G.R. No.

189655 April 13, 2011

AOWA ELECTRONIC PHILIPPINES, INC., Petitioner,

vs.
DEPARTMENT OF TRADE AND INDUSTRY, National Capital Region, Respondent.

RESOLUTION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure,
seeking the reversal of the Court of Appeals (CA) Decision2 dated June 23, 2009, which affirmed the
resolution dated August 26, 20083 of the Department of Trade and Industry (DTI), Appeals Committee,
sustaining the decision4 dated April 10, 2008 of the DTI Adjudication Officer (Adjudication Officer).

The facts, as quoted by the CA from the Adjudication Officer’s findings, are as follows:

DTI-NCR’s records show that numerous administrative complaints have been filed against Aowa
Electronic Philippines, Inc. by different consumers, or a total of at least two hundred and seventy-three
(273) from the year 2001 until 2007. The facts narrated in the said complaints consistently contain a
common thread, as follows:

● A target customer is approached by Aowa’s representatives, usually in a mall and informs the former
that he/she has won a gift or is to receive some giveaways. In certain cases, when the target customer
expresses interest in the said "gift" or giveaway, Aowa’s representatives then verbally reveal that the
same can only be claimed or received upon purchase of an additional product or products, which are
represented to be of high quality. However, consumer complainants allege that such products are
substantially priced.

● An initial gift is offered to the target customer, and upon acceptance, the customer is invited to
[Aowa’s] store/outlet. It is at that point that the customer is informed that he/she has qualified for a
raffle draw or contest, entitling them to claim an additional "gift." In the same manner, such additional
gift can be received only upon the purchase of additional products, also represented to be of high
quality, and sometimes similarly alleged to be substantially charged.

● [In] the course of enticing the target customer to purchase the additional product, they are physically
surrounded by Aowa’s representatives, otherwise known to many as "ganging up" o[n] customers.

● Although the customer is required to purchase an additional product to claim the offered "gift/s," this
is not disclosed during the initial stages of the sales pitch. The revelation is only done when the target
customer is being surrounded by Aowa’s representatives within its showroom/store/outlet.

● In some cases, when customers state that they are short of cash, [Aowa’s] representatives urge said
customers to use their credit card or to withdraw from an Automated Teller Machine (ATM). There are

1
even instances where [Aowa’s] representatives accompany a customer to his/her residence, where the
latter can produce their (sic) means of payment.

In view thereof, DTI-NCR filed a Formal Charge against AOWA for violation of Articles 50 and 52 of
the Consumer Act of the Philippines, praying that a Cease and Desist Order be issued, and [an]
administrative fine be imposed, and other reliefs or remedies be granted as may be just and equitable
under the circumstances.5

The CA further narrates:

When asked to Answer, AOWA denied having violated the provisions of the Consumer Act. A notice
of preliminary conference was thereafter issued, giving the parties to find (sic) ways and means to
expedite the proceedings, but the scheduled preliminary conference had to be terminated, as the
proposal to enter into a plea bargain agreement did not ensue. As a consequence thereof, both parties
were required to submit their respective position papers.

Meanwhile, a Preventive Measure Order (PMO) was issued by the DTI in order to prohibit AOWA
from continuing with the act complained of until such time that a sale promotion permit is secured or
obtained from the DTI.

In their position paper, AOWA vehemently denied committing any violation of the provisions of the
Consumer Act as it does not employ the marketing scheme described in the formal charge. AOWA
argued that the mere filing of the consumer complaint does not prove outright that an offense has been
committed by it, meaning that it is not a conclusive proof that it is violating the law it is charged of. It
stressed that all of the consumer complaints against it have not prospered, as the cases have been
amicably settled. In addition, majority of the consumer complaints which served as basis for the filing
of the formal charge are already deemed barred by prescription. As far as it is concerned therefore,
AOWA claims that the complaint[s are] based on mere assumption and not on established facts.6

On April 10, 2008, after considering the arguments of petitioner Aowa Electronic Philippines, Inc.
(Aowa) and respondent DTI-National Capital Region (NCR), the Adjudication Officer found that the
complaints against Aowa continued to increase despite its claims of amicable settlement. He also found
that Aowa submitted no proof of such amicable settlement. Based on the numerous complaints against
Aowa, the Adjudication Officer held that the DTI had sufficiently established prima facie evidence
against Aowa for violation of the applicable provisions of Republic Act (R.A.) No. 7394, or the
Consumer Act of the Philippines (the Consumer Act), and its Implementing Rules and Regulations
(IRR). Furthermore, the Adjudication Officer highlighted that Aowa failed to secure any Sales
Promotion Permit from the DTI for Aowa’s alleged promotional sales. Thus, he ruled:

WHEREFORE, foregoing premises considered, and by virtue of the power and mandate vested in this
Department, to promote and encourage fair, honest and equitable relations among parties in consumer
transactions and protect the consumer against deceptive, unfair and unconscionable sales act or
practices, [Aowa] is hereby declared liable under the Consumer Act of the Philippines and the Rules
and Regulations Implementing the same.

As a consequence thereof, it is hereby ordered, that –

2
 a) [Aowa] must permanently cease and desist from operating its business in all its stores/outlets
nationwide;

b) [Aowa’s] Certificates of Business Name Registration for all its stores/outlets applying the
sales scheme in question be cancelled;

c) [Aowa’s] application for the registration of the same or another business name be withheld by
DTI if the nature thereof is the same as that mentioned in this case;

d) [Aowa] must pay and/or refund to those who filed administrative complaint[s] with any DTI
Office, the amount of money paid in consideration for the purchase of products sold in [Aowa’s]
stores/outlets as a precondition to the claim of the gift/reward promised to be given to said
complainants[; and]

e) [Aowa] must pay a one time Administrative Fine of Three Hundred Thousand Pesos
(₱300,000.00), Philippine currency, either in cash or in the form of Company or Manager’s
check, at the DTI Cashier’s Office, 4th Floor, Trade and Industry Building, 361 Sen. Gil Puyat
Ave., Makati City.

Let a copy of this Decision be furnished to all Heads of DTI Provincial and Area Offices who are
hereby directed to disseminate copies hereof to the Heads of Business Permit Bureau/Division of the
different municipalities or cities within their respective jurisdictions for their appropriate action.

SO ORDERED.7

Aggrieved, Aowa sought recourse from the DTI Appeals Committee, ascribing grave abuse of
discretion to the Adjudication Officer.

On August 26, 2008, the DTI Appeals Committee dismissed Aowa’s appeal and sustained the
Adjudication Officer’s decision. It held that the techniques and schemes employed by Aowa were
fraudulent, as they were being used as a bait to lure customers into buying its products. The DTI
Appeals Committee noted that Aowa’s act of giving gifts and

prizes to its prospective customers in order to entice the latter to enter Aowa’s store and to purchase its
products is a common thread in every complaint lodged against Aowa before the DTI.8

Unperturbed, Aowa filed a petition for certiorari under Rule 65 of the Rules of Civil Procedure before
the CA. On June 23, 2009, the CA affirmed the findings and ruling of the DTI Appeals Committee.
The CA heavily relied on the findings of the Adjudication Officer and the DTI Appeals Committee,
showing that Aowa committed acts of misrepresentation against its customers, clearly violative of the
Consumer Act. Likewise, the CA affirmed the lower agencies’ findings that Aowa indeed did not
secure any Sales Promotion Permit for its promotional sales.9

Unyielding, Aowa filed its motion for reconsideration, which the CA, however, denied in its
Resolution10 dated September 29, 2009.
3
Hence, this petition based on the following grounds:

[I.] WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN
IT RULED THAT THERE IS SUFFICIENT BASIS IN THE FILING OF THE FORMAL CHARGE
AGAINST HEREIN PETITIONER NOTWITHSTANDING THE FACT THAT THE SAID FORMAL
CHARGE WAS MERELY BASED ON CONSUMER COMPLAINTS WHICH HAVE ALL BEEN
AMICABLY SETTLED AND DISMISSED. MOREOVER, THE HEREIN RESPONDENT DOES
NOT HAVE ANY PERSONAL KNOWLEDGE OF THE CIRCUMSTANCES SURROUNDING
ALL THE CONSUMER COMPLAINTS FILED AGAINST THE PETITIONER[;]

