;

3. Five Hundred Thousand Pesos (500,000.00) each to respondents Dr. Virginia Lao,
Benjamin Escobia and Hercules Paradiang for moral damages;

4. One Million Pesos (1,000,000.00) to respondent FTCP for damages incurred;

5. One Hundred Thousand Pesos (100,000.00) to respondents collectively for exemplary

damages; and

6. Attorney's Fees to 10% of the total award.

SO ORDERED.30

Undaunted, petitioner appealed the decision to the NLRC. In its Decision31 dated March 28, 2007, the
NLRC reversed and set aside the decision of the LA and ruled in her favor, the dispositive portion of
which states:
WHEREFORE, premises considered, the decision of the Labor Arbiter dated 08 November 2006
is REVERSED and SET aside and a new one is entered, to wit:

1. Ordering respondent Feed the Children Philippines, Inc. to pay the complainant of her
salaries and allowances corresponding to the unexpired portion of her contract in the
aggregate amount of One Million Six Hundred Eighty-Five Thousand Nine Hundred and
00/100 (1,685,900.00), broken down as follows:

a. Salaries corresponding to the unexpired portion of the contract -1,610,000.00

b. Transportation allowances - 29,900.00

c. Representation allowances - 46,000.00

Total -1,685,900.00;

And

2. Ordering respondent Feed the Children Philippines, Inc. to pay complainant of moral
damages in the amount of One Hundred Thousand Pesos (100,000.00); and exemplary
damages in the amount of One Hundred Thousand Pesos (100,000.00).

Respondents Dr. Virginia Lao, Hercules Paradiang and Benjamin Escobia are absolved from
any liability for lack of legal basis.

SO ORDERED.32

In a Resolution33 dated June 14, 2007, the NLRC dismissed the motion for reconsideration of the
respondents. Thus, respondents filed before the CA a petition for certiorari. The CA ruled for the
respondents. The fallo of said decision reads:

WHEREFORE, the Decision dated March 28, 2007 and the Resolution dated June 14, 2007, of the
National Labor Relations Commission (NLRC), Fourth Division, Cebu City, in NLRC Case No. V-
000074-2007, are NULLIFIED and a new one rendered as follows:

1. Declaring private respondent to have voluntarily resigned from her

employment/consultancy with FTCP;

2. Directing private respondent to pay FTCP

a. Thirty-four thousand four hundred thirty-eight pesos and 37/100 (P34,438.37) for
her unpaid loans;

b. One hundred nine thousand two hundred eight pesos and 36/100 (109,208.36)
respecting her disbursement and withdrawals from the FTCP Provident Fund.

Costs against private respondent.

SO ORDERED.34
The CA did not find any valid reason to disturb its decision, hence, it denied petitioner’s Motion for
Reconsideration.35

In this recourse, petitioner raises the following issues for this Court's consideration:

I. The CA contravenes the law and jurisprudence when it granted the petition
for certiorari that raised questions factual in nature and when it sweepingly applied the ruling
in St. Martin Funeral Homes to justify its act of delving into the findings of the NLRC which
were outside the scope of extraordinary remedy of certiorari.

II. The CA grossly contradicts the law and jurisprudence on constructive dismissal and
ignored, misunderstood or misinterpreted cogent facts and circumstances which, if
considered, would change the outcome of the case when it ruled that petitioner voluntarily
resigned and was not constructively dismissed.

III. The CA effectively reverses the law and jurisprudence on damages and recognized
money claims in labor cases when it condemned petitioner to pay respondents' claims for
damages that were not duly proven by the latter and that clearly did not arise from an
employer-employee relationship.

IV. The CA violates the Constitution, the law and the prevailing jurisprudence when it
resolved the lingering doubts that remain in the present case, as those arising from evidence
and from interpretation of agreements and writings, against labor.

The present petition is partly meritorious.

It is elementary that this Court is not a trier of facts, and only errors of law are generally reviewed in
petitions for review on certiorari. Judicial review of labor cases does not go beyond the evaluation of
the sufficiency of the evidence upon which its labor officials' findings rest. As such, the findings of
facts and conclusion of the NLRC are generally accorded not only great weight and respect but even
clothed with finality and deemed binding on this Court as long as they are supported by substantial
evidence.36

However, if the factual findings of the LA and the NLRC are conflicting, as in this case, the reviewing
court may delve into the records and examine for itself the questioned findings.37 The exception,
rather than the general rule, applies in the present case since the LA and the CA found facts
supporting the conclusion that petitioner was not constructively dismissed, while the NLRC’s factual
findings contradicted the LA’s findings.

Under this situation, such conflicting factual findings are not binding on us, and we retain the
authority to pass on the evidence presented and draw conclusions therefrom.

After judicious review on the records of the case, this Court deems it proper to disregard the findings
of fact of the NLRC. This Court finds that the NLRC committed grave abuse of discretion when it
ruled for the petitioner without substantial evidence to support its findings of facts and conclusion.

Petitioner, relying in the principle of finality and conclusiveness of the decisions of labor tribunals,
faults the CA for reversing the findings of the NLRC and affirming the factual findings of the LA that
she voluntarily resigned. She averred that the CA erred when it applied the ruling in the case of St.
Martin Funeral Homes v. NLRC38 to justify its inquiring into the findings of the NLRC which was
outside the scope of extraordinary remedy of certiorari. She posited that NLRC's findings cannot be
delved into without first declaring the decision itself to have been issued with grave abuse of
discretion.39

Courts generally accord great respect and finality to factual findings of administrative agencies, like
labor tribunals, in the exercise of their quasijudicial function. However, this doctrine espousing
comity to administrative findings of facts are not infallible and cannot preclude the courts from
reviewing and, when proper, disregarding these findings of facts when shown that the administrative
body committed grave abuse of discretion.40

It is settled that in a special civil action for certiorari under Rule 65, the issues are limited to errors of
jurisdiction or grave abuse of discretion. However, in labor cases elevated to it via petition for
certiorari, the CA is empowered to evaluate the materiality and significance of the evidence alleged
to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC in relation to all other
evidence on record.41

The CA can grant this prerogative writ when the factual findings complained of are not supported by
the evidence on record; when it is necessary to prevent a substantial wrong or to do substantial
justice; when the findings of the NLRC contradict those of the LA; and when necessary to arrive at a
just decision of the case.42 To make this finding, the CA necessarily has to view the evidence if only
to determine if the NLRC ruling had basis in evidence.43

Contrary to petitioner's contention, the CA, by express legal mandate and pursuant to its equity
jurisdiction, may review factual findings and evidence of the parties to determine whether the NLRC
gravely abused its discretion in its findings.44 Since this Court finds that the findings of the LA and
NLRC contradicting and that the findings of NLRC are not supported by the evidence on record, we
rule that it is within the CA’s power to review the factual findings of the NLRC. Accordingly, this Court
does not find erroneous the course that the CA took in resolving that petitioner was not
constructively dismissed.

This Court, in turn, has the same authority to sift through the factual findings of both the CA and the
NLRC in the event of their conflict.45 This Court, therefore, is not precluded from reviewing the factual
issues when there are conflicting findings by the Labor Arbiter, the NLRC and the Court of Appeals.46

Since petitioner admittedly resigned, it is incumbent upon her to prove that her resignation was
involuntary and that it was actually a case of constructive dismissal with clear, positive and
convincing evidence.47

Petitioner alleged that she was forced to resign by Lao, Paradiang and Escobia. For her, it was the
overbearing and prejudiced attitude towards her by individual respondents that rendered her
continued employment impossible, unreasonable or unlikely. She maintained that the prevailing
working environment compelled her to disassociate with FTCP. She recounted that the individual
respondents deliberately excluded her from important meetings despite being the chief executive
officer and a fixture to all Board meetings.

Petitioner cited the August 28, 2005 Board meeting and a subsequent Execom meeting where she
was apparently banished as proof of respondents' discrimination. She emphasized in all her
pleadings that, aside from it being provided by the by-laws, she believed that her presence at all
Board meetings cannot be dispensed with since it was through her effort that the Board of Trustees
became functional. For her, she was isolated and singled out. She claimed that these circumstances
clearly denoted that the actions of the respondents were motivated by discrimination and made in
bad faith.
Case law holds that constructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in
rank or diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee.48 The test is whether a reasonable person in the
employee's position would have felt compelled to give up his position under the circumstances.49

In this case, petitioner cannot be deemed constructively dismissed. She failed to present clear and
positive evidence that respondent FTCP, through its Board of Trustees, committed acts of
discrimination, insensibility, or disdain towards her which rendered her continued employment
unbearable or forced her to terminate her employment from the respondent. As settled, bare
allegations of constructive dismissal, when uncorroborated by the evidence on record, cannot be
given credence.50

It is highly unlikely and incredible for someone of petitioner’s position and educational attainment to
so easily succumb to individual respondents’ alleged harassment without defending herself. In fact,
records reveal that she wrote directly to Jones when her contract was not to be renewed and
whenever she felt threatened. She vehemently opposed the audit and openly disobeyed the Board
when she was not informed of the scope. She, along with other management staff, questioned the
meetings of the Execom that they were not informed.51 It is also noted that her husband is a lawyer
and that she employed lawyers who sent a series of demand letters to the Board to provide her the
details of the audit and even ordered the Board to desist from pursuing the audit.

There was no urgency for petitioner to submit her resignation letter. In fact, the day before it was
given, she and other management staff requested for a dialogue with the Board to address the issue
regarding the management and financial audit.52 It is, therefore, improbable that her continued
employment is rendered impossible or unreasonable.

Records do not show any demotion in rank or a diminution in pay made against her. Petitioner
claimed that the fact that the Supervisory Team performed her functions and issued memorandum
directly to her subordinates, and her being barred from subsequent Execom meetings constituted
constructive dismissal. However, there was no evidence to corroborate her claim of usurpation. She
did not present evidence of the supposed direct memorandum issued by the Supervisory Team to
the staff. Aside from the minutes of the September 29, 2005 meeting of the Execom, there was no
other proof of petitioner's exclusion from other subsequent Execom meetings.

We find that, apart from her self-serving and uncorroborated allegations, petitioner did not present
any substantial evidence of constructive dismissal. She was not able to present a single witness to
corroborate her claims of harassment by Lao, Paradiang and Escobia.

Petitioner supported her claim with the minutes of the August 28, 2005 meeting and another minutes
of the meeting of the Execom that she was excluded. She argued that her sudden exclusion from
board meetings despite established practice constituted grave abuse of managerial rights of the
respondent FTCP.

We are not persuaded that her exclusion to the meeting constituted discrimination or harassment. A
careful perusal of the minutes would reveal that the Board convened to deliberate on the solution to
the apparent conflict between petitioner and the staff since they have insufficient grievance
mechanism for issues involving top management. She could not fault the Board to not include her in
that particular meeting since she was a party involved and to avoid possible influence that she could
have exerted.
Petitioner presented documents like e-mail correspondences with Paradiang about the non-renewal
of her contract earlier in her employment, e-mail correspondences to Jones about harassment
towards her and specifically mentioning Paradiang, demand letters from her and her lawyers, her
resignation letter, and the board resolution accepting her resignation. These do not verify that
respondents committed discrimination or disdain towards her. Hence, her allegations are self-serving
and uncorroborated and should not be given evidentiary weight.

On the other hand, respondent FTCP presented a letter53 dated August 28, 2005 written by petitioner
addressed to the Board wherein she presented her side about the petition of the employees against
her. She also praised the Board for strengthening the organization, for putting valuable policies in
the organization, and for opening the organization to new partnerships.

In another letter54 dated September 6, 2005, she reported that on the same date as the August 28
Board meeting, she and Fostanes met to discuss concerns and apologized for what happened and
other members of management also apologized and accepted the reconciliation that she extended
to them. She also reported that during the September 5, 2005 General Staff meeting, the issues
1âwphi1

were discussed, feelings and sentiments were shared, and concluded with a firm commitment from
everyone to rebuild the good name of FTCP and work together to enhance its system and maintain
its integrity.

The letters did not mention nor hinted that petitioner protested about being excluded from the
meeting which she has considered as a hearing against her. It did not even reveal that there was
undue prejudice from individual respondents. Records are bereft of proof that she even attempted to
address the Board about the supposed discrimination or disdain by individual respondents. It is only
upon filing of the illegal dismissal case that she alleged that she felt that she was discriminated
against and treated with disdain by respondents.

Respondents presented an affidavit and a police blotter55 attesting that some employees who signed
in the August 12 letter-petition were intimidated by the secretary of petitioner’s lawyer-husband to
sign a recantation. She refuted the same by alleging that they could have not known that it was
recantation when it appeared in the blotter that they only saw the page they were made to sign.
Respondents also presented an affidavit56 attesting that petitioner intimidated an employee by telling
her that she would file suits against those who defamed her when the employee refused to recant
her signature in the petition against her.

For petitioner, the fact that the effectivity of her resignation was moved to November showed the
eagerness of Lao, Paradiang and Escobia to get rid of her.57

We held that the act of the employer moving the effectivity of the resignation is not an act of
harassment. The 30-day notice requirement for an employee’s resignation is actually for the benefit
of the employer who has the discretion to waive such period. Its purpose is to afford the employer
enough time to hire another employee if needed and to see to it that there is proper turn-over of the
tasks which the resigning employee may be handling.58

Such rule requiring an employee to stay or complete the 30-day period prior to the effectivity of his
resignation becomes discretionary on the part of management as an employee who intends to resign
may be allowed a shorter period before his resignation becomes effective.59

Thus, the act of respondents moving the effectivity date of petitioner’s resignation to a date earlier
than what she had stated cannot be deemed malicious. This cannot be viewed as an act of
harassment but merely the exercise of respondent's management prerogative. We cannot expect
employers to maintain in their employ employees who intend to resign, just so the latter can have
continuous work as they look for a new source of income.

Petitioner alleged that the CA erred when it ruled that she should pay respondents' claims for
damages. She maintained that they were not duly proven and that they clearly did not arise from an
employer-employee relationship.

This Court held that the "money claims of workers" referred to in Article 21760 of the Labor Code
embraces money claims which arise out of or in connection with the employer-employee
relationship, or some aspect or incident of such relationship.61

Applying the rule of noscitur a sociis in clarifying the scope of Article 217, it is evident that
paragraphs 1 to 5 refer to cases or disputes arising out of or in connection with an employer-
employee relationship. In other words, the money claims within the original and exclusive jurisdiction
of labor arbiters are those which have some reasonable causal connection with the employer-
employee relationship.62

This claim is distinguished from cases of actions for damages where the employer-employee
relationship is merely incidental and the cause of action proceeds from a different source of
obligation. Thus, the regular courts have jurisdiction where the damages claimed for were based on:
tort, malicious prosecution, or breach of contract, as when the claimant seeks to recover a debt from
a former employee or seeks liquidated damages in the enforcement of a prior employment contract.63

By the designating clause "arising from the employer-employee relations," Article 217 applies with
equal force to the claim of an employer for actual damages against its dismissed employee, where
the basis for the claim arises from or is necessarily connected with the fact of termination, and
should be entered as a counterclaim in the illegal dismissal case.64

In this case, the CA erred in awarding 34,438.37 for petitioner’s unpaid debt to respondents. The
claim for recovery of a debt has no reasonable causal connection with any of the claims provided for
in Article 217. The fact that the transaction happened at the time they were employer and employee
did not negate the civil jurisdiction of trial court. Hence, it is erroneous for the LA and the CA to rule
on such claim arising from a different source of obligation and where the employer-employee
relationship was merely incidental.

Likewise, the CA erred in awarding 109,208.36 for the reimbursement of the FTCP Provident Fund
allegedly withdrawn by petitioner. Although it was entered by the respondents in its counterclaim,
this claim does not arise from or is necessarily connected with the fact of termination. It also had no
reasonable causal connection with employer-employee relationship.

Lastly, petitioner maintained that the CA erred when it resolved the lingering doubt in the present
case against labor. She alleged that the CA violated the Constitution, the law, and jurisprudence.

We held that the law and jurisprudence guarantee security of tenure to every employee. However, in
protecting the rights of the workers, the law does not authorize the oppression or self-destruction of
the employer. Social justice does not mean that every labor dispute shall automatically be decided in
favor of labor. Thus, the Constitution and the law equally recognize the employer’s right and
prerogative to manage its operation according to reasonable standards and norms of fair play.65

It is settled that the law serves to equalize the unequal. The labor force is a special class that is
constitutionally protected because of the inequality between capital and labor. This constitutional
protection presupposes that the labor force is weak. However, the level of protection to labor should
vary from case to case; otherwise, the state might appear to be too paternalistic in affording
protection to labor.66 Petitioner could not expect to have the same level of ardent protection that the
laws bestow upon a lowly laborer be given to her, a high ranking officer of respondent FTCP. As
proven, she was considered on equal footing with her employer and even had the occasion to
demand the renewal of her contract by sending an e-mail to the organization’s founder.67

We cannot subscribe to petitioner's allegation that the CA ruled against labor when it resolved the
factual issues of the case. As discussed, it is well within the powers and jurisdiction of the CA to
evaluate the evidence alleged to have been capriciously, whimsically, or arbitrarily disregarded by
the NLRC, or as in the present case, for considering petitioner's bare allegations without support of
substantial evidence. This Court finds that the CA did not violate the Constitution, the law and
jurisprudence. Hence, the resolution of the doubt as to whether petitioner voluntarily resigned or was
constructively dismissed based on the evidence on record was proper and was not against labor.

WHEREFORE, the petition for review on certiorari, dated October 23, 2008, of petitioner Rosalinda
G. Paredes is hereby PARTLY GRANTED. Accordingly, the ruling of the Court of Appeals in its
Decision dated March 25, 2008, that petitioner was not constructively dismissed, is
hereby AFFIRMED. However, the awards of P34,438.37 and Pl09,208.36 for the unpaid debt of
petitioner and reimbursement of the FTCP Provident Fund, respectively, are hereby SET ASIDE.

SO ORDERED.
G.R. No. 153866 February 11, 2005

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
SEAGATE TECHNOLOGY (PHILIPPINES), respondent.

DECISION

PANGANIBAN, J.:

Business companies registered in and operating from the Special Economic Zone in Naga, Cebu --
like herein respondent -- are entities exempt from all internal revenue taxes and the implementing
rules relevant thereto, including the value-added taxes or VAT. Although export sales are not
deemed exempt transactions, they are nonetheless zero-rated. Hence, in the present case, the
distinction between exempt entities and exempt transactions has little significance, because the net
result is that the taxpayer is not liable for the VAT. Respondent, a VAT-registered enterprise, has
complied with all requisites for claiming a tax refund of or credit for the input VAT it paid on capital
goods it purchased. Thus, the Court of Tax Appeals and the Court of Appeals did not err in ruling
that it is entitled to such refund or credit.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the May
27, 2002 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 66093. The decretal portion of the
Decision reads as follows:

"WHEREFORE, foregoing premises considered, the petition for review is DENIED for lack of merit."3

The Facts

The CA quoted the facts narrated by the Court of Tax Appeals (CTA), as follows:

"As jointly stipulated by the parties, the pertinent facts x x x involved in this case are as follows:

1. [Respondent] is a resident foreign corporation duly registered with the Securities and Exchange
Commission to do business in the Philippines, with principal office address at the new Cebu
Township One, Special Economic Zone, Barangay Cantao-an, Naga, Cebu;

2. [Petitioner] is sued in his official capacity, having been duly appointed and empowered to perform
the duties of his office, including, among others, the duty to act and approve claims for refund or tax
credit;

3. [Respondent] is registered with the Philippine Export Zone Authority (PEZA) and has been issued
PEZA Certificate No. 97-044 pursuant to Presidential Decree No. 66, as amended, to engage in the
manufacture of recording components primarily used in computers for export. Such registration was
made on 6 June 1997;

4. [Respondent] is VAT [(Value Added Tax)]-registered entity as evidenced by VAT Registration

Certification No. 97-083-000600-V issued on 2 April 1997;

5. VAT returns for the period 1 April 1998 to 30 June 1999 have been filed by [respondent];
6. An administrative claim for refund of VAT input taxes in the amount of P28,369,226.38 with
supporting documents (inclusive of the P12,267,981.04 VAT input taxes subject of this Petition for
Review), was filed on 4 October 1999 with Revenue District Office No. 83, Talisay Cebu;

7. No final action has been received by [respondent] from [petitioner] on [respondent’s] claim for VAT
refund.

"The administrative claim for refund by the [respondent] on October 4, 1999 was not acted upon by
the [petitioner] prompting the [respondent] to elevate the case to [the CTA] on July 21, 2000 by way
of Petition for Review in order to toll the running of the two-year prescriptive period.

"For his part, [petitioner] x x x raised the following Special and Affirmative Defenses, to wit:

1. [Respondent’s] alleged claim for tax refund/credit is subject to administrative routinary

investigation/examination by [petitioner’s] Bureau;

2. Since ‘taxes are presumed to have been collected in accordance with laws and regulations,’ the
[respondent] has the burden of proof that the taxes sought to be refunded were erroneously or
illegally collected x x x;

3. In Citibank, N.A. vs. Court of Appeals, 280 SCRA 459 (1997), the Supreme Court ruled that:

"A claimant has the burden of proof to establish the factual basis of his or her claim for tax
credit/refund."

4. Claims for tax refund/tax credit are construed in ‘strictissimi juris’ against the taxpayer. This is due
to the fact that claims for refund/credit [partake of] the nature of an exemption from tax. Thus, it is
incumbent upon the [respondent] to prove that it is indeed entitled to the refund/credit sought. Failure
on the part of the [respondent] to prove the same is fatal to its claim for tax credit. He who claims
exemption must be able to justify his claim by the clearest grant of organic or statutory law. An
exemption from the common burden cannot be permitted to exist upon vague implications;

5. Granting, without admitting, that [respondent] is a Philippine Economic Zone Authority (PEZA)
registered Ecozone Enterprise, then its business is not subject to VAT pursuant to Section 24 of
Republic Act No. ([RA]) 7916 in relation to Section 103 of the Tax Code, as amended. As
[respondent’s] business is not subject to VAT, the capital goods and services it alleged to have
purchased are considered not used in VAT taxable business. As such, [respondent] is not entitled to
refund of input taxes on such capital goods pursuant to Section 4.106.1 of Revenue Regulations No.
([RR])7-95, and of input taxes on services pursuant to Section 4.103 of said regulations.

6. [Respondent] must show compliance with the provisions of Section 204 (C) and 229 of the 1997
Tax Code on filing of a written claim for refund within two (2) years from the date of payment of tax.’

"On July 19, 2001, the Tax Court rendered a decision granting the claim for refund."4

Ruling of the Court of Appeals

The CA affirmed the Decision of the CTA granting the claim for refund or issuance of a tax credit
certificate (TCC) in favor of respondent in the reduced amount of P12,122,922.66. This sum
represented the unutilized but substantiated input VAT paid on capital goods purchased for the
period covering April 1, 1998 to June 30, 1999.
The appellate court reasoned that respondent had availed itself only of the fiscal incentives under
Executive Order No. (EO) 226 (otherwise known as the Omnibus Investment Code of 1987), not of
those under both Presidential Decree No. (PD) 66, as amended, and Section 24 of RA 7916.
Respondent was, therefore, considered exempt only from the payment of income tax when it opted
for the income tax holiday in lieu of the 5 percent preferential tax on gross income earned. As a VAT-
registered entity, though, it was still subject to the payment of other national internal revenue taxes,
like the VAT.