[II.] WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED
WHEN IT AFFIRMED THE HARSH AND EXCESSIVE DECISION OF THE DEPARTMENT OF
TRADE AND INDUSTRY, APPEALS COMMITTEE ORDERING THE HEREIN PETITIONER TO
PERMANENTLY CEASE AND DESIST FROM OPERATING ITS BUSINESS AND IN ADDITION
TO PAY THE MAXIMUM FINE PROVIDED UNDER THE LAW NOTWITHSTANDING THE
FACT THAT THE FORMAL CHARGE IS NOT SUPPORTED BY ANY CONCRETE,
SUFFICIENT AND CONVINCING EVIDENCE[; AND]

[III.] WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
ITS RULING THAT THE ASSAILED RESOLUTION’S ORDER MAY BE ENFORCED
NATIONWIDE DESPITE THE FACT THAT THE COMPLAINT PERTAINS TO CASES IN THE
NATIONAL CAPITAL REGION ONLY[.]11

Aowa claims that the complaints filed against it merely pertain to cases in the NCR, hence, there was
no basis for the DTI to presume that the alleged offenses committed by petitioner are likewise practiced
in other places in the country; that DTI never denied Aowa’s averment that the cases filed against it by
customers were already and actually settled; that the mere filing of numerous complaints does not
prove outright that an offense has been committed; and that the complaints were based on mere
assumptions and not on established facts. Moreover, Aowa’s act of amicably settling the cases with the
consumer-complainants manifests Aowa’s good faith and fair dealing with its patrons, not
commensurate with the penalty of closure and the maximum fine imposed by the DTI. Finally, Aowa
denies that it committed fraud and/or deceit in violation of the Consumer Act. Good faith must always
be presumed. Aowa postulates that like other companies, its sales personnel are employed to convince
potential customers to purchase the products they are selling, inclusive of enthusiasm in sales talk and
overzealousness which cannot and should not be considered as deceit. Customers in this case were
never deprived of their prerogative to refuse the offer of the sales agents of Aowa, as the terms and
conditions of the sale were fully explained to all of its customers.12

On the other hand, the DTI, through the Office of the Solicitor General (OSG), claims that there is
sufficient basis for the filing of the formal charge against petitioner; that through Assistant Secretary
Ma. Theresa L. Pelayo, acting as Regional Caretaker, it filed the formal charge against Aowa based on
the numerous complaints filed against the latter and pursuant to Article 15913 of the Consumer Act; that
said complaints constituted prima facie violation of the Consumer Act; that, as such, Aowa has the
burden to overcome the presumption by proof to the contrary; and that Aowa, however, failed to
discharge the said burden. The OSG argues that, contrary to Aowa’s assertion, the amicable settlement
allegedly entered by Aowa and its consumer-complainants is not a ground for the dismissal of the
4
formal charge because Aowa, despite respondent’s issuance of a Preventive Measure Order14 (PMO) on
July 31, 2009, continues to enter and engage in the same acts and/or transactions complained of.
Consonant with the findings of the lower agencies and the CA, the OSG asseverates that Aowa, after it
was afforded its right to due process, was correctly found liable for violation of the Consumer Act
through misrepresentation, and for its failure to secure any Sales Promotion Permit from the DTI.
Moreover, the directive of the Adjudication Officer of closure and imposition of the maximum fine of
₱300,000.00 is in accordance with law and its IRR.15

Correlatively, Aowa assailed the validity of the PMO with the Regional Trial Court (RTC) of Makati
City, Branch 143, docketed as Civil Case No. 09-723. The RTC, however, dismissed the case for lack
of jurisdiction. Unyielding, in a Petition for Prohibition, Aowa went to the CA which, in its
Resolution16 dated October 27, 2009, dismissed Aowa’s case for its failure to file the petition within the
prescribed period. The said CA Resolution became final and executory on January 28, 2010. 17

In a Manifestation,18 the counsel of Aowa intimated that Aowa no longer intends to file a reply to the
OSG’s Comment, on the ground that the discussions made therein had already been addressed in the
instant Petition. Counsel, however, also intimated that Aowa left its known office address without
informing him of the location of its new office.

The sole issue in this case is whether or not the CA committed any reversible error in affirming the
findings and ruling of the Adjudication Officer and the DTI Appeals Committee.

The Petition is bereft of merit.

Contrary to Aowa’s postulations, the DTI has the authority and the mandate to act upon the complaints
filed against Aowa. Article 2 of the Consumer Act clearly sets forth the policy of the State on consumer
protection, viz.:

ART 2. Declaration of Basic Policy. — It is the policy of the State to protect the interests of the
consumer, promote his general welfare and to establish standards of conduct for business and industry.
Towards this end, the State shall implement measures to achieve the following objectives:

a) protection against hazards to health and safety;

b) protection against deceptive, unfair and unconscionable sales acts and practices;

c) provision of information and education to facilitate sound choice and the proper exercise of
rights by the consumer;

d) provision of adequate rights and means of redress; and

e) involvement of consumer representatives in the formulation of social and economic policies.

This policy is reiterated in Article 48 of the Consumer Act, which provides that "the State shall
promote and encourage fair, honest and equitable relations among parties in consumer transactions and
protect the consumer against deceptive, unfair and unconscionable sales acts or practices." Verily, as
espoused by the OSG, the DTI validly invoked Article 159 of the Consumer Act in order to effectuate
5
this policy of the State by filing a formal charge against Aowa. It is indubitable that the DTI is tasked
to protect the consumer against deceptive, unfair, and unconscionable sales, acts, or practices, as
defined in Articles 50 and 52 of the Consumer Act.19

The law is clear. Articles 50 and 52 of the Consumer Act provide:

ART. 50. Prohibition Against Deceptive Sales Acts or Practices. — A deceptive act or practice by a
seller or supplier in connection with a consumer transaction violates this Act whether it occurs before,
during or after the transaction. An act or practice shall be deemed deceptive whenever the producer,
manufacturer, supplier or seller, through concealment, false representation [or] fraudulent
manipulation, induces a consumer to enter into a sales or lease transaction of any consumer product or
service.

Without limiting the scope of the above paragraph, the act or practice of a seller or supplier is deceptive
when it represents that:

a) a consumer product or service has the sponsorship, approval, performance, characteristics,

ingredients, accessories, uses, or benefits it does not have;

b) a consumer product or service is of a particular standard, quality, grade, style, or model when
in fact it is not;

c) a consumer product is new, original or unused, when in fact, it is in a deteriorated, altered,

reconditioned, reclaimed or second-hand state;

d) a consumer product or service is available to the consumer for a reason that is different from
the fact;

e) a consumer product or service has been supplied in accordance with the previous
representation when in fact it is not;

f) a consumer product or service can be supplied in a quantity greater than the supplier intends;

g) a service, or repair of a consumer product is needed when in fact it is not;

h) a specific price advantage of a consumer product exists when in fact it does not;

i) the sales act or practice involves or does not involve a warranty, a disclaimer of warranties,
particular warranty terms or other rights, remedies or obligations if the indication is false; and

j) the seller or supplier has a sponsorship, approval, or affiliation he does not have.

xxxx

ART. 52. Unfair or Unconscionable Sales Act or Practice. — An unfair or unconscionable sales act or
practice by a seller or supplier in connection with a consumer transaction violates this Chapter whether
it occurs before, during or after the consumer transaction. An act or practice shall be deemed unfair or
6
unconscionable whenever the producer, manufacturer, distributor, supplier or seller, by taking
advantage of the consumer's physical or mental infirmity, ignorance, illiteracy, lack of time or the
general conditions of the environment or surroundings, induces the consumer to enter into a sales or
lease transaction grossly inimical to the interests of the consumer or grossly one-sided in favor of the
producer, manufacturer, distributor, supplier or seller.