Moreover, the CA held that neither Section 109 of the Tax Code nor Sections 4.106-1 and 4.103-1 of
RR 7-95 were applicable. Having paid the input VAT on the capital goods it purchased, respondent
correctly filed the administrative and judicial claims for its refund within the two-year prescriptive
period. Such payments were -- to the extent of the refundable value -- duly supported by VAT
invoices or official receipts, and were not yet offset against any output VAT liability.

Hence this Petition.5

Sole Issue

Petitioner submits this sole issue for our consideration:

"Whether or not respondent is entitled to the refund or issuance of Tax Credit Certificate in the
amount of P12,122,922.66 representing alleged unutilized input VAT paid on capital goods
purchased for the period April 1, 1998 to June 30, 1999."6

The Court’s Ruling

The Petition is unmeritorious.

Sole Issue:

Entitlement of a VAT-Registered PEZA Enterprise to a Refund of or Credit for Input VAT

No doubt, as a PEZA-registered enterprise within a special economic zone,7 respondent is entitled to

the fiscal incentives and benefits8 provided for in either PD 669 or EO 226.10 It shall, moreover, enjoy
all privileges, benefits, advantages or exemptions under both Republic Act Nos. (RA) 722711 and
7844.12

Preferential Tax Treatment Under Special Laws

If it avails itself of PD 66, notwithstanding the provisions of other laws to the contrary, respondent
shall not be subject to internal revenue laws and regulations for raw materials, supplies, articles,
equipment, machineries, spare parts and wares, except those prohibited by law, brought into the
zone to be stored, broken up, repacked, assembled, installed, sorted, cleaned, graded or otherwise
processed, manipulated, manufactured, mixed or used directly or indirectly in such activities.13 Even
so, respondent would enjoy a net-operating loss carry over; accelerated depreciation; foreign
exchange and financial assistance; and exemption from export taxes, local taxes and licenses.14

Comparatively, the same exemption from internal revenue laws and regulations applies if EO 22615 is
chosen. Under this law, respondent shall further be entitled to an income tax holiday; additional
deduction for labor expense; simplification of customs procedure; unrestricted use of consigned
equipment; access to a bonded manufacturing warehouse system; privileges for foreign nationals
employed; tax credits on domestic capital equipment, as well as for taxes and duties on raw
materials; and exemption from contractors’ taxes, wharfage dues, taxes and duties on imported
capital equipment and spare parts, export taxes, duties, imposts and fees,16 local taxes and licenses,
and real property taxes.17

A privilege available to respondent under the provision in RA 7227 on tax and duty-free importation
of raw materials, capital and equipment18 -- is, ipso facto, also accorded to the zone19 under RA 7916.
Furthermore, the latter law -- notwithstanding other existing laws, rules and regulations to the
contrary -- extends20 to that zone the provision stating that no local or national taxes shall be imposed
therein.21 No exchange control policy shall be applied; and free markets for foreign exchange, gold,
securities and future shall be allowed and maintained.22 Banking and finance shall also be liberalized
under minimum Bangko Sentral regulation with the establishment of foreign currency depository
units of local commercial banks and offshore banking units of foreign banks.23

In the same vein, respondent benefits under RA 7844 from negotiable tax credits24 for locally-
produced materials used as inputs. Aside from the other incentives possibly already granted to it by
the Board of Investments, it also enjoys preferential credit facilities25 and exemption from PD 1853.26

From the above-cited laws, it is immediately clear that petitioner enjoys preferential tax treatment.27 It
is not subject to internal revenue laws and regulations and is even entitled to tax credits. The VAT on
capital goods is an internal revenue tax from which petitioner as an entity is exempt. Although
the transactionsinvolving such tax are not exempt, petitioner as a VAT-registered person,28 however,
is entitled to their credits.

Nature of the VAT and the Tax Credit Method

Viewed broadly, the VAT is a uniform tax ranging, at present, from 0 percent to 10 percent levied on
every importation of goods, whether or not in the course of trade or business, or imposed on each
sale, barter, exchange or lease of goods or properties or on each rendition of services in the course
of trade or business29 as they pass along the production and distribution chain, the tax being limited
only to the value added30 to such goods, properties or services by the seller, transferor or lessor.31 It is
an indirect tax that may be shifted or passed on to the buyer, transferee or lessee of the goods,
properties or services.32 As such, it should be understood not in the context of the person or entity
that is primarily, directly and legally liable for its payment, but in terms of its nature as a tax on
consumption.33 In either case, though, the same conclusion is arrived at.

The law34 that originally imposed the VAT in the country, as well as the subsequent amendments of
that law, has been drawn from the tax credit method.35 Such method adopted the mechanics and self-
enforcement features of the VAT as first implemented and practiced in Europe and subsequently
adopted in New Zealand and Canada.36 Under the present method that relies on invoices, an entity
can credit against or subtract from the VAT charged on its sales or outputs the VAT paid on its
purchases, inputs and imports.37

If at the end of a taxable quarter the output taxes38 charged by a seller39 are equal to the input
taxes40 passed on by the suppliers, no payment is required. It is when the output taxes exceed the
input taxes that the excess has to be paid.41 If, however, the input taxes exceed the output taxes, the
excess shall be carried over to the succeeding quarter or quarters.42 Should the input taxes result
from zero-rated or effectively zero-rated transactions or from the acquisition of capital goods,43 any
excess over the output taxes shall instead be refunded44 to the taxpayer or credited45 against other
internal revenue taxes.46

Zero-Rated and Effectively Zero-Rated Transactions

Although both are taxable and similar in effect, zero-rated transactions differ from effectively zero-
rated transactions as to their source.

Zero-rated transactions generally refer to the export sale of goods and supply of services.47 The tax
rate is set at zero.48 When applied to the tax base, such rate obviously results in no tax chargeable
against the purchaser. The seller of such transactions charges no output tax,49 but can claim a refund
of or a tax credit certificate for the VAT previously charged by suppliers.

Effectively zero-rated transactions, however, refer to the sale of goods50 or supply of services51 to
persons or entities whose exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects such transactions to a zero rate.52 Again, as applied to
the tax base, such rate does not yield any tax chargeable against the purchaser. The seller who
charges zero output tax on such transactions can also claim a refund of or a tax credit certificate for
the VAT previously charged by suppliers.

Zero Rating and Exemption

In terms of the VAT computation, zero rating and exemption are the same, but the extent of
relief that results from either one of them is not.

Applying the destination principle53 to the exportation of goods, automatic zero rating54 is primarily
intended to be enjoyed by the seller who is directly and legally liable for the VAT, making such seller
internationally competitive by allowing the refund or credit of input taxes that are attributable to
export sales.55 Effective zero rating, on the contrary, is intended to benefit the purchaser who, not
being directly and legally liable for the payment of the VAT, will ultimately bear the burden of the tax
shifted by the suppliers.

In both instances of zero rating, there is total relief for the purchaser from the burden of the tax.56 But
in an exemption there is only partial relief,57 because the purchaser is not allowed any tax refund of or
credit for input taxes paid.58

Exempt Transaction >and Exempt Party

The object of exemption from the VAT may either be the transaction itself or any of the parties to the
transaction.59

An exempt transaction, on the one hand, involves goods or services which, by their nature, are
specifically listed in and expressly exempted from the VAT under the Tax Code, without regard to
the tax status -- VAT-exempt or not -- of the party to the transaction.60 Indeed, such transaction is not
subject to the VAT, but the seller is not allowed any tax refund of or credit for any input taxes paid.

An exempt party, on the other hand, is a person or entity granted VAT exemption under the Tax
Code, a special law or an international agreement to which the Philippines is a signatory, and by
virtue of which its taxable transactions become exempt from the VAT.61 Such party is also not subject
to the VAT, but may be allowed a tax refund of or credit for input taxes paid, depending on its
registration as a VAT or non-VAT taxpayer.

As mentioned earlier, the VAT is a tax on consumption, the amount of which may be shifted or
passed on by the seller to the purchaser of the goods, properties or services.62 While the liabilityis
imposed on one person, the burden may be passed on to another. Therefore, if a special law merely
exempts a party as a seller from its direct liability for payment of the VAT, but does not relieve the
same party as a purchaser from its indirect burden of the VAT shifted to it by its VAT-registered
suppliers, the purchase transaction is not exempt. Applying this principle to the case at bar, the
purchase transactions entered into by respondent are not VAT-exempt.

Special laws may certainly exempt transactions from the VAT.63However, the Tax Code provides that
those falling under PD 66 are not. PD 66 is the precursor of RA 7916 -- the special law under which
respondent was registered. The purchase transactions it entered into are, therefore, not VAT-
exempt. These are subject to the VAT; respondent is required to register.

Its sales transactions, however, will either be zero-rated or taxed at the standard rate of 10
percent,64 depending again on the application of the destination principle.65

If respondent enters into such sales transactions with a purchaser -- usually in a foreign country --
for use or consumption outside the Philippines, these shall be subject to 0 percent.66 If entered into
with a purchaser for use or consumption in the Philippines, then these shall be subject to 10
percent,67 unless the purchaser is exempt from the indirect burden of the VAT, in which case it shall
also be zero-rated.

Since the purchases of respondent are not exempt from the VAT, the rate to be applied is zero. Its
exemption under both PD 66 and RA 7916 effectively subjects such transactions to a zero
rate,68because the ecozone within which it is registered is managed and operated by the PEZA as
a separate customs territory.69 This means that in such zone is created the legal fiction of foreign
territory.70 Under the cross-border principle71 of the VAT system being enforced by the Bureau of
Internal Revenue (BIR),72 no VAT shall be imposed to form part of the cost of goods destined for
consumption outside of the territorial border of the taxing authority. If exports of goods and services
from the Philippines to a foreign country are free of the VAT,73 then the same rule holds for such
exports from the national territory -- except specifically declared areas -- to an ecozone.

Sales made by a VAT-registered person in the customs territory to a PEZA-registered entity are
considered exports to a foreign country; conversely, sales by a PEZA-registered entity to a VAT-
registered person in the customs territory are deemed imports from a foreign country.74 An ecozone --
indubitably a geographical territory of the Philippines -- is, however, regarded in law as foreign
soil.75 This legal fiction is necessary to give meaningful effect to the policies of the special law
creating the zone.76 If respondent is located in an export processing zone77 within that ecozone, sales
to the export processing zone, even without being actually exported, shall in fact be viewed
as constructively exported under EO 226.78 Considered as export sales,79 such purchase transactions
by respondent would indeed be subject to a zero rate.80

Tax Exemptions Broad and Express

Applying the special laws we have earlier discussed, respondent as an entity is exempt from internal
revenue laws and regulations.

This exemption covers both direct and indirect taxes, stemming from the very nature of the VAT as a
tax on consumption, for which the direct liability is imposed on one person but the indirect burden is
passed on to another. Respondent, as an exempt entity, can neither be directly charged for the VAT
on its sales nor indirectly made to bear, as added cost to such sales, the equivalent VAT on its
purchases. Ubi lex non distinguit, nec nos distinguere debemus. Where the law does not distinguish,
we ought not to distinguish.

Moreover, the exemption is both express and pervasive for the following reasons:
First, RA 7916 states that "no taxes, local and national, shall be imposed on business
establishments operating within the ecozone."81 Since this law does not exclude the VAT from the
prohibition, it is deemed included. Exceptio firmat regulam in casibus non exceptis. An exception
confirms the rule in cases not excepted; that is, a thing not being excepted must be regarded as
coming within the purview of the general rule.

Moreover, even though the VAT is not imposed on the entity but on the transaction, it may still be
passed on and, therefore, indirectly imposed on the same entity -- a patent circumvention of the law.
That no VAT shall be imposed directly upon business establishments operating within the ecozone
under RA 7916 also means that no VAT may be passed on and imposed indirectly. Quando aliquid
prohibetur ex directo prohibetur et per obliquum. When anything is prohibited directly, it is also
prohibited indirectly.

Second, when RA 8748 was enacted to amend RA 7916, the same prohibition applied, except for
real property taxes that presently are imposed on land owned by developers.82 This similar and
repeated prohibition is an unambiguous ratification of the law’s intent in not imposing local or
national taxes on business enterprises within the ecozone.

Third, foreign and domestic merchandise, raw materials, equipment and the like "shall not be subject
to x x x internal revenue laws and regulations" under PD 6683 -- the original charter of PEZA (then
EPZA) that was later amended by RA 7916.84 No provisions in the latter law modify such exemption.

Although this exemption puts the government at an initial disadvantage, the reduced tax collection
ultimately redounds to the benefit of the national economy by enticing more business investments
and creating more employment opportunities.85

Fourth, even the rules implementing the PEZA law clearly reiterate that merchandise -- except those
prohibited by law -- "shall not be subject to x x x internal revenue laws and regulations x x x"86 if
brought to the ecozone’s restricted area87 for manufacturing by registered export enterprises,88 of
which respondent is one. These rules also apply to all enterprises registered with the EPZA prior to
the effectivity of such rules.89

Fifth, export processing zone enterprises registered90 with the Board of Investments (BOI) under EO
226 patently enjoy exemption from national internal revenue taxes on imported capital equipment
reasonably needed and exclusively used for the manufacture of their products;91 on required supplies
and spare part for consigned equipment;92 and on foreign and domestic merchandise, raw materials,
equipment and the like -- except those prohibited by law -- brought into the zone for
manufacturing.93 In addition, they are given credits for the value of the national internal revenue taxes
imposed on domestic capital equipment also reasonably needed and exclusively used for the
manufacture of their products,94 as well as for the value of such taxes imposed on domestic raw
materials and supplies that are used in the manufacture of their export products and that form part
thereof.95

Sixth, the exemption from local and national taxes granted under RA 722796 are ipso facto accorded
to ecozones.97 In case of doubt, conflicts with respect to such tax exemption privilege shall be
resolved in favor of the ecozone.98

And seventh, the tax credits under RA 7844 -- given for imported raw materials primarily used in the
production of export goods,99and for locally produced raw materials, capital equipment and spare
parts used by exporters of non-traditional products100 -- shall also be continuously enjoyed by similar
exporters within the ecozone.101 Indeed, the latter exporters are likewise entitled to such tax
exemptions and credits.
Tax Refund as Tax Exemption

To be sure, statutes that grant tax exemptions are construed strictissimi juris102 against the
taxpayer103 and liberally in favor of the taxing authority.104

Tax refunds are in the nature of such exemptions.105 Accordingly, the claimants of those refunds bear
the burden of proving the factual basis of their claims;106 and of showing, by words too plain to be
mistaken, that the legislature intended to exempt them.107 In the present case, all the cited legal
provisions are teeming with life with respect to the grant of tax exemptions too vivid to pass
unnoticed. In addition, respondent easily meets the challenge.

Respondent, which as an entity is exempt, is different from its transactions which are not exempt.
The end result, however, is that it is not subject to the VAT. The non-taxability of transactions that
are otherwise taxable is merely a necessary incident to the tax exemption conferred by law upon it
as an entity, not upon the transactions themselves.108 Nonetheless, its exemption as an entity and the
non-exemption of its transactions lead to the same result for the following considerations:

First, the contemporaneous construction of our tax laws by BIR authorities who are called upon to
execute or administer such laws109 will have to be adopted. Their prior tax issuances have held
inconsistent positions brought about by their probable failure to comprehend and fully appreciate the
nature of the VAT as a tax on consumption and the application of the destination principle.110Revenue
Memorandum Circular No. (RMC) 74-99, however, now clearly and correctly provides that any VAT-
registered supplier’s sale of goods, property or services from the customs territory to any registered
enterprise operating in the ecozone -- regardless of the class or type of the latter’s PEZA registration
-- is legally entitled to a zero rate.111

Second, the policies of the law should prevail. Ratio legis est anima. The reason for the law is its
very soul.

In PD 66, the urgent creation of the EPZA which preceded the PEZA, as well as the establishment of
export processing zones, seeks "to encourage and promote foreign commerce as a means of x x x
strengthening our export trade and foreign exchange position, of hastening industrialization, of
reducing domestic unemployment, and of accelerating the development of the country."112

RA 7916, as amended by RA 8748, declared that by creating the PEZA and integrating the special
economic zones, "the government shall actively encourage, promote, induce and accelerate a sound
and balanced industrial, economic and social development of the country x x x through the
establishment, among others, of special economic zones x x x that shall effectively attract legitimate
and productive foreign investments."113

Under EO 226, the "State shall encourage x x x foreign investments in industry x x x which shall x x
x meet the tests of international competitiveness[,] accelerate development of less developed
regions of the country[,] and result in increased volume and value of exports for the
economy."114 Fiscal incentives that are cost-efficient and simple to administer shall be devised and
extended to significant projects "to compensate for market imperfections, to reward performance
contributing to economic development,"115and "to stimulate the establishment and assist initial
operations of the enterprise."116

Wisely accorded to ecozones created under RA 7916117 was the government’s policy -- spelled out
earlier in RA 7227 -- of converting into alternative productive uses118 the former military reservations
and their extensions,119 as well as of providing them incentives120 to enhance the benefits that would
be derived from them121 in promoting economic and social development.122
Finally, under RA 7844, the State declares the need "to evolve export development into a national
effort"123 in order to win international markets. By providing many export and tax incentives,124 the State
is able to drive home the point that exporting is indeed "the key to national survival and the means
through which the economic goals of increased employment and enhanced incomes can most
expeditiously be achieved."125

The Tax Code itself seeks to "promote sustainable economic growth x x x; x x x increase economic
activity; and x x x create a robust environment for business to enable firms to compete better in the
regional as well as the global market."126 After all, international competitiveness requires economic
and tax incentives to lower the cost of goods produced for export. State actions that affect global
competition need to be specific and selective in the pricing of particular goods or services.127

All these statutory policies are congruent to the constitutional mandates of providing incentives to
needed investments,128 as well as of promoting the preferential use of domestic materials and locally
produced goods and adopting measures to help make these competitive.129 Tax credits for domestic
inputs strengthen backward linkages. Rightly so, "the rule of law and the existence of credible and
efficient public institutions are essential prerequisites for sustainable economic development."130

VAT Registration, Not Application for Effective Zero Rating, Indispensable to VAT Refund

Registration is an indispensable requirement under our VAT law.131Petitioner alleges that respondent
did register for VAT purposes with the appropriate Revenue District Office. However, it is now too
late in the day for petitioner to challenge the VAT-registered status of respondent, given the latter’s
prior representation before the lower courts and the mode of appeal taken by petitioner before this
Court.

The PEZA law, which carried over the provisions of the EPZA law, is clear in exempting from internal
revenue laws and regulations the equipment -- including capital goods -- that registered enterprises
will use, directly or indirectly, in manufacturing.132 EO 226 even reiterates this privilege among the
incentives it gives to such enterprises.133 Petitioner merely asserts that by virtue of the PEZA
registration alone of respondent, the latter is not subject to the VAT. Consequently, the capital goods
and services respondent has purchased are not considered used in the VAT business, and no VAT
refund or credit is due.134 This is a non sequitur. By the VAT’s very nature as a tax on consumption,
the capital goods and services respondent has purchased are subject to the VAT, although at zero
rate. Registration does not determine taxability under the VAT law.

Moreover, the facts have already been determined by the lower courts. Having failed to present
evidence to support its contentions against the income tax holiday privilege of
respondent,135 petitioner is deemed to have conceded. It is a cardinal rule that "issues and arguments
not adequately and seriously brought below cannot be raised for the first time on appeal."136 This is a
"matter of procedure"137 and a "question of fairness."138 Failure to assert "within a reasonable time
warrants a presumption that the party entitled to assert it either has abandoned or declined to assert
it."139

The BIR regulations additionally requiring an approved prior application for effective zero
rating140 cannot prevail over the clear VAT nature of respondent’s transactions. The scope of such
regulations is not "within the statutory authority x x x granted by the legislature.141

First, a mere administrative issuance, like a BIR regulation, cannot amend the law; the former cannot
purport to do any more than interpret the latter.142 The courts will not countenance one that overrides
the statute it seeks to apply and implement.143
Other than the general registration of a taxpayer the VAT status of which is aptly determined, no
provision under our VAT law requires an additional application to be made for such taxpayer’s
transactions to be considered effectively zero-rated. An effectively zero-rated transaction does not
and cannot become exempt simply because an application therefor was not made or, if made, was
denied. To allow the additional requirement is to give unfettered discretion to those officials or
agents who, without fluid consideration, are bent on denying a valid application. Moreover, the State
can never be estopped by the omissions, mistakes or errors of its officials or agents.144

Second, grantia argumenti that such an application is required by law, there is still the presumption
of regularity in the performance of official duty.145 Respondent’s registration carries with it the
presumption that, in the absence of contradictory evidence, an application for effective zero rating
was also filed and approval thereof given. Besides, it is also presumed that the law has been
obeyed146 by both the administrative officials and the applicant.

Third, even though such an application was not made, all the special laws we have tackled exempt
respondent not only from internal revenue laws but also from the regulations issued pursuant
thereto. Leniency in the implementation of the VAT in ecozones is an imperative, precisely to spur
economic growth in the country and attain global competitiveness as envisioned in those laws.

A VAT-registered status, as well as compliance with the invoicing requirements,147 is sufficient for the
effective zero rating of the transactions of a taxpayer. The nature of its business and transactions
can easily be perused from, as already clearly indicated in, its VAT registration papers and
photocopied documents attached thereto. Hence, its transactions cannot be exempted by its mere
failure to apply for their effective zero rating. Otherwise, their VAT exemption would be determined,
not by their nature, but by the taxpayer’s negligence -- a result not at all contemplated.
Administrative convenience cannot thwart legislative mandate.

Tax Refund or Credit in Order

Having determined that respondent’s purchase transactions are subject to a zero VAT rate, the tax
refund or credit is in order.

As correctly held by both the CA and the Tax Court, respondent had chosen the fiscal incentives in
EO 226 over those in RA 7916 and PD 66. It opted for the income tax holiday regime instead of the
5 percent preferential tax regime.

The latter scheme is not a perfunctory aftermath of a simple registration under the PEZA law,148 for
EO 226149 also has provisions to contend with. These two regimes are in fact incompatible and cannot
be availed of simultaneously by the same entity. While EO 226 merely exempts it from income taxes,
the PEZA law exempts it from all taxes.

Therefore, respondent can be considered exempt, not from the VAT, but only from the payment of
income tax for a certain number of years, depending on its registration as a pioneer or a non-pioneer
enterprise. Besides, the remittance of the aforesaid 5 percent of gross income earned in lieu of local
and national taxes imposable upon business establishments within the ecozone cannot outrightly
determine a VAT exemption. Being subject to VAT, payments erroneously collected thereon may
then be refunded or credited.

Even if it is argued that respondent is subject to the 5 percent preferential tax regime in RA 7916,
Section 24 thereof does not preclude the VAT. One can, therefore, counterargue that such provision
merely exempts respondent from taxes imposed on business. To repeat, the VAT is a tax imposed
on consumption, not on business. Although respondent as an entity is exempt, the transactions it
enters into are not necessarily so. The VAT payments made in excess of the zero rate that is
imposable may certainly be refunded or credited.

Compliance with All Requisites for VAT Refund or Credit

As further enunciated by the Tax Court, respondent complied with all the requisites for claiming a
VAT refund or credit.150

First, respondent is a VAT-registered entity. This fact alone distinguishes the present case from
Contex, in which this Court held that the petitioner therein was registered as a non-VAT
taxpayer.151 Hence, for being merely VAT-exempt, the petitioner in that case cannot claim any VAT
refund or credit.

Second, the input taxes paid on the capital goods of respondent are duly supported by VAT invoices
and have not been offset against any output taxes. Although enterprises registered with the BOI
after December 31, 1994 would no longer enjoy the tax credit incentives on domestic capital
equipment -- as provided for under Article 39(d), Title III, Book I of EO 226152 -- starting January 1,
1996, respondent would still have the same benefit under a general and express exemption
contained in both Article 77(1), Book VI of EO 226; and Section 12, paragraph 2 (c) of RA 7227,
extended to the ecozones by RA 7916.

There was a very clear intent on the part of our legislators, not only to exempt investors in ecozones
from national and local taxes, but also to grant them tax credits. This fact was revealed by the
sponsorship speeches in Congress during the second reading of House Bill No. 14295, which later
became RA 7916, as shown below:

"MR. RECTO. x x x Some of the incentives that this bill provides are exemption from national and
local taxes; x x x tax credit for locally-sourced inputs x x x."

xxxxxxxxx

"MR. DEL MAR. x x x To advance its cause in encouraging investments and creating an
environment conducive for investors, the bill offers incentives such as the exemption from local and
national taxes, x x x tax credits for locally sourced inputs x x x."153

And third, no question as to either the filing of such claims within the prescriptive period or the
validity of the VAT returns has been raised. Even if such a question were raised, the tax exemption
under all the special laws cited above is broad enough to cover even the enforcement of internal
revenue laws, including prescription.154

Summary

To summarize, special laws expressly grant preferential tax treatment to business establishments
registered and operating within an ecozone, which by law is considered as a separate customs
territory. As such, respondent is exempt from all internal revenue taxes, including the VAT, and
regulations pertaining thereto. It has opted for the income tax holiday regime, instead of the 5
percent preferential tax regime. As a matter of law and procedure, its registration status entitling it to
such tax holiday can no longer be questioned. Its sales transactions intended for export may not be
exempt, but like its purchase transactions, they are zero-rated. No prior application for the effective
zero rating of its transactions is necessary. Being VAT-registered and having satisfactorily complied
with all the requisites for claiming a tax refund of or credit for the input VAT paid on capital goods
purchased, respondent is entitled to such VAT refund or credit.
WHEREFORE, the Petition is DENIED and the Decision AFFIRMED. No pronouncement as to
costs.

SO ORDERED.
G.R. No. 171153 September 12, 2007

SAN MIGUEL CORPORATION EMPLOYEES UNION–PHILIPPINE TRANSPORT AND GENERAL

WORKERS ORGANIZATION (SMCEU–PTGWO), petitioner,
vs.
SAN MIGUEL PACKAGING PRODUCTS EMPLOYEES UNION–PAMBANSANG DIWA NG
MANGGAGAWANG PILIPINO (SMPPEU–PDMP), respondent1.

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, petitioner SAN
MIGUEL CORPORATION EMPLOYEES UNION-PHILIPPINE TRANSPORT AND GENERAL
WORKERS ORGANIZATION (SMCEU-PTGWO) prays that this Court reverse and set aside the (a)
Decision2 dated 9 March 2005 of the Court of Appeals in CA-G.R. SP No. 66200, affirming the
Decision3dated 19 February 2001 of the Bureau of Labor Relations (BLR) of the Department of
Labor and Employment (DOLE) which upheld the Certificate of Registration of respondent SAN
MIGUEL PACKAGING PRODUCTS EMPLOYEES UNION–PAMBANSANG DIWA NG
MANGGAGAWANG PILIPINO (SMPPEU–PDMP); and (b) the Resolution4 dated 16 January 2006 of
the Court of Appeals in the same case, denying petitioner's Motion for Reconsideration of the
aforementioned Decision.

The following are the antecedent facts:

Petitioner is the incumbent bargaining agent for the bargaining unit comprised of the regular
monthly-paid rank and file employees of the three divisions of San Miguel Corporation (SMC),
namely, the San Miguel Corporate Staff Unit (SMCSU), San Miguel Brewing Philippines (SMBP),
and the San Miguel Packaging Products (SMPP), in all offices and plants of SMC, including the
Metal Closure and Lithography Plant in Laguna. It had been the certified bargaining agent for 20
years – from 1987 to 1997.

Respondent is registered as a chapter of Pambansang Diwa ng Manggagawang Pilipino (PDMP).

PDMP issued Charter Certificate No. 112 to respondent on 15 June 1999.5 In compliance with
registration requirements, respondent submitted the requisite documents to the BLR for the purpose
of acquiring legal personality.6 Upon submission of its charter certificate and other documents,
respondent was issued Certificate of Creation of Local or Chapter PDMP-01 by the BLR on 6 July
1999.7 Thereafter, respondent filed with the Med-Arbiter of the DOLE Regional Officer in the National
Capital Region (DOLE-NCR), three separate petitions for certification election to represent SMPP,
SMCSU, and SMBP.8 All three petitions were dismissed, on the ground that the separate petitions
fragmented a single bargaining unit.9

On 17 August 1999, petitioner filed with the DOLE-NCR a petition seeking the cancellation of
respondent's registration and its dropping from the rolls of legitimate labor organizations. In its
petition, petitioner accused respondent of committing fraud and falsification, and non-compliance
with registration requirements in obtaining its certificate of registration. It raised allegations that
respondent violated Articles 239(a), (b) and (c)10 and 234(c)11 of the Labor Code. Moreover,
petitioner claimed that PDMP is not a legitimate labor organization, but a trade union center, hence,
it cannot directly create a local or chapter. The petition was docketed as Case No. NCR-OD-9908-
007-IRD.12
On 14 July 2000, DOLE-NCR Regional Director Maximo B. Lim issued an Order dismissing the
allegations of fraud and misrepresentation, and irregularity in the submission of documents by
respondent. Regional Director Lim further ruled that respondent is allowed to directly create a local
or chapter. However, he found that respondent did not comply with the 20% membership
requirement and, thus, ordered the cancellation of its certificate of registration and removal from the
rolls of legitimate labor organizations.13 Respondent appealed to the BLR. In a Decision dated 19
February 2001, it declared:

As a chartered local union, appellant is not required to submit the number of employees and
names of all its members comprising at least 20% of the employees in the bargaining unit
where it seeks to operate. Thus, the revocation of its registration based on non-compliance
with the 20% membership requirement does not have any basis in the rules.

Further, although PDMP is considered as a trade union center, it is a holder of Registration

Certificate No. FED-11558-LC issued by the BLR on 14 February 1991, which bestowed
upon it the status of a legitimate labor organization with all the rights and privileges to act as
representative of its members for purposes of collective bargaining agreement. On this basis,
PDMP can charter or create a local, in accordance with the provisions of Department Order
No. 9.

WHEREFORE, the appeal is hereby GRANTED. Accordingly, the decision of the Regional
Director dated July 14, 2000, canceling the registration of appellant San Miguel Packaging
Products Employees Union-Pambansang Diwa ng Manggagawang Pilipino (SMPPEU-
PDMP) is REVERSED and SET ASIDE. Appellant shall hereby remain in the roster of
legitimate labor organizations.14

While the BLR agreed with the findings of the DOLE Regional Director dismissing the allegations of
fraud and misrepresentation, and in upholding that PDMP can directly create a local or a chapter, it
reversed the Regional Director's ruling that the 20% membership is a requirement for respondent to
attain legal personality as a labor organization. Petitioner thereafter filed a Motion for
Reconsideration with the BLR. In a Resolution rendered on 19 June 2001 in BLR-A-C-64-05-9-00
(NCR-OD-9908-007-IRD), the BLR denied the Motion for Reconsideration and affirmed its Decision
dated 19 February 2001.15

Invoking the power of the appellate court to review decisions of quasi-judicial agencies, petitioner
filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the 1997 Rules of Civil
Procedure docketed as CA-G.R. SP No. 66200. The Court of Appeals, in a Decision dated 9 March
2005, dismissed the petition and affirmed the Decision of the BLR, ruling as follows:

In Department Order No. 9, a registered federation or national union may directly create a
local by submitting to the BLR copies of the charter certificate, the local's constitution and by-
laws, the principal office address of the local, and the names of its officers and their
addresses. Upon complying with the documentary requirements, the local shall be issued a
certificate and included in the roster of legitimate labor organizations. The [herein
respondent] is an affiliate of a registered federation PDMP, having been issued a charter
certificate. Under the rules we have reviewed, there is no need for SMPPEU to show a
membership of 20% of the employees of the bargaining unit in order to be recognized as a
legitimate labor union.

xxxx
 In view of the foregoing, the assailed decision and resolution of the BLR are AFFIRMED, and
the petition is DISMISSED.16

Subsequently, in a Resolution dated 16 January 2006, the Court of Appeals denied petitioner's
Motion for Reconsideration of the aforementioned Decision.

Hence, this Petition for Certiorari under Rule 45 of the Revised Rules of Court where petitioner
raises the sole issue of:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED

REVERSIBLE ERROR IN RULING THAT PRIVATE RESPONDENT IS NOT REQUIRED TO
SUBMIT THE NUMBER OF EMPLOYEES AND NAMES OF ALL ITS MEMBERS
COMPRISING AT LEAST 20% OF THE EMPLOYEES IN THE BARGAINING UNIT WHERE
IT SEEKS TO OPERATE.

The present petition questions the legal personality of respondent as a legitimate labor organization.

Petitioner posits that respondent is required to submit a list of members comprising at least 20% of
the employees in the bargaining unit before it may acquire legitimacy, citing Article 234(c) of the
Labor Code which stipulates that any applicant labor organization, association or group of unions or
workers shall acquire legal personality and shall be entitled to the rights and privileges granted by
law to legitimate labor organizations upon issuance of the certificate of registration based on the
following requirements:

a. Fifty pesos (P50.00) registration fee;

b. The names of its officers, their addresses, the principal address of the labor organization,
the minutes of the organizational meetings and the list of the workers who participated in
such meetings;

c. The names of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;

d. If the applicant union has been in existence for one or more years, copies of its annual
financial reports; and

e. Four (4) copies of the constitution and by-laws of the applicant union, minutes of its
adoption or ratification and the list of the members who participated in it.17

Petitioner also insists that the 20% requirement for registration of respondent must be based not on
the number of employees of a single division, but in all three divisions of the company in all the
offices and plants of SMC since they are all part of one bargaining unit. Petitioner refers to Section 1,
Article 1 of the Collective Bargaining Agreement (CBA),18 quoted hereunder:

ARTICLE 1

SCOPE

Section 1. Appropriate Bargaining Unit. The appropriate bargaining unit covered by this
Agreement consists of all regular rank and file employees paid on the basis of fixed salary
per month and employed by the COMPANY in its Corporate Staff Units (CSU), San Miguel
 Brewing Products (SMBP) and San Miguel Packaging Products (SMPP) and in different
operations existing in the City of Manila and suburbs, including Metal Closure and
Lithography Plant located at Canlubang, Laguna subject to the provisions of Article XV of this
Agreement provided however, that if during the term of this Agreement, a plant within the
territory covered by this Agreement is transferred outside but within a radius of fifty (50)
kilometers from the Rizal Monument, Rizal Park, Metro Manila, the employees in the
transferred plant shall remain in the bargaining unit covered by this Agreement. (Emphasis
supplied.)

Petitioner thus maintains that respondent, in any case, failed to meet this 20% membership
requirement since it based its membership on the number of employees of a single division only,
namely, the SMPP.

There is merit in petitioner's contentions.

A legitimate labor organization19 is defined as "any labor organization duly registered with the
Department of Labor and Employment, and includes any branch or local thereof."20 The mandate of
the Labor Code is to ensure strict compliance with the requirements on registration because a
legitimate labor organization is entitled to specific rights under the Labor Code,21and are involved in
activities directly affecting matters of public interest. Registration requirements are intended to afford
a measure of protection to unsuspecting employees who may be lured into joining unscrupulous or
fly-by-night unions whose sole purpose is to control union funds or use the labor organization for
illegitimate ends.22 Legitimate labor organizations have exclusive rights under the law which cannot
be exercised by non-legitimate unions, one of which is the right to be certified as the exclusive
representative23 of all the employees in an appropriate collective bargaining unit for purposes of
collective bargaining.24 The acquisition of rights by any union or labor organization, particularly the
right to file a petition for certification election, first and foremost, depends on whether or not the labor
organization has attained the status of a legitimate labor organization.25

A perusal of the records reveals that respondent is registered with the BLR as a "local" or "chapter"
of PDMP and was issued Charter Certificate No. 112 on 15 June 1999. Hence, respondent was
directly chartered by PDMP.

The procedure for registration of a local or chapter of a labor organization is provided in Book V of
the Implementing Rules of the Labor Code, as amended by Department Order No. 9 which took
effect on 21 June 1997, and again by Department Order No. 40 dated 17 February 2003. The
Implementing Rules as amended by D.O. No. 9 should govern the resolution of the petition at bar
since respondent's petition for certification election was filed with the BLR in 1999; and that of
petitioner on 17 August 1999.26

The applicable Implementing Rules enunciates a two-fold procedure for the creation of a chapter or
a local. The first involves the affiliation of an independent union with a federation or national union or
industry union. The second, finding application in the instant petition, involves the direct creation of a
local or a chapter through the process of chartering.27

A duly registered federation or national union may directly create a local or chapter by submitting to
the DOLE Regional Office or to the BLR two copies of the following:

(a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;
 (b) The names of the local/chapter's officers, their addresses, and the principal office of the
local/chapter; and

(c) The local/chapter's constitution and by-laws; Provided, That where the local/chapter's
constitution and by-laws is the same as that of the federation or national union, this fact shall
be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or
the Treasurer of the local/chapter and attested to by its President.28

The Implementing Rules stipulate that a local or chapter may be directly created by
a federation or national union. A duly constituted local or chapter created in accordance with the
foregoing shall acquire legal personality from the date of filing of the complete documents with the
BLR.29 The issuance of the certificate of registration by the BLR or the DOLE Regional Office is not
the operative act that vests legal personality upon a local or a chapter under Department Order No.
9. Such legal personality is acquired from the filing of the complete documentary requirements
enumerated in Section 1, Rule VI.30

Petitioner insists that Section 3 of the Implementing Rules, as amended by Department Order No. 9,
violated Article 234 of the Labor Code when it provided for less stringent requirements for the
creation of a chapter or local. This Court disagrees.

Article 234 of the Labor Code provides that an independent labor organization acquires legitimacy
only upon its registration with the BLR:

Any applicant labor organization, association or group of unions or workers shall acquire
legal personality and shall be entitled to the rights and privileges granted by law to legitimate
labor organizations upon issuance of the certificate of registration based on the following
requirements:

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor organization,
the minutes of the organizational meetings and the list of the workers who participated in
such meetings;

(c) The names of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies of its annual
financial reports; and

(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes of its
adoption or ratification, and the list of the members who participated in it. (Italics supplied.)

It is emphasized that the foregoing pertains to the registration of an independent labor organization,
association or group of unions or workers.

However, the creation of a branch, local or chapter is treated differently. This Court, in the landmark
case of Progressive Development Corporation v. Secretary, Department of Labor and
Employment,31 declared that when an unregistered union becomes a branch, local or chapter, some
of the aforementioned requirements for registration are no longer necessary or compulsory.
Whereas an applicant for registration of an independent union is mandated to submit, among other
things, the number of employees and names of all its members comprising at least 20% of the
employees in the bargaining unit where it seeks to operate, as provided under Article 234 of the
Labor Code and Section 2 of Rule III, Book V of the Implementing Rules, the same is no longer
required of a branch, local or chapter.32 The intent of the law in imposing less requirements in the
case of a branch or local of a registered federation or national union is to encourage the affiliation of
a local union with a federation or national union in order to increase the local union's bargaining
powers respecting terms and conditions of labor.33

Subsequently, in Pagpalain Haulers, Inc. v. Trajano34 where the validity of Department Order No. 9
was directly put in issue, this Court was unequivocal in finding that there is no inconsistency
between the Labor Code and Department Order No. 9.

As to petitioner's claims that respondent obtained its Certificate of Registration through fraud and
misrepresentation, this Court finds that the imputations are not impressed with merit. In the instant
case, proof to declare that respondent committed fraud and misrepresentation remains wanting. This
Court had, indeed, on several occasions, pronounced that registration based on false and fraudulent
statements and documents confer no legitimacy upon a labor organization irregularly recognized,
which, at best, holds on to a mere scrap of paper. Under such circumstances, the labor organization,
not being a legitimate labor organization, acquires no rights.35

This Court emphasizes, however, that a direct challenge to the legitimacy of a labor organization
based on fraud and misrepresentation in securing its certificate of registration is a serious allegation
which deserves careful scrutiny. Allegations thereof should be compounded with supporting
circumstances and evidence. The records of the case are devoid of such evidence. Furthermore,
this Court is not a trier of facts, and this doctrine applies with greater force in labor cases. Findings of
fact of administrative agencies and quasi-judicial bodies, such as the BLR, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally accorded not only
great respect but even finality.36

Still, petitioner postulates that respondent was not validly and legitimately created, for PDMP cannot
create a local or chapter as it is not a legitimate labor organization, it being a trade union center.

Petitioner's argument creates a predicament as it hinges on the legitimacy of PDMP as a labor

organization. Firstly, this line of reasoning attempts to predicate that a trade union center is not a
legitimate labor organization. In the process, the legitimacy of PDMP is being impugned, albeit
indirectly. Secondly, the same contention premises that a trade union center cannot directly create a
local or chapter through the process of chartering.

Anent the foregoing, as has been held in a long line of cases, the legal personality of a legitimate
labor organization, such as PDMP, cannot be subject to a collateral attack. The law is very clear on
this matter. Article 212 (h) of the Labor Code, as amended, defines a legitimate labor
organization37 as "any labor organization duly registered with the DOLE, and includes any branch or
local thereof."38 On the other hand, a trade union center is any group of registered national unions or
federations organized for the mutual aid and protection of its members; for assisting such members
in collective bargaining; or for participating in the formulation of social and employment policies,
standards, and programs, and is duly registered with the DOLE in accordance with Rule III, Section
2 of the Implementing Rules.39

The Implementing Rules stipulate that a labor organization shall be deemed registered and vested
with legal personality on the date of issuance of its certificate of registration. Once a certificate of
registration is issued to a union, its legal personality cannot be subject to collateral attack.40 It may
be questioned only in an independent petition for cancellation in accordance with Section 5 of Rule
V, Book V of the Implementing Rules. The aforementioned provision is enunciated in the following:

Sec. 5. Effect of registration. The labor organization or workers' association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of
registration. Such legal personality cannot thereafter be subject to collateral attack, but may
be questioned only in an independent petition for cancellation in accordance with these
Rules.

PDMP was registered as a trade union center and issued Registration Certificate No. FED-11558-LC
by the BLR on 14 February 1991. Until the certificate of registration of PDMP is cancelled, its legal
personality as a legitimate labor organization subsists. Once a union acquires legitimate status as a
labor organization, it continues to be recognized as such until its certificate of registration is
cancelled or revoked in an independent action for cancellation.41 It bears to emphasize that what is
being directly challenged is the personality of respondent as a legitimate labor organization and not
that of PDMP. This being a collateral attack, this Court is without jurisdiction to entertain questions
indirectly impugning the legitimacy of PDMP.

Corollarily, PDMP is granted all the rights and privileges appurtenant to a legitimate labor
organization,42 and continues to be recognized as such until its certificate of registration is
successfully impugned and thereafter cancelled or revoked in an independent action for cancellation.

We now proceed to the contention that PDMP cannot directly create a local or a chapter, it being a
trade union center.

This Court reverses the finding of the appellate court and BLR on this ground, and rules that PDMP
cannot directly create a local or chapter.

After an exhaustive study of the governing labor law provisions, both statutory and regulatory,43 we
find no legal justification to support the conclusion that a trade union center is allowed to directly
create a local or chapter through chartering. Apropos, we take this occasion to reiterate the first and
fundamental duty of this Court, which is to apply the law. The solemn power and duty of the Court to
interpret and apply the law does not include the power to correct by reading into the law what is not
written therein.44

Presidential Decree No. 442, better known as the Labor Code, was enacted in 1972. Being a
legislation on social justice,45 the provisions of the Labor Code and the Implementing Rules have
been subject to several amendments, and they continue to evolve, considering that labor plays a
major role as a socio-economic force. The Labor Code was first amended by Republic Act No. 6715,
and recently, by Republic Act No. 9481. Incidentally, the term trade union center was never
mentioned under Presidential Decree No. 442, even as it was amended by Republic Act No. 6715.
The term trade union center was first adopted in the Implementing Rules, under Department Order
No. 9.

Culling from its definition as provided by Department Order No. 9, a trade union center is any group
of registered national unions or federations organized for the mutual aid and protection of its
members; for assisting such members in collective bargaining; or for participating in the formulation
of social and employment policies, standards, and programs, and is duly registered with the DOLE in
accordance with Rule III, Section 2 of the Implementing Rules.46 The same rule provides that the
application for registration of an industry or trade union center shall be supported by the following:
 (a) The list of its member organizations and their respective presidents and, in the case of an
industry union, the industry where the union seeks to operate;

(b) The resolution of membership of each member organization, approved by the Board of
Directors of such union;

(c) The name and principal address of the applicant, the names of its officers and their
addresses, the minutes of its organizational meeting/s, and the list of member organizations
and their representatives who attended such meeting/s; and

(d) A copy of its constitution and by-laws and minutes of its ratification by a majority of the
presidents of the member organizations, provided that where the ratification was done
simultaneously with the organizational meeting, it shall be sufficient that the fact of ratification
be included in the minutes of the organizational meeting.47

Evidently, while a "national union" or "federation" is a labor organization with at least ten locals or
chapters or affiliates, each of which must be a duly certified or recognized collective bargaining
agent;48 a trade union center, on the other hand, is composed of a group of registered national
unions or federations.49

The Implementing Rules, as amended by Department Order No. 9, provide that "a duly registered
federation or national union" may directly create a local or chapter. The provision reads:

Section 1. Chartering and creation of a local/chapter. – A duly registered federation or

national union may directly create a local/chapter by submitting to the Regional Office or to
the Bureau two (2) copies of the following:

(a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;

(b) The names of the local/chapter's officers, their addresses, and the principal office of the
local/chapter; and

(c) The local/chapter's constitution and by-laws; provided that where the local/chapter's
constitution and by-laws is the same as that of the federation or national union, this fact shall
be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or
the Treasurer of the local/chapter and attested to by its President.50

Department Order No. 9 mentions two labor organizations either of which is allowed to directly
create a local or chapter through chartering – a duly registered federation or a national union.
Department Order No. 9 defines a "chartered local" as a labor organization in the private sector
operating at the enterprise level that acquired legal personality through a charter certificate, issued
by a duly registered federation or national union and reported to the Regional Office in accordance
with Rule III, Section 2-E of these Rules.51

Republic Act No. 9481 or "An Act Strengthening the Workers' Constitutional Right to Self-
Organization, Amending for the Purpose Presidential Decree No. 442, As Amended, Otherwise
Known as the Labor Code of the Philippines" lapsed52 into law on 25 May 2007 and became
effective on 14 June 2007.53 This law further amends the Labor Code provisions on Labor Relations.
Pertinent amendments read as follows:

SECTION 1. Article 234 of Presidential Decree No. 442, as amended, otherwise known as
the Labor Code of the Philippines, is hereby further amended to read as follows:

ART. 234. Requirements of Registration. — A federation, national union or industry

or trade union center or an independent union shall acquire legal personality and
shall be entitled to the rights and privileges granted by law to legitimate labor
organizations upon issuance of the certificate of registration based on the following
requirements:

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meetings and the list of the workers
who participated in such meetings;

(c) In case the applicant is an independent union, the names of all its members
comprising at least twenty percent (20%) of all the employees in the bargaining unit
where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies of its
annual financial reports; and

(e) Four copies of the constitution and by-laws of the applicant union, minutes of its
adoption or ratification, and the list of the members who participated in it.