In determining whether an act or practice is unfair and unconscionable, the following circumstances
shall be considered:

a) that the producer, manufacturer, distributor, supplier or seller took advantage of the inability
of the consumer to reasonably protect his interest because of his inability to understand the
language of an agreement, or similar factors;

b) that when the consumer transaction was entered into, the price grossly exceeded the price at
which similar products or services were readily obtainable in similar transaction by like
consumers;

c) that when the consumer transaction was entered into, the consumer was unable to receive a
substantial benefit from the subject of the transaction;

d) that when the consumer transaction was entered into, the seller or supplier was aware that
there was no reasonable probability or payment of the obligation in full by the consumer; and

e) that the transaction that the seller or supplier induced the consumer to enter into was
excessively one-sided in favor of the seller or supplier.

It cannot be gainsaid that the DTI acted on the basis of about 273 consumer complaints against Aowa,
averring a common and viral scheme in carrying out its business to the prejudice of consumers.
Complaints — filed by consumers residing not only within the NCR but also in the provinces20 ¾
continued to be filed even after the formal charge and the issuance of the PMO. In this regard, we quote
with affirmation and accord respect to the factual findings of the CA, to wit:

[Aowa], in employing the sales scheme described by customers in their complaints in order to entice
customers to purchase [its] products clearly violated Article 52 of the Consumer Act of the Philippines.
As found by public respondent DTI whose findings We heretofore adopt:

"It is undisputed that the techniques/scheme employed by [Aowa] were fraudulently (sic) considering
that the same were being used as a bait to lure customers into buying it products. [Aowa’s] customary
act of giving gifts and the so called prizes to its prospective customers in order to entice them to enter
the store outlet and later convincing (sic) them to purchase the products [it is] selling are (sic) but
common trends (sic) that occurred in every complaint lodged against [Aowa] before the DTI-NCR and
regional offices. In such manner, it is evident that the said scheme is actually the means by which
[Aowa] operates its business. Simply, it is intrinsically connected to the business itself of and had
[Aowa] not employed those techniques, customers would not have transacted with it."

7
In doing so, [Aowa], as seller, through its representatives stationed usually in malls, entice consumers
into purchasing their products by taking advantage of the latter’s physical or mental infirmity,
ignorance, illiteracy, lack of time or the general conditions of the environment or surroundings. This is
done by misrepresenting to the consumer that he/she has won a gift or is to receive some giveaways
when in truth, these gifts can only be claimed or received upon purchase of an additional product or
products, again misrepresented by [Aowa to] be of high quality. This is how [Aowa] operates its
business, and not simply as a means of promotional sale. The act sought to be avoided and punished
under the Consumer Act has clearly been committed by Aowa.21

By reason of the special knowledge and expertise of the DTI over matters falling under its jurisdiction,
it is in a better position to pass judgment on the issues, and its findings of fact in that regard, especially
when affirmed by the CA, are generally accorded respect, if not finality, by this Court. 22 Furthermore,
Aowa failed to refute DTI’s finding that it did not secure any permit for its alleged promotional sales.
In sum, Aowa failed to show any reversible error on the part of the CA in affirming the ruling of the
DTI as to warrant the modification much less the reversal of its assailed decision.

A final note.

In these trying times when fly-by-night establishments and syndicates proliferate all over the country,
lurking and waiting to prey on innocent consumers, and ganging up on them like a pack of wolves with
their sugar-coated sales talk and false representations disguised as "overzealous marketing strategies,"
it is the mandated duty of the Government, through its various agencies like the DTI, to be wary and
ready to protect each and every consumer. To allow or even tolerate the marketing schemes such as
these, under the pretext of promotional sales in contravention of the law and its existing rules and
regulations, would result in consumers being robbed in broad daylight of their hard earned money. This
Court shall not countenance these pernicious acts at the expense of consumers.

WHEREFORE, the Petition is DENIED and the Court of Appeals Decision dated June 23, 2009 is
AFFIRMED. Costs against petitioner.

SO ORDERED.

8
G.R. No. 172835 December 13, 2007

AIR PHILIPPINES CORPORATION, Petitioner,

vs.
PENNSWELL, INC. Respondent.

DECISION

CHICO-NAZARIO, J.:

Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the
Rules of Court, the nullification of the 16 February 2006 Decision1 and the 25 May 2006 Resolution2 of
the Court of Appeals in CA-G.R. SP No. 86329, which affirmed the Order3 dated 30 June 2004 of the
Regional Trial Court (RTC), Makati City, Branch 64, in Civil Case No. 00-561.

Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air
transportation services. On the other hand, respondent Pennswell, Inc. was organized to engage in the
business of manufacturing and selling industrial chemicals, solvents, and special lubricants.

On various dates, respondent delivered and sold to petitioner sundry goods in trade, covered by Sales
Invoices No. 8846,4 9105,5 8962,6 and 8963,7 which correspond to Purchase Orders No. 6433, 6684,
6634 and 6633, respectively. Under the contracts, petitioner’s total outstanding obligation amounted to
₱449,864.98 with interest at 14% per annum until the amount would be fully paid. For failure of the
petitioner to comply with its obligation under said contracts, respondent filed a Complaint8 for a Sum
of Money on 28 April 2000 with the RTC.

In its Answer,9 petitioner contended that its refusal to pay was not without valid and justifiable reasons.
In particular, petitioner alleged that it was defrauded in the amount of ₱592,000.00 by respondent for
its previous sale of four items, covered by Purchase Order No. 6626. Said items were misrepresented
by respondent as belonging to a new line, but were in truth and in fact, identical with products
petitioner had previously purchased from respondent. Petitioner asserted that it was deceived by
respondent which merely altered the names and labels of such goods. Petitioner specifically identified
the items in question, as follows:

Label/Description Item No. Amount P.O. Date

1. a. Anti-Friction Fluid MPL- 153,941.40 5714 05/20/99

b. Excellent Rust Corrosion (fake) 800 155,496.00 5888 06/20/99
MPL-
008

2. a. Contact Grease COG #2 115,236.00 5540 04/26/99

9
 b. Connector Grease (fake) CG 230,519.52 6327 08/05/99

3. a. Trixohtropic Grease EPC 81,876.96 4582 01/29/99

b. Di-Electric Strength Protective EPC#2 81,876.96 5446 04/21/99
Coating (fake)

4. a. Dry Lubricant ASC-EP 87,346.52 5712 05/20/99

b. Anti-Seize Compound (fake) ASC-EP 124,108.10 4763 & 02/16/99 &
5890 06/24/99
2000

According to petitioner, respondent’s products, namely Excellent Rust Corrosion, Connector Grease,
Electric Strength Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction
Fluid, Contact Grease, Thixohtropic Grease, and Dry Lubricant, respectively. Petitioner asseverated
that had respondent been forthright about the identical character of the products, it would not have
purchased the items complained of. Moreover, petitioner alleged that when the purported fraud was
discovered, a conference was held between petitioner and respondent on 13 January 2000, whereby the
parties agreed that respondent would return to petitioner the amount it previously paid. However,
petitioner was surprised when it received a letter from the respondent, demanding payment of the
amount of ₱449,864.94, which later became the subject of respondent’s Complaint for Collection of a
Sum of Money against petitioner.

During the pendency of the trial, petitioner filed a Motion to Compel10 respondent to give a detailed list
of the ingredients and chemical components of the following products, to wit: (a) Contact Grease and
Connector Grease; (b) Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c) Dry
Lubricant and Anti-Seize Compound.11 It appears that petitioner had earlier requested the Philippine
Institute of Pure and Applied Chemistry (PIPAC) for the latter to conduct a comparison of respondent’s
goods.

On 15 March 2004, the RTC rendered an Order granting the petitioner’s motion. It disposed, thus:

The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner] Air Philippines
Corporation[,] a detailed list of the ingredients or chemical components of the following chemical
products:

a. Contact Grease to be compared with Connector Grease;

b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating; and

c. Dry Lubricant to be compared with Anti-Seize Compound[.]

[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order to submit to
[petitioner] Air Philippines Corporation the chemical components of all the above-mentioned products
for chemical comparison/analysis.12
10
Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled to
disclose the chemical components sought because the matter is confidential. It argued that what
petitioner endeavored to inquire upon constituted a trade secret which respondent cannot be forced to
divulge. Respondent maintained that its products are specialized lubricants, and if their components
were revealed, its business competitors may easily imitate and market the same types of products, in
violation of its proprietary rights and to its serious damage and prejudice.