SECTION 2. A new provision is hereby inserted into the Labor Code as Article 234-A to read
as follows:

ART. 234-A. Chartering and Creation of a Local Chapter. — A duly

registered federation or national union may directly create a local chapter by issuing
a charter certificate indicating the establishment of the local chapter. The chapter
shall acquire legal personality only for purposes of filing a petition for certification
election from the date it was issued a charter certificate.

The chapter shall be entitled to all other rights and privileges of a legitimate labor
organization only upon the submission of the following documents in addition to its
charter certificate:

(a) The names of the chapter's officers, their addresses, and the principal office of
the chapter; and

(b) The chapter's constitution and by-laws: Provided, That where the chapter's
constitution and by-laws are the same as that of the federation or the national union,
this fact shall be indicated accordingly.

The additional supporting requirements shall be certified under oath by the secretary or
treasurer of the chapter and attested by its president. (Emphasis ours.)
Article 234 now includes the term trade union center, but interestingly, the provision indicating the
procedure for chartering or creating a local or chapter, namely Article 234-A, still makes no mention
of a "trade union center."

Also worth emphasizing is that even in the most recent amendment of the implementing
rules,54 there was no mention of a trade union center as being among the labor organizations
allowed to charter.

This Court deems it proper to apply the Latin maxim expressio unius est exclusio alterius. Under this
maxim of statutory interpretation, the expression of one thing is the exclusion of another. When
certain persons or things are specified in a law, contract, or will, an intention to exclude all others
from its operation may be inferred. If a statute specifies one exception to a general rule or assumes
to specify the effects of a certain provision, other exceptions or effects are excluded.55 Where the
terms are expressly limited to certain matters, it may not, by interpretation or construction, be
extended to other matters.56Such is the case here. If its intent were otherwise, the law could have so
easily and conveniently included "trade union centers" in identifying the labor organizations allowed
to charter a chapter or local. Anything that is not included in the enumeration is excluded therefrom,
and a meaning that does not appear nor is intended or reflected in the very language of the statute
cannot be placed therein.57 The rule is restrictive in the sense that it proceeds from the premise that
the legislating body would not have made specific enumerations in a statute if it had the intention not
to restrict its meaning and confine its terms to those expressly mentioned.58 Expressium facit
cessare tacitum.59 What is expressed puts an end to what is implied. Casus omissus pro omisso
habendus est. A person, object or thing omitted must have been omitted intentionally.

Therefore, since under the pertinent status and applicable implementing rules, the power granted to
labor organizations to directly create a chapter or local through chartering is given to a federation or
national union, then a trade union center is without authority to charter directly.

The ruling of this Court in the instant case is not a departure from the policy of the law to foster the
free and voluntary organization of a strong and united labor movement,60 and thus assure the rights
of workers to self-organization.61 The mandate of the Labor Code in ensuring strict compliance with
the procedural requirements for registration is not without reason. It has been observed that the
formation of a local or chapter becomes a handy tool for the circumvention of union registration
requirements. Absent the institution of safeguards, it becomes a convenient device for a small group
of employees to foist a not-so-desirable federation or union on unsuspecting co-workers and pare
the need for wholehearted voluntariness, which is basic to free unionism.62 As a legitimate labor
organization is entitled to specific rights under the Labor Code and involved in activities directly
affecting public interest, it is necessary that the law afford utmost protection to the parties
affected.63 However, as this Court has enunciated in Progressive Development Corporation v.
Secretary of Department of Labor and Employment, it is not this Court's function to augment the
requirements prescribed by law. Our only recourse, as previously discussed, is to exact strict
compliance with what the law provides as requisites for local or chapter formation.64

In sum, although PDMP as a trade union center is a legitimate labor organization, it has no power to
directly create a local or chapter. Thus, SMPPEU-PDMP cannot be created under the more lenient
requirements for chartering, but must have complied with the more stringent rules for creation and
registration of an independent union, including the 20% membership requirement.

WHEREFORE, the instant Petition is GRANTED. The Decision dated 09 March 2005 of the Court of
Appeals in CA-GR SP No. 66200 is REVERSED and SET ASIDE. The Certificate of Registration of
San Miguel Packaging Products Employees Union–Pambansang Diwa ng Manggagawang Pilipino
is ORDERED CANCELLED, and SMPPEU-PDMP DROPPED from the rolls of legitimate labor
organizations.

Costs against petitioner.

SO ORDERED.
G.R. No. 78585 July 5, 1989

JOSE ANTONIO MAPA, petitioner,

vs.
HON. JOKER ARROYO, in his Capacity as Executive Secretary, and LABRADOR
DEVELOPMENT CORPORATION, respondents.

Francisco T. Mamaug for petitioner.

Emiliano S. Samson for private respondent.

REGALADO, J.:

We are called upon once again, in this special civil action for certiorari, for a pronouncement as to
whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of the executive branch of Government, particularly in the adjudication of a controversy
originally commenced in one of its regulatory agencies.

Petitioner herein seeks the reversal of the decision of the Office of the President, rendered by the
Deputy Executive Secretary on April 24,1987, 1 which dismissed his appeal from the resolution of the
Commission Proper, Human Settlements Regulatory Commission (HSRC, for short), promulgated on
January 10, 1986 and affirming the decision of July 3, 1985 of the Office of Adjudication and Legal
Affairs (OAALA, for brevity) of HSRC. Petitioner avers that public respondent "gravely transcended
the sphere of his discretion" in finding that Presidential Decree No. 957 is inapplicable to the
contracts to sell involved in this case and in consequently dismissing the same. 2

The established facts on which the assailed decision is based are set out therein as follows:

Records disclose that, on September 18, 1975, appellant Jose Antonio Mapa and
appellee Labrador Development Corporation (Labrador, for short), owner/developer
of the Barangay Hills Subdivision in Antipolo, Rizal, entered into two contracts to sell
over lots 12 and 13 of said subdivision. On different months in 1976, they again
entered into two similar contracts involving lots 15 and 16 in the same subdivision.
Under said contracts, Mapa undertook to make a total monthly installment of
P2,137.54 over a period of ten (10) years. Mapa, however, defaulted in the payment
thereof starting December 1976, prompting Labrador to send to the former a demand
letter, dated May 5, 1977, giving him until May 18, 1977, within which to settle his
unpaid installments for the 4 lots amounting to P15,411.66, with a warning that non-
payment thereof will result in the cancellation of the four (4) contracts. Despite
receipt of said letter on May 6,1977, Mapa failed to take any action thereon. Labrador
subsequently wrote Mapa another letter, dated June 15, 1982, which the latter
received on June 21, 1982, reminding him of his total arrears amounting to
P180,065.27 and demanding payment within 5 days from receipt thereof, but which
letter Mapa likewise ignored. Thus, on August 16, 1982, Labrador sent Mapa a
notarial cancellation of the four (4) contracts to sell, which Mapa received on August
20, 1982. On September 10, 1982, however, Mapa's counsel sent Labrador a letter
calling Labrador's attention to, and demanding its compliance with, Clause 20 of the
four (4) contracts to sell which relates to Labrador's obligation to provide, among
others, lighting/water facilities to subdivision lot buyers.
 On September 10, 1982, Labrador issued a certification holding the implementation
of the letter dated August 16, 1982 (re notarial cancellation) pending the complete
development of road lot cul de sac within the properties of Mapa at Barangay Hills
Subdivision.' Thereafter on October 25,1982, Labrador sent Mapa a letter informing
him 'that the construction of road, sidewalk, curbs and gutters adjacent to Block 11
Barangay Hills Subdivision are already completed' and further requesting Mapa to
'come to our office within five (5) days upon receipt of this letter to settle your
account.'

On December 10, 1982, Mapa tendered payment by means of a check in the amount
of P 2,137.54, but Labrador refused to accept payment for the reason that it was
agreed 'that after the development of the cul de sac, he (complainant) will pay in full
the total amount due,' which Labrador computed at P 260,138.61. On December 14,
1982, Mapa wrote Labrador claiming that 'you have not complied with the
requirements for water and light facilities in lots 12, 13, 15 & 16 Block 2 of Barangay
Hills Subdivision.' The following day, Mapa filed a complaint against Labrador for the
latter's neglect to put 1) a water system that meets the minimum standard as
specified by HSRC, and 2) electrical power supply. By way of relief, Mapa requested
the HSRC to direct Labrador to provide the facilities aforementioned, and to issue a
cease and desist order enjoining Labrador from cancelling the contracts to sell.

After due hearing/investigation, which included an on-site inspection of the

subdivision, OAALA, issued its decision of July 3, 1985, dismissing the complaint and
declaring that after the lapse of 5 years from complainant's default respondent had
every right to rescind the contract pursuant to Clause 7 thereof. . .

Per its resolution of January 10, 1986, the Commission Proper, HSRC, affirmed the
aforesaid OAALA decision.3

It was petitioner's adamant submission in the administrative proceedings that the provisions of
Presidential Decree No. 957 4and implementing rules form part of the contracts to sell executed by
him and respondent corporation, hence the obligations imposed therein had to be complied with by
Labrador within the period provided. Since, according to petitioner, Labrador failed to perform the
aforementioned obligations, it is precluded from rescinding the subject contracts to sell since
petitioner consequently did not incur in delay on his part.

Such intransigent position of petitioner has not changed in the petition at bar and unyielding reliance
is placed on the provisions of Presidential Decree No. 957 and its implementing rules. The specific
provisions of the Decree which are persistently relied upon read:

SEC. 20. Time of Completion. — Every owner or developer shall construct and
provide the facilities, improvements, infrastructures and other forms of development,
including water supply and lighting facilities, which are offered and indicated in the
approved subdivision or condominium plans, brochures, prospectus, printed matters
letters or in any form of advertisements, within one year from the date of the
issuance of the license for the subdivision or condominium project or such other
period of time as may be fixed by the Authority.

SEC. 21. Sales Prior to Decree. — In cases of subdivision lots or condominium units
sold or disposed of prior to the effectivity of this Decree, it shall be incumbent upon
the owner or developer of the subdivision or condominium project to complete
compliance with his or its obligations as provided in the preceding section within two
 years from the date of this Decree unless otherwise extended by the Authority or
unless an adequate performance bond is filed in accordance with Section 6 hereof.

Failure of the owner or developer to comply with the obligations under this and the
preceding provisions shall constitute a violation punishable under Sections 38 and 39
of this Decree.

Rule V of the implementing rules, on the other hand, requires two (2) sources of electric power, two
(2) deep-well and pump sets with a specified capacity and two standard fire hose flows with a
capacity of 175 gallons per minute. 5

The provision, in said contracts to sell which, according to petitioner, includes and incorporates the
aforequoted statutory provisions, is Clause 20 of said contracts which provides:

Clause 20. SUBDIVISION DEVELOPMENT — To insure the physical development

of the subdivision, the SELLER hereby obliges itself to provide the individual lot
buyer with the following:

a) PAVED ROADS

b) UNDERGROUND DRAINAGE

c) CONCRETE CURBS AND GUTTERS

d) WATER SYSTEM

e) PARK AND OPEN SPACE

These improvements shall apply only to the portions of the subdivision which are for
sale or have been sold. All improvements except those requiring the services of a
public utility company or the government shall be completed within a period of three
(3) years from date of this contract. Failure by the SELLER to reasonably comply
with the above schedule shall permit the BUYER/ S to suspend his monthly
installments without any penalties or interest charges until such time that these
improvements shall have been made as scheduled.6

As recently reiterated, it is jurisprudentially settled that absent a clear, manifest and grave abuse of
discretion amounting to want of jurisdiction, the findings of the administrative agency on matters
falling within its competence will not be disturbed by the courts. 7 Specifically with respect to factual
findings, they are accorded respect, if not finality, because of the special knowledge and expertise
gained by these tribunals from handling the specific matters falling under their jurisdiction. Such
factual findings may be disregarded only if they "are not supported by evidence; where the findings
are vitiated by fraud, imposition or collusion; where the procedure which led to the factual findings is
irregular; when palpable errors are committed; or when grave abuse of discretion, arbitrariness or
capriciousness is manifest." 8

A careful scrutiny of the records of the instant case reveals that the circumstances thereof do not fag
under the aforesaid excepted cases, with the findings duly supported by the evidence.

Petitioner's insistence on the applicability of Presidential Decree No. 957 must be rejected. Said
decree was issued on July 12, 1976 long after the execution of the contracts involved. Obviously and
necessarily, what subsequently were statutorily provided therein as obligations of the owner or
developer could not have been intended by the parties to be a part of their contracts. No intention to
give restrospective application to the provisions of said decree can be gathered from the language
thereof. Section 20, in relation to Section 21, of the decree merely requires the owner or developer
to construct the facilities, improvements, infrastructures and other forms of development but only
such as are offered and indicated in the approved subdivision or condominium plans, brochures,
prospectus, printed matters, letters or in any form of advertisements. Other than what are provided in
Clause 20 of the contract, no further written commitment was made by the developer in this respect.
To read into the contract the matters desired by petitioner would have the law impose additional
obligations on the parties to a contract executed before that very law existed or was contemplated.

We further reject petitioner's strained and tenuous application of the so-called doctrine of last
antecedent in the interpretation of Section 20 and, correlatively, of Section 21. He would thereby
have the enumeration of "facilities, improvements, infrastructures and other forms of development"
interpreted to mean that the demonstrative phrase "which are offered and indicated in the approved
subdivision plans, etc." refer only to "other forms of development" and not to "facilities,
improvements and infrastructures." While this subserves his purpose, such bifurcation whereby the
supposed adjectival phrase is set apart from the antecedent words, is illogical and erroneous. The
complete and applicable rule is ad proximum antecedens fiat relatio nisi impediatur
sentencia. 9 Relative words refer to the nearest antecedent, unless it be prevented by the context. In
the present case, the employment of the word "and" between "facilities, improvements,
infrastructures" and "other forms of development," far from supporting petitioner's theory, enervates
it instead since it is basic in legal hermeneutics that "and" is not meant to separate words but is a
conjunction used to denote a joinder or union.

Thus, if ever there is any valid ground to suspend the monthly installments due from petitioner, it
would only be based on non-performance of the obligations provided in Clause 20 of the contract,
particularly the alleged non-construction of the cul-de-sac. But, even this is unavailing and is
obviously being used only to justify petitioner's default. The on-site inspection of the subdivision
conducted by the OAALA and its subsequent report reveal that Labrador substantially complied with
its obligation. 10

Furthermore, the initial non-construction of the cul-de-sac, as private respondent Labrador

explained, was because petitioner Mapa requested the suspension of its construction since his
intention was to purchase the adjoining lots and thereafter enclose the same. 11 If these were not
true, petitioner would have invoked that supposed default in the first instance. As the OAALA noted,
petitioner "stopped payments of his monthly obligations as early as December, 1976, which is a
mere five months after the effectivity of P.D. No. 957 or about a year after the execution of the
contracts. This means that respondent still has 1 and 1/2 years to comply with its legal obligation to
develop the subdivision under said P.D. and two years to do so under the agreement, hence, it was
improper for complainant to have suspended payments in December, 1976 on the ground of non-
development since the period allowed for respondent's obligation to undertake such development
has not yet expired." 12

ON THE FOREGOING CONSIDERATIONS, the petition should be, as it is hereby DISMISSED.

SO ORDERED.
G.R. No. L-14859 March 31, 1962

MACARIO KING, ET AL., petitioners-appellees,

vs.
PEDRO S. HERNAEZ, ETC., ET AL., respondents-appellants.

Sycip, Salazar and Associates for petitioners-appellees.

Office of the Solicitor General for respondents-appellants.

BAUTISTA ANGELO, J.:

On January 1, 1957, Macario King, a naturalized Filipino citizen, became the owner of the business
establishment known as "Import Meat and Produce", a grocery wholesale and retail business,
previously owned by the Philippine Cold Stores, Inc. In the business 15 persons were employed 12
of whom are Filipinos and the other 3 Chinese. The three Chinese were old employees of the
previous owner, the Philippine Cold Stores, Inc., one having been employed as purchaser and the
other two as salesmen.

Three weeks after King had acquired the business as aforesaid, he sought permission from the
President of the Philippines to retain the services of the three Chinese employees pursuant to
Section 2-A of Commonwealth Act 108, coursing his letter thru the Secretary of Commerce and
Industry. This official recommended to the President the disapproval of King's request on the ground
that aliens may not be appointed to operate or administer a retail business under Section 1 of
Republic Act No. 1180 which requires that its capital be wholly owned by citizens of the Philippines,
the only exception thereto being the employment of technical personnel which may be allowed after
securing to that effect an authorization from the President. The President approved the
recommendation of the Secretary of Commerce and Industry since the positions of purchaser and
salesmen occupied by the three Chinese employees are not technical positions within the meaning
of Section 2-A of Commonwealth Act 108, as amended by Republic Act No. 134.

As a result of such adverse ruling, Macario King and his three Chinese employees filed a petition for
declaratory relief, injunction and mandamus on August 25, 1958 against the Secretary of Commerce
and Industry and the Executive Secretary before the Court of First Instance of Manila praying that
they be given relief because they are "uncertain and in doubt as to their rights and duties under
Republic Act No. 1180 and Commonwealth Act No. 108, as amended by Republic Act No. 134, in
view of the aforesaid rulings of the Department of Commerce and Industry and of the Executive
Secretary." They alleged that said rulings are illegal in view of the respective situations and positions
of petitioners in the retail establishment, the purpose and language of the laws abovementioned, and
the constitutional guarantee of the rights of an employer to employ and of an employee to work
accorded to citizens and aliens alike. The lower court issued a writ of preliminary injunction ex parte
upon petitioners' filing a bond in the amount of P5,000.00. 1äwphï1.ñët

Respondents filed an answer setting up certain affirmative and special defenses tending to show
that the petition does not allege facts sufficient to constitute a cause of action. With regard to the
declaratory relief, respondents claim that such remedy is not available to petitioners because they
have already committed a breach of the statute which is apparent on the face of the petition,
meaning that the employment of the three Chinese as salesmen and purchaser in the store of
Macario King is a violation of the Section 1 of the Retail Trade Act which provides that only citizens
of the Philippines can engage in retail trade, as well as of Section 2-A of the Anti-Dummy Law which
prohibits Chinese citizens to intervene in the management, operation, administration or control of
such business, whether as an officer, employee or laborer with or without remuneration.
Respondents further claim that the three Chinese employees are not technical men who are
exempted from the operation of the law, and even if they are, they need the authorization of the
President which they failed to obtain in their case.

With regard to the petition for preliminary injunction, respondents contend that the requisites for its
issuance have not been satisfied. And with regard to the petition for mandamus, respondents
alleged that petitioners have failed to show that respondents have unlawfully neglected any duty
which they are called upon to perform and which would make them liable for such relief. Hence,
respondents prayed that the petition be dismissed and that the writ of preliminary injunction issued
by the court ex parte be lifted.

To this answer, petitioners filed a reply, which was followed by a rejoinder and sur-rejoinder, with a
detailed discussion of the arguments advanced in support thereof. And because the motion to
dismiss filed by respondents had been denied for lack of merit, trial proceeded, after which the lower
court entered judgment holding "that petitioner Macario King may employ any person, although not a
citizen of the Philippines or of the United States of America, including the three petitioners herein as
purchaser and salesmen, in any position in his retail business not involving participation, or
intervention in the management, operation, administration or control of said business; that petitioners
Lim Pin, Chang Pak and Ng See Keng are entitled to continue as purchaser and salesmen,
respectively, in Macario King's Import Meat and Produce or in any other retail establishment; that the
writ of preliminary injunction issued against respondents ordering the to desist from interfering by
criminal and/or administrative action with the rights of the petitioners as above defined, is hereby
declared final; and, finally, respondents are hereby ordered to allow and permit petitioners to enjoy
and exercise their rights in the manner and to the extent aforestated." Respondents took the present
appeal before this Court.

The center of controversy between petitioners-appellees and respondents-appellants hinges on the

interpretation be given to Section 1, Republic Act No. 1180, in relation to Section 2-A,
Commonwealth Act 108, as amended by Republic Act No. 134. For ready reference we quote the
pertinent provisions: .

SECTION 1. No person who is not a citizen of the Philippines, and no association,

partnership, or corporation the capital of which is not wholly owned by citizens of the
Philippines, shall engage directly or indirectly in the retail business: ... (Emphasis supplied) .

SEC. 2-A. Any person, corporation, or association which, having in its name or under its
control, a right, franchise, privilege, property or business, the exercise or enjoyment of which
is expressly reserved by the Constitution or the laws to citizens of the Philippines, or of any
other specific country, or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, permits or allows the use, exploitation or
enjoyment thereof by a person, corporation or association not possessing the requisites
prescribed by the Constitution or the laws of the Philippines; or leases, or in any other way
transfers or conveys said right, franchise, privilege, property or business to a person,
corporation or association not otherwise qualified under the Constitution, or the provisions of
the existing laws; or in any manner permits or allows any person, not possessing the
qualifications required by the Constitution or existing laws to acquire, use, exploit or enjoy a
right, franchise, privilege, property or business, the exercise and enjoyment of which are
expressly reserved by the Constitution or existing laws to citizens of the Philippines or of any
other specific country, to intervene in the management, operation, administration or control
thereof, whether as an officer, employee or laborer therein, with or without remuneration
except technical personnel whose employment may be specifically authorized by the
President of the Philippines upon recommendation of the Department Head concerned....
(emphasis supplied) .
With regard to the Retail Trade Law, this Court had already occasion to rule on its constitutionality.
We held that the same is valid and that its purpose is to completely nationalize the retail trade in the
Philippines. In other words, its primordial purpose is to confine the privilege to engage in retail trade
to Filipino citizens by prohibiting any person who is not a Filipino citizen or any entity whose capital
is not wholly owned by citizens of the Philippines from engaging, directly or indirectly, in the retail
business. The nationalization of retail trade is, therefore, complete in the sense that it must be wholly
owned by a Filipino citizen or Filipino controlled entity in order that it may be licensed to operate. The
law seeks a complete ban to aliens who may not engage in it directly or indirectly. And the reasons
behind such ban are the pernicious and intolerable practices of alien retailers who in the past have
either individually or in organized groups contrived in many dubious ways to control the trade and
dominate the distribution of goods vital to the life of our people thereby resulting not only in the
increasing dominance of alien control in retail trade but at times in the strangle hold on our economic
life. These reasons were well expressed by Mr. Justice Labrador in the following wise: .

"But the dangers arising from alien participation in the retail trade does not seem to lie in the
predominance alone; there is a prevailing feeling that such predominance may truly
endanger the national interest. With ample capital, unity of purpose and action and thorough
organization, alien retailers and merchants can act in such complete unison and concert on
such vital matters as the fixing of prices, the determination of the amount of goods or articles
to be made available in the market, and even the choice of the goods or articles they would
or would not patronize or distribute, that fears of dislocation of the national economy and of
the complete subservience of national retailers and of the producers and consumers alike,
can be placed completely at their mercy...

"... Grave abuses have characterized the exercise of the retail trade by aliens. It is a fact
within judicial notice, which courts of justice may not properly overlook or ignore in the
interests of truth and justice, that there exists a general feeling on the part of the public that
alien participation in the retail trade has been attended by a pernicious and intolerable
practices, the mention of a few of which would suffice for our purposes; that at some time or
other they have cornered the market of essential commodities, like corn and rice, creating
artificial scarcities to justify and enhance profits to unreasonable proportions; that they have
hoarded essential foods to the inconvenience and prejudice of the consuming public, so
much so that the Government has had to establish the National Rice and Corn Corporation
to save the public from their continuous hoarding practices and tendencies; that they have
violated price control laws, especially on foods and essential commodities, such that the
legislature had to enact a law (Sec. 9, Republic Act No. 1168), authorizing their immediate
and automatic deportation for price control convictions; that they have secret combinations
among themselves to control prices, cheating the operation of the law of supply and demand;
that they have connived to boycott honest merchants and traders who would not cater or
yield to their demands, in unlawful restraint of freedom of trade and enterprise. They are
believed by the public to have evaded tax laws, smuggled goods and money into and out of
the land, violated import and export prohibitions, control laws and the like, in derision and
contempt of lawful authority. It is also believed that they have engaged in corrupting public
officials with fabulous bribes, indirectly causing the prevalence of graft and corruption in the
Government. As a matter of fact appeals to unscrupulous aliens have been made both by the
Government and by their own lawful diplomatic representatives, action which impliedly
admits a prevailing feeling about the existence of many of the above practices.

The circumstances above set forth create well founded fears that worse things may come in
the future. The present dominance of the alien retailer, especially in the big centers of
population, therefore, becomes a potential source of danger on occasions of war or other
calamity. We do not have here in this country isolated groups of harmless aliens retailing
goods among nationals; what we have are well organized and powerful groups that dominate
 the distribution of goods and commodities in the communities and big centers of population.
They owe no allegiance or loyalty to the State, and the State cannot rely upon them in times
of crisis or emergency. While the national holds his life, his person and his property subject
to the needs of his country, the alien may even become the potential enemy of the State.
(Lao H. Ichong v. Hernandez, et al., G.R. No. L-7995, May 31, 1957).

The purpose of the enactment of the Retail Trade Law, therefore, is clear. As expressed by this
Court, it is to translate the general preoccupation of the Filipinos against the threat and danger to our
national economy caused by alien dominance and control of the retail business by weeding out such
threat and danger and thus prevent aliens from having a strangle hold upon our economic life. But in
so doing the legislature did not intend to deprive aliens of their means of livelihood. This is clearly
pointed out in the explanatory note of the law: .

This bill proposes to regulate the retail business. Its purpose is to prevent persons who are
not citizens of the Philippines from having a strangle hold upon our economic life. If the
persons who control this vital artery of our economic life are those who owe no allegiance to
this Republic, who have no profound devotion to our free institutions and who have no
permanent state in our people's welfare, we are not really the masters of our own country. All
aspects of our life, even our national security, will be at the mercy of other people.

In seeking to accomplish the foregoing purpose, we do not propose to deprive persons who
are not citizens of the Philippines of their means of livelihood. While this bill seeks to take
away from the hands of persons who are not citizens of the Philippines a power that can be
wielded to paralyze all aspects of our national life and endanger our national security, it
respects existing rights.

It is in the light of this view of the Retail Trade Law that the issue was posed whether the prohibition
to aliens from engaging in such trade is intended merely to ban them from its ownership and not
from its management control or operation. However, from the context of the law as well as from the
decision of this Court in the Ichong case, it may be safely inferred that the nationalization of the retail
trade is merely confined to its ownership and not its management, control, or operation.
Nevertheless, this apparent flaw in the Retail Trade Law cannot be availed of by an unscrupulous
alien as a convenient pretext to employ in the management of his business persons of his ilk to flout
the law or subvert its nationalistic purpose, for in pari materia with such law we have the Anti-
Dummy Law (Commonwealth Act No. 108, as amended by Republic Act No. 134), which seeks "to
punish acts of evasion of the laws of nationalization of certain rights, franchises or privileges." Read
in connection with the Retail Trade Law, the Anti-Dummy Law would punish acts intended to
circumvent the provisions of the former law which nationalize the retail business.

The question that now arises is: Is the employment of aliens in non-control positions in a retail
establishment or trade prohibited by the Anti-Dummy Law?

Petitioners contend that their employment is not prohibited either by the Retail Trade Law or the
Anti-Dummy Law. The three Chinese petitioners testified that they had nothing to do with the
management and control of the business, nor do they participate in its profits outside of their monthly
salaries. They had been employed long before the enactment of Republic Act No. 1180. They only
wait for customers and sell according to the prices appearing on the tags previously fixed by their
manager Macario King. They desire to continue in the employ of Macario King in his business and
their job is their only means of earning support for themselves and their families. Lim Pin who is
employed as buyer declared that his duties include no more than buying the groceries appearing in a
list prepared and given to him from time to time by Macario King, and at no more than the prices
indicated in said list. Respondents did not present any evidence to contradict these facts, as they
merely relied their motion to dismiss.

It is evident that petitioners' theory is that since they do not intervene in the management, operation,
administration or control of the retail establishment of Macario King they are not covered by the Anti-
Dummy Law. Indeed, they contend, Section 1 of Republic Act No. 1180 mirrors the legislative intent
to nationalize the retail trade merely thru the ownership by Filipinos of the business, and as stated by
this Court in the Ichong case, the ownership of the retail business by non-citizens lies at the
foundation of the prohibition, and since there is nothing in the Retail Trade Law which prohibits a
Filipino-owned retail enterprise from employing an alien and the dummy law merely limits the
prohibition to any position that relates to management, operation, administration or control,
petitioners contend that they may be allowed to continue in their positions without doing violence to
both the Retail Trade Law and the Anti-Dummy Law. In other words, they draw a line of distinction
between one class of alien employees occupying positions of control and another class occupying
non-control positions.

Respondents, on the other hand, sustain a different view. They hold that the language of the Anti-
Dummy Law bans aliens' employment in both control and non-control positions. They contend that
the words management, operation, administration and control, followed by and blended with the
words "whether as an officer, employee or laborer therein", signify the legislative intent to cover the
entire scale of personnel activity so that even laborers are excluded from employment, the only
exemption being technical personnel whose employment may be allowed with the previous
authorization of the President. This contention, according to respondents, results from the
application of the rule known in statutory construction as redendo singula singulis. This means that
the antecedents "management, operation, administration and control" and the consequents "officer,
employee, and laborer" should be read distributively to the effect that each word is to be applied to
the subject to which it appears by context most properly relate and to which it is most applicable
(Vol. 2, Sutherland, Statutory Construction, Section 4819).

We agree to this contention of respondents not only because the context of the law seems to be
clear on what its extent and scope seem to prohibit but also because the same is in full accord with
the main objective that permeates both the Retail Trade Law and the Anti-Dummy Law. The one
advocates the complete nationalization of the retail trade by denying its ownership to any alien, while
the other limits its management, operation, administration and control to Filipino citizens. The
prevailing idea is to secure both ownership and management of the retail business in Filipino hands.
It prohibits a person not a Filipino from engaging in retail trade directly or indirectly while it limits the
management, operation, administration and control to Filipino citizens. These words may be
technically synonymous in the sense that they all refer to the exercise of a directing, restraining or
governing influence over an affair or business to which they relate, but it cannot be denied that by
reading them in connection with the positions therein enumerated one cannot draw any other
conclusion than that they cover the entire range of employment regardless of whether they involve
control or non-control activities. When the law says that you cannot employ an alien in any position
pertaining to management, operation, administration and control, "whether as an officer, employee,
or laborer therein", it only means one thing: the employment of a person who is not a Filipino citizen
even in a minor or clerical or non-control position is prohibited. The reason is obvious: to plug any
loophole or close any avenue that an unscrupulous alien may resort to flout the law or defeat its
purpose, for no one can deny that while one may be employed in a non-control position who
apparently is harmless he may later turn out to be a mere tool to further the evil designs of the
employer. It is imperative that the law be interpreted in a manner that would stave off any attempt at
circumvention of this legislative purpose.

In this respect, we agree with the following remark of the Solicitor General: "Summing up, there is no
point in distinguishing employments in positions of control from employments in non-control positions
except to facilitate violations of the Anti-Dummy Law. It does not require ingenuity to realize that the
law is framed up the way we find it so that no difficulties will be encountered in its enforcement. This
is not the first time to use the words of the United States Supreme Court ... that a government wants
to know, without being put to a search, that what it forbids is carried out effectively." .

There is an intimation in the decision of the trial court that if the employment of aliens in non-control
positions is prohibited as respondents so advocate, it may impair the right of a citizen under our
Constitution to select, pick and employ any one who in his opinion may be amenable to his business
provided he is not a criminal, a communist, or affected by a contagious disease, in the same manner
as one may not be deprived of his right to associate with people of his own choice because those
are rights that are guaranteed by our Constitution. The language of the trial court on this matter
follows: .

There is no question that a Filipino citizen has a right under the Constitution and the laws of
this Republic to engage in any lawful business, to select, pick and employ anyone who in his
opinion may be amenable, congenial, friendly, understanding and profitable to his business
provided that they are not originals, say communists, or affected by some contagious
disease or morally unfit. The right to associate with our friends or people of our choice
cannot be seriously contested in a democratic form of government. This is one of the most
cherished privileges of a citizen. Nullify it and it will produce a communist control of action in
our free movement and intercourse with our fellow citizens as now prevails in Russia and
other Soviet satellites History has amply demonstrated that in countries where personal
liberties are limited, curtailed or hampered, communism thrives; while in the lands where
personal liberties are protected, democracy lives. We need but look at the horizon and see
terrible and sinister shadows of some catastrophic events threatening to annihilate all our
hopes and love for liberty if we are to traffic with our rights as citizens like any other ordinary
commodities. It is our sacred and bounden duty to protect individual rights so that by their
benign influence real democracy may be nurtured to full maturity.

xxx xxx xxx

There is no need of any lengthy discussion as to the rights of a Filipino citizen to employ any
person in his business provided the latter is not a criminal, affected with some contagious
disease, or a recognized human derelict. The right to employ is the same as the right to
associate. The right to associate is admittedly one of the most sacred privileges of a Filipino
citizen. If a Filipino citizen has the right to employ any person in his business, has a
naturalized citizen the same rights? We hold and sustain that under the Constitution and
laws of this country, there is no difference between a natural-born citizen and a naturalized
citizen, with the possible exception, as provided by the Constitution, that while the former can
be President, Vice-President or member of Congress, the latter cannot. But outside of these
exceptions, they have the same rights and privileges.

It is hard to see how the nationalization of employment in the Philippines can run counter to any
provision of our Constitution considering that its aim is not exactly to deprive citizen of a right that he
may exercise under it but rather to promote enhance and protect those that are expressly accorded
to a citizen such as the right to life, liberty and pursuit of happiness. The nationalization of an
economic measure when founded on grounds of public policy cannot be branded as unjust, arbitrary
or oppressive or contrary to the Constitution because its aim is merely to further the material
progress and welfare of the citizens of a country. This is what we expressed in no uncertain terms in
the Ichong Case when we declared constitutional the nationalization of the retail trade. Indeed, we
said there that it is a law "clearly in the interest of the public, nay of the national security itself, and
indisputability falls within the scope police power, thru which and by which the State insures its
existence and security and the supreme welfare of its citizens." True, this fundamental policy was
expressed in a decision the subject of which concerns the constitutionality of the Retail Trade Act,
but since the Anti-Dummy Law is but a mere complement of the former in the sense that it is
designed to make effective its aims and purposes and both tend to accomplish the same objective
either by excluding aliens from owning any retail trade or by banning their employment if the trade is
owned by Filipinos, and the target of both is "the removal and eradication of the shackles of foreign
economic control and domination" thru the nationalization of the retail trade both in ownership and
employment, the pronouncement made in one regarding its constitutionality applies equally if not
with greater reason to the other both being complementary one to the other. Indeed, in nationalizing
employment in retail trade the right of choice of an employer is not impaired but its sphere is merely
limited to the citizens to the exclusion of those of other nationalities.

We note that the case cited by the trial court to substantiate its conclusion that freedom to employ is
guaranteed by our Constitution is Meyer v. Nebraska, 67 Law Ed. 1042, which is also the same case
relied upon by petitioners in support of their proposition that "the liberty guaranteed by the
Constitution includes the right to engage in any of the common occupations of life". We also note
that this is the same case cited by counsel for Lao Itchong to support the same proposition in his
advocacy of the unconstitutionality of the nationalization of the Retail Trade Law which did not
deserve favorable consideration by this Court in the Itchong case. To refute counsel's argument that
the retail trade is a common occupation the pursuit of which cannot be impaired and consequently
the right to employ therein is guaranteed by our Constitution, suffice it to state that we brushed aside
such theory in the Itchong case in view of the monopolistic control exercised by aliens in the retail
business and their "deadly strangle hold on the national economy endangering the national security
in times of crisis and emergency". The circumstances surrounding the enforcement of the Retail
Trade Law being the very foundation of the Anti-Dummy Law the same circumstances that justify the
rejection of counsel's proposition in the Itchong case should also apply with regard to the application
of the Meyer case in the consideration of the constitutionality of the Anti-Dummy Law.

The thinking of the lower court that the nationalization of employment in retail trade produces
communistic control or impairs a right guaranteed by the Constitution to a citizen seems to have as
basis its pronouncement that "the right to employ is the same as the right to associate". This promise
has no foundation in law for it confuses the right of employment with the right of association
embodied in the Bill of Rights of our Constitution. Section 1, paragraph 6, of said Bill of Rights,
provides that "the right to form associations or societies for purposes not contrary to law, shall not be
abridged", and this has as its main purpose "to encourage the formation of voluntary associations so
that thru the cooperative activities of individuals the welfare of the nation may be
advanced."1 Petitioners have never been denied the right to form voluntary associations. In fact, they
can so organize to engage in any business venture of their own choosing provided that they comply
with the limitations prescribed by our regulatory laws. These laws cannot be assailed as abridging
our Constitution because they were adopted in the exercise of the police power of the State (Lao
Itchong case, supra).

Against the charge that this nationalization movement initiated by Congress in connection with
several measures that affect the economic life of our people places the Philippines in a unique
position in the free world, we have only to cite the cases of Commonwealth v. Hans, 81 N.E. 149,
and Bloomfield v. State, 99 N.E. 309, which this Court considered as basic authorities for
nationalization of legislative measures in the Lao Ichong case. Similar laws had been declared
constitutional by the Supreme Court of California and the United States Supreme Court in a series of
cases involving contracts under the Alien Land Law, and because of the similarities of the facts and
laws involved therein we can consider the decisions rendered in said cases of persuasive force and
effect in the determination of the present case.2
We wish to add one word with regard to the procedural aspect raised in respondents' brief. It is
respondents' theory that a complaint for declaratory relief will not prosper if filed after a contract or
statute has been breached. The law does not even require that there shall be an actual pending
case. It is sufficient that there is a breach of the law, or an actionable violation, to bar a complaint for
declaratory judgment (Vol. 2, Moran, Comments on the Rules of Court, 1957 Ed., 145). The
pertinent provisions of the Anti-Dummy Law postulate that aliens cannot be employed by Filipino
retailers except for technical positions with previous authority of the President, and it is contended
that Macario King had in his employ his Chinese co-petitioners for a period of more than 2 years in
violation of Section 2-A of Republic Act No. 134. Hence, respondents contend, due to their breach of
the law petitioners have forfeited their right to file the present action for declaratory relief.

It appears, however, that alien petitioners were already in the employ of the establishment known as
"Import Meat and Produce" previously owned by the Philippine Cold Stores, Inc. when Macario King
acquired the ownership of said establishment and because of the doubt he entertained as regards
the scope of the prohibition of the law King wrote the President of the Philippines to request
permission to continue said petitioners in his employment, and immediately after the request was
denied, he instituted the present petition for declaratory relief. It cannot, therefore, be said that King
has already breached the law when he filed the present action..

WHEREFORE, the decision appealed from is reversed. This preliminary injunction issued by the trial
court on December 6, 1958 is hereby lifted. The petition for mandamus is dismissed, with costs
against appellees.

Bengzon, C.J., Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and De Leon, JJ., concur.
Padilla, J., took no part.
G.R. No. 183891 October 19, 2011

ROMARICO J. MENDOZA, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

R E SO L U T I O N

BRION, J.:

We resolve the motion for reconsideration filed by petitioner Romarico J. Mendoza seeking the
reversal of our Decision dated August 3, 2010. The Decision affirmed the petitioner’s conviction for
his failure to remit the Social Security Service (SSS) contributions of his employees. The petitioner
anchors the present motion on his supposed inclusion within the coverage of Republic Act (RA) No.
9903 or the Social Security Condonation Law of 2009, whose passage the petitioner claims to be
a supervening event in his case. He further invokes the equal protection clause in support of his
motion.

In our Decision dated August 3, 2010, we AFFIRMED, with modification, the decree of conviction
issued by both the trial and appellate courts for the petitioner’s violation of Section 22(a) and (d), in
relation to Section 28 of RA No. 8282 or the Social Security Act of 1997. To recall its highlights,
our Decision emphasized that the petitioner readily admitted during trial that he did not remit the
SSS premium contributions of his employees at Summa Alta Tierra Industries, Inc. from August
1998 to July 1999, in the amount of ₱239,756.80; inclusive of penalties, this unremitted amount
totaled to ₱421,151.09. The petitioner’s explanation for his failure to remit, which the trial court
disbelieved, was that during this period, Summa Alta Tierra Industries, Inc. shut down as a result of
the general decline in the economy. The petitioner pleaded good faith and lack of criminal intent as
his defenses.

We ruled that the decree of conviction was founded on proof beyond reasonable doubt, based on
the following considerations: first, the remittance of employee contributions to the SSS is mandatory
under RA No. 8282; and second, the failure to comply with a special law being malum prohibitum,
the defenses of good faith and lack of criminal intent are immaterial.

The petitioner further argued that since he was designated in the Information as a "proprietor," he
was without criminal liability since "proprietors" are not among the corporate officers specifically
enumerated in Section 28(f) of RA No. 8282 to be criminally liable for the violation of its provisions.
We rejected this argument based on our ruling in Garcia v. Social Security Commission Legal and
Collection.1 We ruled that to sustain the petitioner’s argument would be to allow the unscrupulous to
conveniently escape liability merely through the creative use of managerial titles.

After taking into account the Indeterminate Penalty Law and Article 315 of the Revised Penal Code,
we MODIFIED the penalty originally imposed by the trial court2 and, instead, decreed the penalty of
four (4) years and two (2) months of prision correccional, as minimum, to twenty (20) years
of reclusion temporal, as maximum.

In the present motion for reconsideration, the petitioner points out that pending his appeal with the
Court of Appeals (CA), he voluntarily paid the SSS the amount of ₱239,756.80 to settle his
delinquency.3 Note that the petitioner also gave notice of this payment to the CA via a Motion for
Reconsideration and a Motion for New Trial. Although the People did not contest the fact of
voluntary payment, the CA nevertheless denied the said motions.
The present motion for reconsideration rests on the following points:

First. On January 7, 2010, during the pendency of the petitioner’s case before the Court,
then President Gloria Macapagal-Arroyo signed RA No. 9903 into law. RA No. 9903
mandates the effective withdrawal of all pending cases against employers who would remit
their delinquent contributions to the SSS within a specified period, viz., within six
months after the law’s effectivity.4 The petitioner claims that in view of RA No. 9903 and its
implementing rules, the settlement of his delinquent contributions in 2007 entitles him to an
acquittal. He invokes the equal protection clause in support of his plea.

Second. The petitioner alternatively prays that should the Court find his above argument
wanting, he should still be acquitted since the prosecution failed to prove all the elements of
the crime charged.

Third. The petitioner prays that a fine be imposed, not imprisonment, should he be found
guilty.

The Solicitor General filed a Manifestation In Lieu of Comment andclaims that the passage of RA
No. 9903 constituted a supervening event in the petitioner’s case that supports the petitioner’s
acquittal "[a]fter a conscientious review of the case."5

THE COURT’S RULING

The petitioner’s arguments supporting his prayer for acquittal fail to convince us. However, we find
basis to allow waiver of the petitioner’s liability for accrued penalties.

The petitioner’s liability for the crime is a settled matter

Upfront, we reject the petitioner’s claim that the prosecution failed to prove all the elements of the
crime charged. This is a matter that has been resolved in our Decision, and the petitioner did not
raise anything substantial to merit the reversal of our finding of guilt. To reiterate, the petitioner’s
conviction was based on his admission that he failed to remit his employees’ contribution to the SSS.

The petitioner cannot benefit from the terms of RA No. 9903, which condone only employers who
pay their delinquencies within six months from the law’s effectivity

We note that the petitioner does not ask for the reversal of his conviction based on the authority of
RA No. 9903; he avoids making a straightforward claim because this law plainly does not apply to
him or to others in the same situation. The clear intent of the law is to grant condonation only to
employers with delinquent contributions or pending cases for their delinquencies and who pay their
delinquencies within the six (6)-month period set by the law. Mere payment of unpaid contributions
does not suffice; it is payment within, and only within, the six (6)-month availment period that triggers
the applicability of RA No. 9903.

True, the petitioner’s case was pending with us when RA No. 9903 was passed. Unfortunately for
him, he paid his delinquent SSS contributions in 2007. By paying outside of the availment period, the
petitioner effectively placed himself outside the benevolent sphere of RA No. 9903. This is how the
law is written: it condones employers — and only those employers — with unpaid SSS contributions
or with pending cases who pay within the six (6)-month period following the law’s date of
effectivity. Dura lex, sed lex.
The petitioner’s awareness that RA No. 9903 operates as discussed above is apparent in his plea
for equal protection. In his motion, he states that

[he] is entitled under the equal protection clause to the dismissal of the case against him since he
had already paid the subject delinquent contributions due to the SSS which accepted the payment
as borne by the official receipt it issued (please see Annex "A"). The equal protection clause requires
that similar subjects, [sic] should not be treated differently, so as to give undue favor to some and
unjustly discriminate against others. The petitioner is no more no less in the same situation as the
employer who would enjoy freedom from criminal prosecution upon payment in full of the delinquent
contributions due and payable to the SSS within six months from the effectivity of Republic Act No.
9903.6

The Court cannot amplify the scope of RA No. 9903 on the ground of equal protection, and acquit
the petitioner and other delinquent employers like him; it would in essence be an amendment of RA
No. 9903, an act of judicial legislation abjured by the trias politica principle.7

RA No. 9903 creates two classifications of employers delinquent in remitting the SSS contributions
of their employees: (1) those delinquent employers who pay within the six (6)-month period (the
former group), and (2) those delinquent employers who pay outside of this availment period (the
latter group). The creation of these two classes is obvious and unavoidable when Section 2 and the
last proviso of Section 48 of the law are read together. The same provisions show the law’s intent to
limit the benefit of condonation to the former group only; had RA No. 9903 likewise intended to
benefit the latter group, which includes the petitioner, it would have expressly declared so. Laws
granting condonation constitute an act of benevolence on the government’s part, similar to tax
amnesty laws; their terms are strictly construed against the applicants. Since the law itself excludes
the class of employers to which the petitioner belongs, no ground exists to justify his acquittal. An
implementing rule or regulation must conform to and be consistent with the provisions of the
enabling statute; it cannot amend the law either by abridging or expanding its scope.9

For the same reason, we cannot grant the petitioner’s prayer to impose a fine in lieu of
imprisonment; neither RA No. 8282 nor RA No. 9903 authorizes the Court to exercise this option.

On the matter of equal protection, we stated in Tolentino v. Board of Accountancy, et al.10 that the
guarantee simply means "that no person or class of persons shall be denied the same protection of
the laws which is enjoyed by other persons or other classes in the same place and in like
circumstances." In People v. Cayat,11 we further summarized the jurisprudence on equal protection
in this wise:

It is an established principle of constitutional law that the guaranty of the equal protection of the laws
is not violated by a legislation based on reasonable classification. And the classification, to be
reasonable, (1) must rest on substantial distinctions; (2) must be germane to the purposes of the
law; (3) must not be limited to existing conditions only; and (4) must apply equally to all members of
the same class.