The RTC gave credence to respondent’s reasoning, and reversed itself. It issued an Order dated 30 June
2004, finding that the chemical components are respondent’s trade secrets and are privileged in
character. A priori, it rationalized:

The Supreme Court held in the case of Chavez vs. Presidential Commission on Good Government, 299
SCRA 744, p. 764, that "the drafters of the Constitution also unequivocally affirmed that aside from
national security matters and intelligence information, trade or industrial secrets (pursuant to the
Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the
Secrecy of Bank Deposit Act) are also exempted from compulsory disclosure."

Trade secrets may not be the subject of compulsory disclosure. By reason of [their] confidential and
privileged character, ingredients or chemical components of the products ordered by this Court to be
disclosed constitute trade secrets lest [herein respondent] would eventually be exposed to unwarranted
business competition with others who may imitate and market the same kinds of products in violation
of [respondent’s] proprietary rights. Being privileged, the detailed list of ingredients or chemical
components may not be the subject of mode of discovery under Rule 27, Section 1 of the Rules of
Court, which expressly makes privileged information an exception from its coverage.13

Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition for Certiorari
under Rule 65 of the Rules of Court with the Court of Appeals, which denied the Petition and affirmed
the Order dated 30 June 2004 of the RTC.

The Court of Appeals ruled that to compel respondent to reveal in detail the list of ingredients of its
lubricants is to disregard respondent’s rights over its trade secrets. It was categorical in declaring that
the chemical formulation of respondent’s products and their ingredients are embraced within the
meaning of "trade secrets." In disallowing the disclosure, the Court of Appeals expounded, thus:

The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989]) held that trade secrets
and confidential, commercial and financial information are exempt from public scrutiny. This is
reiterated in Chavez v. Presidential Commission on Good Government (299 SCRA 744 [1998]) where
the Supreme Court enumerated the kinds of information and transactions that are recognized as
restrictions on or privileges against compulsory disclosure. There, the Supreme Court explicitly stated
that:

"The drafters of the Constitution also unequivocally affirmed that, aside from national security matters
and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and
other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act) re
also exempt from compulsory disclosure."

11
It is thus clear from the foregoing that a party cannot be compelled to produce, release or disclose
documents, papers, or any object which are considered trade secrets.

In the instant case, petitioner [Air Philippines Corporation] would have [respondent] Pennswell
produce a detailed list of ingredients or composition of the latter’s lubricant products so that a chemical
comparison and analysis thereof can be obtained. On this note, We believe and so hold that the
ingredients or composition of [respondent] Pennswell’s lubricants are trade secrets which it cannot be
compelled to disclose.

[Respondent] Pennswell has a proprietary or economic right over the ingredients or components of its
lubricant products. The formulation thereof is not known to the general public and is peculiar only to
[respondent] Pennswell. The legitimate and economic interests of business enterprises in protecting
their manufacturing and business secrets are well-recognized in our system.

[Respondent] Pennswell has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information against the public. Otherwise, such
information can be illegally and unfairly utilized by business competitors who, through their access to
[respondent] Pennswell’s business secrets, may use the same for their own private gain and to the
irreparable prejudice of the latter.

xxxx

In the case before Us, the alleged trade secrets have a factual basis, i.e., it comprises of the ingredients
and formulation of [respondent] Pennswell’s lubricant products which are unknown to the public and
peculiar only to Pennswell.

All told, We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
public respondent Judge in finding that the detailed list of ingredients or composition of the subject
lubricant products which petitioner [Air Philippines Corporation] seeks to be disclosed are trade secrets
of [respondent] Pennswell; hence, privileged against compulsory disclosure.14

Petitioner’s Motion for Reconsideration was denied.

Unyielding, petitioner brought the instant Petition before us, on the sole issue of:

WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH PREVAILING LAWS

AND JURISPRUDENCE WHEN IT UPHELD THE RULING OF THE TRIAL COURT THAT THE
CHEMICAL COMPONENTS OR INGREDIENTS OF RESPONDENT’S PRODUCTS ARE TRADE
SECRETS OR INDUSTRIAL SECRETS THAT ARE NOT SUBJECT TO COMPULSORY
DISCLOSURE.15

Petitioner seeks to convince this Court that it has a right to obtain the chemical composition and
ingredients of respondent’s products to conduct a comparative analysis of its products. Petitioner
assails the conclusion reached by the Court of Appeals that the matters are trade secrets which are
protected by law and beyond public scrutiny. Relying on Section 1, Rule 27 of the Rules of Court,
petitioner argues that the use of modes of discovery operates with desirable flexibility under the

12
discretionary control of the trial court. Furthermore, petitioner posits that its request is not done in bad
faith or in any manner as to annoy, embarrass, or oppress respondent.

A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner
and those of his employees to whom it is necessary to confide it.16 The definition also extends to a
secret formula or process not patented, but known only to certain individuals using it in compounding
some article of trade having a commercial value.17 A trade secret may consist of any formula, pattern,
device, or compilation of information that: (1) is used in one's business; and (2) gives the employer an
opportunity to obtain an advantage over competitors who do not possess the information.18 Generally, a
trade secret is a process or device intended for continuous use in the operation of the business, for
example, a machine or formula, but can be a price list or catalogue or specialized customer list.19 It is
indubitable that trade secrets constitute proprietary rights. The inventor, discoverer, or possessor of a
trade secret or similar innovation has rights therein which may be treated as property, and ordinarily an
injunction will be granted to prevent the disclosure of the trade secret by one who obtained the
information "in confidence" or through a "confidential relationship."20 American jurisprudence has
utilized the following factors21 to determine if an information is a trade secret, to wit:

(1) the extent to which the information is known outside of the employer's business;

(2) the extent to which the information is known by employees and others involved in the
business;

(3) the extent of measures taken by the employer to guard the secrecy of the information;

(4) the value of the information to the employer and to competitors;

(5) the amount of effort or money expended by the company in developing the information; and

(6) the extent to which the information could be easily or readily obtained through an
independent source.22

In Cocoland Development Corporation v. National Labor Relations Commission,23 the issue was the
legality of an employee’s termination on the ground of unauthorized disclosure of trade secrets. The
Court laid down the rule that any determination by management as to the confidential nature of
technologies, processes, formulae or other so-called trade secrets must have a substantial factual basis
which can pass judicial scrutiny. The Court rejected the employer’s naked contention that its own
determination as to what constitutes a trade secret should be binding and conclusive upon the NLRC.
As a caveat, the Court said that to rule otherwise would be to permit an employer to label almost
anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss an
employee on the pretext that the latter somehow disclosed a trade secret, even if in fact there be none at
all to speak of.24 Hence, in Cocoland, the parameters in the determination of trade secrets were set to be
such substantial factual basis that can withstand judicial scrutiny.

The chemical composition, formulation, and ingredients of respondent’s special lubricants are trade
secrets within the contemplation of the law. Respondent was established to engage in the business of
general manufacturing and selling of, and to deal in, distribute, sell or otherwise dispose of goods,

13
wares, merchandise, products, including but not limited to industrial chemicals, solvents, lubricants,
acids, alkalies, salts, paints, oils, varnishes, colors, pigments and similar preparations, among others. It
is unmistakable to our minds that the manufacture and production of respondent’s products proceed
from a formulation of a secret list of ingredients. In the creation of its lubricants, respondent expended
efforts, skills, research, and resources. What it had achieved by virtue of its investments may not be
wrested from respondent on the mere pretext that it is necessary for petitioner’s defense against a
collection for a sum of money. By and large, the value of the information to respondent is crystal clear.
The ingredients constitute the very fabric of respondent’s production and business. No doubt, the
information is also valuable to respondent’s competitors. To compel its disclosure is to cripple
respondent’s business, and to place it at an undue disadvantage. If the chemical composition of
respondent’s lubricants are opened to public scrutiny, it will stand to lose the backbone on which its
business is founded. This would result in nothing less than the probable demise of respondent’s
business. Respondent’s proprietary interest over the ingredients which it had developed and expended
money and effort on is incontrovertible. Our conclusion is that the detailed ingredients sought to be
revealed have a commercial value to respondent. Not only do we acknowledge the fact that the
information grants it a competitive advantage; we also find that there is clearly a glaring intent on the
part of respondent to keep the information confidential and not available to the prying public.

We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect
documents or things upon a showing of good cause before the court in which an action is pending. Its
entire provision reads:

SECTION 1. Motion for production or inspection order. – Upon motion of any party showing good
cause therefore, the court in which an action is pending may (a) order any party to produce and permit
the inspection and copying or photographing, by or on behalf of the moving party, of any designated
documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged,
which constitute or contain evidence material to any matter involved in the action and which are in his
possession, custody or control; or (b) order any party to permit entry upon designated land or other
property in his possession or control for the purpose of inspecting, measuring, surveying, or
photographing the property or any designated relevant object or operation thereon. The order shall
specify the time, place and manner of making the inspection and taking copies and photographs, and
may prescribe such terms and conditions as are just.

A more than cursory glance at the above text would show that the production or inspection of
documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by any
party upon a showing of good cause therefor before the court in which an action is pending. The court
may order any party: a) to produce and permit the inspection and copying or photographing of any
designated documents, papers, books, accounts, letters, photographs, objects or tangible things, which
are not privileged;25 which constitute or contain evidence material to any matter involved in the action;
and which are in his possession, custody or control; or b) to permit entry upon designated land or other
property in his possession or control for the purpose of inspecting, measuring, surveying, or
photographing the property or any designated relevant object or operation thereon.

Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs,
objects or tangible things that may be produced and inspected should not be privileged.26 The
documents must not be privileged against disclosure.27 On the ground of public policy, the rules
14
providing for production and inspection of books and papers do not authorize the production or
inspection of privileged matter; that is, books and papers which, because of their confidential and
privileged character, could not be received in evidence.28 Such a condition is in addition to the requisite
that the items be specifically described, and must constitute or contain evidence material to any matter
involved in the action and which are in the party’s possession, custody or control.

Section 2429 of Rule 130 draws the types of disqualification by reason of privileged communication, to
wit: (a) communication between husband and wife; (b) communication between attorney and client; (c)
communication between physician and patient; (d) communication between priest and penitent; and (e)
public officers and public interest. There are, however, other privileged matters that are not mentioned
by Rule 130. Among them are the following: (a) editors may not be compelled to disclose the source of
published news; (b) voters may not be compelled to disclose for whom they voted; (c) trade secrets; (d)
information contained in tax census returns; and (d) bank deposits. 30

We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals which upheld the
finding of the RTC that there is substantial basis for respondent to seek protection of the law for its
proprietary rights over the detailed chemical composition of its products.

That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction
affords to trade secrets is evident in our laws. The Interim Rules of Procedure on Government
Rehabilitation, effective 15 December 2000, which applies to: (1) petitions for rehabilitation filed by
corporations, partnerships, and associations pursuant to Presidential Decree No. 902-A,31 as amended;
and (2) cases for rehabilitation transferred from the Securities and Exchange Commission to the RTCs
pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, expressly
provides that the court may issue an order to protect trade secrets or other confidential research,
development, or commercial information belonging to the debtor.32 Moreover, the Securities
Regulation Code is explicit that the Securities and Exchange Commission is not required or authorized
to require the revelation of trade secrets or processes in any application, report or document filed with
the Commission.33 This confidentiality is made paramount as a limitation to the right of any member of
the general public, upon request, to have access to all information filed with the Commission.34

Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets under the following
articles:

Art. 291. Revealing secrets with abuse of office. — The penalty of arresto mayor and a fine not
exceeding 500 pesos shall be imposed upon any manager, employee or servant who, in such capacity,
shall learn the secrets of his principal or master and shall reveal such secrets.

Art. 292. Revelation of industrial secrets. — The penalty of prision correccional in its minimum and
medium periods and a fine not exceeding 500 pesos shall be imposed upon the person in charge,
employee or workman of any manufacturing or industrial establishment who, to the prejudice of the
owner thereof, shall reveal the secrets of the industry of
the latter.

15
Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997,
has a restrictive provision on trade secrets, penalizing the revelation thereof by internal revenue officers
or employees, to wit:

SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who causes or procures
an officer or employee of the Bureau of Internal Revenue to divulge any confidential information
regarding the business, income or inheritance of any taxpayer, knowledge of which was acquired by
him in the discharge of his official duties, and which it is unlawful for him to reveal, and any person
who publishes or prints in any manner whatever, not provided by law, any income, profit, loss or
expenditure appearing in any income tax return, shall be punished by a fine of not more than two
thousand pesos (₱2,000), or suffer imprisonment of not less than six (6) months nor more than five (5)
years, or both.

Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of
1990, enacted to implement the policy of the state to regulate, restrict or prohibit the importation,
manufacture, processing, sale, distribution, use and disposal of chemical substances and mixtures that
present unreasonable risk and/or injury to health or the environment, also contains a provision that
limits the right of the public to have access to records, reports or information concerning
chemical substances and mixtures including safety data submitted and data on emission or
discharge into the environment, if the matter is confidential such that it would divulge trade
secrets, production or sales figures; or methods, production or processes unique to such
manufacturer, processor or distributor; or would otherwise tend to affect adversely the
competitive position of such manufacturer, processor or distributor.35

Clearly, in accordance with our statutory laws, this Court has declared that intellectual and industrial
property rights cases are not simple property cases.36 Without limiting such industrial property rights to
trademarks and trade names, this Court has ruled that all agreements concerning intellectual property
are intimately connected with economic development.37 The protection of industrial property
encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction
of human needs. It speeds up transfer of technology and industrialization, and thereby bring about
social and economic progress.38 Verily, the protection of industrial secrets is inextricably linked to the
advancement of our economy and fosters healthy competition in trade.

Jurisprudence has consistently acknowledged the private character of trade secrets.1âwphi1 There is a
privilege not to disclose one’s trade secrets.39 Foremost, this Court has declared that trade secrets and
banking transactions are among the recognized restrictions to the right of the people to information as
embodied in the Constitution.40 We said that the drafters of the Constitution also unequivocally
affirmed that, aside from national security matters and intelligence information, trade or industrial
secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking
transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from compulsory
disclosure.41

Significantly, our cases on labor are replete with examples of a protectionist stance towards the trade
secrets of employers. For instance, this Court upheld the validity of the policy of a pharmaceutical
company prohibiting its employees from marrying employees of any competitor company, on the
rationalization that the company has a right to guard its trade secrets, manufacturing formulas,
16
marketing strategies and other confidential programs and information from competitors.42 Notably, it
was in a labor-related case that this Court made a stark ruling on the proper determination of trade
secrets.

In the case at bar, petitioner cannot rely on Section 7743 of Republic Act 7394, or the Consumer Act of
the Philippines, in order to compel respondent to reveal the chemical components of its products. While
it is true that all consumer products domestically sold, whether manufactured locally or imported, shall
indicate their general make or active ingredients in their respective labels of packaging, the law does
not apply to respondent. Respondent’s specialized lubricants -- namely, Contact Grease, Connector
Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating, Dry Lubricant and Anti-Seize
Compound -- are not consumer products. "Consumer products," as it is defined in Article 4(q),44 refers
to goods, services and credits, debts or obligations which are primarily for personal, family, household
or agricultural purposes, which shall include, but not be limited to, food, drugs, cosmetics, and devices.
This is not the nature of respondent’s products. Its products are not intended for personal, family,
household or agricultural purposes. Rather, they are for industrial use, specifically for the use of
aircraft propellers and engines.

Petitioner’s argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs, requires
the disclosure of the active ingredients of a drug is also on faulty ground.45 Respondent’s products are
outside the scope of the cited law. They do not come within the purview of a drug46 which, as defined
therein, refers to any chemical compound or biological substance, other than food, that is intended for
use in the treatment, prevention or diagnosis of disease in man or animals. Again, such are not the
characteristics of respondent’s products.

What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical
formulation of respondent’s products is not known to the general public and is unique only to it. Both
courts uniformly ruled that these ingredients are not within the knowledge of the public. Since such
factual findings are generally not reviewable by this Court, it is not duty-bound to analyze and weigh
all over again the evidence already considered in the proceedings below.47 We need not delve into the
factual bases of such findings as questions of fact are beyond the pale of Rule 45 of the Rules of Court.
Factual findings of the trial court when affirmed by the Court of Appeals, are binding and conclusive
on the Supreme Court.48

We do not find merit or applicability in petitioner’s invocation of Section 1249 of the Toxic Substances
and Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access to records,
reports or information concerning chemical substances and mixtures, including safety data submitted,
and data on emission or discharge into the environment. To reiterate, Section 1250 of said Act deems
as confidential matters, which may not be made public, those that would divulge trade secrets,
including production or sales figures or methods; production or processes unique to such manufacturer,
processor or distributor, or would otherwise tend to affect adversely the competitive position of such
manufacturer, processor or distributor. It is true that under the same Act, the Department of
Environment and Natural Resources may release information; however, the clear import of the law is
that said authority is limited by the right to confidentiality of the manufacturer, processor or distributor,
which information may be released only to a medical research or scientific institution where the
information is needed for the purpose of medical diagnosis or treatment of a person exposed to the
chemical substance or mixture. The right to confidentiality is recognized by said Act as primordial.
17
Petitioner has not made the slightest attempt to show that these circumstances are availing in the case at
bar.

Indeed, the privilege is not absolute; the trial court may compel disclosure where it is indispensable for
doing justice.51 We do not, however, find reason to except respondent’s trade secrets from the
application of the rule on privilege. The revelation of respondent’s trade secrets serves no better
purpose to the disposition of the main case pending with the RTC, which is on the collection of a sum
of money. As can be gleaned from the facts, petitioner received respondent’s goods in trade in the
normal course of business. To be sure, there are defenses under the laws of contracts and sales
available to petitioner. On the other hand, the greater interest of justice ought to favor respondent as the
holder of trade secrets. If we were to weigh the conflicting interests between the parties, we rule in
favor of the greater interest of respondent. Trade secrets should receive greater protection from
discovery, because they derive economic value from being generally unknown and not readily
ascertainable by the public.52 To the mind of this Court, petitioner was not able to show a compelling
reason for us to lift the veil of confidentiality which shields respondent’s trade secrets.

WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the Resolution
dated 25 May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No costs.

SO ORDERED.

18
G.R. No. 153888 July 9, 2003

ISLAMIC DA'WAH COUNCIL OF THE PHILIPPINES, INC., herein represented by PROF.

ABDULRAFIH H. SAYEDY, petitioner,
vs.
OFFICE OF THE EXECUTIVE SECRETARY of the Office of the President of the Philippines,
herein represented by HON. ALBERTO G. ROMULO, Executive Secretary, and the OFFICE
ON MUSLIM AFFAIRS, herein represented by its Executive Director, HABIB MUJAHAB
HASHIM, respondents.

CORONA, J.:

Before us is a petition for prohibition filed by petitioner Islamic Da'wah Council of the Philippines, Inc.
(IDCP) praying for the declaration of nullity of Executive Order (EO) 46, s. 2001 and the prohibition of
herein respondents Office of the Executive Secretary and Office of Muslim Affairs (OMA) from
implementing the subject EO.

Petitioner IDCP, a corporation that operates under Department of Social Welfare and Development
License No. SB-01-085, is a non-governmental organization that extends voluntary services to the
Filipino people, especially to Muslim communities. It claims to be a federation of national Islamic
organizations and an active member of international organizations such as the Regional Islamic Da'wah
Council of Southeast Asia and the Pacific (RISEAP)1 and The World Assembly of Muslim Youth. The
RISEAP accredited petitioner to issue halal2 certifications in the Philippines. Thus, among the
functions petitioner carries out is to conduct seminars, orient manufacturers on halal food and issue
halal certifications to qualified products and manufacturers.

Petitioner alleges that, on account of the actual need to certify food products as halal and also due to
halal food producers' request, petitioner formulated in 1995 internal rules and procedures based on the
Qur'an3 and the Sunnah4 for the analysis of food, inspection thereof and issuance of halal certifications.
In that same year, petitioner began to issue, for a fee, certifications to qualified products and food
manufacturers. Petitioner even adopted for use on its halal certificates a distinct sign or logo registered
in the Philippine Patent Office under Patent No. 4-2000-03664.

On October 26, 2001, respondent Office of the Executive Secretary issued EO 465 creating the
Philippine Halal Certification Scheme and designating respondent OMA to oversee its implementation.
Under the EO, respondent OMA has the exclusive authority to issue halal certificates and perform
other related regulatory activities.

On May 8, 2002, a news article entitled "OMA Warns NGOs Issuing Illegal 'Halal' Certification" was
published in the Manila Bulletin, a newspaper of general circulation. In said article, OMA warned
Muslim consumers to buy only products with its official halal certification since those without said
certification had not been subjected to careful analysis and therefore could contain pork or its
derivatives. Respondent OMA also sent letters to food manufacturers asking them to secure the halal

19
certification only from OMA lest they violate EO 46 and RA 4109.6 As a result, petitioner lost
revenues after food manufacturers stopped securing certifications from it.

Hence, this petition for prohibition.

Petitioner contends that the subject EO violates the constitutional provision on the separation of Church
and State.7 It is unconstitutional for the government to formulate policies and guidelines on the halal
certification scheme because said scheme is a function only religious organizations, entity or scholars
can lawfully and validly perform for the Muslims. According to petitioner, a food product becomes
halal only after the performance of Islamic religious ritual and prayer. Thus, only practicing Muslims
are qualified to slaughter animals for food. A government agency like herein respondent OMA cannot
therefore perform a religious function like certifying qualified food products as halal.

Petitioner also maintains that the respondents violated Section 10, Article III of the 1987 Constitution
which provides that "(n)o law impairing the obligation of contracts, shall be passed." After the subject
EO was implemented, food manufacturers with existing contracts with petitioner ceased to obtain
certifications from the latter.

Moreover, petitioner argues that the subject EO violates Sections 15 and 16 of Article XIII of the 1987
Constitution which respectively provide:

ROLE AND RIGHTS OF PEOPLE'S ORGANIZATIONS

Sec. 15. The State shall respect the role of independent people's organizations to enable the
people to pursue and protect, within the democratic framework, their legitimate and collective
interests and aspirations through peaceful and lawful means.

People's organizations are bona fide associations of citizens with demonstrated capacity to
promote the public interest and with identifiable leadership, membership, and structure.

Sec. 16. The rights of the people and their organizations to effective and reasonable participation
at all levels of social, political, and economic decision-making shall not be abridged. The State
shall, by law, facilitate, the establishment of adequate consultation mechanisms.

According to petitioner, the subject EO was issued with utter haste and without even consulting
Muslim people's organizations like petitioner before it became effective.

We grant the petition.

OMA was created in 1981 through Executive Order No. 697 (EO 697) "to ensure the integration of
Muslim Filipinos into the mainstream of Filipino society with due regard to their beliefs, customs,
traditions, and institutions."8 OMA deals with the societal, legal, political and economic concerns of the
Muslim community as a "national cultural community" and not as a religious group. Thus, bearing in
mind the constitutional barrier between the Church and State, the latter must make sure that OMA does
not intrude into purely religious matters lest it violate the non-establishment clause and the "free
exercise of religion" provision found in Article III, Section 5 of the 1987 Constitution.9

20
Freedom of religion was accorded preferred status by the framers of our fundamental law. And this
Court has consistently affirmed this preferred status, well aware that it is "designed to protect the
broadest possible liberty of conscience, to allow each man to believe as his conscience directs, to
profess his beliefs, and to live as he believes he ought to live, consistent with the liberty of others and
with the common good."10

Without doubt, classifying a food product as halal is a religious function because the standards used are
drawn from the Qur'an and Islamic beliefs. By giving OMA the exclusive power to classify food
products as halal, EO 46 encroached on the religious freedom of Muslim organizations like herein
petitioner to interpret for Filipino Muslims what food products are fit for Muslim consumption. Also,
by arrogating to itself the task of issuing halal certifications, the State has in effect forced Muslims to
accept its own interpretation of the Qur'an and Sunnah on halal food.

To justify EO 46's intrusion into the subject religious activity, the Solicitor General argues that the
freedom of religion is subservient to the police power of the State. By delegating to OMA the authority
to issue halal certifications, the government allegedly seeks to protect and promote the muslim
Filipinos' right to health, and to instill health consciousness in them.

We disagree.

Only the prevention of an immediate and grave danger to the security and welfare of the community
can justify the infringement of religious freedom.11 If the government fails to show the seriousness and
immediacy of the threat, State intrusion is constitutionally unacceptable. In a society with a democratic
framework like ours, the State must minimize its interference with the affairs of its citizens and instead
allow them to exercise reasonable freedom of personal and religious activity.

In the case at bar, we find no compelling justification for the government to deprive muslim
organizations, like herein petitioner, of their religious right to classify a product as halal, even on the
premise that the health of muslim Filipinos can be effectively protected by assigning to OMA the
exclusive power to issue halal certifications. The protection and promotion of the muslim Filipinos'
right to health are already provided for in existing laws and ministered to by government agencies
charged with ensuring that food products released in the market are fit for human consumption,
properly labeled and safe. Unlike EO 46, these laws do not encroach on the religious freedom of
muslims.

Section 48(4) of the Administrative Code of 1987 gives to the National Meat Inspection Commission
(NMIC) of the Department of Agriculture (DOA) the power to inspect slaughtered animals intended for
human consumption to ensure the safety of the meat released in the market. Another law, RA 7394,
otherwise known as "The Consumer Act of 1992," gives to certain government departments the duty to
protect the interests of the consumer, promote his general welfare and to establish standards of conduct
for business and industry.12 To this end, a food product, before its distribution to the market, is required
to secure the Philippine Standard Certification Mark after the concerned department inspects and
certifies its compliance with quality and safety standards.13

21
One such government agency designated by RA 7394 is the Bureau of Food and Drugs (BFD) of the
Department of Health (DOH). Under Article 22 of said law, BFD has the duty to promulgate and
enforce rules and regulations fixing and establishing a reasonable definition and standard of identity, a
standard of quality and a standard of fill of containers for food. The BFD also ensures that food
products released in the market are not adulterated.14

Furthermore, under Article 48 of RA 7394, the Department of Trade and Industry (DTI) is tasked to
protect the consumer against deceptive, unfair and unconscionable sales acts or practices as defined in
Article 50.15 DTI also enforces compulsory labeling and fair packaging to enable the consumer to
obtain accurate information as to the nature, quality and quantity of the contents of consumer products
and to facilitate his comparison of the value of such products.16

With these regulatory bodies given detailed functions on how to screen and check the quality and
safety of food products, the perceived danger against the health of muslim and non-muslim Filipinos
alike is totally avoided. Of great help are the provisions on labeling of food products (Articles 74 to
85)17 of RA 7394. In fact, through these labeling provisions, the State ably informs the consuming
public of the contents of food products released in the market. Stiff sanctions are imposed on violators
of said labeling requirements.

Through the laws on food safety and quality, therefore, the State indirectly aids muslim consumers in
differentiating food from non-food products. The NMIC guarantees that the meat sold in the market has
been thoroughly inspected and fit for consumption. Meanwhile, BFD ensures that food products are
properly categorized and have passed safety and quality standards. Then, through the labeling
provisions enforced by the DTI, muslim consumers are adequately apprised of the products that contain
substances or ingredients that, according to their Islamic beliefs, are not fit for human intake. These are
the non-secular steps put in place by the State to ensure that the muslim consumers' right to health is
protected. The halal certifications issued by petitioner and similar organizations come forward as the
official religious approval of a food product fit for muslim consumption.

We do not share respondents' apprehension that the absence of a central administrative body to regulate
halal certifications might give rise to schemers who, for profit, will issue certifications for products that
are not actually halal. Aside from the fact that muslim consumers can actually verify through the labels
whether a product contains non-food substances, we believe that they are discerning enough to know
who the reliable and competent certifying organizations in their community are. Before purchasing a
product, they can easily avert this perceived evil by a diligent inquiry on the reliability of the concerned
certifying organization.

WHEREFORE, the petition is GRANTED. Executive Order 46, s. 2000, is hereby declared NULL
AND VOID. Consequently, respondents are prohibited from enforcing the same.

SO ORDERED.

22
G.R. No. 192957 September 29, 2014

EMMANUEL B. MORAN, JR., (Deceased), substituted by his widow, CONCORDIA V.

MORAN, Petitioner,
vs.
OFFICE OF THE PRESIDENT OF THE PHILIPPINES, AS REPRESENTED BY THE
HONORABLE EXECUTIVE SECRETARY EDUARDO R. ERMITA and PGA CARS, INC.,
Respondents.

DECISION

VILLARAMA, JR., J.:

Before us is a petition . for review on certiorari assailing the Resolutions dated March 13, 20091 and
June 25, 2010,2 of the Court of Appeals (CA) in CA-G.R. SP No. 107059. In the Resolution dated
March 13, 2009, the CA outrightly struck down the petition for certiorari that the petitioner had filed to
annul and set aside the Decision3 dated April 3, 2007, and Order4 dated October 22, 2008 of the Office
of the President (OP) in O.P. Case No. 06-E-195. Meanwhile, in the Resolution dated June 25, 2010,
the CA denied the petitioner's. motion for reconsideration.

From the records, the following facts emerge:

On February 2, 2004, the late Emmanuel B. Moran, Jr. filed with the Consumer Arbitration Office
(CAO) a verified complaint against private respondent PGA Cars, Inc. pursuant tothe relevant
provisions of Republic Act No. 7394 (RA 7394), otherwise known as the Consumer Act of the
Philippines. Docketed as DTI Administrative Case No. 04-17, the complaint alleged that the private
respondent should be held liable for the product imperfections of a BMW car which it sold to
complainant.

On September 23, 2005, the CAO rendered a Decision5 in favor of complainant and ordered the private
respondent to refund the purchase price of the BMW car in addition to the payment of costs of
litigation and administrative fines:

WHEREFORE, in view of the foregoing, the respondent is hereby found guilty for violation of the
aforequoted provisions and [is] hereby ordered to perform the following:

1. To refund the purchase price ofthe subject vehicle in the amount of three million three
hundred seventy five thousand pesos (₱3,375,000.00);

2. To pay complainant the amount of five thousand pesos (₱5,000.00) as costs of litigation;

3. To pay an administrative finein the amount of ₱10,000.00 payable at 4th flr., DTI Cashier,
361 Sen. Gil Puyat Ave., Makati City.

SO ORDERED.6

23
On October 19, 2005, the private respondent sought reconsideration of the Decision but the CAO
denied the motion in an Order7 dated January 19, 2006. Thus, the private respondent appealed to the
Secretary of the Department of Trade and Industry (DTI), the quasi-judicial agency designated by
Article 1658 of RA 7394 to entertain appeals from the adverse decisions and orders of the CAO.
However, in a Resolution9 dated April 28, 2006, the DTI Secretary dismissed the appeal of the private
respondent who then filed an appeal with the herein public respondent OP.

On April 3, 2007, the OP granted the appeal, reversed the DTI Secretary’s Resolution, and dismissed
the complaint. The OP ruled that the DTI erred in holding the private respondent liable for product
defects which issue was never raised by the complainant and because the private respondent was not
the manufacturer, builder, producer or importer of the subject BMW car but only its seller. Assuch, it
could not be held liable especially since none of the circumstances under Article 9810 of RA 7394 were
present in the case. The OP further ruled that the private respondent could also not be held liable for
product imperfections because the product was never proven to be unfit or inadequate under the
conditions laid down by law. Neither was there any inconsistency in the information provided in the
container or product advertisements/messages. More, it was only after the lapse of a considerabletime
(nearly 10 months) since the purchase of the car and after it had been driven for 12,518 kilometers, that
the complainant first complained about it. The vehicle never once broke down before then and the
complainant could not, in fact, point to any specific part that is defective.

Complainant filed a motion for reconsideration with the OP, but the OP denied said motion in an Order
dated October 22, 2008. On November 25, 2008, complainant received a copy of the Order denying his
motion for reconsideration.

On January 23, 2009, complainant filed a petition for certiorari with the CA and alleged lack of
jurisdiction on the part of the OP for ruling on cases involving a violation of RA 7394. On March 13,
2009, the CA dismissed the petition for certiorari on the ground that it was a wrong mode of appeal and
for the failure of the petitioner to state material dates. On June 25, 2010, the CA likewise denied the
motion for reconsideration filed by the petitioner.

Since the original complainant Emmanuel B. Moran, Jr. passed away on May 17, 2010, his widow,
Concordia V. Moran filed the present petition for review on certiorari on August 9, 2010. Petitioner
argues that the CA erred in denying the petition for certiorari which alleged error of jurisdiction on the
part of the OP. She contends that in cases alleging error ofjurisdiction on the part of the OP, the proper
remedy is to file a petition for certiorari with the CA because appeal is not available to correct lack of
jurisdiction. Moreover, even though appeal is available, it is not considered as the plain, speedy, and
adequate legal remedy.

Further, the petitioner claims that the OP lacked appellate jurisdiction to review decisions of the DTI in
cases involving a violation of RA 7394 based on Article 16611 thereof, which expressly confers
appellate jurisdiction to review such decisions of the DTI to the proper court through a petition for
certiorari. Hence, the OP cannot be deemed as the "proper court" within the purview of Article 166.

On the other hand, private respondentargues that the CA was correct in denying the petition for
certiorari since this was an improper remedy in view of the availability of an appeal from the OP.
Furthermore, the private respondent confirms the appellate jurisdiction of the OP over the DTI based
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on the constitutional power of control of the OP over Executive Departments and the well-entrenched
doctrine of exhaustion of administrative remedies.

Meanwhile, the public respondent, through the Office of the Solicitor General (OSG), claims that the
availability of an appeal from the OP precluded the petitioner from availing of the extraordinary
remedy of certiorari. Even though there is an allegation of error of jurisdiction, the OSG avers that
appeal still takes precedence over a petition for certiorari as long as the same is at the disposal ofthe
petitioner. However, in the present case, the OSG claims that the OP acted within its jurisdiction in
deciding the case on appeal from the DTI Secretary as Article 166 of RA 7394 must yield to the
constitutional power of control of the OP over Executive Departments. The OSG also cites the doctrine
of exhaustion of administrative remedies to support the appellate jurisdiction of the OP over the DTI.

Is the CA correct in dismissing the petition for certiorari on the ground that petitioner resorted to a
wrong mode of appeal?

We rule in the negative.

Under the Consumer Act (RA 7394), the DTI has the authority and the mandate to act upon complaints
filed by consumers pursuant to the State policy of protecting the consumeragainst deceptive, unfair and
unconscionable sales, acts or practices.12 Said law provided for an arbitration procedure whereby
consumer complaints are heard and investigated by consumer arbitration officers whose decisions are
appealable to the DTI Secretary.13 Article 166 thereof provides:

ART. 166. Decision on Appeal.– The Secretary shall decide the appeal within thirty (30) days
fromreceipt thereof.1âwphi1 The decision becomes final after fifteen (15) days from receipt thereof
unless a petition for certiorari is filed with the proper court. (Emphasis supplied.)

In his motion for reconsideration from the OP’s Decision dated April 3, 2007 which reversed and set
aside the resolution dated April 28, 2006 of the DTI Secretary, complainant EmmanuelB. Moran, Jr.
raised the issue of lack of jurisdiction of the OP, not being the proper court referred to in Article 166 of
R.A. 7394. The OP, however, denied his motion on the ground that the President’spower of control
over the executive department grants him the power to amend, modify, alter or repeal decisions of the
department secretaries. On the other hand, the CA, in dismissing outright the petition for certiorari filed
by Moran, Jr., implicitly sustained such reasoning when it held that the proper remedy from an adverse
order or judgment of the OP is a petition for review under Rule 43 of the 1997 Rules of Civil
Procedure, as amended.

We reverse the CA.

The procedure for appeals to the OP is governed by Administrative Order No. 18, 14 Series of 1987.
Section 1 thereof provides:

SECTION 1. Unless otherwise governed by special laws, an appeal to the Office of the President shall
be taken within thirty (30) days from receipt by the aggrieved party of the decision/resolution/order
complained of or appealed from… (Emphasis supplied.)

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In Phillips Seafood (Philippines) Corporation v. The Board of Investments,15 we interpreted the above
provision and declared that "a decision or order issued by a department or agency need notbe appealed
to the Office of the President when there is a speciallaw that provides for a different mode of appeal."
Thus:

Petitioner further contends that from the decision of respondent BOI, appeal to the Office of the
President should be allowed; otherwise, the constitutional power of the President to review acts of
department secretaries will be rendered illusory by mere rules of procedure.

The executive power of control over the acts of department secretaries is laid down in Section 17,
Article VII of the 1987 Constitution. The power of control has been defined as the "power of an officer
to alter or modify or nullify orset aside what a subordinate officer had done in the performance of his
duties and to substitute the judgment of the former for that of the latter."

Such "executive control" is not absolute. The definition of the structure of the executive branch of
government, and the corresponding degrees of administrative control and supervision is not the
exclusive preserve of the executive. It may be effectively limited by the Constitution, by law, or by
judicial decisions. All the more in the matter of appellate procedure as in the instant case.Appeals are
remedial in nature; hence, constitutionally subject to this Court’s rulemaking power. The Rules of
Procedure was issued by the Court pursuant to Section 5, Article VIII of the Constitution, which
expressly empowers the Supreme Court to promulgate rules concerning the procedure in all courts.

Parenthetically, Administrative Order (A.O.) No. 18 expressly recognizes an exception to the remedyof
appeal to the Office of the President from the decisions of executive departments and agencies. Under
Section 1 thereof, a decision or order issued by a department or agency need not be appealed to the
Office of the President when there is a special law that provides for a different mode of appeal. In the
instant case, the enabling law of respondent BOI, E.O. No. 226, explicitly allows for immediate judicial
relieffrom the decision of respondent BOI involving petitioner’s application for an ITH. E.O. No. 226
is a law of special nature and should prevail over A.O. No. 18.16 (Emphasis supplied.)

In this case, a special law, RA 7394,likewise expressly provided for immediate judicial relief from
decisionsof the DTI Secretary by filing a petition for certiorari with the "proper court." Hence, private
respondent should have elevated the case directly to the CA through a petition for certiorari.

In filing a petition for certiorari beforethe CA raising the issue of the OP’s lack of jurisdiction,
complainant Moran, Jr. thus availed of the proper remedy.

Certiorariis an extraordinary remedy available in extraordinary cases where a tribunal, board or officer,
among others, completely acted without jurisdiction.1âwphi1 Ineluctably, a judgment rendered without
jurisdiction over the subject matter is void.17 While errors of judgmentare correctible by appeal, errors
of jurisdiction are reviewable by certiorari.18 Considering that the OP had no jurisdiction to entertain
private respondent’s appeal, certiorari lies to correct such jurisdictional error. The CA thus erred in
dismissing the petition for certiorari on the ground of being an improper remedy.

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Further, we hold that the Resolution dated April 28, 2006 of the DTI Secretary had become FINAL and
EXECUTORY with private respondent’s failure to appeal the same withinthe 15-day reglementary
period.

WHEREFORE, the petition for review on certiorari is GRANTED. The Resolutions dated March 13,
2009 and June 25, 2010 in CA-G.R. SP No. 107059 are REVERSED and SET ASIDE. The Decision
dated April 3, 2007 and Order dated October 22, 2008 of the Office of the President are hereby
declared NULL and VOID. Consequently, the Resolution dated April 28, 2006 of the DTI Secretary is
hereby REINSTATED and UPHELD.

No pronouncement as to costs.

SO ORDERED.

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