The difference in the dates of payment of delinquent contributions provides a substantial distinction
between the two classes of employers. In limiting the benefits of RA No. 9903 to delinquent
employers who pay within the six (6)-month period, the legislature refused to allow a sweeping, non-
discriminatory condonation to all delinquent employers, lest the policy behind RA No. 8282 be
undermined. 1avv phi 1

The petitioner is entitled to a waiver of his accrued penalties

Despite our discussion above, the petitioner’s move to have our Decision reconsidered is not entirely
futile. The one benefit the petitioner can obtain from RA No. 9903 is the waiver of his accrued
penalties, which remain unpaid in the amount of ₱181,394.29. This waiver is derived from the last
proviso of Section 4 of RA No. 9903:

Provided, further, That for reason of equity, employers who settled arrears in contributions before the
effectivity of this Act shall likewise have their accrued penalties waived.

This proviso is applicable to the petitioner who settled his contributions long before the passage of
the law. Applied to the petitioner, therefore, RA No. 9903 only works to allow a waiver of his accrued
penalties, but not the reversal of his conviction.
1avvphi 1

Referral to the Chief Executive for possible exercise of executive clemency

We realize that with the affirmation of the petitioner’s conviction for violation of RA No. 8282, he
stands to suffer imprisonment for four (4) years and two (2) months of prision correccional, as
minimum, to twenty (20) years of reclusion temporal, as maximum, notwithstanding the payment of
his delinquent contribution.

Under Article 5 of the Revised Penal Code,12 the courts are bound to apply the law as it is and
impose the proper penalty, no matter how harsh it might be. The same provision, however, gives the
Court the discretion to recommend to the President actions it deems appropriate but are beyond its
power when it considers the penalty imposed as excessive. Although the petitioner was convicted
under a special penal law, the Court is not precluded from giving the Revised Penal Code suppletory
application in light of Article 1013 of the same Code and our ruling in People v. Simon.14

WHEREFORE, the Court PARTIALLY GRANTS petitioner Romarico J. Mendoza’s motion for
reconsideration. The Court AFFIRMS the petitioner’s conviction for violation of Section 22(a) and (d),
in relation to Section 28 of Republic Act No. 8282, and the petitioner is thus sentenced to an
indeterminate prison term of four (4) years and two (2) months of prision correccional, as minimum,
to twenty (20) years of reclusion temporal, as maximum. In light of Section 4 of Republic Act No.
9903, the petitioner’s liability for accrued penalties is considered WAIVED. Considering the
circumstances of the case, the Court transmits the case to the Chief Executive, through the
Department of Justice, and RECOMMENDS the grant of executive clemency to the petitioner.

SO ORDERED
G.R. No. L-17663 May 30, 1962

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant,

vs.
ISAURO SANTIAGO, defendant-appellee.

Office of the Solicitor General for plaintiff-appellant.

Roces, Alidio and Ceguera for defendant-appellee.

CONCEPCION, J.:

The information herein alleges that defendant Isauro Santiago has committed the crime of "libel" as
follows:

That on or about the 5th day of October 1959, in the City of Manila, Philippines, the said
accused, for the evident purpose of injuring the name and reputation of Arsenio H. Lacson,
and of impeaching and besmirching the latter's virtue, honesty, honor and reputation, and
with the malicious intent of exposing him to public hatred, contempt and ridicule, did then and
there wilfully, feloniously, maliciously and publicly call said Mayor Arsenio H. Lacson, in the
course of a political speech delivered at 392 Fraternal, Quiapo, in said city, thru the medium
of an amplifier system and before a crowd of around a hundred persons, the following, to wit:
"Arsenio Hayop Lacson, pinakawalang hiyang Alkalde, Mayor Lacson raped a woman at the
Aroma Cafe and another City Hall employee in Shellborne Hotel", which are false, malicious
and highly defamatory statements against Mayor Arsenio H. Lacson, delivered with no good
intentions or justifiable motive, but solely for the purpose of injuring the name and reputation
of said Mayor Arsenio H. Lacson and to expose him to public hatred, contempt and ridicule.

Defendant moved to quash this information upon the ground that the crime charged therein is, not
libel, but oral defamation, which has already prescribed, it having been allegedly committed on
October 5, 1959, or more than six (6) months prior to the filing of the information on August 11,
1960. The Court of First Instance of Manila granted this motion and, accordingly, quashed the
information, with costs de oficio. Hence, this appeal by the prosecution.

The only issue in this case is whether the crime charged in the information is oral defamation, under
Article 358 of the Revised Penal Code, or libel, under Article 355, in relation to Article 353, of the
same Code. Said provisions read:

ART. 358. Slander. — Oral defamation shall be punished by arresto mayor in its maximum
period to prision correccional in its minimum period if it is of a serious and insulting nature;
otherwise the penalty shall be arresto menor or a fine not exceeding 200 pesos".

ART. 355. Libel by means of writings or similar means. — A libel committed by means of
writing, printing, lithography, engraving, radio, phonograph, painting, theatrical exhibition,
cinematographic exhibition, or any similar means, shall be punished by prision
correccional in its minimum and medium periods or a fine ranging from 200 to 6,000 pesos,
or both, in addition to the civil action which may be brought by the offended party.

ART. 353. Definition of libel. — A libel is a public and malicious imputation of a crime, or of a
vice or defect, real or imaginary, or any act, omission, condition, status, or circumstance
tending to cause the dishonor, discredit, or contempt of a natural or juridical person, or to
blacken the memory of one who is dead.
The prosecution maintains that "the medium of an amplifier system", thru which the defamatory
statements imputed to the accused were allegedly made, falls within the purview of the terms
"writing, printing, lithography, engraving, radio, phonograph, painting, theatrical exhibition,
cinematographic exhibition, or any similar means", appearing in said Article 355, in the sense, at
least, that in "amplifier system" is a means "similar" to "radio".

This pretense is untenable. To begin with, as correctly stated in defendant's brief, "radio as a means
of publication is "the transmission and reception of electromagnetic waves without conducting wires
intervening between transmitter and receiver" (Library of Universal Knowledge)" (see, also, 18
Encyclopedia Britanica, p. 285), "while transmission of words by means of an amplifier system", such
as the one mentioned in the information, "is not thru "electromagnetic waves" and is with the use of
"conducting wires" intervening between the transmitter . . . and the receiver . . . .

Secondly, even the word "radio" used in said Article 355, should be considered in relation to the
terms with which it is associated — "writing, printing, lithography, engraving . . . phonograph,
painting, theatrical exhibition or cinematographical exhibition" — all of which have a common
characteristic, namely, their permanent nature as a means of publication, and this explains the
graver penalty for libel than that prescribed for oral defamation. Thus, it has been held that
slanderous statements forming part of a manuscript read by a speaker over the radio constitute libel
(Sorensen vs. Wood, 243 N.W. 82, 82 A.L.R. 1109; Nules vs. Wasner, 20 P. [2d] 487, 104 A.L.R.
877), whereas the rules governing such offense were declared inapplicable to extemporaneous
remarks of scurrilous nature, made ad libitum in the course of a radio broadcast by a person hired to
read a prepared text, but not appearing thereon (Summit Hotel Co. vs. National Broadcasting Co.,
PA-124 A.L.R. 963). 1äwphï1.ñët

IN SHORT, the facts alleged in the information constitute the crime of oral defamation punished in
Article 358 of the Revised Penal Code, which prescribed six (6) months after its commission, or on
April 5, 1960 (Articles 90 and 91, Revised Penal Code), over four (4) months before the filing of said
information, in view of which the order appealed from is affirmed, without special pronouncement as
to costs. It is so ordered.

Padilla, Bautista Angelo, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ., concur.
Bengzon, C.J., is on leave.
G.R. No. 180356 February 16, 2010

SOUTH AFRICAN AIRWAYS, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the July 19, 2007
Decision1 and October 30, 2007 Resolution2 of the Court of Tax Appeals (CTA) En Banc in CTA E.B.
Case No. 210, entitled South African Airways v. Commissioner of Internal Revenue. The assailed
decision affirmed the Decision dated May 10, 20063 and Resolution dated August 11, 20064rendered
by the CTA First Division.

The Facts

Petitioner South African Airways is a foreign corporation organized and existing under and by virtue
of the laws of the Republic of South Africa. Its principal office is located at Airways Park, Jones
Road, Johannesburg International Airport, South Africa. In the Philippines, it is an internal air carrier
having no landing rights in the country. Petitioner has a general sales agent in the Philippines,
Aerotel Limited Corporation (Aerotel). Aerotel sells passage documents for compensation or
commission for petitioner’s off-line flights for the carriage of passengers and cargo between ports or
points outside the territorial jurisdiction of the Philippines. Petitioner is not registered with the
Securities and Exchange Commission as a corporation, branch office, or partnership. It is not
licensed to do business in the Philippines.

For the taxable year 2000, petitioner filed separate quarterly and annual income tax returns for its
off-line flights, summarized as follows:

2.5% Gross
Period Date Filed
Phil. Billings

1st Quarter May 30, 2000 222,531.25

2nd Quarter August 29, 2000 424,046.95
For Passenger PhP
3rd Quarter November 29, 2000 422,466.00
4th Quarter April 16, 2000 453,182.91

Sub-total PhP 1,522,227.11

1st Quarter May 30, 2000 81,531.00

2nd Quarter August 29, 2000 50,169.65
For Cargo PhP
3rd Quarter November 29, 2000 36,383.74
4th Quarter April 16, 2000 37,454.88

Sub-total PhP 205,539.27

 TOTAL 1,727,766.38

Thereafter, on February 5, 2003, petitioner filed with the Bureau of Internal Revenue, Revenue
District Office No. 47, a claim for the refund of the amount of PhP 1,727,766.38 as erroneously paid
tax on Gross Philippine Billings (GPB) for the taxable year 2000. Such claim was unheeded. Thus,
on April 14, 2003, petitioner filed a Petition for Review with the CTA for the refund of the
abovementioned amount. The case was docketed as CTA Case No. 6656.

On May 10, 2006, the CTA First Division issued a Decision denying the petition for lack of merit. The
CTA ruled that petitioner is a resident foreign corporation engaged in trade or business in the
Philippines. It further ruled that petitioner was not liable to pay tax on its GPB under Section
28(A)(3)(a) of the National Internal Revenue Code (NIRC) of 1997. The CTA, however, stated that
petitioner is liable to pay a tax of 32% on its income derived from the sales of passage documents in
the Philippines. On this ground, the CTA denied petitioner’s claim for a refund.

Petitioner’s Motion for Reconsideration of the above decision was denied by the CTA First Division
in a Resolution dated August 11, 2006.

Thus, petitioner filed a Petition for Review before the CTA En Banc, reiterating its claim for a refund
of its tax payment on its GPB. This was denied by the CTA in its assailed decision. A subsequent
Motion for Reconsideration by petitioner was also denied in the assailed resolution of the CTA En
Banc.

Hence, petitioner went to us.

The Issues

Whether or not petitioner, as an off-line international carrier selling passage documents through an
independent sales agent in the Philippines, is engaged in trade or business in the Philippines subject
to the 32% income tax imposed by Section 28 (A)(1) of the 1997 NIRC.

Whether or not the income derived by petitioner from the sale of passage documents covering
petitioner’s off-line flights is Philippine-source income subject to Philippine income tax.

Whether or not petitioner is entitled to a refund or a tax credit of erroneously paid tax on Gross
Philippine Billings for the taxable year 2000 in the amount of P1,727,766.38.5

The Court’s Ruling

This petition must be denied.

Petitioner Is Subject to Income Tax at the Rate of 32% of Its Taxable Income

Preliminarily, we emphasize that petitioner is claiming that it is exempted from being taxed for its
sale of passage documents in the Philippines. Petitioner, however, failed to sufficiently prove such
contention.

In Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation,6 we held, "Since an

action for a tax refund partakes of the nature of an exemption, which cannot be allowed unless
granted in the most explicit and categorical language, it is strictly construed against the claimant who
must discharge such burden convincingly."

Petitioner has failed to overcome such burden.

In essence, petitioner calls upon this Court to determine the legal implication of the amendment to
Sec. 28(A)(3)(a) of the 1997 NIRC defining GPB. It is petitioner’s contention that, with the new
definition of GPB, it is no longer liable under Sec. 28(A)(3)(a). Further, petitioner argues that
because the 2 1/2% tax on GPB is inapplicable to it, it is thereby excluded from the imposition of any
income tax.

Sec. 28(b)(2) of the 1939 NIRC provided:

(2) Resident Corporations. – A corporation organized, authorized, or existing under the laws of a
foreign country, engaged in trade or business within the Philippines, shall be taxable as provided in
subsection (a) of this section upon the total net income received in the preceding taxable year from
all sources within the Philippines: Provided, however, that international carriers shall pay a tax of two
and one-half percent on their gross Philippine billings.

This provision was later amended by Sec. 24(B)(2) of the 1977 NIRC, which defined GPB as follows:

"Gross Philippine billings" include gross revenue realized from uplifts anywhere in the world by any
international carrier doing business in the Philippines of passage documents sold therein, whether
for passenger, excess baggage or mail, provided the cargo or mail originates from the Philippines.

In the 1986 and 1993 NIRCs, the definition of GPB was further changed to read:

"Gross Philippine Billings" means gross revenue realized from uplifts of passengers anywhere in the
world and excess baggage, cargo and mail originating from the Philippines, covered by passage
documents sold in the Philippines.

Essentially, prior to the 1997 NIRC, GPB referred to revenues from uplifts anywhere in the world,
provided that the passage documents were sold in the Philippines. Legislature departed from such
concept in the 1997 NIRC where GPB is now defined under Sec. 28(A)(3)(a):

"Gross Philippine Billings" refers to the amount of gross revenue derived from carriage of persons,
excess baggage, cargo and mail originating from the Philippines in a continuous and uninterrupted
flight, irrespective of the place of sale or issue and the place of payment of the ticket or passage
document.

Now, it is the place of sale that is irrelevant; as long as the uplifts of passengers and cargo occur to
or from the Philippines, income is included in GPB.

As correctly pointed out by petitioner, inasmuch as it does not maintain flights to or from the
Philippines, it is not taxable under Sec. 28(A)(3)(a) of the 1997 NIRC. This much was also found by
the CTA. But petitioner further posits the view that due to the non-applicability of Sec. 28(A)(3)(a) to
it, it is precluded from paying any other income tax for its sale of passage documents in the
Philippines.

Such position is untenable.

In Commissioner of Internal Revenue v. British Overseas Airways Corporation (British Overseas
Airways),7 which was decided under similar factual circumstances, this Court ruled that off-line air
carriers having general sales agents in the Philippines are engaged in or doing business in the
Philippines and that their income from sales of passage documents here is income from within the
Philippines. Thus, in that case, we held the off-line air carrier liable for the 32% tax on its taxable
income.

Petitioner argues, however, that because British Overseas Airways was decided under the 1939
NIRC, it does not apply to the instant case, which must be decided under the 1997 NIRC. Petitioner
alleges that the 1939 NIRC taxes resident foreign corporations, such as itself, on all income from
sources within the Philippines. Petitioner’s interpretation of Sec. 28(A)(3)(a) of the 1997 NIRC is that,
since it is an international carrier that does not maintain flights to or from the Philippines, thereby
having no GPB as defined, it is exempt from paying any income tax at all. In other words, the
existence of Sec. 28(A)(3)(a) according to petitioner precludes the application of Sec. 28(A)(1) to it.

Its argument has no merit.

First, the difference cited by petitioner between the 1939 and 1997 NIRCs with regard to the taxation
of off-line air carriers is more apparent than real.

We point out that Sec. 28(A)(3)(a) of the 1997 NIRC does not, in any categorical term, exempt all
international air carriers from the coverage of Sec. 28(A)(1) of the 1997 NIRC. Certainly, had
legislature’s intentions been to completely exclude all international air carriers from the application of
the general rule under Sec. 28(A)(1), it would have used the appropriate language to do so; but the
legislature did not. Thus, the logical interpretation of such provisions is that, if Sec. 28(A)(3)(a) is
applicable to a taxpayer, then the general rule under Sec. 28(A)(1) would not apply. If, however,
Sec. 28(A)(3)(a) does not apply, a resident foreign corporation, whether an international air carrier or
not, would be liable for the tax under Sec. 28(A)(1).

Clearly, no difference exists between British Overseas Airways and the instant case, wherein
petitioner claims that the former case does not apply. Thus, British Overseas Airways applies to the
instant case. The findings therein that an off-line air carrier is doing business in the Philippines and
that income from the sale of passage documents here is Philippine-source income must be upheld.

Petitioner further reiterates its argument that the intention of Congress in amending the definition of
GPB is to exempt off-line air carriers from income tax by citing the pronouncements made by
Senator Juan Ponce Enrile during the deliberations on the provisions of the 1997 NIRC. Such
pronouncements, however, are not controlling on this Court. We said in Espino v. Cleofe:8

A cardinal rule in the interpretation of statutes is that the meaning and intention of the law-making
body must be sought, first of all, in the words of the statute itself, read and considered in their
natural, ordinary, commonly-accepted and most obvious significations, according to good and
approved usage and without resorting to forced or subtle construction. Courts, therefore, as a rule,
cannot presume that the law-making body does not know the meaning of words and rules of
grammar. Consequently, the grammatical reading of a statute must be presumed to yield its correct
sense. x x x It is also a well-settled doctrine in this jurisdiction that statements made by individual
members of Congress in the consideration of a bill do not necessarily reflect the sense of that body
and are, consequently, not controlling in the interpretation of law. (Emphasis supplied.)

Moreover, an examination of the subject provisions of the law would show that petitioner’s
interpretation of those provisions is erroneous.
Sec. 28(A)(1) and (A)(3)(a) provides:

SEC. 28. Rates of Income Tax on Foreign Corporations. -

(A) Tax on Resident Foreign Corporations. -

(1) In General. - Except as otherwise provided in this Code, a corporation organized,

authorized, or existing under the laws of any foreign country, engaged in trade or business
within the Philippines, shall be subject to an income tax equivalent to thirty-five percent
(35%) of the taxable income derived in the preceding taxable year from all sources within the
Philippines: provided, That effective January 1, 1998, the rate of income tax shall be thirty-
four percent (34%); effective January 1, 1999, the rate shall be thirty-three percent (33%),
and effective January 1, 2000 and thereafter, the rate shall be thirty-two percent (32%).

xxxx

(3) International Carrier. - An international carrier doing business in the Philippines shall pay
a tax of two and one-half percent (2 1/2%) on its ‘Gross Philippine Billings’ as defined
hereunder:

(a) International Air Carrier. – ‘Gross Philippine Billings’ refers to the amount of gross
revenue derived from carriage of persons, excess baggage, cargo and mail originating from
the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale or
issue and the place of payment of the ticket or passage document: Provided, That tickets
revalidated, exchanged and/or indorsed to another international airline form part of the Gross
Philippine Billings if the passenger boards a plane in a port or point in the Philippines:
Provided, further, That for a flight which originates from the Philippines, but transshipment of
passenger takes place at any port outside the Philippines on another airline, only the aliquot
portion of the cost of the ticket corresponding to the leg flown from the Philippines to the
point of transshipment shall form part of Gross Philippine Billings.

Sec. 28(A)(1) of the 1997 NIRC is a general rule that resident foreign corporations are liable for 32%
tax on all income from sources within the Philippines. Sec. 28(A)(3) is an exception to this general
rule.

An exception is defined as "that which would otherwise be included in the provision from which it is
excepted. It is a clause which exempts something from the operation of a statue by express
words."9 Further, "an exception need not be introduced by the words ‘except’ or ‘unless.’ An
exception will be construed as such if it removes something from the operation of a provision of
law."10

In the instant case, the general rule is that resident foreign corporations shall be liable for a 32%
income tax on their income from within the Philippines, except for resident foreign corporations that
are international carriers that derive income "from carriage of persons, excess baggage, cargo and
mail originating from the Philippines" which shall be taxed at 2 1/2% of their Gross Philippine Billings.
Petitioner, being an international carrier with no flights originating from the Philippines, does not fall
under the exception. As such, petitioner must fall under the general rule. This principle is embodied
in the Latin maxim, exception firmat regulam in casibus non exceptis, which means, a thing not
being excepted must be regarded as coming within the purview of the general rule.11

To reiterate, the correct interpretation of the above provisions is that, if an international air carrier
maintains flights to and from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross
Philippine Billings, while international air carriers that do not have flights to and from the Philippines
but nonetheless earn income from other activities in the country will be taxed at the rate of 32% of
such income.

As to the denial of petitioner’s claim for refund, the CTA denied the claim on the basis that petitioner
is liable for income tax under Sec. 28(A)(1) of the 1997 NIRC. Thus, petitioner raises the issue of
whether the existence of such liability would preclude their claim for a refund of tax paid on the basis
of Sec. 28(A)(3)(a). In answer to petitioner’s motion for reconsideration, the CTA First Division ruled
in its Resolution dated August 11, 2006, thus:

On the fourth argument, petitioner avers that a deficiency tax assessment does not, in any way,
disqualify a taxpayer from claiming a tax refund since a refund claim can proceed independently of a
tax assessment and that the assessment cannot be offset by its claim for refund.

Petitioner’s argument is erroneous. Petitioner premises its argument on the existence of an

assessment. In the assailed Decision, this Court did not, in any way, assess petitioner of any
deficiency corporate income tax. The power to make assessments against taxpayers is lodged with
the respondent. For an assessment to be made, respondent must observe the formalities provided in
Revenue Regulations No. 12-99. This Court merely pointed out that petitioner is liable for the regular
corporate income tax by virtue of Section 28(A)(3) of the Tax Code. Thus, there is no assessment to
speak of.12

Precisely, petitioner questions the offsetting of its payment of the tax under Sec. 28(A)(3)(a) with
their liability under Sec. 28(A)(1), considering that there has not yet been any assessment of their
obligation under the latter provision. Petitioner argues that such offsetting is in the nature of legal
compensation, which cannot be applied under the circumstances present in this case.

Article 1279 of the Civil Code contains the elements of legal compensation, to wit:

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be
of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

And we ruled in Philex Mining Corporation v. Commissioner of Internal Revenue,13 thus:

In several instances prior to the instant case, we have already made the pronouncement that taxes
cannot be subject to compensation for the simple reason that the government and the taxpayer are
not creditors and debtors of each other. There is a material distinction between a tax and debt.
Debts are due to the Government in its corporate capacity, while taxes are due to the Government in
its sovereign capacity. We find no cogent reason to deviate from the aforementioned distinction.
Prescinding from this premise, in Francia v. Intermediate Appellate Court, we categorically held that
taxes cannot be subject to set-off or compensation, thus:

We have consistently ruled that there can be no off-setting of taxes against the claims that the
taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that
the government owes him an amount equal to or greater than the tax being collected. The collection
of a tax cannot await the results of a lawsuit against the government.

The ruling in Francia has been applied to the subsequent case of Caltex Philippines, Inc. v.
Commission on Audit, which reiterated that:

. . . a taxpayer may not offset taxes due from the claims that he may have against the government.
Taxes cannot be the subject of compensation because the government and taxpayer are not
mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.

Verily, petitioner’s argument is correct that the offsetting of its tax refund with its alleged tax
deficiency is unavailing under Art. 1279 of the Civil Code.

Commissioner of Internal Revenue v. Court of Tax Appeals,14however, granted the offsetting of a tax
refund with a tax deficiency in this wise:

Further, it is also worth noting that the Court of Tax Appeals erred in denying petitioner’s
supplemental motion for reconsideration alleging bringing to said court’s attention the existence of
the deficiency income and business tax assessment against Citytrust. The fact of such deficiency
assessment is intimately related to and inextricably intertwined with the right of respondent bank to
claim for a tax refund for the same year. To award such refund despite the existence of that
deficiency assessment is an absurdity and a polarity in conceptual effects. Herein private respondent
cannot be entitled to refund and at the same time be liable for a tax deficiency assessment for the
same year.

The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts
stated therein are true and correct. The deficiency assessment, although not yet final, created a
doubt as to and constitutes a challenge against the truth and accuracy of the facts stated in said
return which, by itself and without unquestionable evidence, cannot be the basis for the grant of the
refund.

Section 82, Chapter IX of the National Internal Revenue Code of 1977, which was the applicable law
when the claim of Citytrust was filed, provides that "(w)hen an assessment is made in case of any
list, statement, or return, which in the opinion of the Commissioner of Internal Revenue was false or
fraudulent or contained any understatement or undervaluation, no tax collected under such
assessment shall be recovered by any suits unless it is proved that the said list, statement, or return
was not false nor fraudulent and did not contain any understatement or undervaluation; but this
provision shall not apply to statements or returns made or to be made in good faith regarding annual
depreciation of oil or gas wells and mines."

Moreover, to grant the refund without determination of the proper assessment and the tax due would
inevitably result in multiplicity of proceedings or suits. If the deficiency assessment should
subsequently be upheld, the Government will be forced to institute anew a proceeding for the
recovery of erroneously refunded taxes which recourse must be filed within the prescriptive period of
ten years after discovery of the falsity, fraud or omission in the false or fraudulent return
involved.This would necessarily require and entail additional efforts and expenses on the part of the
Government, impose a burden on and a drain of government funds, and impede or delay the
collection of much-needed revenue for governmental operations. 1avv phi 1

Thus, to avoid multiplicity of suits and unnecessary difficulties or expenses, it is both logically
necessary and legally appropriate that the issue of the deficiency tax assessment against Citytrust
be resolved jointly with its claim for tax refund, to determine once and for all in a single proceeding
the true and correct amount of tax due or refundable.

In fact, as the Court of Tax Appeals itself has heretofore conceded,it would be only just and fair that
the taxpayer and the Government alike be given equal opportunities to avail of remedies under the
law to defeat each other’s claim and to determine all matters of dispute between them in one single
case. It is important to note that in determining whether or not petitioner is entitled to the refund of
the amount paid, it would [be] necessary to determine how much the Government is entitled to
collect as taxes. This would necessarily include the determination of the correct liability of the
taxpayer and, certainly, a determination of this case would constitute res judicata on both parties as
to all the matters subject thereof or necessarily involved therein. (Emphasis supplied.)

Sec. 82, Chapter IX of the 1977 Tax Code is now Sec. 72, Chapter XI of the 1997 NIRC. The above
pronouncements are, therefore, still applicable today.

Here, petitioner’s similar tax refund claim assumes that the tax return that it filed was correct. Given,
however, the finding of the CTA that petitioner, although not liable under Sec. 28(A)(3)(a) of the
1997 NIRC, is liable under Sec. 28(A)(1), the correctness of the return filed by petitioner is now put
in doubt. As such, we cannot grant the prayer for a refund.

Be that as it may, this Court is unable to affirm the assailed decision and resolution of the CTA En
Banc on the outright denial of petitioner’s claim for a refund. Even though petitioner is not entitled to
a refund due to the question on the propriety of petitioner’s tax return subject of the instant
controversy, it would not be proper to deny such claim without making a determination of petitioner’s
liability under Sec. 28(A)(1).

It must be remembered that the tax under Sec. 28(A)(3)(a) is based on GPB, while Sec. 28(A)(1) is
based on taxable income, that is, gross income less deductions and exemptions, if any. It cannot be
assumed that petitioner’s liabilities under the two provisions would be the same. There is a need to
make a determination of petitioner’s liability under Sec. 28(A)(1) to establish whether a tax refund is
forthcoming or that a tax deficiency exists. The assailed decision fails to mention having computed
for the tax due under Sec. 28(A)(1) and the records are bereft of any evidence sufficient to establish
petitioner’s taxable income. There is a necessity to receive evidence to establish such amount vis-à-
vis the claim for refund. It is only after such amount is established that a tax refund or deficiency may
be correctly pronounced.

WHEREFORE, the assailed July 19, 2007 Decision and October 30, 2007 Resolution of the CTA En
Banc in CTA E.B. Case No. 210 are SET ASIDE. The instant case is REMANDED to the CTA En
Banc for further proceedings and appropriate action, more particularly, the reception of evidence for
both parties and the corresponding disposition of CTA E.B. Case No. 210 not otherwise inconsistent
with our judgment in this Decision.

SO ORDERED.
G.R. No. 180771 April 21, 2015

RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE TAÑON STRAIT, e.g.,

TOOTHED WHALES, DOLPHINS, PORPOISES, AND OTHER CETACEAN SPECIES, Joined in
and Represented herein by Human Beings Gloria Estenzo Ramos and Rose-Liza Eisma-
Osorio, In Their Capacity as Legal Guardians of the Lesser Life-Forms and as Responsible
Stewards of God's Creations, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of Energy
(DOE), SECRETARY JOSE L. ATIENZA, in his capacity as Secretary of the Department of
Environment and Natural Resources (DENR), LEONARDO R. SIBBALUCA, DENR Regional
Director-Region VII and in his capacity as Chairperson of the Tañon Strait Protected
Seascape Management Board, Bureau of Fisheries and Aquatic Resources (BFAR),
DIRECTOR MALCOLM J. SARMIENTO, JR., BFAR Regional Director for Region VII ANDRES
M. BOJOS, JAPAN PETROLEUM EXPLORATION CO., LTD. (JAPEX), as represented by its
Philippine Agent, SUPPLY OILFIELD SERVICES, INC.Respondents.

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

G.R. No. 181527

CENTRAL VISAYAS FISHERFOLK DEVELOPMENT CENTER (FIDEC), CERILO D. ENGARCIAL,

RAMON YANONG, FRANCISCO LABID, in their personal capacity and as representatives of
the SUBSISTENCE FISHERFOLKS OF THE MUNICIPALITIES OF ALOGUINSAN AND
PINAMUNGAJAN, CEBU, AND THEIR FAMILIES, AND THE PRESENT AND FUTURE
GENERATIONS OF FILIPINOS WHOSE RIGHTS ARE SIMILARLY AFFECTED,Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of Energy
(DOE), JOSE L. ATIENZA, in his capacity as Secretary of the Department of Environment and
Natural Resources (DENR), LEONARDO R. SIBBALUCA, in his capacity as DENR Regional
Director-Region VII and as Chairperson of the Tañon Strait Protected Seascape Management
Board, ALAN ARRANGUEZ, in his capacity as Director - Environmental Management Bureau-
Region VII, DOE Regional Director for Region VIII1 ANTONIO LABIOS, JAPAN PETROLEUM
EXPLORATION CO., LTD. (JAPEX), as represented by its Philippine Agent, SUPPLY OILFIELD
SERVICES, INC.,Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

Before Us are two consolidated Petitions filed under Rule 65 of the 1997 Rules of Court, concerning
Service Contract No. 46 (SC-46), which allowed the exploration, development, and exploitation of
petroleum resources within Tañon Strait, a narrow passage of water situated between the islands of
Negros and Cebu.2

The Petition docketed as G.R. No. 180771 is an original Petition for Certiorari, Mandamus, and
Injunction, which seeks to enjoin respondents from implementing SC-46 and to have it nullified for
willful and gross violation of the 1987 Constitution and certain international and municipal laws.3

Likewise, the Petition docketed as G.R. No. 181527 is an original Petition for Certiorari, Prohibition,
and Mandamus, which seeks to nullify the Environmental Compliance Certificate (ECC) issued by
the Environmental Management Bureau (EMB) of the Department of Environment and Natural
Resources (DENR), Region VII in connection with SC-46; to prohibit respondents from implementing
SC-46; and to compel public respondents to provide petitioners access to the pertinent documents
involving the Tañon Strait Oil Exploration Project.4

ANTECEDENT FACTS AND PROCEEDINGS

Petitioners in G.R. No. 180771, collectively referred to as the "Resident Marine Mammals" in the
petition, are the toothed whales, dolphins, porpoises, and other cetacean species, which inhabit the
waters in and around the Tañon Strait. They are joined by Gloria Estenzo Ramos (Ramos) and
Rose-Liza Eisma-Osorio (Eisma-Osorio) as their legal guardians and as friends (to be collectively
known as "the Stewards") who allegedly empathize with, and seek the protection of, the
aforementioned marine species. Also impleaded as an unwilling co-petitioner is former President
Gloria Macapagal-Arroyo, for her express declaration and undertaking in the ASEAN Charter to
protect the Tañon Strait, among others.5

Petitioners in G.R. No. 181527 are the Central Visayas Fisherfolk Development Center (FIDEC), a
non-stock, non-profit, non-governmental organization, established for the welfare of the marginal
fisherfolk in Region VII; and Cerilo D. Engarcial (Engarcial), Ramon Yanong (Yanong) and Francisco
Labid (Labid), in their personal capacities and as representatives of the subsistence fisherfolk of the
municipalities of Aloguinsan and Pinamungajan, Cebu.

Named as respondents in both petitions are the late Angelo T. Reyes, as then Secretary of the
Department of Energy (DOE); Jose L. Atienza, as then Secretary of the DENR; Leonardo R.
Sibbaluca, as then DENRRegional Director for Region VII and Chairman of the Tañon Strait
Protected Seascape Management Board; Japan Petroleum Exploration Co., Ltd. (JAPEX), a
company organized and existing under the laws of Japan with a Philippine branch office; and Supply
Oilfield Services, Inc. (SOS), as the alleged Philippine agent of JAPEX.

In G.R. No. 181527, the following were impleaded as additional public respondents: Alan C.
Arranguez (Arranguez) and Antonio Labios (Labios), in their capacities as then Director of the EMB,
Region VII and then Regional Director of the DOE, Region VII, respectively.6

On June 13, 2002, the Government of the Philippines, acting through the DOE, entered into a
Geophysical Survey and Exploration Contract-I 02 (GSEC-102) with JAPEX. This contract involved
geological and geophysical studies of the Tañon Strait. The studies included surface geology,
sample analysis, and reprocessing of seismic and magnetic data. JAPEX, assisted by DOE, also
conducted geophysical and satellite surveys, as well as oil and gas sampling in Tañon Strait.7

On December 21, 2004, DOE and JAPEX formally converted GSEC-102 into SC-46 for the
exploration, development, and production of petroleum resources in a block covering approximately
2,850 square kilometers offshore the Tañon Strait.8

From May 9 to 18, 2005, JAPEX conducted seismic surveys in and around the Tañon Strait. A multi-
channel sub-bottom profiling covering approximately 751 kilometers was also done to determine the
area's underwater composition.9

JAPEX committed to drill one exploration well during the second sub-phase of the project. Since the
well was to be drilled in the marine waters of Aloguinsan and Pinamungajan, where the Tañon Strait
was declared a protected seascape in 1988,10 JAPEX agreed to comply with the Environmental
Impact Assessment requirements pursuant to Presidential Decree No. 1586, entitled "Establishing
An Environmental Impact Statement System, Including Other Environmental Management Related
Measures And For Other Purposes."11
On January 31, 2007, the Protected Area Management Board12 of the Tañon Strait (PAMB-Tañon
Strait) issued Resolution No. 2007-001,13 wherein it adopted the Initial Environmental Examination
(IEE) commissioned by JAPEX, and favorably recommended the approval of JAPEX's application for
an ECC.

On March 6, 2007, the EMB of DENR Region VII granted an ECC to the DOE and JAPEX for the
offshore oil and gas exploration project in Tañon Strait.14 Months later, on November 16, 2007,
JAPEX began to drill an exploratory well, with a depth of 3,150 meters, near Pinamungajan town in
the western Cebu Province.15This drilling lasted until February 8, 2008.16

It was in view of the foregoing state of affairs that petitioners applied to this Court for redress, via two
separate original petitions both dated December 1 7, 2007, wherein they commonly seek that
respondents be enjoined from implementing SC-46 for, among others, violation of the 1987
Constitution.

On March 31, 2008, SOS filed a Motion to Strike17 its name as a respondent on the ground that it is
not the Philippine agent of JAPEX. In support of its motion, it submitted the branch office application
of JAPEX,18 wherein the latter's resident agent was clearly identified. SOS claimed that it had acted
as a mere logistics contractor for JAPEX in its oil and gas exploration activities in the Philippines.

Petitioners Resident Marine Mammals and Stewards opposed SOS' s motion on the ground that it
was premature, it was pro-forma, and it was patently dilatory. They claimed that SOS admitted that
"it is in law a (sic) privy to JAPEX" since it did the drilling and other exploration activities in Tañon
Strait under the instructions of its principal, JAPEX. They argued that it would be premature to drop
SOS as a party as JAPEX had not yet been joined in the case; and that it was "convenient" for SOS
to ask the Court to simply drop its name from the parties when what it should have done was to
either notify or ask JAPEX to join it in its motion to enable proper substitution. At this juncture,
petitioners Resident Marine Mammals and Stewards also asked the Court to" implead JAPEX
Philippines as a corespondent or as a substitute for its parent company, JAPEX.19

On April 8, 2008, the Court resolved to consolidate G.R. No. 180771 and G.R. No. 181527.

On May 26, 2008, the FIDEC manifested20 that they were adopting in toto the Opposition to Strike
with Motion to Implead filed by petitioners Resident Marine Mammals and Stewards in G.R. No.
180771.

On June 19, 2008, public respondents filed their Manifestation21that they were not objecting to SOS's
Motion to Strike as it was not JAPEX's resident agent. JAPEX during all this time, did not file any
comment at all.

Thus, on February 7, 2012, this Court, in an effort to ensure that all the parties were given ample
chance and opportunity to answer the issues herein, issued a Resolution directing the Court's
process servicing unit to again serve the parties with a copy of the September 23, 2008 Resolution
of the Court, which gave due course to the petitions in G.R. Nos. 180771 and 181527, and which
required the parties to submit their respective memoranda. The February 7, 2012 Resolution22 reads
as follows:

G.R. No. 180771 (Resident Marine Mammals of the Protected Seascape Tañon Strait, e.g., Toothed
Whales, Dolphins, Porpoises and Other Cetacean Species, et al. vs. Hon. Angelo Reyes, in his
capacity as Secretary of the Department of Energy, et al.) and G.R. No. 181527 (Central Visayas
Fisherfolk Development Center, et al. vs. Hon. Angelo Reyes, et al.). - The Court Resolved to direct
the Process Servicing Unit to RE-SEND the resolution dated September 23, 2008 to the following
parties and counsel, together with this resolution:

Atty. Aristeo O. Carino 20th Floor Pearlbank Centre

Counsel for Respondent Supply 146 Valero Street
Oilfield Services, Inc. Salcedo Village, Makati City

JAPEX Philippines Ltd. 20th Floor Pearlbank Centre

146 Valero Street
Salcedo Village, Makati City

JAPEX Philippines Ltd. 19th Floor Pearlbank Centre

c/o Atty. Maria Farah Z.G. 146 Valero Street
Nicolas-Suchianco Salcedo Village, Makati City

Atty. Maria Farah Z.G. Suite 2404 Discovery Centre

Nicolas-Suchianco 25 ADB Avenue
Resident Agent of JAPEX Ortigas Center, Pasig City
Philippines Ltd.

This Resolution was personally served to the above parties, at the above addresses on February 23,
2012. On March 20, 2012, JAPEX Philippines, Ltd. (JAPEX PH), by way of special appearance, filed
a Motion to Admit23 its Motion for Clarification,24wherein JAPEX PH requested to be clarified as to
whether or not it should deem the February 7, 2012 Resolution as this Court's Order of its inclusion
in the case, as it has not been impleaded. It also alleged that JAPEX PH had already stopped
exploration activities in the Taft. on Strait way back in 2008, rendering this case moot.

On March 22, 2012, JAPEX PH, also by special appearance, filed a Motion for Extension of Time25 to
file its Memorandum. It stated that since it received the February 7, 2012 Resolution on February 23,
2012, it had until March 22, 2012 to file its Memorandum. JAPEX PH then asked for an additional
thirty days, supposedly to give this Court some time to consider its Motion for Clarification.

On April 24, 2012, this Court issued a Resolution26 granting JAPEX PH's Motion to Admit its Motion
for Clarification. This Court, addressing JAPEX PH's Motion for Clarification, held:

With regard to its Motion for Clarification (By Special Appearance) dated March 19, 2012, this Court
considers JAPEX Philippines, Ltd. as a real party-in-interest in these cases. Under Section 2, Rule 3
of the 1997 Rules of Court, a real party-in-interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Contrary to JAPEX
Philippines, Ltd. 's allegation that it is a completely distinct corporation, which should not be
confused with JAPEX Company, Ltd., JAPEX Philippines, Ltd. is a mere branch office, established
by JAPEX Company, Ltd. for the purpose of carrying out the latter's business transactions here in
the Philippines. Thus, JAPEX Philippines, Ltd., has no separate personality from its mother foreign
corporation, the party impleaded in this case.

Moreover, Section 128 of the Corporation Code provides for the responsibilities and duties of a
resident agent of a foreign corporation:

SECTION 128. Resident agent; service of process. - The Securities and Exchange Commission
shall require as a condition precedent to the issuance of the license to transact business in the
Philippines by any foreign corporation that such corporation file with the Securities and Exchange
Commission a written power of attorney designating some person who must be a resident of the
Philippines, on whom any summons and other legal processes may be served in all actions or other
legal proceedings against such corporation, and consenting that service upon such resident agent
shall be admitted and held as valid as if served upon the duly authorized officers of the foreign
corporation at its home office. Any such foreign corporation shall likewise execute and file with the
Securities and Exchange Commission an agreement or stipulation, executed by the proper
authorities of said corporation, in form and substance as follows:

"The (name of foreign corporation) does hereby stipulate and agree, in consideration of its being
granted by the Securities and Exchange Commission a license to transact business in the
Philippines, that if at any time said corporation shall cease to transact business in the Philippines, or
shall be without any resident agent in the Philippines on whom any summons or other legal
processes may be served, then in any action or proceeding arising out of any business or
transaction which occurred in the Philippines, service of any summons or other legal process may be
made upon the Securities and Exchange Commission and that such service shall have the same
force and effect as if made upon the duly-authorized officers of the corporation at its home office."

Whenever such service of summons or other process shall be made upon the Securities and
Exchange Commission, the Commission shall, within ten (10) days thereafter, transmit by mail a
copy of such summons or other legal process to the corporation at its home or principal office. The
sending of such copy by the Commission shall be a necessary part of and shall complete such
service. All expenses incurred by the Commission for such service shall be paid in advance by the
party at whose instance the service is made.

In case of a change of address of the resident agent, it shall be his or its duty to immediately notify in
writing the Securities and Exchange Commission of the new address.

It is clear from the foregoing provision that the function of a resident agent is to receive summons or
legal processes that may be served in all actions or other legal proceedings against the foreign
corporation. These cases have been prosecuted in the name of JAPEX Company, Ltd., and JAPEX
Philippines Ltd., as its branch office and resident agent, had been receiving the various resolutions
from this Court, as evidenced by Registry Return Cards signed by its representatives.

And in the interest of justice, this Court resolved to grant JAPEX PH's motion for extension of time to
file its memorandum, and was given until April 21, 2012, as prayed for, within which to comply with
the submission.27

Without filing its Memorandum, JAPEX PH, on May 14, 2012, filed a motion, asking this Court for an
additional thirty days to file its Memorandum, to be counted from May 8, 2012. It justified its request
by claiming that this Court's April 24, 2012 Resolution was issued past its requested deadline for
filing, which was on April 21, 2012.28

On June 19, 2012, this Court denied JAPEX PH's second request for additional time to file its
Memorandum and dispensed with such filing.

Since petitioners had already filed their respective memoranda,29and public respondents had earlier
filed a Manifestation30 that they were adopting their Comment dated March 31, 2008 as their
memorandum, this Court submitted the case for decision.

Petitioners.' Allegations
Protesting the adverse ecological impact of JAPEX's oil exploration activities in the Tañon Strait,
petitioners Resident Marine Mammals and Stewards aver that a study made after the seismic survey
showed that the fish catch was reduced drastically by 50 to 70 percent. They claim that before the
seismic survey, the average harvest per day would be from 15 to 20 kilos; but after the activity, the
fisherfolk could only catch an average of 1 to 2 kilos a day. They attribute this "reduced fish catch" to
the destruction of the ''payao," also known as the "fish aggregating device" or "artificial
reef."31 Petitioners Resident Marine Mammals and Stewards also impute the incidences of "fish
kill"32 observed by some of the local fisherfolk to the seismic survey. And they further allege that the
ECC obtained by private respondent JAPEX is invalid because public consultations and discussions
with the affected stakeholders, a pre-requisite to the issuance of the ECC, were not held prior to the
ECC's issuance.

In its separate petition, petitioner FIDEC confirms petitioners Resident Marine Mammals and
Stewards' allegations of reduced fish catch and lack of public consultations or discussions with the
fisherfolk and other stakeholders prior to the issuance of the ECC. Moreover, it alleges that during
the seismic surveys and drilling, it was barred from entering and fishing within a 7-kilometer radius
from the point where the oilrig was located, an area greater than the 1.5-kilometer radius "exclusion
zone" stated in the IEE.33 It also agrees in the allegation that public respondents DENR and EMB
abused their discretion when they issued an ECC to public respondent DOE and private respondent
JAPEX without ensuring the strict compliance with the procedural and substantive requirements
under the Environmental Impact Assessment system, the Fisheries Code, and their implementing
rules and regulations.34 It further claims that despite several requests for copies of all the documents
pertaining to the project in Tañon Strait, only copies of the P AMB-Tañon Strait Resolution and the
ECC were given to the fisherfolk.35

Public Respondents' Counter-Allegations

Public respondents, through the Solicitor General, contend that petitioners Resident Marine
Mammals and Stewards have no legal standing to file the present petition; that SC-46 does not
violate the 1987 Constitution and the various laws cited in the petitions; that the ECC was issued in
accordance with existing laws and regulations; that public respondents may not be compelled by
mandamus to furnish petitioners copies of all documents relating to SC-46; and that all the
petitioners failed to show that they are entitled to injunctive relief. They further contend that the
issues raised in these petitions have been rendered moot and academic by the fact that SC-46 had
been mutually terminated by the parties thereto effective June 21, 2008.36

ISSUES

The following are the issues posited by petitioners Resident Marine Mammals and Stewards in G.R.
No. 180771:

I. WHETHER OR NOT PETITIONERS HAVE LOCUS STAND! TO FILE THE INSTANT

PETITION;

II. WHETHER OR NOT SERVICE CONTRACT NO. 46 IS VIOLA T[IVE] OF THE 1987
PHILIPPINE CONSTITUTION AND STATUTES;

III. WHETHER OR NOT THE ON-GOING EXPLORATION AND PROPOSED

EXPLOITATION FOR OIL AND NATURAL GAS AT, AROUND, AND UNDERNEATH THE
MARINE WATERS OF THE TAÑON STRAIT PROTECTED SEASCAPE IS INCONSISTENT
WITH THE PHILIPPINE COMMITMENTS TO INTERNATIONAL ENVIRONMENTAL LAWS
AND INSTRUMENTS; AND
 IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE
CERTIFICATE (ECC) IN ENVIRONMENTALLY CRITICAL AREAS AND HABITATS OF
MARINE WILDLIFE AND ENDANGERED SPECIES IS LEGAL AND PROPER.37

Meanwhile, in G.R. No. 181527, petitioner FIDEC presented the following issues for our
consideration:

I. WHETHER OR NOT SERVICE CONTRACT NO. 46 EXECUTED BETWEEN

RESPONDENTS DOE AND JAPEX SHOULD BE NULLIFIED AND SET ASIDE FOR BEING
IN DIRECT VIOLATION OF SPECIFIC PROVISIONS OF THE 1987 PHILIPPINE
CONSTITUTION AND APPLICABLE LAWS;

II. WHETHER OR NOT THE OFF-SHORE OIL EXPLORAT[I]ON CONTEMPLATED UNDER

SERVICE CONTRACT NO. 46 ·IS LEGALLY PERMISSIBLE WITHOUT A LAW BEING
DULY PASSED EXPRESSLY FOR THE PURPOSE;

III. WHETHER OR NOT THE OIL EXPLORATION BEING CONDUCTED WITHIN THE
TAÑON STRAIT PROTECTED SEASCAPE VIOLATES THE RIGHTS AND LEGAL
PROTECTION GRANTED TO PETITIONERS UNDER THE CONSTITUTION AND
APPLICABLE LAWS.

IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE

CERTIFICATE (ECC) FOR SUCH AN ENVIRONMENTALLY CRITICAL PROJECT INSIDE
AN ENVIRONMENTALLY CRITICAL AREA SUCH AS THE TAÑON STRAIT PROTECTED
SEASCAPE CONFORMED TO LAW AND EXISTING RULES AND REGULATIONS ON
THE MATTER.

V. WHETHER OR NOT THE RESPONDENTS MAY BE COMPELLED BY MANDAMUS TO

FURNISH PETITIONERS WITH COPIES OF THE DOCUMENTS PERTAINING TO THE
TAÑON STRAIT OIL EXPLORATION PROJECT.38

In these consolidated petitions, this Court has determined that the various issues raised by the
petitioners may be condensed into two primary issues:

I. Procedural Issue: Locus Standi of the Resident Marine Mammals and Stewards, petitioners in
G.R. No. 180771; and

II. Main Issue: Legality of Service Contract No. 46.

DISCUSSION

At the outset, this Court makes clear that the "'moot and academic principle' is not a magical formula
that can automatically dissuade the courts in resolving a case." Courts have decided cases
otherwise moot and academic under the following exceptions:

1) There is a grave violation of the Constitution;

2) The exceptional character of the situation and the paramount public interest is involved;

3) The constitutional issue raised requires formulation of controlling principles to guide the
bench, the bar, and the public; and
 4) The case is capable of repetition yet evading review.39

In this case, despite the termination of SC-46, this Court deems it necessary to resolve these
consolidated petitions as almost all of the foregoing exceptions are present in this case. Both
petitioners allege that SC-46 is violative of the Constitution, the environmental and livelihood issues
raised undoubtedly affect the public's interest, and the respondents' contested actions are capable of
repetition.

Procedural Issues

Locus Standi of Petitioners Resident Marine Mammals and Stewards

The Resident Marine Mammals, through the Stewards, "claim" that they have the legal standing to
file this action since they stand to be benefited or injured by the judgment in this suit.40 Citing Oposa
v. Factoran, Jr.,41 they also assert their right to sue for the faithful performance of international and
municipal environmental laws created in their favor and for their benefit. In this regard, they
propound that they have the right to demand that they be accorded the benefits granted to them in
multilateral international instruments that the Philippine Government had signed, under the concept
of stipulation pour autrui.42

For their part, the Stewards contend that there should be no question of their right to represent the
Resident Marine Mammals as they have stakes in the case as forerunners of a campaign to build
awareness among the affected residents of Tañon Strait and as stewards of the environment since
the primary steward, the Government, had failed in its duty to protect the environment pursuant to
the public trust doctrine.43

Petitioners Resident Marine Mammals and Stewards also aver that this Court may lower the
benchmark in locus standi as an exercise of epistolary jurisdiction.44

In opposition, public respondents argue that the Resident Marine Mammals have no standing
because Section 1, Rule 3 of the Rules of Court requires parties to an action to be either natural or
juridical persons, viz.:

Section 1. Who may be parties, plaintiff and defendant. - Only natural or juridical persons, or entities
authorized by law may be parties in a civil action. The term "plaintiff' may refer to the claiming party,
the counter-claimant, the cross-claimant, or the third (fourth, etc.)-party plaintiff. The term
"defendant" may refer to the original defending party, the defendant in a counterclaim, the cross-
defendant, or the third (fourth, etc.)-party defendant.

The public respondents also contest the applicability of Oposa, pointing out that the petitioners
therein were all natural persons, albeit some of them were still unborn.45

As regards the Stewards, the public respondents likewise challenge their claim of legal standing on
the ground that they are representing animals, which cannot be parties to an action. Moreover, the
public respondents argue that the Stewards are not the real parties-in-interest for their failure to
show how they stand to be benefited or injured by the decision in this case.46 Invoking the alter ego
principle in political law, the public respondents claim that absent any proof that former President
Arroyo had disapproved of their acts in entering into and implementing SC-46, such acts remain to
be her own.47
The public respondents contend that since petitioners Resident Marine Mammals and Stewards'
petition was not brought in the name of a real party-in-interest, it should be dismissed for failure to
state a cause of action.48

The issue of whether or not animals or even inanimate objects should be given legal standing in
actions before courts of law is not new in the field o f animal rights and environmental law.
Petitioners Resident Marine Mammals and Stewards cited the 1972 United States case Sierra Club
v. Rogers C.B. Morton,49wherein Justice William 0. Douglas, dissenting to the conventional thought
on legal standing, opined:

The critical question of "standing" would be simplified and also put neatly in focus if we fashioned a
federal rule that allowed environmental issues to be litigated before federal agencies or federal
courts in the name of the inanimate object about to be despoiled, defaced, or invaded by roads and
bulldozers and where injury is the subject of public outrage. x x x. Inanimate objects are sometimes
parties in litigation. A ship has a legal personality, a fiction found useful for maritime purposes. The
corporation sole - a creature of ecclesiastical law - is an acceptable adversary and large fortunes
ride on its cases. The ordinary corporation is a "person" for purposes of the adjudicatory processes,
whether it represents proprietary, spiritual, aesthetic, or charitable causes.

So it should be as respects valleys, alpine meadows, rivers, lakes, estuaries, beaches, ridges,
groves of trees, swampland, or even air that feels the destructive pressures of modem technology
and modem life. The river, for example, is the living symbol of all the life it sustains or nourishes-fish,
aquatic insects, water ouzels, otter, fisher, deer, elk, bear, and all other animals, including man, who
are dependent on it or who enjoy it for its sight, its sound, or its life. The river as plaintiff speaks for
the ecological unit of life that is part of it. Those people who have a meaningful relation to that body
of water-whether it be a fisherman, a canoeist, a zoologist, or a logger-must be able to speak for the
values which the river represents and which are threatened with destruction.50(Citations omitted.)

The primary reason animal rights advocates and environmentalists seek to give animals and
inanimate objects standing is due to the need to comply with the strict requirements in bringing a suit
to court. Our own 1997 Rules of Court demand that parties to a suit be either natural or juridical
persons, or entities authorized by law. It further necessitates the action to be brought in the name of
the real party-in-interest, even if filed by a representative, viz.:

Rule 3
Parties to Civil Actions

Section 1. Who may be parties; plaintiff and defendant. - Only natural or juridical
persons, or entities authorized by law may be parties in a civil action. The term
"plaintiff' may refer to the claiming party, the counter-claimant, the cross-claimant, or
the third (fourth, etc.)-party plaintiff. The term "defendant" may refer to the original
defending party, the defendant in a counterclaim, the cross-defendant, or the third
(fourth, etc.)-party defendant.

Sec. 2. Parties in interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of
the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.

Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or

defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the
 real party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed principal may
sue or be sued without joining the principal except when the contract involves things
belonging to the principal.

It had been suggested by animal rights advocates and environmentalists that not only natural and
juridical persons should be given legal standing because of the difficulty for persons, who cannot
show that they by themselves are real parties-in-interests, to bring actions in representation of these
animals or inanimate objects. For this reason, many environmental cases have been dismissed for
failure of the petitioner to show that he/she would be directly injured or affected by the outcome of
the case. However, in our jurisdiction, locus standi in environmental cases has been given a more
liberalized approach. While developments in Philippine legal theory and jurisprudence have not
progressed as far as Justice Douglas's paradigm of legal standing for inanimate objects, the current
trend moves towards simplification of procedures and facilitating court access in environmental
cases.

Recently, the Court passed the landmark Rules of Procedure for Environmental Cases,51 which allow
for a "citizen suit," and permit any Filipino citizen to file an action before our courts for violations of
our environmental laws:

SEC. 5. Citizen suit. - Any Filipino citizen in representation of others, including minors or generations
yet unborn, may file an action to enforce rights or obligations under environmental laws. Upon the
filing of a citizen suit, the court shall issue an order which shall contain a brief description of the
cause of action and the reliefs prayed for, requiring all interested parties to manifest their interest to
intervene in the case within fifteen (15) days from notice thereof. The plaintiff may publish the order
once in a newspaper of a general circulation in the Philippines or furnish all affected barangays
copies of said order.

Citizen suits filed under R.A. No. 8749 and R.A. No. 9003 shall be governed by their respective
provisions.52 (Emphasis ours.)

Explaining the rationale for this rule, the Court, in the Annotations to the Rules of Procedure for
Environmental Cases, commented:

Citizen suit. To further encourage the protection of the environment, the Rules enable litigants
enforcing environmental rights to file their cases as citizen suits. This provision liberalizes standing
for all cases filed enforcing environmental laws and collapses the traditional rule on personal and
direct interest, on the principle that humans are stewards of nature. The terminology of the text
reflects the doctrine first enunciated in Oposa v. Factoran, insofar as it refers to minors and
generations yet unborn.53 (Emphasis supplied, citation omitted.) Although this petition was filed in
2007, years before the effectivity of the Rules of Procedure for Environmental Cases, it has been
consistently held that rules of procedure "may be retroactively applied to actions pending and
undetermined at the time of their passage and will not violate any right of a person who may feel that
he is adversely affected, inasmuch as there is no vested rights in rules of procedure."54

Elucidating on this doctrine, the Court, in Systems Factors Corporation v. National Labor Relations
Commission55 held that:

Remedial statutes or statutes relating to remedies or modes of procedure, which do not create new
or take away vested rights, but only operate in furtherance of the remedy or confirmation of rights
already existing, do not come within the legal conception of a retroactive law, or the general rule
against retroactive operation of statutes. Statutes regulating the procedure of the courts will be
construed as applicable to actions pending and undetermined at the time of their passage.
Procedural laws are retroactive in that sense and to that extent. x x x.

Moreover, even before the Rules of Procedure for Environmental · Cases became effective, this
Court had already taken a permissive position on the issue of locus standi in environmental cases. In
Oposa, we allowed the suit to be brought in the name of generations yet unborn "based on the
concept of intergenerational responsibility insofar as the right to a balanced and healthful ecology is
concerned."56 Furthermore, we said that the right to a balanced and healthful ecology, a right that
does not even need to be stated in our Constitution as it is assumed to exist from the inception of
humankind, carries with it the correlative duty to refrain from impairing the environment.57

In light of the foregoing, the need to give the Resident Marine Mammals legal standing has been
eliminated by our Rules, which allow any Filipino citizen, as a steward of nature, to bring a suit to
enforce our environmental laws. It is worth noting here that the Stewards are joined as real parties in
the Petition and not just in representation of the named cetacean species. The Stewards, Ramos
and Eisma-Osorio, having shown in their petition that there may be possible violations of laws
concerning the habitat of the Resident Marine Mammals, are therefore declared to possess the legal
standing to file this petition.

Impleading Former President Gloria Macapagal-Arroyo

as an Unwilling Co-Petitioner

Petitioners Stewards in G.R. No. 180771 impleaded as an unwilling co-petitioner former President
Gloria Macapagal-Arroyo for the following reasons, which we quote:

Her Excellency Gloria Macapagal-Arroyo, also of legal age, Filipino and resident of Malacailang
Palace, Manila Philippines. Steward Gloria Macapagal-Arroyo happens to be the incumbent
President of the Philippine Islands. She is personally impleaded in this suit as an unwilling co-
petitioner by reason of her express declaration and undertaking under the recently signed ASEAN
Charter to protect Your Petitioners' habitat, among others. She is meantime dominated as an
unwilling co-petitioner due to lack of material time in seeking her signature and imprimatur hereof
and due to possible legal complications that may hereafter arise by reason of her official relations
with public respondents under the alter ego principle in political law.58 This is incorrect.

Section 10, Rule 3 of the Rules of Court provides:

Sec. 10. Unwilling co-plaintiff. - If the consent of any party who should be joined as plaintiff can not
be obtained, he may be made a defendant and the reason therefor shall be stated in the complaint.

Under the foregoing rule, when the consent of a party who should be joined as a plaintiff cannot be
obtained, he or she may be made a party defendant to the case. This will put the unwilling party
under the jurisdiction of the Court, which can properly implead him or her through its processes. The
unwilling party's name cannot be simply included in a petition, without his or her knowledge and
consent, as such would be a denial of due process.

Moreover, the reason cited by the petitioners Stewards for including former President Macapagal-
Arroyo in their petition, is not sufficient to implead her as an unwilling co-petitioner. Impleading the
former President as an unwilling co-petitioner, for an act she made in the performance of the
functions of her office, is contrary to the public policy against embroiling the President in suits, "to
assure the exercise of Presidential duties and functions free from any hindrance or distraction,
considering that being the Chief Executive of the Government is a job that, aside from requiring all of
the office holder's time, also demands undivided attention."59

Therefore, former President Macapagal-Arroyo cannot be impleaded as one of the petitioners in this
suit. Thus, her name is stricken off the title of this case.

Main Issue:

Legality of Service Contract No. 46

Service Contract No. 46 vis-a-vis
Section 2, Article XII of the
1987 Constitution

Petitioners maintain that SC-46 transgresses the Jura Regalia Provision or paragraph 1, Section 2,
Article XII of the 1987 Constitution because JAPEX is 100% Japanese-owned.60Furthermore, the
FIDEC asserts that SC-46 cannot be considered as a technical and financial assistance agreement
validly executed under paragraph 4 of the same provision.61 The petitioners claim that La Bugal-
B'laan Tribal Association, Inc. v. Ramos62 laid down the guidelines for a valid service contract, one of
which is that there must exist a general law for oil exploration before a service contract may be
entered into by the Government. The petitioners posit that the service contract in La Bugal is
presumed to have complied with the requisites of (a) legislative enactment of a general law after the
effectivity of the 1987 Constitution (such as Republic Act No. 7942, or the Philippine Mining Law of
1995, governing mining contracts) and (b) presidential notification. The petitioners thus allege that
the ruling in La Bugal, which involved mining contracts under Republic Act No. 7942, does not apply
in this case.63 The petitioners also argue that Presidential Decree No. 87 or the Oil Exploration and
Development Act of 1972 cannot legally justify SC-46 as it is deemed to have been repealed by the
1987 Constitution and subsequent laws, which enunciate new policies concerning the
environment.64 In addition, petitioners in G.R. No. 180771 claim that paragraphs 2 and 3 of Section 2,
Article XII of the 1987 Constitution mandate the exclusive use and enjoyment by the Filipinos of our
natural resources,65 and paragraph 4 does not speak of service contracts but of FTAAs or Financial
Technical Assistance Agreements.66

The public respondents again controvert the petitioners' claims and asseverate that SC-46 does not
violate Section 2, Article XII of the 1987 Constitution. They hold that SC-46 does not fall under the
coverage of paragraph 1 but instead, under paragraph 4 of Section 2, Article XII of the 1987
Constitution on FTAAs. They also insist that paragraphs 2 and 3, which refer to the grant of
exclusive fishing right to Filipinos, are not applicable to SC-46 as the contract does not grant
exclusive fishing rights to JAPEX nor does it otherwise impinge on the FIDEC's right to preferential
use of communal marine and fishing resources.67

Ruling of the Court

On the legality of Service Contract No. 46

vis-a-vis Section 2, Article XII of the 1987 Constitution

The petitioners insist that SC-46 is null and void for having violated Section 2, Article XII of the 1987
Constitution, which reads as follows:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned
by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable
for not more than twenty-five years, and under such terms and conditions as may be provided by
law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and
exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The
Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well
as cooperative fish farming, with priority to subsistence fishermen and fishworkers in rivers, lakes,
bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical
or financial assistance for large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils according to the general terms and conditions provided by law,
based on real contributions to the economic growth and general welfare of the country. In such
agreements, the State shall promote the development and use of local scientific and technical
resources.

The President shall notify the Congress of every contract entered into in accordance with this
provision, within thirty days from its execution. (Emphases ours.)

This Court has previously settled the issue of whether service contracts are still allowed under the
1987 Constitution. In La Bugal, we held that the deletion of the words "service contracts" in the 1987
Constitution did not amount to a ban on them per se. In fact, in that decision, we quoted in length,
portions of the deliberations of the members of the Constitutional Commission (ConCom) to show
that in deliberating on paragraph 4, Section 2, Article XII, they were actually referring to service
contracts as understood in the 1973 Constitution, albeit with safety measures to eliminate or
minimize the abuses prevalent during the martial law regime, to wit: Summation of the

ConCom Deliberations

At this point, we sum up the matters established, based on a careful reading of the Con Com
deliberations, as follows:

In their deliberations on what was to become paragraph 4, the framers used the term service
contracts in referring to agreements x x x involving either technical or financial assistance.

They spoke of service contracts as the concept was understood in the 1973 Constitution.

It was obvious from their discussions that they were not about to ban or eradicate service contracts.

Instead, they were plainly crafting provisions to put in place safeguards that would eliminate or
minimize the abuses prevalent during the marital law regime. In brief, they were going to permit
service contracts with foreign corporations as contractors, but with safety measures to prevent
abuses, as an exception to the general norm established in the first paragraph of Section 2 of Article
XII. This provision reserves or limits to Filipino citizens -- and corporations at least 60 percent of
which is owned by such citizens -- the exploration, development and utilization of natural resources.
This provision was prompted by the perceived insufficiency of Filipino capital and the felt need for
foreign investments in the EDU of minerals and petroleum resources.

The framers for the most part debated about the sort of safeguards that would be considered
adequate and reasonable. But some of them, having more "radical" leanings, wanted to ban service
contracts altogether; for them, the provision would permit aliens to exploit and benefit from the
nation's natural resources, which they felt should be reserved only for Filipinos.

In the explanation of their votes, the individual commissioners were heard by the entire body. They
sounded off their individual opinions, openly enunciated their philosophies, and supported or
attacked the provisions with fervor. Everyone's viewpoint was heard.

In the final voting, the Article on the National Economy and Patrimony -- including paragraph 4
allowing service contracts with foreign corporations as an exception to the general norm in
paragraph 1 of Section 2 of the same article --was resoundingly approved by a vote of 32 to 7, with 2
abstentions.

Agreements Involving Technical

Or Financial Assistance Are
Service Contracts with Safeguards

From the foregoing, we are impelled to conclude that the phrase agreements involving either
technical or financial assistance, referred to in paragraph 4, are in fact service contracts. But unlike
those of the 1973 variety, the new ones are between foreign corporations acting as contractors on
the one hand; and on the other, the government as principal or "owner" of the works. In the new
service contracts, the foreign contractors provide capital, technology and technical know-how, and
managerial expertise in the creation and operation of large-scale mining/extractive enterprises; and
the government, through its agencies (DENR, MGB), actively exercises control and supervision over
the entire operation.68

In summarizing the matters discussed in the ConCom, we established that paragraph 4, with the
safeguards in place, is the exception to paragraph 1, Section 2 of Article XII. The following are the
safeguards this Court enumerated in La Bugal:

Such service contracts may be entered into only with respect to minerals, petroleum and other
mineral oils. The grant thereof is subject to several safeguards, among which are these
requirements:

(1) The service contract shall be crafted in accordance with a general law that will set
standard or uniform terms, conditions and requirements, presumably to attain a certain
uniformity in provisions and avoid the possible insertion of terms disadvantageous to the
country.

(2) The President shall be the signatory for the government because, supposedly before an
agreement is presented to the President for signature, it will have been vetted several times
over at different levels to ensure that it conforms to law and can withstand public scrutiny.

(3) Within thirty days of the executed agreement, the President shall report it to Congress to
give that branch of government an opportunity to look over the agreement and interpose
timely objections, if any.69
Adhering to the aforementioned guidelines, this Court finds that SC-46 is indeed null and void for
noncompliance with the requirements of the 1987 Constitution.

1. The General Law on Oil Exploration

The disposition, exploration, development, exploitation, and utilization of indigenous petroleum in the
Philippines are governed by Presidential Decree No. 87 or the Oil Exploration and Development Act
of 1972. This was enacted by then President Ferdinand Marcos to promote the discovery and
production of indigenous petroleum through the utilization of government and/or local or foreign
private resources to yield the maximum benefit to the Filipino people and the revenues to the
Philippine Government.70

Contrary to the petitioners' argument, Presidential Decree No. 87, although enacted in 1972, before
the adoption of the 1987 Constitution, remains to be a valid law unless otherwise repealed, to wit:

ARTICLE XVIII - TRANSITORY PROVISIONS

Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and
other executive issuances not inconsistent with this Constitution shall remain operative until
amended, repealed, or revoked.

If there were any intention to repeal Presidential Decree No. 87, it would have been done expressly
by Congress. For instance, Republic Act No. 7160, more popularly known as the Local Government
Code of 1991, expressly repealed a number of laws, including a specific provision in Presidential
Decree No. 87, viz.:

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

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

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

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

(e) The following provisions are hereby repealed or amended insofar as they are inconsistent
with the provisions of this Code: Sections 2, 16 and 29 of Presidential Decree No. 704;
Section 12 of Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70,
71, 72, 73, and 74 of Presidential Decree No. 463, as amended; and Section 16 of
Presidential Decree No. 972, as amended, and
 (f) All general and special laws, acts, city charters, decrees, executive orders, proclamations
and administrative regulations, or part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified accordingly. (Emphasis supplied.)

This Court could not simply assume that while Presidential Decree No. 87 had not yet been
expressly repealed, it had been impliedly repealed. As we held in Villareña v. The Commission on
Audit,71 "[i]mplied repeals are not lightly presumed." It is a settled rule that when laws are in conflict
with one another, every effort must be exerted to reconcile them. In Republic of the Philippines v.
Marcopper Mining Corporation,72 we said:

The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the
inference of implied repeal may be drawn. The rule is expressed in the maxim, interpretare et
concordare leqibus est optimus interpretendi, i.e., every statute must be so interpreted and brought
into accord with other laws as to form a uniform system of jurisprudence. The fundament is that the
legislature should be presumed to have known the existing laws on the subject and not have
enacted conflicting statutes. Hence, all doubts must be resolved against any implied repeal, and all
efforts should be exerted in order to harmonize and give effect to all laws on the subject. (Citation
omitted.)

Moreover, in cases where the statute seems to be in conflict with the Constitution, but a construction
that it is in harmony with the Constitution is also possible, that construction should be
preferred.73 This Court, in Pangandaman v. Commission on Elections74 expounding on this point,
pronounced: