1. G.R. No.

179408, March 05, 2014

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner, v. ABIGAIL R. RAZON

ALVAREZ AND VERNON R. RAZON, Respondents.

DECISION

Before the Court is a petition for review on certiorari1 assailing the decision2 dated August 11, 2006
and the resolution3 dated August 22, 2007 of the Court of Appeals (CA) in CA–G.R. SP No. 89213 on
the validity of the four search warrants issued by the Regional Trial Court (RTC) of Pasay City,
Branch 115.

The CA rulings (i) quashed the first two search warrants, similarly docketed as Search Warrant No.
03–063, issued for violation of Article 308, in relation to Article 309, of the Revised Penal Code
(RPC), and (ii) declared void paragraphs 7, 8 and 9 of the other two search warrants, also similarly
docketed as Search Warrant No. 03–064, issued for violation of Presidential Decree (PD) No. 401.4

FACTUAL ANTECEDENTS

Philippine Long Distance Telephone Company (PLDT) is the grantee of a legislative franchise 5 which
authorizes it to carry on the business of providing basic and enhanced telecommunications services
in and between areas in the Philippines and between the Philippines and other countries and
territories,6 and, accordingly, to establish, operate, manage, lease, maintain and purchase
telecommunications system for both domestic and international calls.7 Pursuant to its franchise,
PLDT offers to the public wide range of services duly authorized by the National
Telecommunications Commission (NTC).

PLDT’s network is principally composed of the Public Switch Telephone Network, telephone
handsets and/or telecommunications equipment used by its subscribers, the wires and cables
linking these handsets and/or equipment, antennae, transmission facilities, the international
gateway facility (IGF) and other telecommunications equipment providing interconnections.8 To
safeguard the integrity of its network, PLDT regularly conducts investigations on various prepaid
cards marketed and sold abroad to determine alternative calling patterns (ACP) and network fraud
that are being perpetrated against it.

To prevent or stop network fraud, PLDT’s ACP Detection Division (ACPDD) regularly visits foreign
countries to conduct market research on various prepaid phone cards offered abroad that allow
their users to make overseas calls to PLDT subscribers in the Philippines at a cheaper rate.

The ACPDD bought The Number One prepaid card — a card principally marketed to Filipinos
residing in the United Kingdom for calls to the Philippines – to make test calls using two telephone
lines: the dialing phone – an IDD–capable9 telephone line which makes the call and through which
the access number and the PIN number printed at the back of the card are entered; and the
receiving phone – a caller identification (caller id) unit–equipped telephone line which would
receive the call and reflect the incoming caller’s telephone number.

During a test call placed at the PLDT–ACPDD office, the receiving phone reflected a PLDT telephone
number (2–8243285) as the calling number used, as if the call was originating from a local
telephone in Metro Manila. Upon verification with the PLDT’s Integrated Customer Management
(billing) System, the ACPDD learned that the subscriber of the reflected telephone number is Abigail
R. Razon Alvarez, with address at 17 Dominic Savio St., Savio Compound, Barangay Don Bosco,
Parañaque City. It further learned that several lines are installed at this address with Abigail and
Vernon R. Razon (respondents), among others, as subscribers.10

To validate its findings, the ACPDD conducted the same test calls on November 5, 2003 at the
premises of the NTC in Quezon City (and in the presence of an NTC representative 11) using the same
prepaid card (validation test). The receiving phone at the NTC premises reflected the telephone
numbers registered in the name of Abigail as the calling number from the United Kingdom.12

Similar test calls subsequently conducted using the prepaid cards Unity Card and IDT Supercalling
Card revealed the same results. The caller–id–equipped receiving phone reflected telephone
numbers13 that are in the names of Experto Enterprises and Experto Phils, as subscribers, with a
common address at No. 38 Indonesia St., Better Living Subdivision, Barangay Don Bosco,
Parañaque City. It turned out that the actual occupant of these premises is also Abigail.
Subsequently, a validation test was also conducted, yielding several telephone numbers registered
in the name of Experto Phils./Experto Enterprises as the calling numbers supposedly from the
United Kingdom.14

According to PLDT, had an ordinary and legitimate call been made, the screen of the caller–id–
equipped receiving phone would not reflect a local number or any number at all. In the cards they
tested, however, once the caller enters the access and pin numbers, the respondents would route
the call via the internet to a local telephone number (in this case, a PLDT telephone number) which
would connect the call to the receiving phone. Since calls through the internet never pass the toll
center of the PLDT’s IGF, users of these prepaid cards can place a call to any point in the
Philippines (provided the local line is NDD–capable) without the call appearing as coming from
abroad.15

On November 6, 2003 and November 19, 2003, Mr. Lawrence Narciso of the PLDT’s Quality Control
Division, together with the operatives of the Philippine National Police (PNP), conducted an ocular
inspection at 17 Dominic Savio St., Savio Compound and at No. 38 Indonesia St., Better Living
Subdivision – both in Barangay Don Bosco, Paranaque City – and discovered that PLDT telephone
lines were connected to several pieces of equipment.16 Mr. Narciso narrated the results of the
inspection, thus –
10. During [the] ocular inspection [at 17 Dominic Savio St., Savio Compound], Ms. Abigail Razon
Alvarez allowed us to gain entry and check the telephone installations within their premises. First,
we checked the location of the telephone protectors that are commonly installed at a concrete wall
boundary inside the compound. Some of these protectors are covered with a fabricated wooden
cabinet. Other protectors are installed beside the said wooden cabinet, xxx. The inside wiring
installations from telephone protectors to connecting block were routed to the said adjacent room
passing through the house ceiling.

11. xxx. Upon entering the so–called adjacent room, we immediately noticed that the PLDT
telephone lines were connected to the equipment situated at multi–layered rack. The equipment
room contains the following:
a. 6 Quintum router;

b. 13 Com router;

c. 1 Cisco 800 router;

d. 1 Nokia Modem for PLDT DSL;

e. 1 Meridian Subscriber’s Unit[;]

f. 5 Personal Computers[;]

g. 1 Computer Printer[; and]

h. 1 Flat–bed Scanner[.]
12. We also noticed that these routers are connected to the Meridian’s subscriber unit ("SU” ) that
has an outdoor antenna installed on the top of the roof. Meridian’s SU and outdoor antenna are
service components used to connect with wireless broadband internet access service of Meridian
Telekoms.

xxxx

18. During the site inspection [at No. 38 Indonesia St., Better Living Subdivision], we noticed that
the protector of each telephone line/number xxx were enclosed in a fabricated wooden cabinet with
safety padlock. Said wooden cabinet was situated on the concrete wall inside the compound near
the garage entrance gate. The telephone inside the wiring installations from the protector to the
connecting blocks were placed in a plastic electrical conduit routed to the adjacent room at the
second floor.17
On December 3, 2003, Police Superintendent Gilbert C. Cruz filed a consolidated application for a
search warrant18 before Judge Francisco G. Mendiola of the RTC, for the crimes of theft and
violation of PD No. 401. According to PLDT, the respondents are engaged in a form of network fraud
known as International Simple Resale (ISR) which amounts to theft under the RPC.

ISR is a method of routing and completing international long distance calls using lines, cables,
antennae and/or wave frequencies which are connected directly to the domestic exchange facilities
of the country where the call is destined (terminating country); and, in the process, bypassing the
IGF at the terminating country.19

Judge Mendiola found probable cause for the issuance of the search warrants applied for.
Accordingly, four search warrants20 were issued for violations of Article 308, in relation to Article
309, of the RPC (SW A–1 and SW A–2) and of PD No. 401, as amended (SW B–1 and SW B–2) for the
ISR activities being conducted at 17 Dominic Savio St., Savio Compound and at No. 38 Indonesia
St., Better Living Subdivision, both in Barangay Don Bosco, Paranaque City. The four search
warrants enumerated the objects to be searched and seized as follows:
1. MERIDIAN SUBSCRIBERS UNIT AND PLDT DSL LINES and/or CABLES AND ANTENNAS and/or
similar equipment or device capable of transmitting air waves or frequency, such as a Meridian
Subscriber’s Unit, Broadband DSL and telephone lines;

2. PERSONAL COMPUTERS or any similar equipment or device capable of accepting information

applying the prescribed process of the information and supplying the result of this process;

3. NOKIA MODEM or any similar equipment or device that enables data terminal equipment such
as computers to communicate with other data terminal equipment via a telephone line;

4. QUINTUM Equipment or any similar equipment capable of receiving digital signals from the
internet and converting those signals to voice;

5. QUINTUM, 3COM AND CISCO Routers or any similar equipment capable of switching packets of
data to their assigned destination or addresses;

6. LINKS DSL SWITCH or any similar equipment capable of switching data;

7. COMPUTER PRINTERS AND SCANNERS or any similar equipment or device used for copying
and/or printing data and/or information;

8. SOFTWARE, DISKETTES, TAPES or any similar equipment or device used for recording or storing
information; and

9. Manuals, phone cards, access codes, billing statements, receipts, contracts, checks, orders,
communications and documents, lease and/or subscription agreements or contracts,
communications and documents relating to securing and using telephone lines and/or
equipment[.]21
On the same date, the PNP searched the premises indicated in the warrants. On December 10,
2003, a return was made with a complete inventory of the items seized.22 On January 14, 2004, the
PLDT and the PNP filed with the Department of Justice a joint complaint–affidavit for theft and for
violation of PD No. 401 against the respondents.23

On February 18, 2004, the respondents filed with the RTC a motion to quash24 the search warrants
essentially on the following grounds: first, the RTC had no authority to issue search warrants which
were enforced in Parañaque City; second, the enumeration of the items to be searched and seized
lacked particularity; and third, there was no probable cause for the crime of theft.

On March 12, 2004, PLDT opposed the respondents' motion.25

In a July 6, 2004 order,26 the RTC denied the respondents' motion to quash. Having been
rebuffed27 in their motion for reconsideration,28 the respondents filed a petition for certiorari with
the CA.” 29

RULING OF THE CA

On August 11, 2006, the CA rendered the assailed decision and resolution, granting the
respondents' petition for certiorari. The CA quashed SW A–l and SW A–2 (for theft) on the ground
that they were issued for “non–existent crimes.” 30 According to the CA, inherent in the
determination of probable cause for the issuance of search warrant is the accompanying
determination that an offense has been committed. Relying on this Court’s decision in Laurel v.
Judge Abrogar,31 the CA ruled that the respondents could not have possibly committed the crime of
theft because PLDT’s business of providing telecommunication services and these services
themselves are not personal properties contemplated under Article 308 of the RPC.

With respect to SW B–l and SW B–2 (for violation of PD No. 401), the CA upheld paragraphs one to
six of the enumeration of items subject of the search. The CA held that the stock phrase “or similar
equipment or device” found in paragraphs one to six of the search warrants did not make it suffer
from generality since each paragraph’s enumeration of items was sufficiently qualified by the
citation of the specific objects to be seized and by its functions which are inherently connected with
the crime allegedly committed.

The CA, however, nullified the ensuing paragraphs, 7, 8 and 9, for lack of particularity and ordered
the return of the items seized under these provisions. While the same stock phrase appears in
paragraphs 7 and 8, the properties described therein – i.e., printer and scanner, software, diskette
and tapes – include even those for the respondents' personal use, making the description of the
things to be seized too general in nature.

With the denial of its motion for reconsideration,32 PLDT went to this Court via this Rule 45
petition.

THE PETITIONER'S ARGUMENTS

PLDT faults the CA for relying on Laurel on three grounds: first, Laurel cannot be cited yet as an
authority under the principle of stare decisis because Laurel is not yet final and executory; in fact, it
is the subject of a pending motion for reconsideration filed by PLDT itself; second, even assuming
that Laurel is already final, the facts in Laurel vary from the present case. Laurel involves the
quashal of an information on the ground that the information does not charge any offense; hence,
the determination of the existence of the elements of the crime of theft is indispensable in resolving
the motion to quash. In contrast, the present case involves the quashal of a search warrant. Third,
accordingly, in resolving the motion, the issuing court only has to be convinced that there is
probable cause to hold that: (i) the items to be seized are connected to a criminal activity; and (ii)
these items are found in the place to be searched. Since the matter of quashing a search warrant
may be rooted on matters “extrinsic of the search warrant,” 33 the issuing court does not need to
look into the elements of the crime allegedly committed in the same manner that the CA did
in Laurel.

PLDT adds that a finding of grave abuse of discretion in the issuance of search warrant may be
justified only when there is “disregard of the requirements for the issuance of a search
warrant[.]” 34 In the present case, the CA did not find (and could not have found) any grave abuse of
discretion on the part of the RTC because at the time the RTC issued the search warrants in
2003, Laurel had not yet been promulgated.

In defending the validity of the nullified provisions of SW B–l and SW B–2, PLDT argues that PD No.
401 also punishes unauthorized installation of telephone connections. Since the enumerated items
are connected to the computers that are illegally connected to PLDT telephone lines, then these
items bear a direct relation to the offense of violation of PD No. 401, justifying their seizure.

The enumeration in paragraph 8 is likewise a proper subject of seizure because they are the fruits
of the offense as they contain information on PLDT’s business profit and other information relating
to the commission of violation of PD No. 401. Similarly, paragraph 9 specifies the fruits and
evidence of violation of PD No. 401 since it supports PLDT’s claim that the respondents have made
a business out of their illegal connections to PLDT lines.

THE RESPONDENTS' ARGUMENTS

The respondents counter that while Laurel may not yet be final, at least it has a persuasive effect as
the current jurisprudence on the matter. Even without Laurel, the CA’s nullification of SW A–l and
SW A–2 can withstand scrutiny because of the novelty of the issue presented before it. The
nullification of paragraphs 7, 8 and 9 of SW B–l and SW B–2 must be upheld not only on the
ground of broadness but for lack of any relation whatsoever with PD No. 401 which punishes the
theft of electricity.

OUR RULING

We partially grant the petition.

Laurel and its reversal by the Court En Banc

Before proceeding with the case, a review of Laurel is in order as it involves substantially similar
facts as in the present case.

Baynet Co., Ltd. (Baynet) sells prepaid cards, “Bay Super Orient Card,” that allow their users to
place a call to the Philippines from Japan. PLDT asserted that Baynet is engaged in ISR activities by
using an international private leased line (IPL) to course Baynet’s incoming international long
distance calls. The IPL is linked to a switching equipment, which is then connected to PLDT
telephone lines/numbers and equipment, with Baynet as subscriber.

To establish its case, PLDT obtained a search warrant. On the strength of the items seized during
the search of Baynet’s premises, the prosecutor found probable cause for theft against Luis Marcos
Laurel (Laurel) and other Baynet officials. Accordingly, an information was filed, alleging that the
Baynet officials “take, steal and use the international long distance calls belonging to PLDT by [ISR
activities] xxx effectively stealing this business from PLDT while using its facilities in the estimated
amount of P20,370,651.92 to the damage and prejudice of PLDT[.]” 35

Laurel moved to quash the information on the bold assertion that ISR activities do not constitute a
crime under Philippine law. Laurel argued that an ISR activity cannot entail taking of personal
property because the international long distance telephone calls using PLDT telephone lines belong
to the caller himself; the amount stated in the information, if at all, represents the rentals due PLDT
for the caller’s usage of its facilities. Laurel argued that the business of providing international long
distance calls, i.e., PLDT’s service, and the revenue derived therefrom are not personal property that
can be appropriated.

Laurel went to the Court after failing to secure the desired relief from the trial and appellate
courts,36 raising the core issue of whether PLDT’s business of providing telecommunication services
for international long distance calls is a proper subject of theft under Article 308 of the RPC. The
Court’s First Division granted Laurel’s petition and ordered the quashal of the information.

Taking off from the basic rule that penal laws are construed strictly against the State, the Court
ruled that international long distance calls and the business of providing telecommunication or
telephone services by PLDT are not personal properties that can be the subject of theft.
One is apt to conclude that “personal property” standing alone, covers both tangible and intangible
properties and are subject of theft under the Revised Penal Code. But the words “Personal property”
under the Revised Penal Code must be considered in tandem with the word “take” in the law. The
statutory definition of “taking” and movable property indicates that, clearly, not all personal
properties may be the proper subjects of theft. The general rule is that, only movable properties
which have physical or material existence and susceptible of occupation by another are proper
objects of theft, xxx.

xxxx

xxx. Business, like services in business, although are properties, are not proper subjects of
theft under the Revised Penal Code because the same cannot be “taken” or “occupied.” If it were
otherwise, xxx there would be no juridical difference between the taking of the business of a person
or the services provided by him for gain, vis–a–vis, the taking of goods, wares or merchandise, or
equipment comprising his business. If it was its intention to include “business” as personal
property under Article 308 of the Revised Penal Code, the Philippine Legislature should have spoken
in language that is clear and definite: that business is personal property under Article 308 of the
Revised Penal Code.

xxxx

The petitioner is not charged, under the Amended Information, for theft of telecommunication or
telephone services offered by PLDT. Even if he is, the term “personal property” under Article 308 of
the Revised Penal Code cannot be interpreted beyond its seams so as to include “telecommunication
or telephone services” or computer services for that matter. xxx. Even at common law, neither time
nor services may be taken and occupied or appropriated. A service is generally not considered
property and a theft of service would not, therefore, constitute theft since there can be no caption or
asportation. Neither is the unauthorized use of the equipment and facilities of PLDT by [Laurel]
theft under [Article 308].

If it was the intent of the Philippine Legislature, in 1930, to include services to be the subject of
theft, it should have incorporated the same in Article 308 of the Revised Penal Code. The Legislature
did not. In fact, the Revised Penal Code does not even contain a definition of services. 37
PLDT38 moved for reconsideration and referral of the case to the Court En Banc. The Court’s First
Division granted the referral.

On January 13, 2009 (or while the present petition was pending in court), the Court En
Banc unanimously granted PLDT’s motion for reconsideration.39 The Court ruled that even prior to
the passage of the RPC, jurisprudence is settled that “any personal property, tangible or intangible,
corporeal or incorporeal, capable of appropriation can be the object of theft.” 40 This jurisprudence,
in turn, applied the prevailing legal meaning of the term “personal property” under the old Civil
Code as “anything susceptible of appropriation and not included in the foregoing chapter (not real
property).” 41 PLDT’s telephone service or its business of providing this was appropriable personal
property and was, in fact, the subject of appropriation in an ISR operation, facilitated by means of
the unlawful use of PLDT’s facilities.
In this regard, the Amended Information inaccurately describes the offense by making it appear that
what [Laurel] took were the international long distance telephone calls, rather than respondent
PLDT’s business.

xxxx

Indeed, while it may be conceded that “international long distance calls,” the matter alleged to be
stolen xxx, take the form of electrical energy, it cannot be said that such international long distance
calls were personal properties belonging to PLDT since the latter could not have acquired ownership
over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using
its complex communications infrastructure and facilities. PLDT not being the owner of said
telephone calls, then it could not validly claim that such telephone calls were taken without its
consent. It is the use of these communications facilities without the consent of PLDT that
constitutes the crime of theft, which is the unlawful taking of the telephone services and business.

Therefore, the business of providing telecommunication and the telephone service are personal
property under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of
“subtraction” penalized under said article.42
The Court En Banc’s reversal of its Laurel Division ruling during the pendency of this petition
significantly impacts on how the Court should resolve the present case for two
reasons:chanRoblesvirtualLawlibrary

First, the Laurel En Banc ruling categorically equated an ISR activity to theft under the RPC. In so
doing, whatever alleged factual variance there may be between Laurel and the present case cannot
render Laurel inapplicable.

Second, and more importantly, in a Rule 45 petition, the Court basically determines whether the CA
was legally correct in determining whether the RTC committed grave abuse of discretion. Under this
premise, the CA ordinarily gauges the grave abuse of discretion at the time the RTC rendered its
assailed resolution. In quashing SW A–l and SW A–2, note that the CA relied on the Laurel Division
ruling at the time when it was still subject of a pending motion for reconsideration. The CA, in fact,
did not expressly impute grave abuse of discretion on the RTC when the RTC issued the search
warrants and later refused to quash these. Understandably, the CA could not have really found the
presence of grave abuse of discretion for there was no Laurel ruling to speak of at the time the RTC
issued the search warrants.

These peculiar facts require us to more carefully analyze our prism of review under Rule 45.

Requisites for the issuance of search warrant; probable cause requires the probable
existence of an offense

Section 2, Article III of the 1987 Constitution guarantees the right of persons to be free from
unreasonable searches and seizures.
Section 2. The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable,
and no search warrant or warrant of arrest shall issue except upon probable cause to be
determined personally by the judge after examination under oath or affirmation of the complainant
and the witnesses he may produce, and particularly describing the place to be searched and the
persons or things to be seized.
The purposes of the constitutional provision against unlawful searches and seizures are to: (i)
prevent the officers of the law from violating private security in person and property and illegally
invading the sanctity of the home; and (ii) give remedy against such usurpations when attempted or
committed.43

The constitutional requirement for the issuance of a search warrant is reiterated under Sections 4
and 5, Rule 126 of the Revised Rules of Criminal Procedure. These sections lay down the following
requirements for the issuance of a search warrant: (1) the existence of probable cause; (2) the
probable cause must be determined personally by the judge; (3) the judge must examine, in writing
and under oath or affirmation, the complainant and the witnesses he or she may produce; (4) the
applicant and the witnesses testify on the facts personally known to them; and (5) the warrant
specifically describes the place to be searched and the things to be seized.44 Should any of these
requisites be absent, the party aggrieved by the issuance and enforcement of the search warrant
may file a motion to quash the search warrant with the issuing court or with the court where the
action is subsequently instituted.45

A search warrant proceeding is a special criminal and judicial process akin to a writ of discovery. It
is designed by the Rules of Criminal Procedure to respond only to an incident in the main case, if
one has already been instituted, or in anticipation thereof. Since it is at most incidental to the main
criminal case, an order granting or denying a motion to quash a search warrant may be questioned
only via a petition for certiorari under Rule 65.46

When confronted with this petition, the higher court must necessarily determine the validity of the
lower court’s action from the prism of whether it was tainted with grave abuse of discretion. By
grave abuse of discretion, jurisprudence refers to the capricious and whimsical exercise of judgment
equivalent to lack of jurisdiction, or to the exercise of power in an arbitrary or despotic manner by
reason of passion or personal hostility or in a manner so patent and gross as to amount to an
invasion of positive duty or to the virtual refusal to perform the duty enjoined or to act at all in
contemplation of the law.47

In a certiorari proceeding, the determination translates to an inquiry on whether the requirements

and limitations provided under the Constitution and the Rules of Court were properly complied
with, from the issuance of the warrant up to its implementation. In view of the constitutional
objective of preventing stealthy encroachment upon or the gradual depreciation of the rights
secured by the Constitution, strict compliance with the constitutional and procedural requirements
is required. A judge who issues a search warrant without complying with these requirements
commits grave abuse of discretion.48

One of the constitutional requirements for the validity of a search warrant is that it must be issued
based on probable cause which, under the Rules, must be in connection with one specific offense. In
search warrant proceedings, probable cause is defined as such facts and circumstances that would
lead a reasonably discreet and prudent man to believe that an offense has been committed and
that the objects sought in connection with the offense are in the place sought to be searched. 49

In the determination of probable cause, the court must necessarily determine whether an offense
exists to justify the issuance or quashal of the search warrant50 because the personal properties
that may be subject of the search warrant are very much intertwined with the “one specific offense”
requirement of probable cause.51 Contrary to PLDT’s claim, the only way to determine whether a
warrant should issue in connection with one specific offense is to juxtapose the facts and
circumstances presented by the applicant with the elements of the offense that are alleged to
support the search warrant.

Reviewing the RTC’s denial of the motion to quash SWA–l and SW A–2

a. From the prism of Rule 65

The facts of the present case easily call to mind the case of Columbia Pictures, Inc. v. CA52 involving
copyright infringement. In that case, the CA likewise voided the search warrant issued by the trial
court by applying a doctrine that added a new requirement (i.e., the production of the master tape
for comparison with the allegedly pirate copies) in determining the existence of probable cause for
the issuance of search warrant in copyright infringement cases. The doctrine referred to was laid
down in 20th Century Fox Film Corporation v. Court of Appeals. 20th Century Fox, however, was
promulgated more than eight months after the search warrants were issued by the RTC. In
reversing the CA, the Court ruled:chanRoblesvirtualLawlibrary

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair play,
it is our considered view that the 20th Century Fox ruling cannot be retroactively applied to the
instant case to justify the quashal of Search Warrant No. 87–053. [The] petitioners' consistent
position that the order of the lower court[,] xxx [which denied the respondents'] motion to lift the
order of search warrant^] was properly issued, [because there was] satisfactory compliance with the
then prevailing standards under the law for determination of probable cause, is indeed well taken.
The lower court could not possibly have expected more evidence from petitioners in their application
for a search warrant other than what the law and jurisprudence, then existing and judicially
accepted, required with respect to the finding of probable cause.53

Columbia could easily be cited in favor of PLDT to sustain the RTC’s refusal to quash the search
warrant. Indeed, in quashing SW A–l and SW A–2, the CA never intimated that the RTC disregarded
any of the requisites for the issuance of a search warrant as these requirements were interpreted
and observed under the then prevailing jurisprudence. The CA could not have done so because
precisely the issue of whether telephone services or the business of providing these services could
be the subject of theft under the RPC had not yet reached the Court when the search warrants were
applied for and issued.

However, what distinguishes Columbia from the present case is the focus of Columbia’s legal
rationale. Columbia’s focus was not on whether the facts and circumstances would reasonably lead
to the conclusion that an offense has been or is being committed and that the objects sought in
connection with the offense were in the place to be searched – the primary points of focus of the
present case. Columbia’s focus was on whether the evidence presented at the time the search
warrant was applied for was sufficient to establish the facts and circumstances required for
establishing probable cause to issue a search warrant.

Nonetheless, Columbia serves as a neat guide for the CA to decide the

respondents' certiorari petition. In Columbia, the Court applied the principle of non–retroactivity of
its ruling in 20th Century Fox, whose finality was not an issue, in reversing a CA ruling. The Court’s
attitude in that case should have been adopted by the CA in the present case a fortiori since the
ruling that the CA relied upon was not yet final at the time the CA resolved to quash the search
warrants.

b. Supervening events justifying a broader review under Rule 65

Ordinarily, the CA’s determination under Rule 65 is limited to whether the RTC gravely abused its
discretion in granting or denying the motion to quash based on facts then existing. Nonetheless, the
Court recognizes that supervening facts may transpire after the issuance and implementation of the
search warrant that may provide justification for the quashal of the search warrant via a petition
for certiorari.

For one, if the offense for which the warrant is issued is subsequently decriminalized during the
pendency of the petition for certiorari, then the warrant may be quashed.54 For another, a
subsequent ruling from the Court that a similar set of facts and circumstances does not constitute
an offense, as alleged in the search warrant application, may be used as a ground to quash a
warrant.55 In both instances, the underlying reason for quashing the search warrant is the absence
of probable cause which can only possibly exist when the combination of facts and circumstances
points to the possible commission of an offense that may be evidenced by the personal properties
sought to be seized. To the CA, the second instance mentioned justified the quashal of the search
warrants.

We would have readily agreed with the CA if the Laurel Division ruling had not been subsequently
reversed. As things turned out, however, the Court granted PLDT’s motion for reconsideration of the
Court First Division’s ruling in Laurel and ruled that “the act of engaging in ISR is xxx penalized
under xxx article [308 of the RPC].” 56 As the RTC itself found, PLDT successfully established in its
application for a search warrant a probable cause for theft by evidence that Laurel’s ISR activities
deprived PLDT of its telephone services and of its business of providing these services without its
consent.

b1. the stare decisis aspect

With the Court En Banc’s reversal of the earlier Laurel ruling, then the CA’s quashal of these
warrants would have no leg to stand on. This is the dire consequence of failing to appreciate the full
import of the doctrine of stare decisis that the CA ignored.

Under Article 8 of the Civil Code, the decisions of this Court form part of the country’s legal system.
While these decisions are not laws pursuant to the doctrine of separation of powers, they evidence
the laws' meaning, breadth, and scope and, therefore, have the same binding force as the laws
themselves.57 Hence, the Court’s interpretation of a statute forms part of the law as of the date it
was originally passed because the Court’s construction merely establishes the contemporaneous
legislative intent that the interpreted law carries into effect.58

Article 8 of the Civil Code embodies the basic principle of stare decisis et non quieta movere (to
adhere to precedents and not to unsettle established matters) that enjoins adherence to judicial
precedents embodied in the decision of the Supreme Court. That decision becomes a judicial
precedent to be followed in subsequent cases by all courts in the land. The doctrine of stare decisis,
in turn, is based on the principle that once a question of law has been examined and decided, it
should be deemed settled and closed to further argument.59 The doctrine of (horizontal) stare
decisis is one of policy, grounded on the necessity of securing certainty and stability of judicial
decisions.60

In the field of adjudication, a case cannot yet acquire the status of a “decided” case that is
“deemed settled and closed to further argument” if the Court’s decision is still the subject of a motion
for reconsideration seasonably filed by the moving party. Under the Rules of Court, a party is
expressly allowed to file a motion for reconsideration of the Court’s decision within 15 days from
notice.61 Since the doctrine of stare decisis is founded on the necessity of securing certainty and
stability in law, then these attributes will spring only once the Court’s ruling has lapsed to finality
in accordance with law. In Ting v. Velez–Ting,62 we ruled that:
The principle of stare decisis enjoins adherence by lower courts to doctrinal rules established by
this Court in its final decisions. It is based on the principle that once a question of law has been
examined and decided, it should be deemed settled and closed to further argument.
In applying Laurel despite PLDT’s statement that the case is still subject of a pending motion for
reconsideration,63 the CA legally erred in refusing to reconsider its ruling that largely relied on a
non–fmal ruling of the Court. While the CA’s dutiful desire to apply the latest pronouncement of the
Court in Laurel is expected, it should have acted with caution, instead of excitement, on being
informed by PLDT of its pending motion for reconsideration; it should have then followed the
principle of stare decisis. The appellate court’s application of an exceptional circumstance when it
may order the quashal of the search warrant on grounds not existing at the time the warrant was
issued or implemented must still rest on prudential grounds if only to maintain the limitation of the
scope of the remedy of certiorari as a writ to correct errors of jurisdiction and not mere errors of
judgment.

Still, the respondents attempt to justify the CA’s action by arguing that the CA would still rule in
the way it did64 even without Laurel. As PLDT correctly pointed out, there is simply nothing in the
CA’s decision that would support its quashal of the search warrant independently of Laurel. We
must bear in mind that the CA’s quashal of SW A–l and SW A–2 operated under the strictures of
a certiorari petition, where the presence of grave abuse of discretion is necessary for the corrective
writ to issue since the appellate court exercises its supervisory jurisdiction in this case. We simply
cannot second–guess what the CA’s action could have been.

Lastly, the CA’s reliance on Savage v. Judge Taypin65 can neither sustain the quashal of SW A–l and
SW A–2. In Savage, the Court granted the certiorari petition and quashed the search warrant
because the alleged crime (unfair competition involving design patents) that supported the search
warrant had already been repealed, and the act complained of, if at all, gave rise only to civil
liability (for patent infringement). Having been decriminalized, probable cause for the crime alleged
could not possibly exist.

In the present case, the issue is whether the commission of an ISR activity, in the manner that
PLDT’s evidence shows, sufficiently establishes probable cause for the issuance of search
warrants for the crime of theft. Unlike in Savage, the Court in Laurel was not confronted with the
issue of decriminalization (which is a legislative prerogative) but whether the commission of an ISR
activity meets the elements of the offense of theft for purposes of quashing an information. Since
the Court, in Laurel, ultimately ruled then an ISR activity justifies the elements of theft that must
necessarily be alleged in the information a fortiori, the RTC’s determination should be sustained
on certiorari.

The requirement of particularity in SWB–1 and SWB–2

On the issue of particularity in SW B–l and SW B–2, we note that the respondents have not
appealed to us the CA ruling that sustained paragraphs 1 to 6 of the search warrants. Hence, we
shall limit our discussion to the question of whether the CA correctly ruled that the RTC gravely
abused its discretion insofar as it refused to quash paragraphs 7 to 9 of SW B–l and SWB–2.

Aside from the requirement of probable cause, the Constitution also requires that the search
warrant must particularly describe the place to be searched and the things to be seized. This
requirement of particularity in the description, especially of the things to be seized, is meant to
enable the law enforcers to readily identify the properties to be seized and, thus, prevent the seizure
of the wrong items. It seeks to leave the law enforcers with no discretion at all regarding these
articles and to give life to the constitutional provision against unreasonable searches and
seizures.66 In other words, the requisite sufficient particularity is aimed at preventing the law
enforcer from exercising unlimited discretion as to what things are to be taken under the warrant
and ensure that only those connected with the offense for which the warrant was issued shall be
seized.67

The requirement of specificity, however, does not require technical accuracy in the description of
the property to be seized. Specificity is satisfied if the personal properties' description is as far as
the circumstances will ordinarily allow it to be so described. The nature of the description should
vary according to whether the identity of the property or its character is a matter of concern. 68 One
of the tests to determine the particularity in the description of objects to be seized under a search
warrant is when the things described are limited to those which bear direct relation to the offense for
which the warrant is being issued.69

Additionally, the Rules require that a search warrant should be issued “in connection with one
specific offense” to prevent the issuance of a scatter–shot warrant.70 The one–specific–offense
requirement reinforces the constitutional requirement that a search warrant should issue only on
the basis of probable cause.71 Since the primary objective of applying for a search warrant is to
obtain evidence to be used in a subsequent prosecution for an offense for which the search warrant
was applied, a judge issuing a particular warrant must satisfy himself that the evidence presented
by the applicant establishes the facts and circumstances relating to this specific offense for which
the warrant is sought and issued.72 Accordingly, in a subsequent challenge against the validity of
the warrant, the applicant cannot be allowed to maintain its validity based on facts and
circumstances that may be related to other search warrants but are extrinsic to the warrant in
question.

Under the Rules, the following personal property may be subject of search warrant: (i) the subject of
the offense; (ii) fruits of the offense; or (iii) those used or intended to be used as the means of
committing an offense. In the present case, we sustain the CA’s ruling nullifying paragraphs 7, 8
and 9 of SW B–l and SW B–2 for failing the test of particularity. More specifically, these provisions
do not show how the enumerated items could have possibly been connected with the crime for
which the warrant was issued, i.e., P.D. No. 401. For clarity, PD No. 401 punishes:
Section 1. Any person who installs any water, electrical, telephone or piped gas connection
without previous authority from xxx the Philippine Long Distance Telephone Company, xxx,
tampers and/or uses tampered water, electrical or gas meters, jumpers or other devices whereby
water, electricity or piped gas is stolen; steals or pilfers water, electric or piped gas meters, or water,
electric and/or telephone wires, or piped gas pipes or conduits; knowingly possesses stolen or
pilfered water, electrical or gas meters as well as stolen or pilfered water, electrical and/or telephone
wires, or piped gas pipes and conduits, shall, upon conviction, be punished with prision
correccional in its minimum period or a fine ranging from two thousand to six thousand pesos, or
both.73
Paragraphs 7 to 8 of SW B–l and SW B–2 read as follows:
7. COMPUTER PRINTERS AND SCANNERS or any similar equipment or device used for copying
and/or printing data and/or information;

8. SOFTWARE, DISKETTES, TAPES or any similar equipment or device used for recording or storing
information; and

9. Manuals, phone cards, access codes, billing statements, receipts, contracts, checks, orders,
communications and documents, lease and/or subscription agreements or contracts,
communications and documents relating to securing and using telephone lines and/or
equipment[.]74
According to PLDT, the items in paragraph 7 have a direct relation to violation of PD No. 401
because the items are connected to computers that, in turn, are linked to the unauthorized
connections to PLDT telephone lines. With regard to the software, diskette and tapes in paragraph
8, and the items in paragraph 9, PLDT argues that these items are “fruits of the offense” and that
the information it contains “constitutes the business profit” of PLDT. According to PLDT, it
corroborates the fact that the respondents have made a business out of their illegal connections to
its telephone lines.

We disagree with PLDT. The fact that the printers and scanners are or may be connected to the
other illegal connections to the PLDT telephone lines does not make them the subject of the offense
or fruits of the offense, much less could they become a means of committing an offense.

It is clear from PLDT’s submission that it confuses the crime for which SW B–l and SW B–2 were
issued with the crime for which SW A–l and SWA–2 were issued: SW B–l and SW B–2 were issued
for violation of PD No. 401, to be enforced in two different places as identified in the warrants. The
crime for which these search warrants were issued does not pertain to the crime of theft – where
matters of personal property and the taking thereof with intent to gain become significant – but to
PD No. 401.

These items could not be the subject of a violation of PD No. 401 since PLDT itself does not claim
that these items themselves comprise the unauthorized installations. For emphasis, what PD No.
401 punishes is the unauthorized installation of telephone connection without the previous consent
of PLDT. In the present case, PLDT has not shown that connecting printers, scanners, diskettes or
tapes to a computer, even if connected to a PLDT telephone line, would or should require its prior
authorization.

Neither could these items be a means of committing a violation of PD No. 401 since these copying,
printing and storage devices in no way aided the respondents in making the unauthorized
connections. While these items may be accessory to the computers and other equipment linked to
telephone lines, PD No. 401 does not cover this kind of items within the scope of the prohibition. To
allow the seizure of items under the PLDT’s interpretation would, as the CA correctly observed,
allow the seizure under the warrant of properties for personal use of the respondents.

If PLDT seeks the seizure of these items to prove that these installations contain the respondents'
financial gain and the corresponding business loss to PLDT, then that purpose is served by SW A–l
and SW A–2 since this is what PLDT essentially complained of in charging the respondents with
theft. However, the same reasoning does not justify its seizure under a warrant for violation of PD
No. 401 since these items are not directly connected to the PLDT telephone lines and PLDT has not
even claimed that the installation of these items requires prior authorization from it.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The decision and the
resolution of the Court of Appeals in CA–G.R. SP No. 89213 are hereby MODIFIED in that SW A–l
and SW A–2 are hereby declared valid and constitutional.

SO ORDERED.
 3. G.R. No. L-25291 March 10, 1977

THE INSULAR LIFE ASSURANCE CO., LTD. EMPLOYEES ASSOCIATION-NATU, FGU INSURANCE
GROUP WORKER & EMPLOYEES ASSOCIATION-NATU, and INSULAR LIFE BUILDING
EMPLOYEES ASSOCIATION, petitioners,
vs.
THE INSULAR LIFE ASSURANCE CO., LTD., FGU INSURANCE GROUP, JOSE M. OLBES AND
COURT OF INDUSTRIAL RELATIONS, respondents.

The Insular Life Assurance Company, Ltd., FGU Insurance Group, and Jose M. Olbes, through a
motion for reconsideration filed on April 21, 1971, ask this Court to re-examine its decision dated
January 30, 1971.

In the main, the respondents question the review made by this Court of the determination of facts
reached by the Court of Industrial Relations and the consequent revision of the said findings of fact.
The respondents allege that this Court "swept into unmerited oblivion the voluminous documentary
and testimonial evidence" they proffered which evidence consisted of

Exhibits "1" to "38", and the testimony of Messrs. Felipe Enage, Enrique Clemente, Vicente Abella,
Rodolfo R. Encarnacion, Nestor Cipriano, Mauro Blardoni, Sr., Ramon Garcia, Ramon M. Zosa,
Vicente R. Ayllon, Antonio L. Castillo, Carlos Valencia, Juan S. Raymundo, Jose Olbes, Calixto S.
Fernandez, Detective Lieutenant Felino Singh of the Manila Police Department Sergeant Crisanto
Lorenzo of the Manila Police Department, and Feliciano Morada. 1

Concededly, the findings of fact of the Court of Industrial Relations, if supported by substantial
evidence, bind this Court. 2 This, for the reason that the rule of substantial evidence, rather than
the rule of preponderance of evidence applicable in ordinary civil cases, governs the Court of
Industrial Relations in its findings of fact. 3 And substantial evidence refers to "such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion." 4 There too, the
substantiality, of the evidence depends on its quantitative as well as its qualitative aspects. For, to
be considered as substantial, Evidence should primarily be credible. 5

However, findings of fact of the Court of Industrial Relations unsupported by substantial and
credible evidence do not bind this Court. 6 And, certainly, the failure of substantial and credible
proof to sustain the findings of fact of the Court of industrial Relations justifies the review by this
Court of the said factual determination. Conmitantly, the need to revise, reverse or modify the
factual findings of the Court of Industrial Relations arises to enable this court to draw the
appropriate and correct conclusions for the proper resolution of the questions on the rights and
obligations of the parties involved.

Thus, before coming to the numerous errors which respondents claim have been committed by this
Court in reviewing and reversing the factual determination reached by the Court of Industrial
Relations, we reiterate what we stated in the decision of January 10, 1971: we deemed it necessary
to review the entire factual milieu of the case in controversy and to reverse the factual findings
arrived at by the Court of Industrial Relations because we found the sa same unsupported by
Substantial evidence and much more, by credible proof.

The errors allegedly committed by this Court in its factual findings and its conclusions derived
therefrom, properly summed up and grouped, fall into three categories (1) those pertaining to
findings and conclusions without basis on record or contrary to the evidence on records (2) those
referring to findings and conclusions contrary to the factual determination made by and
conclusions arrived at by the Court of Industrial Relations, and (3) those relating to issues not
raises or errors not assigned by the parties.
To the respondents' first cauldron of steaming objections belong the following factual findings and
conclusions of this Court purportedly unsupported by the records or contrary to what appears in
the same: (1) that the respondents instructed Ramon Garcia and Vicente Abella to create the
disturbance which occurred on May 21, 1958; (2) that Garcia issued a circular to dissuade the
members of the Unions from disaffiliating with the FFW and joining the NATU; (3) that the
respondents did not make counter-proposals to the Unions' demands and that the said respondents
insisted on the Unions' dropping their demands for union security, "promising money benefits if
this was done;" (4) that the Court of First Instance of Manila issued the restraining order "on the
basis of the pendency of the various criminal cases against striking members of the Unions;" (5)
that "more than 120 criminal charges" were filed against the members of the Unions; (6) that the
respondents hired Felipe Enage and Garcia, "former legal counsels of the petitioner, as personnel
manager and assistant corporate secretary respectively, with attractive compensations," and (7) that
Jose M. Olbes "brought three truckloads of non-strikers and others, escorted by armed men, who,
despite the presence of eight entrances to the three buildings occupied by the Companies, entered
thru only one gate less than two meters wide and in the process, crashed thru the picket line posted
in front of the premises of the Insular Life Building."

1. Anent the first point raised by the respondents, this Court, in the decision of January 30, 1971,
stated:

There is therefore a reasonable suggestion that they were sent to work at the latter building to
create such an incident and have a basis for filing criminal charges against the petitioners in the
fiscal's office and applying for injunction from the court of first instance. 7

Earlier in the decision (Page 4) and in the preceding statements, this Court briefly recounted the
circumstances attending the occurrence. To claim that this Court, in the above-quoted portion of
the decision, found and categorically stated that Garcia and Abella participated in some sort of a
pre- planned scheme to "create the disturbance" constitutes but a mistaken impression of the
statement of this Court. The statement simply express that in the circumstances already mentioned
— which circumstances the records unraveled — lurked the distinct likelihood that Garcia and
Abella purposely provided the provocation for the incident.

2. We find the second objection of the respondents well-taken, for the records offer little to provide
sufficient clarity on whether or not Garcia, as acting president of the Insular Life/FGU unions and
the Insular Life Building Employees Association, "in a circular issued in his name and signed by
him, tried to dissuade the members of the Unions from disaffiliating with the FFW and joining the
National Association of Trade Unions (NATU)." The transcript of the proceedings before the Court of
Industrial Relations reveals only Garcia's apparent adeptness at evasion and inability to recall,
among other things, whether or not he issued the circular aforementioned. Nonetheless, the
foregoing questioned statement of this Court in the narration of facts in the decision bears no
materiality to the conclusions finally arrived at.

3. The respondents claim the statement of this Court that "the Companies did not make any
counter-proposals but, instead, insisted that the Unions first drop their demand for union security,
promising money benefits if this was done" as "truly false" and "an unwarranted deviation from the
truth." Far from being so, we find that the records precisely support the finding. The thrust of the
testimony of Enage (Pages 13 to 65, tsn, March 30, 1960; pages 7 to 13, tsn, April 29, 1960) — the
chairman of the negotiating committee for the respondents — verily points out that the said
respondents omitted, without sufficient reasons, to present counter-proposals to the Unions'
demands. This, in addition to the testimonial evidence offered by Ignacio Lacsina (Pages 56 to 62,
tsn, September 8, 1958) — chairman of the negotiating panel for the Unions, — supports the
finding that, indeed, the respondents offered no counter-proposals to the demands of the said
Unions. At most, the records reveal, the respondents, to placate the Unions, indulged in the
superficial discussion of the demands, requiring the said Unions to explain and clarify the import of
their demands. Then, too, the totality of the testimonial evidence of Lacsina (pages 35 to 38, tsn,
October 14, 1958) and the Unions' panel members Villaruel (Pages 60 to 61, tsn, November 21,
1958) and Du Timbol (Pages 25 to 26 and 30, tsn, November 18, 1959) clearly indicates that the
respondents more than persuaded the Unions to drop their union security demands with the
promise of monetary benefits.

4. We consider the objection of the respondents to the statement of this Court that the Court of
First Instance of Manila issued the restraining order "on the basis of the pendency of the various
criminal cases against striking members of the Unions" as well-founded. The records show that the
respondents predicated their petition for the issuance of the writ of preliminary injunction (Exhibit
"32-B") upon certain acts which the said respondents claimed the picketing members of the striking
Unions committed through "force, threats, intimidation, coercion and violence." The restraining
order (Exhibit "33-C") issued by the Court of First Instance of Manila on May 31, 1958 makes no
express mention of the pendency of the various criminal charges already filed against the picketing
members of the striking Unions. Nevertheless, the fact remains that on the day the Court of First
Instance of Manila issued the restraining order, several criminal charges (Exhibits "19," "20", "23" to
"29," inclusive and "31") had been filed already with the Office of the City Fiscal of Manila against
many of the picketing members of the Unions.

5. The respondents also question the statement of this Court giving the impression of the filing of
"more than 120 criminal charges" against the members of the striking Unions. The evidence at hand
(Exhibits "19", "20," "23", to "31," inclusive) show, as of June 2, 1958, four complaints for coercion
and seven for grave coercion already filed with the Office of the City Fiscal of Manila. Each of the
preliminary investigation memoranda, however, except three (Exhibits "26," "29" and "30") names
several members of the striking Unions collectively as accused. Counting the charges individually —
prescinding from the fact that a number of the members of the striking Unions then faced two or
more charges, having been named as accused in more than one memorandum the charges add up
to eighty-four. On this point, we sustain the objection of the respondents.

6. The respondents also allege as objectionable the following statement of this Court:

It must be recalled that previous to the petitioners' submission of proposals for an amended
renewal of their respective collective bargaining agreements to the respondents, the latter hired
Felipe Enage and Ramon Garcia, former legal counsels of the petitioners, as personnel manager and
assistant corporate secretary, respectively, with attractive compensations. 8

The respondents claim the "falsity of the finding" that Enage and Garcia worked as "legal counsels
of the petitioners" and alleged this Court as "unduly unkind" in giving the impression that they
enticed Enage and Garcia "from their positions as 'legal counsels of the petitioners' with high
salaries." The records, however, evince that Garcia served as Secretary-Treasurer of the Federation
of Free Workers (Pages 59 to 61, tsn, August 4, 1961) and that Garcia handled cases for the
Federation of Free Workers (Page 58, tsn, August 4, 1961) with which the Unions then formed an
affiliation (Pages 59 to 62, tsn, August 4, 1961; page 62, tsn, January 16, 1962). With respect to
Enage, the records show that he worked with the Federation of Free Workers (Page 25, tsn, April 29,
1960). Even the respondents, in their brief (Page 46), stated that Garcia and Enage worked as
counsels for the Federation of Free Workers. Nevertheless, assuming the truth of the respondents'
assertion that neither Garcia nor Enage served as counsel, directly or indirectly through the
Federation of Free Workers, for the Unions, this passing mention of the disputed former connection
of Garcia and Enage to the said Unions bears no relevance to the principal merits of the case at bar.
As to the other observations of the respondents, we deem it unnecessary to discuss the same for
only a misreading of the aforequoted portion of the decision gives, in the words of the respondents
themselves, "the unkind impression that respondents enticed them (Enage and Garcia) from their
position as 'legal counsels of the petitioners' with high salaries."

7. The respondents' allegation that no evidence supports the statement of this Court that they,
through their president and manager Jose Olbes,
brought three truckloads of non-strikers and others, escorted by armed men, who, despite the
presence of eight entrances to the three buildings occupied by the Companies, entered thru only
one gate less than two meters wide and in the process, crashed thru the picket line posted in front
of the premises of the Insular Life Building.9

rounds up the objections of the said respondents properly falling under the first group, The
respondents claim the absence of Evidence showing that: (1) Olbes held the position of manager; (2)
Olbes brought three truckloads of "non-strikers and others;" (3) armed men escorted the non-
strikers and others;" (4) eight entrances provided access to the three buildings; and (5) that the gate
through which the non-strikers and others entered measured "less than two meters wide."

Object number one deals with an inconsequential detail — whether or not Olbes held, in any
capacity, the position of manager — which bears no materiality to the main issues raised by the
case at hand.

As to number two, the evidence of the respondents' own witnesses — Ramon Zosa (Page 38, tsn,
December 5, 1960), Nestor Cipriano (Pages 18, 19 and 26, tsn, February 1, 1961) and Olbes (Pages
7 to 13, 33, 34 and 45 to 50, tsn, October 2, 1962) — more than sufficiently indicate the truth that
Olbes led three busloads of non-strikers and others to the picketed buildings. To this effect too,
testified some witnesses of the Unions, particularly Ponciano Abesamis (Pages 57 to 66, tsn,
January 20, 1959) and Jose Victorio (Pages 19 to 25, tsn, June 11, 1959).

Regarding number three, the records miss to evince clearly whether or not armed men escorted the
three JD buses filled with non-strikers and others to the respondents' picketed premises.

On number four, a collation of all the evidence bearing on this objection ion reveal the following
means of access of the office premises of the respondents comprised of almost one block bounded
by Plaza Cervantes, Plaza Moraga, Muelle de la Industria and Juan Luna: (1) the Plaza Cervantes
entrance to the Insular Life Building (Page 8, tsn, February 8, 1961); (2) the two Plaza Moraga
entrances to the Insular Life Building (Page 8, tsn, September 13, 1960); (3) the basement entrance
to the Insular Life Building (Page 29, tsn, October 2, 1962); (4) the Juan Luna entrance to the Ayala
Building (Page 11, tsn, August 4, 1961); (5) the Muelle de la Industria entrance to the Ayala
Building (Page 27, tsn, August 4, 1961); (6) the Plaza Moraga entrance to the Filipinas Building
(Page 21, tsn, August 18, 1959); and (7) the entrance to the National City Bank of New York the
premises of which have a connecting door to the lobby of the Ayala Building (Page 30, tsn, October
2, 1962).

As to objection number five, not one of the parties offers any specific evidence showing the exact
measurement of the gate through which the non-strikers and others entered. The evidence on
record relevant to this point disclose that the gate measures about two to three meters wide.

The respondents further unleash their vigorous exception to the following findings arrived at by this
Court; (1) that the respondents discriminated against the strikers in the re-admission; (2) that the
respondents dismissed thirty-four strikers without lawful cause; (3) that the respondents omitted to
give the dismissed strikers the opportunity to defend themselves against the supposed charges
against them; and (4) that the respondents' letter of May 21, 1959 (Exhibit "A") contained "promises
of benefits to the employees in order to entice them to return to work" and that the said
respondents' letter of May 31, 1958 (Exhibit "B") contained threats to obtain replacements for the
striking employees' in the event of their failure to report for work on June 2, 1958. The respondents
strongly protest against the alteration and reversal made by this Court of the factual determination
reached by the Court of Industrial Relations on these salient points.

Setting aside the incisive dissection performed by the respondents on the statements of this Court
relevant and related to the aforementioned findings, the arguments of the said respondents all but
lead to their primary objection that this Court erred in finding that they committed unfair labor
practice. For, admittedly, the foregoing findings provided this Court with the unshakeable bases in
arriving at the inescapable conclusion that the respondents committed unfair labor practice.

In the decision of January 30, 1971, this Court, fully cognizant that the findings now questioned by
the respondents constituted the considerations of importance to the issues involved in the case at
bar, sufficiently and clearly, albeit lengthily, discussed all of them. And a consultation with and a
combing of the voluminous records disclose the evidence, substantial and credible, in support of the
said findings.

The respondents labor under the impression that, in the controversy at hand, the findings of fact of
the Court of Industrial Relations deserve much weight and consideration. The said findings of fact,
the respondents argue, should remain conclusive. However, the want of substantial evidence, nay,
credible proof, to uphold the findings of the Court of Industrial Relations on the matters now
disputed by the respondents, brought about by the mistaken appreciation of the facts, prompted
this Court to review the facts on record and to alter and reverse the determination reached by the
said Court of Industrial Relations. These, consequently, resulted in a view rather different from that
of the Court of Industrial Relations.

Not infrequently, the Court of Industrial Relations misapprehends the facts and, eventually, arrives
at erroneous conclusions. For in the Court of Industrial Relations, only one judge hears the case
and usually, not even a judge hears the same. Instead, a hearing examiner — an employee of the
Court of Industrial Relations — takes charge of the proceedings and receives the evidence. After
hearing, the hearing examiner submits his report on the case to the judge. The judge then studies
the case and, relying on the ability and integrity of the hearing examiner who saw and heard the
witnesses and submitted the report, renders the decision. More often than not, the proceedings
before the Court of Industrial Relations drag through years before the case finally becomes subject
to study and decision by the judge.

And even in the reconsideration of the decision asked for by the aggrieved party, no rehearing takes
place before the Court of Industrial Relations en banc. The individual judges, if they have the
disposition and the time to do so, review the evidence on record or merely read and rely upon the
memoranda submitted by the respective parties and the decision subject of reconsideration, giving
due consideration to the capability, competency and probity of the judge who penned the said
decision. And almost invariably, the Court of Industrial Relations en banc upholds the decision for
reconsideration. 10

The case at bar, this Court notes, passed from the hands of one hearing examiner — Arsenio
Adriano — to another — Guillermo Medina. This case also took more than seven years before its
determination by the Court of Industrial Relations. These factors, we opine, contributed to the
misapprehension of facts committed by the Court of Industrial Relations warranting a review of the
factual determination in its totality.

Thus, this Court finds it neither important nor imperative to pursue any further discussion and
resolution of the matters claimed by the respondents as contrary to the findings of the Court of
Industrial Relations. And for the satisfaction of the respondents, an examination of the entire
evidence on record makes it more apparent that evidence of quantity and quality sustain, the
findings of this Court on the aforementioned matters now disputed by them.

To the third group of the respondents' objections appertain those findings of this Court on issues
not raised or errors not assigned by the parties. The respondents question the action taken by this
Court in discussing and resolving the following: (1) the question as to the nature of the strike staged
by the Unions; (2) the issue as to whether or not the respondents refused to bargain collectively in
good faith; and (3) the question as to the reclassification of eighty-seven employees as supervisors.
Concededly, the Rules of Court, in proceedings before the appellate courts, namely, the Court of
Appeals and the Supreme Court, require the party seeking the review of a judgment to set out in his
brief the errors upon which he relies for reversal. Otherwise, the appellate courts would not
consider those errors not properly assigned or specified. 11 However, the Supreme Court has ample
authority to review and resolve matters not assigned and specified as errors by either of the parties
in the appeal if it finds the consideration and determination of the same essential and indispensable
in order to arrive at a just decision in the case. 12 This Court, thus, has the authority to waive the
lack of proper assignment of errors if the unassigned errors closely relate to errors properly
pinpointed out or if the unassigned errors refer to matters upon which the determination of the
questions raised by the errors properly assigned depend. 13

The same also applies to issues not specifically raised by the parties. The Supreme Court, likewise,
has broad discretionary powers, in the resolution of a controversy, to take into consideration
matters on record which the parties fail to submit to the Court as specific questions for
determination. 14 Where the issues already raised also rest on other issues not specifically
presented, as long as the latter issues bear relevance and close relation to the former and as long as
they arise from matters on record, the Court has the authority to include them in its discussion of
the controversy as well as to pass upon them. In brief, in those cases wherein questions not
particularly raised by the parties surface as necessary for the complete adjudication of the rights
and obligations of the parties and such questions fall within the issues already framed by the
parties, the interests of justice dictate that the Court consider and resolve them.

In the case at hand, the questions as to the nature of the strike staged by the Unions, the refusal of
the respondents to bargain collectively in good faith, and the reclassification of eighty-seven
employees as supervisors relate closely to the determination of whether or not the respondents
committed unfair labor practice. Thus, this Court found it necessary to resolve these issues,
without confining itself to those tendered by the parties.

In the same vein, we are also constrained to reassess the ruling in our decision of January 30, 1971
to the effect that the strikes must receive backwages from the date of the act of discrimination, that
is, from the date of their discharge or their offer to return to work up to the date of their actual
reinstatement, deducting therefrom whatever they have earned pending readmission.

Significant changes have since supervened as to the method of awarding backwages. In a line of
cases, the court has established a policy of fixing the amount of backwages to a just and reasonable
level without qualification or deduction.

Blazing the trail is Mercury Drug Co. vs. CIR, 15 L-23357, April 30, 1974, which enunciated the
policy. The doctrine is not without justification, for, in the same case, it was stated that the evident
aim is "to avoid protracted delay in the execution of the award of backwages due to extended
hearings and unavoidable delays and difficulties encountered in determining the earnings of the
laid-off employees ordered to be reinstated with backwages during the pendency of the case for
purposes of deducting the same from the gross backwages awarded."

Feati University Club vs. Feati University, L-35103, August 25, 1974, adopted a consensus policy of
pegging the amount of backwages to their total equivalent for three years (depending on the
circumstances) without deduction or qualification. The rationale for the policy was stated in the
following words:

As has been noted, this formula of awarding reasonable net backwages without deduction or
qualification relieves the employees from proving or disproving their earnings during their lay-off
and the employers from submitting counterproofs, and obviates the twin evils of Idleness on the
part of the employee who would "with folded arms, remain inactive in the expectation that a windfall
would come to him" (Itogon Suyoc Mines, Inc. vs. Sangilo-Itogon Workers Union, 24 SCRA 873
(1968), cited in Diwa ng Pagkakaisa vs. Filtex International Corp., 43 SCRA 217 (1972)) and
attrition and protracted delay in satisfying such award on the part of unscrupulous employers who
have seized upon the further proceedings to determine the actual earnings of the wrongfully
dismissed or laid-off employees to hold unduly extended hearings for each and every employee
awarded backwages and thereby render practically nugatory such award and compel the employees
to agree to unconscionable settlements of their backwages award in order to satisfy their dire need.
(See La Campana Food Products, Inc. vs. CIR, 28 SCRA 314 (1969) and Kaisahan ng Mga
Manggagawa vs. La Campana Food Products, Inc., 36 SCRA 142 (1970)).

The above judicial policy became entrenched in our jurisprudence when the Court, in Luzon
Stevedoring Corporation and B.H. Tenefrancia vs. CIR, et al., L-34300, November 22, 1974,
reiterated the same way of computation, decreeing the grant of backwages not exceeding three years
without requiring the parties to submit proof of compensation received from other sources from the
time of the illegal dismissal until actual reinstatement. 16

We must now respond to the pronouncements in the above and related cases if we are to give our
law on the matter order, direction and light.

Here, a total of eighteen (18) years has elapsed from June 2, 1958, date of the commencement of
the backwages. Considering all the commencement of the backwages. Considering all the
circumstances at bar, viz., the lengthy procedural and technical manipulations of the parties, the
delay in the resolution of the case by the court below, the complexity of the issues raised by the
parties which were resolved only on January 30, 1971, etc., the Court considers the fixing and
limitation of the backwages award to their total equivalent of three years without qualification and
deduction as applicable to and fully justified in the case at bar.

The Court finds no sufficient or compelling reason to further depart from its judgment as embodied
in the decision of January 30, 1971.

ACCORDINGLY, subject to the above modification as to backwages, the motion for reconsideration
is hereby denied, and the judgment of the Court as embodied in its decision of January 30, 1971 is
affirmed in all other respects. This denial is immediately executor.
4. G.R. No. 134284, December 1, 2000.

AYALA CORPORATION, petitioner.

vs.
ROSA-DIANA REALTY AND DEVELOPMENT CORPORATION, respondent.

Before us is a petition for review on certiorari seeking the reversal of a decision rendered by the
Court of Appeals in C.A. G.R. C.V. No. 4598 entitled "Ayala Corporation vs. Rosa-Diana Realty and
Development Corporation, ‘ dismissing Ayala Corporation’s petition for lack of merit.

The facts of the case are not in dispute:

Petitioner Ayala Corporation (herein-after referred to as Ayala) was the registration owner of a parcel
of land located in Alfaro Street, Salcedo Village, Makati City with an area of 840 square meters,
more or less and covered by Transfer Certificate of Title (TCT) No. 233435 of the Register of Deeds of
Rizal.

On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka Kieng married to
Rosa Chan. The Deed of Sale executed between Ayala and the buyers contained Special conditions
of sale and Deed Restrictions. Among the Special Conditions of Sale were.

The vendee shall build on the lot and submit the building plans to the vendor before September 30,
1976 for the latter’s approval.
The construction of the building shall start on or before March 30, 1977 and completed before
1979. Before such completion, neither no the title released even if the purchase price shall have
been fully paid.
There shall be no resale of the property.
The Deed Restrictions, on the other hand, contained the stipulation that the gross floor area of the
building to be constructed shall not be more than five (5) times the lot area and the total height
shall not exceed forty two (42) meters. The restrictions were to expire in the year 2025.

Manuel Sy and Sy Ka Kieng failed to construct the building in violation of the Special Conditions of
Sale. Notwithstanding the violation, Manuel Sy anf Sy Ka Kieng, in April 1989, were able to sell the
lot to respondent Rosa-Diana Realty and Development Corporation (hereinafter referred to as Rosa-
Diana) with Ayala’s approval. As a consideration for Ayala to release the Certificate of title of the
subject property, Rosa Diana, on July 27, 1989 executed an Undertaking, together with the
buildings plans for a condominium project, known as "The Peak", Ayala released title to the lot,
thereby enabling Rosa-Diana t register the deed of sale in its favor and obtain Certificate of Title No.
165720 in its name. The title carried as encumbrances the special conditions of sale and the deed
restrictions. Rosa-Diana’s building plans as approved by Ayala were ‘subject to strict compliance of
cautionary notices appearing on the building plans and to the restrictions encumbering the Lot
regarding the use and occupancy of the same.’

Thereafter, Rosa-Diana submitted to the building official of Makati another set of building plans for
"The Peak" which Rosa-Diana submitted to Ayala for approval envisioned a 24-meter high, seven (7)
storey condominium project with a gross floor area of 3,968.56 square meters, the building plans
which Rosa-Diana submitted to the building official of Makati, contemplated a 91.65 meter high, 38
storey condominium building with a gross floor area of 23,305.09 square meters.1 Needless to say,
while the first set of building plans complied with the deed restrictions, the latter set seceded the
same.

During the construction of Rosa-Diana’s condominium project, Ayala filed an action with the
Regional Trial Court (RTC) of Makati, Branch 139 for specific performance, with application for a
writ of preliminary injunction/temporary restraining order against Rosa-Diana Realty seeking to
compel the latter to comply with the contractual obligations under the deed of restrictions
annotated on its title as well as with the building plans it submitted to the latter. In the alternative,
Ayala prayed for rescission of the sale of the subject lot to Rosa-Diana Realty.

The lower court denied Ayala’s prayer for injunctive relief, thus enabling Rosa-Diana to complete
the construction of the building. Undeterred, Ayala tried to cause the annotation of a notice of lis
pendens on Rosa-Diana’s title. The Register of Deeds of Makati, however, refused registration of the
notice of lis pendens on the ground that the case pending before the trial court, being an action for
specific performance and/or rescission, is an action in personal which does not involve the title, use
or possession of the property.2 The Land Registration Authority (LRA) reversed the ruling of the
Register of Deeds saying that an action for specific performance or recession may be classified as a
proceeding of any kind in court directly affecting title to the land or the use or occupation thereof
for which a notice of lis pendens may be held proper.3 The decision of the LRA, however, was
overturned by the Court of Appeals in C.A. G.R. S.P. No. 29157. In G.R. No. 112774, We affirmed
the ruling of the CA on February 16, 1994 saying.

We agree with respondent court that the notice of lis pendens is not proper in this instance. The
case before the trial court is a personal action since the cause of action thereof arises primarily from
the alleged violation of the Deed of Restriction.

In the meantime, Ayala completed its presentation of evidence before the trial court. Rosa-Diana
filed a Demurrer to Evidence averring that Ayala failed to establish its right to the relief sought in-as
much as (a) Ayala admittedly does not enforce the deed restrictions uniformly and strictly (b) Ayala
has lost its right/power to enforce the restrictions due to its own acts and omissions; and (c) the
deed restrictions are no longer valid and effective against lot buyers in Ayala’s controlled
subdivision.

The trial court sustained Rosa-Diana’s Demurrer to Evidence saying that Ayala was guilty of
abandonment and/or estoppel due to its failure to enforce the terms of deed of restrictions and
special conditions of sale against Manuel Sy and Sy Ka Kieng. The trial court noted that
notwithstanding the violation of the special conditions of sale, Manuel Sy and Sy Ka Kieng were able
to transfer the title to Rosa-Diana with the approval of Ayala. The trial court added that Ayala’s
failure to enforce the restrictions with respect to Trafalgar, Shellhouse, Eurovilla, LPL Plaza, Parc
Regent, LPL Mansion and Leronville, which are located within Salcedo Village, shows that Ayala
discriminated against those which it wants to have the obligation enforced. The trial court then
concluded that for Ayala to discriminatory choose which obligor would be made to follow certain
conditions and which should not, did not seem fair and legal.

The Court of Appeals affirmed the ruling of the trial court saying that the "appeal is seated by the
doctrine of the law of the case in C.A. G.R. S.P. No. 29157" where it was stated that

xxx Ayala is bared from enforcing the Deed of Restriction in question pursuant to the doctrine of
waiver and estoppel. Under the terms of the deed of sale, the vendee Sy Ka Kieng assumed faithful
compliance with the special conditions of sale and with the Salcedo Village Deed of Restrictions.
One of the conditions was that a building would be constructed within one year. However, Sy Ka
Kieng failed to construct the building as required under the Deed Sale. Ayala did nothing to enforce
the terms of the contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of
petitioner Realty in 1989 or thirteen (13) years later. We, therefore, see no justifiable reason for
Ayala to attempt to enforce the terms of the conditions of sale against the petitioner.

xxx

The Court of Appeals also cited C.A. G.R. C.V. No. 46488 entitled, "Ayala Corporation vs. Ray
Burton Development Corporation’ which relied on C.A. G.R. S.P. No. 29157 in ruling that Ayala is
barred from enforcing the deed restrictions in dispute. Upon a motion for reconsideration filed by
herein petitioner, the Court of Appeals clarified that "the citation of the decision in Ayala
Corporation vs. Ray Burton Development Corporation, Ca G.R. C.V. No. 46488, February 27, 1996,
was made not because said decision is res judicata to the case at bar but rather because it is
precedential under the doctrine of stare decisis."

Upon denial of said motion for reconsideration, Ayala filed the present appeal.

Ayala contends that the pronouncement of the Court of Appeals in C.A. G.R. S.P. No. 29157 that it
is estopped from enforcing the deed restrictions is merely obiter dicta inasmuch as the only issue
raised in the aforesaid case was the propriety of a lis pendens annotation on Rosa-Diana’s
certificate of title.

Ayala avers that Rosa-Diana presented no evidence whatsoever on Ayala’s supposed waiver or
estoppel in C.A. G.R. S.P. No. 29157. Ayala likewise pointed out that at the time C.A. G.R. S.P. No.
29157 was on appeal, the issues of the validity and continued viability of the deed of restrictions
and their enforceability by Ayala were joined and then being tried before the trial court.

Petitioner’s assignment of errors in the present appeal may essentially be summarized as follows:

The Court of Appeals acted in manner not in accord with law and the applicable decisions of the
Supreme Court in holding that the doctrine of the law of the case, or stare decisis, operated to
dismiss Ayala’s appeal.
The Court of Appeals erred as a matter of law and departed from the accepted and usual course of
judicial proceedings when it failed to expressly pass upon the specific errors assigned in Ayala’s
appeal.

A discussion on the distinctions between law of the case, stare decisis and obiter dicta is in order.

The doctrine of the law of the case has certain affinities with, but is clearly distinguishable from, the
doctrines of res judicata and stare decisis, principally on the ground that the rule of the law of the
case operates only in the particular case and only as a rule of policy and not as one of law.4 At
variance with the doctrine of stare decisis, the ruling adhered to in the particular case under the
doctrine of the law of the case need not be followed as a precedent in subsequent litigation between
other parties, neither by the appellate court which made the decision followed on a subsequent
appeal in the same case, nor by any other court. The ruling covered by the doctrine of the law of the
case is adhered to in the single case where it arises, but is not carried into other cases as a
precedent.5 On the other hand, under the doctrine of stare decisis, once a point of law has been
established by the court, that point of law will, generally, be followed by the same court and by all
courts of lower rank in subsequent cases where the same legal issue is raised.6 Stare decisis
proceeds from the first principle of justice that, absent powerful countervailing considerations, like
cases ought to be decided alike.7

The Court of Appeals, in ruling against petitioner Ayala Corporation stated that the appeal is
‘sealed’ by the doctrine of the law of the case, referring to G.R. No. 112774 entitled "Ayala
Corporation, petitioner vs. Courts of Appeals, et al., respondents". The Court of Appeals likewise
made reference to C.A. G.R. C.V. No. 46488 entitled, "Ayala Corporation vs. Ray Burton
Development Corporation, Inc." in ruling against petitioner saying that it is jurisprudentially under
the doctrine of stare decisis.

It must be pointed out that the only issue that was raised before the Court of Appeals in C.A. G.R.
S.P. No. 29157 was whether or not the annotation of lis pendens is proper. The Court of Appeals, in
its decision, in fact stated "the principal issue to be resolved is: whether or not an action for specific
performance, or in the alternative, rescission of deed of sale to enforce the deed of restrictions
governing the use of property, is a real or personal action, or one that affects title thereto and its
use or occupation thereof.8

In the aforesaid decision, the Court of Appeals even justified the cancellation of the notice of lis
pendens on the ground that Ayala had ample protection should it succeed in proving its allegations
regarding the violation of the deed of restrictions, without unduly curtailing the right of the
petitioner to fully enjoy its property in the meantime that there is as yet no decision by the trial
court.9

From the foregoing, it is clear that the Court of Appeals was aware that the issue as to whether
petitioner is estopped from enforcing the deed of restrictions has yet to be resolved by the trial
court. Though it did make a pronouncement that the petitioner is estopped from enforcing the deed
of restrictions, it also mentioned at the same time that this particular issue has yet to be resolved
by the trial court. Notably, upon appeal to this Court, We have affirmed the ruling of the Court of
Appeals only as regards the particular issue of the propriety of the cancellation of the notice of lis
pendens.

We see no reason then, how the law of the case or stare decisis can be held to be applicable in the
case at bench. If at all, the pronouncement made by the Court of Appeals that petitioner Ayala is
barred from enforcing the deed of restrictions can only be considered as obiter dicta. As earlier
mentioned the only issue before the Court of Appeals at the time was the propriety of the
annotation of the lis pendens. The additional pronouncement of the Court of Appeals that Ayala is
estopped from enforcing the deed of restrictions even as it recognized that this said issue is being
tried before the trial court was not necessary to dispose of the issue as to the propriety of the
annotation of the lis pendens. A dictum is an opinion of a judge which does not embody the
resolution or determination of the court, and made without argument, or full consideration of the
point, not the proffered deliberate opinion of the judge himself.10 It is not necessarily limited to
issues essential to the decision but may also include expressions of opinion which are not
necessary to support the decision reached by the court. Mere dicta are not binding under the
doctrine of stare decisis11.

While the Court of Appeals did not err in ruling that the present petition is not barred by C.A. G.R.
C.V. No. 46488 entitled "Ayala Corporation vs. Ray Burton Development Inc." under the doctrine of
res judicata, neither, however, can the latter case be cited as presidential under the doctrine of
stare decisis. It must be pointed out that at the time the assailed decision was rendered, C.A. G.R.
C.V. No. 46488 was on appeal with this Court. Significantly, in the decision. We have rendered in
Ayala Corporation vs. Ray Burton Development Corporation12 which became final and executory on
July 5, 1999 we have clearly stated that "An examination of the decision in the said Rosa-Diana
case reveals that the sole issue raised before the appellate court was the propriety of the lis pendens
annotation. However, the appellate court went beyond the sole issue and made factual findings
bereft of any basis in the record to inappropriately rule that AYALA is in estoppel and has waived its
right to enforce the subject restrictions. Such ruling was immaterial to the annotation of the lis
pendens. The finding of estoppel was thus improper and made in excess of jurisdiction."

Coming now to the merits of the case, petitioner avers that the Court of Appeals departed from the
usual course of judicial proceedings when it failed to expressly pass upon the specific errors
assigned in its appeal. Petitioner reiterates its contention that law and evidence do not support the
trial court’s findings that Ayala has waived its right to enforce the deed of restrictions.

We find merit in the petition.

It is basic that findings of fact of the trial court and the Court of Appeals are conclusive upon the
Supreme Court when supported by substantial evidence.13 We are constrained, however, to review
the trial court'’ findings of fact, which the Court of Appeals chose not to pass upon, in as much as
there is ample evidence on record to show that certain facts were overlooked which would affect the
disposition of the case.

In its assailed decision of February 4, 1994, the trial court, ruled in favor of respondent Rosa-Diana
Realty on the ground that Ayala had not acted fairly when it did not institute an action against the
original vendees despite the latter’s violation of the Special Conditions of Sale but chose instead to
file an action against herein respondent Rosa-Diana. The trial court added that although the 38-
storey building of Rosa-Diana is beyond the total height restriction, it was not violative of the
National Building Code. According to the trial court the construction of the 38 storey building
known as "The Peak" has not been shown to have been prohibited by law and neither is it against
public policy.

It bears emphasis that as complainant, Ayala had the prerogative to initiate an action against
violators of the deed restrictions. That Rosa-Diana had acted in bad faith is manifested by the fact
that it submitted two sets of building plans, one which was in conformity with the deed restrictions
submitted to Ayala and MACEA, and the other, which exceeded the height requirement in the deed
restrictions to the Makati building official for the purpose of procuring a building permit from the
latter. Moreover, the violation of the deed restrictions committed by respondent can hardly be
denominated as a minor violation. It should be pointed out that the original building plan which
was submitted to and approved by petitioner Ayala Corporation, envisioned a twenty four (24) meter
high, seven (7) storey condominium whereas the respondent’s building plan which was submitted to
and approved by the building official of Makati is that of a thirty eight (38) storey, 91.65 meters
high, building. At present, the Peak building of respondent which actually stands at 133.65 meters
with a total gross floor area of 23,305.09 square meters, seriously violates the dimensions indicated
in the building plans submitted by Rosa-Diana to petitioner Ayala for approval in as much as the
Peak building exceeds the approved height limit by about 109 meters and the allowable gross floor
area under the applicable deed restrictions by about 19,105 square meters. Clearly, there was a
gross violation of the deed restrictions and evident bad faith by the respondent.

It may not be amiss to mention that the deed restrictions were revised in a general membership
meeting of the association of lot owners in Makati Central Business District the Makati Commercial
Estate Association, Inc. (MACEA).

Whereby direct height restrictions were abolished in lieu of floor area limits. Respondent, however,
did not vote for the approval of this revision during the General Membership meeting, which was
held on July 11, 1990 at the Manila Polo Clud Pavilion, Makati, and Metro Manila. Hence,
respondent continues to be bound by the original deed restrictions applicable to Lot 7, Block 1 and
annotated on its title to said lot. In any event, assuming arguendo that respondent voted for the
approval of direct height restrictions in lieu of floor area limits, the total floor area of its Peak
building would still be violative of the floor area limits to the extent of about 9,865 square meters of
allowable floor area under the MACEA revised restrictions.

Respondent Rosa-Diana avers that there is nothing illegal or unlawful in the building plans which it
used in the construction of the Peak condominium ‘inasmuch as it bears the imprimatur of the
building official of Makati, who is tasked to determine whether building and construction plans are
in accordance with the law, notably, the National Building Code."

Respondent Rosa-Diana, however, misses the point inasmuch as it has freely consented to be
bound by the deed restrictions when it entered into a contract of sale with spouses Manuel Sy and
Sy Ka Kieng. While respondent claims that it was under the impression that Ayala was no longer
enforcing the deed restrictions, the Undertaking14 it executed belies this same claim. In said
Undertaking, respondent agreed to ‘construct and complete the construction of the house on said
lot as required under the special condition of sale." Respondent likewise bound itself to abide and
comply with x x x the condition of the rescission of the scale by Ayala Land, Inc. on the grounds
therein stated x x x.
Contractual obligations between parties have the force of law between them and absent any
allegation that the same are contrary to law, morals, good custom, public order or public policy,
they must be complied with in good faith. Hence, Article 1159 of the New Civil Code provides.

"Obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith."

Respondent Rosa-Diana insists that the trial court had already ruled that the undertaking executed
by its Chairman and President cannot validly bind Rosa-Diana and hence, it should not be held
bound by the deed restrictions.

We agree with petitioner Ayala’s observation that respondent Rosa-Diana’s special and affirmative
defenses before the trial court never mentioned any allegation that its president and chairman were
not authorized to execute the Undertaking. It was inappropriate therefore for the trial court to rule
that in the absence of any authority or confirmation from the Board of Directors of respondent
Rosa-Diana, its Chairman and the President cannot validly enter into an undertaking relative to the
construction of the building on the lot within one year from July 27, 1989 and in accordance with
the deed restrictions, Curiously, while the trial court stated that it cannot be presumed that the
Chairman and the President can validly bind respondent Rosa-Diana to enter into the aforesaid
Undertaking in the absence of any authority or confirmation from the Board of Directors, the trial
court held that the ordinary presumption of regularity of business transactions is applicable as
regards the Deed of Sale which was executed by Manuel Sy and Sy Ka Kieng and respondent Rosa-
Diana. In the light of the fact that respondent Rosa-Diana never alleged in its Answer that its
president and chairman were not authorized to execute the Undertaking, the aforesaid ruling of the
trial court is without factual and legal basis and suppressing to say the least.

The fact alone that respondent Rosa-Diana conveniently prepared two sets of building plans –with
one set which fully conformed to the Deed Restrictions and another in gross violation of the same –
should have cautioned the trial court to conclude that respondent Rose-Diana was under the
erroneous impression that the Deed Restrictions were no longer enforceable and that it never
intended to be bound by the Undertaking signed by its President and Chairman. We reiterate that
contractual obligations have the force of law between parties and unless the same is contrary to
public policy morals and good customs, they must be complied by the parties in good faith.

Petitioners, in its Petition, prays that judgement be rendered:

ordering Rosa-Diana Realty and Development Corporation to comply with its contractual obligations
in the construction of the Peak by removing, or closing down and prohibiting Rosa-Diana from
using, selling, leasing or otherwise disposing, of the portions of areas thereof constructed beyond or
in excess of the approved height, as shown by the building plans submitted to, and approved by,
Ayala, including any other portion of the building constructed not in accordance with the said
building plans, during the effectivity of the Deed Restrictions;
Alternatively, in the event specific performance has become impossible;
ordering the cancellation and recession of the April 20, 1976 Deed of Sale by Ayala in favor of the
original vendees thereof as well as the subsequent Deed of Sale executed by such original vendees
in favor of Rosa-Diana, and ordering Rosa-Diana to return Ayala Lot 7, Block 1 of Salcedo Village;
ordering the cancellation of Transfer Certificate of Title No. 165720 (in the name of Rosa-Diana) and
directing the office of the Register of Deeds of Makati to issue a new title over the lot in the name of
Ayala; and
Ordering Rosa-Diana to pay Ayala attorney’s fees in the amount of P500, 000.00, exemplary
damages in the amount of P5, 000,000.00 and the costs of suit.
It must be noted that during the trial respondent Rosa-Diana was able to complete the construction
of The Peak as a building with a height of thirty-eight (38) floors or 133.65 meters. Having been
completed for a number of years already, it would be reasonable to assume that it is now fully
tenanted. Consequently, the remedy of specific performance by respondent is no longer feasible.
However, neither can we grant petitioner’s prayer for the cancellation and rescission of the April 20,
1976 Deed of Sale by petitioner Ayala in favor of respondent Rosa-Diana inasmuch as the resale of
the property by the original vendees, spouses Manuel Sy and Ka Kieng to comply with their
obligation to construct a building within one year from April 20, 1976, has effectively waived its
right to rescind the sale of the subject lot to the original vendees.

Faced with the same question as to the proper remedy available to petitioner in the case of "Ayala
Corporation vs. Ray Burton Development Inc., ‘ a case which is on all fours with the case at bench,
we ruled therein that the party guilty of violating the deed restrictions may only be held
alternatively liable for substitute performance of its obligation, that is, for the payment of damages.
In the aforesaid case it was observed that the Consolidated and Revised Deed Restrictions (CRDR)
imposed development charges on constructions which exceed the estimated Gross Limits permitted
under the original Deed Restrictions but which are within the limits of the CRDR’s.1âwphi1.nêt

The pertinent portion of the Deed of Restrictions reads:

3. DEVELOPMENT CAHRGE For building construction within the Gross Floor Area limits defined
under Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area exceeding
certain standards defined in Paragraphs C-3.1-C below, the OWNER shall pay MACEA, prior to the
construction of any new building a DEVELOPMENT CHARGE as a contribution to a trust fund to be
administered by MACEA. This trust fund shall be used to improve facilities and utilities in Makati
Central District.

3.1 The amount of the development charge that shall be due from the OWNER shall be computed as
follows:

DEVELOPMENT

CAHRGE = A x (B-C-D)

Where:

A – is equal to the a Area Assessment which shall be set at Five Hundred Pesos (P500.00) until
December 31, 1990. Each January 1st thereafter, such amount shall increase by ten percent (10%)
over the immediately preceding year; provided that beginning 1995 and at the end of every
successive five-year period thereafter, the increase in the Area Assessment shall be reviewed and
adjusted by the VENDOR to correspond to the accumulated increase in the construction cost index
during the immediately preceding five years as based on the weighted average of wholesale price
and wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics.

B – Is equal to the Gross Floor Area of the completed or expanded building in square meters.

C – is equal to the estimated Gross Floor Area permitted under the original deed restrictions,
derived by multiplying the lot area by the effective original FAR shown below for each location.

We then ruled in the aforesaid case that the development; charges are a fair measure of
compensatory damages which therein respondent Ray Burton Development Inc. is liable to Ayala
Corporation. The dispositive portion of the decision in the said case, which is squarely applicable to
the case at bar, reads as, follows:

WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated February
27, 1996, in CA G.R. C.V. No. 46488, and its Resolution dated October 7, 1996 are hereby
REVERSED and SET ASIDE, and in lieu thereof judgement is hereby rendered finding that:
The Deed Restrictions are valid and petitioner AYALA is not estopped from enforcing them against
lot owners who have not yet adopted the Consolidated and Revised Deed Restrictions.
Having admitted that the Consolidated and Revised Deed Restrictions are the applicable Deed
Restrictions to Ray Burton Development Corporation, RBDC should be, and is bound by the same.
Considering that Ray Burton Development Corporation’s Trafalgar plaza exceeds the floor area
limits of the Deed Restrictions, RBDC is hereby ordered to pay development charges as computed
under the provisions of the consolidated and Revised Deed Restrictions currently in force.
Ray Burton Development corporation is further ordered to pay AYALA exemplary damages in the
amount of P2, 500,000.00 attorney’s fees in the amount of P250,000.00
SO ORDERED:

There is no reason why the same rule should not be followed in the case at bar, the remedies of
specific performance and/or rescission prayed for by petitioner no longer being feasible. In
accordance with the peculiar circumstances of the case at bar, the development charges would
certainly be a fair measure of compensatory damages to petitioner Ayala.

Exemplary damages in the sum of P2, 500,000.00 as prayed for by petitioner are also in order
inasmuch as respondent Rosa-Diana was in evident bad faith when it submitted a set of building
plans in conformity with the deed restrictions to petitioner Ayala for the sole purpose of obtaining
title to the property, but only to prepare and later on submit another set of buildings plans which
are in gross violation of the Deed Restrictions. Petitioner Ayala is likewise entitled to an award of
attorney’s fees in the sum of P250, 000.00.

WHEREFORE, the assailed Decision of the Court of Appeals dated December 4, 1997 and its
Resolution dated June 19, 1998, C.A. G.R. C.V. No. 4598, are REVERSED and SET ASIDE. In lieu
thereof, judgement is rendered.

orderings respondent Rosa-Diana Realty and Development Corporation to pay development charges
as computed under the provisions of the consolidated and Revised Deed Restrictions currently in
force; and ordering respondent Rosa-Diana Realty and Development Corporation to pay petitioner
Ayala Corporation exemplary damages in the sum of P2,500,00.00, attorney’s fees in the sum of
P250,000.00 and the costs of the suit.
SO ORDERED.
5. G.R. No. 147387 December 10, 2003

RODOLFO C. FARIÑAS, MANUEL M. GARCIA, FRANCIS G. ESCUDERO, and AGAPITO A. AQUINO,

AS MEMBERS OF THE HOUSE OF REPRESENTATIVES AND ALSO AS TAXPAYERS, IN THEIR
OWN BEHALF AND IN REPRESENTATION OF THE MEMBERS OF THE MINORITY IN THE HOUSE
OF REPRESENTATIVES, petitioners,
vs.
THE EXECUTIVE SECRETARY, COMMISSION ON ELECTIONS, HON. FELICIANO R. BELMONTE,
JR., SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT, SECRETARY OF THE SENATE,
AND SECRETARY GENERAL OF THE HOUSE OF REPRESENTATIVES, respondents.

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

G.R. No. 152161

CONG. GERRY A. SALAPUDDIN, petitioner,

vs.
COMMISSION ON ELECTIONS, respondent.

Before the Court are two Petitions under Rule 65 of the Rules of Court, as amended, seeking to
declare as unconstitutional Section 14 of Republic Act No. 9006 (The Fair Election Act), insofar as it
expressly repeals Section 67 of Batas Pambansa Blg. 881 (The Omnibus Election Code) which
provides:

SEC. 67. Candidates holding elective office. – Any elective official, whether national or local, running
for any office other than the one which he is holding in a permanent capacity, except for President
and Vice-President, shall be considered ipso facto resigned from his office upon the filing of his
certificate of candidacy.

The petition for certiorari and prohibition in G.R. No. 147387 was filed by Rodolfo C. Fariñas,
Manuel M. Garcia, Francis G. Escudero and Agapito A. Aquino. At the time of filing of the petition,
the petitioners were members of the minority bloc in the House of Representatives. Impleaded as
respondents are: the Executive Secretary, then Speaker of the House of Representatives Feliciano R.
Belmonte, Jr., the Commission on Elections, the Secretary of the Department of the Interior and
Local Government (DILG), the Secretary of the Senate and the Secretary General of the House of
Representatives.

The petition for prohibition in G.R. No. 152161 was filed by Gerry A. Salapuddin, then also a
member of the House of Representatives. Impleaded as respondent is the COMELEC.

Legislative History of Republic Act No. 9006

Rep. Act No. 9006, entitled "An Act to Enhance the Holding of Free, Orderly, Honest, Peaceful and
Credible Elections through Fair Election Practices," is a consolidation of the following bills
originating from the House of Representatives and the Senate, respectively:

House Bill (HB) No. 9000 entitled "AN ACT ALLOWING THE USE OF MASS MEDIA FOR ELECTION
PROPAGANDA, AMENDING FOR THE PURPOSE BATAS PAMBANSA BILANG 881, OTHERWISE
KNOWN AS THE ‘OMNIBUS ELECTION CODE,’ AS AMENDED, AND FOR OTHER PURPOSES;"1

Senate Bill (SB) No. 1742 entitled "AN ACT TO ENHANCE THE HOLDING OF FREE, ORDERLY,
HONEST, PEACEFUL, AND CREDIBLE ELECTIONS THROUGH FAIR ELECTION PRACTICES."2
A Bicameral Conference Committee, composed of eight members of the Senate3 and sixteen (16)
members of the House of Representatives,4 was formed to reconcile the conflicting provisions of the
House and Senate versions of the bill.

On November 29, 2000, the Bicameral Conference Committee submitted its Report,5 signed by its
members, recommending the approval of the bill as reconciled and approved by the conferees.

During the plenary session of the House of Representatives on February 5, 2001, Rep. Jacinto V.
Paras proposed an amendment to the Bicameral Conference Committee Report. Rep. Didagen P.
Dilangalen raised a point of order commenting that the House could no longer submit an
amendment thereto. Rep. Sergio A.F. Apostol thereupon moved that the House return the report to
the Bicameral Conference Committee in view of the proposed amendment thereto. Rep. Dilangalen
expressed his objection to the proposal. However, upon viva voce voting, the majority of the House
approved the return of the report to the Bicameral Conference Committee for proper action.6

In view of the proposed amendment, the House of Representatives elected anew its conferees7 to the
Bicameral Conference Committee.8 Then again, for unclear reasons, upon the motion of Rep.
Ignacio R. Bunye, the House elected another set of conferees9 to the Bicameral Conference
Committee.10

On February 7, 2001, during the plenary session of the House of Representatives, Rep. Bunye
moved that the House consider the Bicameral Conference Committee Report on the contrasting
provisions of HB No. 9000 and SB No. 1742. Rep. Dilangalen observed that the report had been
recommitted to the Bicameral Conference Committee. The Chair responded that the Bicameral
Conference Report was a new one, and was a result of the reconvening of a new Bicameral
Conference Committee. Rep. Dilangalen then asked that he be given time to examine the new
report. Upon motion of Rep. Apostol, the House deferred the approval of the report until the other
members were given a copy thereof.11

After taking up other pending matters, the House proceeded to vote on the Bicameral Conference
Committee Report on the disagreeing provisions of HB No. 9000 and SB No. 1742. The House
approved the report with 125 affirmative votes, 3 negative votes and no abstention. In explaining
their negative votes, Reps. Fariñas and Garcia expressed their belief that Section 14 thereof was a
rider. Even Rep. Escudero, who voted in the affirmative, expressed his doubts on the
constitutionality of Section 14. Prior to casting his vote, Rep. Dilangalen observed that no senator
signed the Bicameral Conference Committee Report and asked if this procedure was regular.12

On the same day, the Senate likewise approved the Bicameral Conference Committee Report on the
contrasting provisions of SB No. 1742 and HB No. 9000.

Thereafter, Rep. Act No. 9006 was duly signed by then Senate President Aquilino Pimentel, Jr. and
then Speaker of the House of Representatives Feliciano R. Belmonte, Jr. and was duly certified by
the Secretary of the Senate Lutgardo B. Barbo and the Secretary General of the House of
Representatives Robert P. Nazareno as "the consolidation of House Bill No. 9000 and Senate Bill No.
1742," and "finally passed by both Houses on February 7, 2001."

President Gloria Macapagal-Arroyo signed Rep. Act No. 9006 into law on February 12, 2001.

The Petitioners’ Case

The petitioners now come to the Court alleging in the main that Section 14 of Rep. Act No. 9006,
insofar as it repeals Section 67 of the Omnibus Election Code, is unconstitutional for being in
violation of Section 26(1), Article VI of the Constitution, requiring every law to have only one subject
which should be expressed in its title.
According to the petitioners, the inclusion of Section 14 repealing Section 67 of the Omnibus
Election Code in Rep. Act No. 9006 constitutes a proscribed rider. They point out the dissimilarity
in the subject matter of Rep. Act No. 9006, on the one hand, and Section 67 of the Omnibus
Election Code, on the other. Rep. Act No. 9006 primarily deals with the lifting of the ban on the use
of media for election propaganda and the elimination of unfair election practices, while Section 67 of
the Omnibus Election Code imposes a limitation on elective officials who run for an office other
than the one they are holding in a permanent capacity by considering them as ipso facto resigned
therefrom upon filing of the certificate of candidacy. The repeal of Section 67 of the Omnibus
Election Code is thus not embraced in the title, nor germane to the subject matter of Rep. Act No.
9006.

The petitioners also assert that Section 14 of Rep. Act No. 9006 violates the equal protection clause
of the Constitution because it repeals Section 67 only of the Omnibus Election Code, leaving intact
Section 66 thereof which imposes a similar limitation to appointive officials, thus:

SEC. 66. Candidates holding appointive office or position. – Any person holding a public appointive
office or position, including active members of the Armed Forces of the Philippines, and officers and
employees in government-owned or controlled corporations, shall be considered ipso facto resigned
from his office upon the filing of his certificate of candidacy.

They contend that Section 14 of Rep. Act No. 9006 discriminates against appointive officials. By the
repeal of Section 67, an elective official who runs for office other than the one which he is holding is
no longer considered ipso facto resigned therefrom upon filing his certificate of candidacy. Elective
officials continue in public office even as they campaign for reelection or election for another elective
position. On the other hand, Section 66 has been retained; thus, the limitation on appointive
officials remains - they are still considered ipso facto resigned from their offices upon the filing of
their certificates of candidacy.

The petitioners assert that Rep. Act No. 9006 is null and void in its entirety as irregularities
attended its enactment into law. The law, not only Section 14 thereof, should be declared null and
void. Even Section 16 of the law which provides that "[t]his Act shall take effect upon its approval" is
a violation of the due process clause of the Constitution, as well as jurisprudence, which require
publication of the law before it becomes effective.

Finally, the petitioners maintain that Section 67 of the Omnibus Election Code is a good law; hence,
should not have been repealed. The petitioners cited the ruling of the Court in Dimaporo v. Mitra,
Jr.,13 that Section 67 of the Omnibus Election Code is based on the constitutional mandate on the
"Accountability of Public Officers:"14

Sec. 1. Public office is a public trust. Public officers and employees must at all times be accountable
to the people, serve them with utmost responsibility, integrity, loyalty and efficiency, act with
patriotism and justice, and lead modest lives.

Consequently, the respondents Speaker and Secretary General of the House of Representatives
acted with grave abuse of discretion amounting to excess or lack of jurisdiction for not considering
those members of the House who ran for a seat in the Senate during the May 14, 2001 elections as
ipso facto resigned therefrom, upon the filing of their respective certificates of candidacy.

The Respondents’ Arguments

For their part, the respondents, through the Office of the Solicitor General, urge this Court to
dismiss the petitions contending, preliminarily, that the petitioners have no legal standing to
institute the present suit. Except for the fact that their negative votes were overruled by the
majority of the members of the House of Representatives, the petitioners have not shown that they
have suffered harm as a result of the passage of Rep. Act No. 9006. Neither do petitioners have any
interest as taxpayers since the assailed statute does not involve the exercise by Congress of its
taxing or spending power.

Invoking the "enrolled bill" doctrine, the respondents refute the petitioners’ allegations that
"irregularities" attended the enactment of Rep. Act No. 9006. The signatures of the Senate President
and the Speaker of the House, appearing on the bill and the certification signed by the respective
Secretaries of both houses of Congress, constitute proof beyond cavil that the bill was duly enacted
into law.

The respondents contend that Section 14 of Rep. Act No. 9006, as it repeals Section 67 of the
Omnibus Election Code, is not a proscribed rider nor does it violate Section 26(1) of Article VI of the
Constitution. The title of Rep. Act No. 9006, "An Act to Enhance the Holding of Free, Orderly,
Honest, Peaceful and Credible Elections through Fair Election Practices," is so broad that it
encompasses all the processes involved in an election exercise, including the filing of certificates of
candidacy by elective officials.

They argue that the repeal of Section 67 is germane to the general subject of Rep. Act No. 9006 as
expressed in its title as it eliminates the effect of prematurely terminating the term of an elective
official by his filing of a certificate of candidacy for an office other than the one which he is
permanently holding, such that he is no longer considered ipso facto resigned therefrom. The
legislature, by including the repeal of Section 67 of the Omnibus Election Code in Rep. Act No.
9006, has deemed it fit to remove the "unfairness" of considering an elective official ipso facto
resigned from his office upon the filing of his certificate of candidacy for another elective office. With
the repeal of Section 67, all elective officials are now placed on equal footing as they are allowed to
finish their respective terms even if they run for any office, whether the presidency, vice-presidency
or other elective positions, other than the one they are holding in a permanent capacity.

The respondents assert that the repeal of Section 67 of the Omnibus Election Code need not be
expressly stated in the title of Rep. Act No. 9006 as the legislature is not required to make the title
of the act a complete index of its contents. It must be deemed sufficient that the title be
comprehensive enough reasonably to include the general subject which the statute seeks to effect
without expressing each and every means necessary for its accomplishment. Section 26(1) of Article
VI of the Constitution merely calls for all the parts of an act relating to its subject to find expression
in its title. Mere details need not be set forth.

According to the respondents, Section 14 of Rep. Act No. 9006, insofar as it repeals Section 67,
leaving Section 66 of the Omnibus Election Code intact and effective, does not violate the equal
protection clause of the Constitution. Section 67 pertains to elective officials while Section 66
pertains to appointive officials. A substantial distinction exists between these two sets of officials;
elective officials occupy their office by virtue of their mandate based upon the popular will, while the
appointive officials are not elected by popular will. The latter cannot, therefore, be similarly treated
as the former. Equal protection simply requires that all persons or things similarly situated are
treated alike, both as to rights conferred and responsibilities imposed.

Further, Section 16, or the "Effectivity" clause, of Rep. Act No. 9006 does not run afoul of the due
process clause of the Constitution as it does not entail any arbitrary deprivation of life, liberty and
property. Specifically, the section providing for penalties in cases of violations thereof presume that
the formalities of the law would be observed, i.e., charges would first be filed, and the accused
would be entitled to a hearing before judgment is rendered by a court having jurisdiction. In any
case, the issue about lack of due process is premature as no one has, as yet, been charged with
violation of Rep. Act No. 9006.

Finally, the respondents submit that the respondents Speaker and Secretary General of the House
of Representatives did not commit grave abuse of discretion in not excluding from the Rolls those
members thereof who ran for the Senate during the May 14, 2001 elections. These respondents
merely complied with Rep. Act No. 9006, which enjoys the presumption of validity until declared
otherwise by the Court.

The Court’s Ruling

Before resolving the petitions on their merits, the Court shall first rule on the procedural issue
raised by the respondents, i.e., whether the petitioners have the legal standing or locus standi to file
the petitions at bar.

The petitions were filed by the petitioners in their capacities as members of the House of
Representatives, and as taxpayers and registered voters.

Generally, a party who impugns the validity of a statute must have a personal and substantial
interest in the case such that he has sustained, or will sustain, direct injury as a result of its
enforcement.15 The rationale for requiring a party who challenges the constitutionality of a statute
to allege such a personal stake in the outcome of the controversy is "to assure that concrete
adverseness which sharpens the presentation of issues upon which the court so largely depends for
illumination of difficult constitutional questions."16

However, being merely a matter of procedure, this Court, in several cases involving issues of
"overarching significance to our society,"17 had adopted a liberal stance on standing. Thus, in
Tatad v. Secretary of the Department of Energy,18 this Court brushed aside the procedural
requirement of standing, took cognizance of, and subsequently granted, the petitions separately
filed by then Senator Francisco Tatad and several members of the House of Representatives
assailing the constitutionality of Rep. Act No. 8180 (An Act Deregulating the Downstream Oil
Industry and For Other Purposes).

The Court likewise took cognizance of the petition filed by then members of the House of
Representatives which impugned as unconstitutional the validity of a provision of Rep. Act No. 6734
(Organic Act for the Autonomous Region in Muslim Mindanao) in Chiongbian v. Orbos.19 Similarly,
the Court took cognizance of the petition filed by then members of the Senate, joined by other
petitioners, which challenged the validity of Rep. Act No. 7716 (Expanded Value Added Tax Law) in
Tolentino v. Secretary of Finance.20

Members of Congress, such as the petitioners, were likewise allowed by this Court to challenge the
validity of acts, decisions, rulings, or orders of various government agencies or instrumentalities in
Del Mar v. Philippine Amusement and Gaming Corporation,21 Kilosbayan, Inc. v. Guingona, Jr.,22
Philippine Constitution Association v. Enriquez,23 Albano v. Reyes,24 and Bagatsing v. Committee
on Privatization.25

Certainly, the principal issue posed by the petitions, i.e., whether Section 67 of the Omnibus
Election Code, which this Court had declared in Dimaporo26 as deriving its existence from the
constitutional provision on accountability of public officers, has been validly repealed by Section 14
of Rep. Act No. 9006, is one of "overarching significance" that justifies this Court’s adoption of a
liberal stance vis-à-vis the procedural matter on standing. Moreover, with the national elections
barely seven months away, it behooves the Court to confront the issue now and resolve the same
forthrightly. The following pronouncement of the Court is quite apropos:

... All await the decision of this Court on the constitutional question. Considering, therefore, the
importance which the instant case has assumed and to prevent multiplicity of suits, strong reasons
of public policy demand that [its] constitutionality . . . be now resolved. It may likewise be added
that the exceptional character of the situation that confronts us, the paramount public interest, and
the undeniable necessity for a ruling, the national elections beings barely six months away,
reinforce our stand.27
Every statute is presumed valid.28 The presumption is that the legislature intended to enact a
valid, sensible and just law and one which operates no further than may be necessary to effectuate
the specific purpose of the law.29

It is equally well-established, however, that the courts, as guardians of the Constitution, have the
inherent authority to determine whether a statute enacted by the legislature transcends the limit
imposed by the fundamental law.30 And where the acts of the other branches of government run
afoul of the Constitution, it is the judiciary’s solemn and sacred duty to nullify the same.31

Proceeding from these guideposts, the Court shall now resolve the substantial issues raised by the
petitions.

Section 14 of Rep. Act No. 9006 Is Not a Rider32

At the core of the controversy is Section 14, the repealing clause of Rep. Act No. 9006, which
provides:

Sec. 14. Sections 67 and 85 of the Omnibus Election Code (Batas Pambansa Blg. 881) and Sections
10 and 11 of Republic Act No. 6646 are hereby repealed. As a consequence, the first proviso in the
third paragraph of Section 11 of Republic Act No. 8436 is rendered ineffective. All laws, presidential
decrees, executive orders, rules and regulations, or any part thereof inconsistent with the provisions
of this Act are hereby repealed or modified or amended accordingly.

The repealed provision, Section 67 of the Omnibus Election Code, quoted earlier, reads:

SEC. 67. Candidates holding elective office. – Any elective official, whether national or local, running
for any office other than the one which he is holding in a permanent capacity, except for President
and Vice-President, shall be considered ipso facto resigned from his office upon the filing of his
certificate of candidacy.

Section 26(1), Article VI of the Constitution provides:

SEC. 26 (1). Every bill passed by the Congress shall embrace only one subject which shall be
expressed in the title thereof.

The proscription is aimed against the evils of the so-called omnibus bills and log-rolling legislation
as well as surreptitious and/or unconsidered encroaches. The provision merely calls for all parts of
an act relating to its subject finding expression in its title.33

To determine whether there has been compliance with the constitutional requirement that the
subject of an act shall be expressed in its title, the Court laid down the rule that –

Constitutional provisions relating to the subject matter and titles of statutes should not be so
narrowly construed as to cripple or impede the power of legislation. The requirement that the
subject of an act shall be expressed in its title should receive a reasonable and not a technical
construction. It is sufficient if the title be comprehensive enough reasonably to include the general
object which a statute seeks to effect, without expressing each and every end and means necessary
or convenient for the accomplishing of that object. Mere details need not be set forth. The title need
not be an abstract or index of the Act.34

The title of Rep. Act No. 9006 reads: "An Act to Enhance the Holding of Free, Orderly, Honest,
Peaceful and Credible Elections through Fair Election Practices." Section 2 of the law provides not
only the declaration of principles but also the objectives thereof:
Sec. 2. Declaration of Principles. – The State shall, during the election period, supervise or regulate
the enjoyment or utilization of all franchises or permits for the operation of media of communication
or information to guarantee or ensure equal opportunity for public service, including access to
media time and space, and the equitable right to reply, for public information campaigns and fora
among candidates and assure free, orderly, honest, peaceful and credible elections.

The State shall ensure that bona fide candidates for any public office shall be free from any form of
harassment and discrimination.35

The Court is convinced that the title and the objectives of Rep. Act No. 9006 are comprehensive
enough to include the repeal of Section 67 of the Omnibus Election Code within its contemplation.
To require that the said repeal of Section 67 of the Code be expressed in the title is to insist that the
title be a complete index of its content.36

The purported dissimilarity of Section 67 of the Omnibus Election Code, which imposes a limitation
on elective officials who run for an office other than the one they are holding, to the other provisions
of Rep. Act No. 9006, which deal with the lifting of the ban on the use of media for election
propaganda, does not violate the "one subject-one title" rule. This Court has held that an act having
a single general subject, indicated in the title, may contain any number of provisions, no matter
how diverse they may be, so long as they are not inconsistent with or foreign to the general subject,
and may be considered in furtherance of such subject by providing for the method and means of
carrying out the general subject.37

The deliberations of the Bicameral Conference Committee on the particular matter are particularly
instructive:

SEN. LEGARDA-LEVISTE:

Yes, Mr. Chairman, I just wanted to clarify.

So all we’re looking for now is an appropriate title to make it broader so that it would cover this
provision [referring to the repeal of Section 67 of the Omnibus Election Code], is that correct? That’s
all. Because I believe ...

THE CHAIRMAN (REP. SYJUCO):

We are looking for an appropriate coverage which will result in the nomenclature or title.

SEN. LEGARDA-LEVISTE:

Because I really do not believe that it is out of place. I think that even with the term "fair election
practice," it really covers it, because as expressed by Senator Roco, those conditions inserted earlier
seemed unfair and it is an election practice and, therefore, I think, I’m very comfortable with the
title "Fair Election Practice" so that we can get over with these things so that we don’t come back
again until we find the title. I mean, it’s one provision which I think is fair for everybody. It may
seem like a limitation but this limitation actually provides for fairness in election practices as the
title implies.

THE CHAIRMAN (REP. SYJUCO):

Yes.

SEN. LEGARDA-LEVISTE:
So I would want to beg the House contingent, let’s get it over with. To me, ha, it’s not a very touchy
issue. For me, it’s even a very correct provision. I feel very comfortable with it and it was voted in
the Senate, at least, so I would like to appeal to the ... para matapos na, then we come back as a
Bicam just for the title Is that what you’re ...?

THE CHAIRMAN (REP. SYJUCO):

It’s not the title per se, it’s the coverage. So if you will just kindly bear with us. I’m happy that there
is already one comfortable senator there among ... several of us were also comfortable with it. But it
would be well that when we rise from this Bicam that we’re all comfortable with it.

THE CHAIRMAN (SEN. ROCO):

Yes. Anyway, let’s listen to Congressman Marcos.

REP. MARCOS:

Mr. Chairman, may I just make the observation that although it is true that the bulk of provisions
deals with the area of propaganda and political advertising, the complete title is actually one that
indulge full coverage. It says "An Act to enhance the holding of free, orderly, honest ... elections
through fair election practices." But as you said, we will put that aside to discuss later one.

Secondly, I think the Declaration of Principles contained in Section 2, paragraph 2 is perfectly

adequate in that it says that it shall ensure candidates for public office that may be free from any
form of harassment and discrimination.

Surely this provision in Section 67 of the old Election Code of the existing Omnibus Election Code is
a form of harassment or discrimination. And so I think that in the effort at leveling the playing field,
we can cover this and it should not be considered a rider.

SEN. LEGARDA-LEVISTE:

I agree, Mr. Chairman. I think the Congresswoman from Ilocos had very clearly put it, that it is
covered in the Declaration of Principles and in the objective of this bill. And therefore, I hope that
the House contingent would agree to this so that we can finish it now. And it expressly provides for
fair election practices because ...

THE CHAIRMAN (SEN. ROCO):

Yeah, I think what is on the table is that we are not disputing this, but we are looking for a title that
is more generic so that then we have less of an objection on constitutionality. I think that’s the
theory. So, there is acceptance of this.

Maybe we should not call it na limitation on elected officials. Maybe we should say the special
provision on elected officials. So how is that? Alam mo ito ...

REP. MARCOS:

I think we just change the Section 1, the short title.

THE CHAIRMAN (SEN. ROCO):

Also, Then we say - - on the short title of the Act, we say ...

REP. MARCOS:
What if we say fair election practices? Maybe that should be changed...

THE CHAIRMAN (SEN. ROCO):

O, sige, fine, fine. Let’s a brainstorm. Equal...

REP. PADILLA:

Mr. Chairman, why don’t we use "An Act rationalizing the holding of free, orderly, honest, peaceful
and credible elections, amending for the purpose Batasang Pambansa known as the Omnibus
Election Code?"

THE CHAIRMAN (SEN. ROCO):

Why don’t we remove "fair" and then this shall be cited as Election Practices Act?"
REP. PICHAY:
That’s not an election practice. That’s a limitation.
THE CHAIRMAN (SEN. ROCO):
Ah - - - ayaw mo iyong practice. O, give me another noun.
REP. MARCOS:
The Fair Election.
THE CHAIRMAN (SEN. ROCO):
O, Fair Election Act.
REP. MACARAMBON:
Nagbi-brainstorm tayo dito, eh. How about if we change the title to enhance the holding of free,
orderly, honest, peaceful and ensure equal opportunity for public service through fair election
practices?
REP. PICHAY:
Fair election practices?
REP. MACARAMBON:
Yeah. To ensure equal opportunity for public service through fair ...
THE CHAIRMAN (SEN. ROCO):
Wala nang practices nga.
REP. PICHAY:
Wala nang practices.
THE CHAIRMAN (SEN. ROCO):
It shall be cited as Fair Election Act.
(Informal discussions)
REP. PICHAY:
Approve na iyan.
THE CHAIRMAN (SEN. ROCO):
Done. So, okay na iyon. The title will be "Fair Election Act."
The rest wala nang problema ano?
VOICES:
Wala na.
REP. MACARAMBON:
Wala na iyong practices?
THE CHAIRMAN (SEN. ROCO):
Wala na, wala na. Mahina tayo sa practice, eh.
O, wala na? We will clean up.
REP. MARCOS:
Title?
THE CHAIRMAN (SEN. ROCO):
The short title, "This Act ..."
THE CHAIRMAN (REP. SYJUCO):
You’re back to your No. 21 already.
REP. MARCOS:
The full title, the same?
THE CHAIRMAN (SEN. ROCO):
Iyon na nga. The full title is "An Act to enhance the holding ..." That’s the House version, eh, dahil
pareho, hindi ba? Then the short title "This Act shall be known as the Fair Election Act."38

The legislators considered Section 67 of the Omnibus Election Code as a form of harassment or
discrimination that had to be done away with and repealed. The executive department found cause
with Congress when the President of the Philippines signed the measure into law. For sure, some
sectors of society and in government may believe that the repeal of Section 67 is bad policy as it
would encourage political adventurism. But policy matters are not the concern of the Court.
Government policy is within the exclusive dominion of the political branches of the government.39
It is not for this Court to look into the wisdom or propriety of legislative determination. Indeed,
whether an enactment is wise or unwise, whether it is based on sound economic theory, whether it
is the best means to achieve the desired results, whether, in short, the legislative discretion within
its prescribed limits should be exercised in a particular manner are matters for the judgment of the
legislature, and the serious conflict of opinions does not suffice to bring them within the range of
judicial cognizance.40 Congress is not precluded from repealing Section 67 by the ruling of the
Court in Dimaporo v. Mitra41 upholding the validity of the provision and by its pronouncement in
the same case that the provision has a laudable purpose. Over time, Congress may find it
imperative to repeal the law on its belief that the election process is thereby enhanced and the
paramount objective of election laws – the fair, honest and orderly election of truly deserving
members of Congress – is achieved.

Moreover, the avowed purpose of the constitutional directive that the subject of a bill should be
embraced in its title is to apprise the legislators of the purposes, the nature and scope of its
provisions, and prevent the enactment into law of matters which have not received the notice,
action and study of the legislators and the public.42 In this case, it cannot be claimed that the
legislators were not apprised of the repeal of Section 67 of the Omnibus Election Code as the same
was amply and comprehensively deliberated upon by the members of the House. In fact, the
petitioners, as members of the House of Representatives, expressed their reservations regarding its
validity prior to casting their votes. Undoubtedly, the legislators were aware of the existence of the
provision repealing Section 67 of the Omnibus Election Code.

Section 14 of Rep. Act No. 9006

Is Not Violative of the Equal
Protection Clause of the Constitution43

The petitioners’ contention, that the repeal of Section 67 of the Omnibus Election Code pertaining
to elective officials gives undue benefit to such officials as against the appointive ones and violates
the equal protection clause of the constitution, is tenuous.

The equal protection of the law clause in the Constitution is not absolute, but is subject to
reasonable classification. If the groupings are characterized by substantial distinctions that make
real differences, one class may be treated and regulated differently from the other.44 The Court has
explained the nature of the equal protection guarantee in this manner:

The equal protection of the law clause is against undue favor and individual or class privilege, as
well as hostile discrimination or the oppression of inequality. It is not intended to prohibit
legislation which is limited either in the object to which it is directed or by territory within which it
is to operate. It does not demand absolute equality among residents; it merely requires that all
persons shall be treated alike, under like circumstances and conditions both as to privileges
conferred and liabilities enforced. The equal protection clause is not infringed by legislation which
applies only to those persons falling within a specified class, if it applies alike to all persons within
such class, and reasonable grounds exist for making a distinction between those who fall within
such class and those who do not.45

Substantial distinctions clearly exist between elective officials and appointive officials. The former
occupy their office by virtue of the mandate of the electorate. They are elected to an office for a
definite term and may be removed therefrom only upon stringent conditions.46 On the other hand,
appointive officials hold their office by virtue of their designation thereto by an appointing authority.
Some appointive officials hold their office in a permanent capacity and are entitled to security of
tenure47 while others serve at the pleasure of the appointing authority.48

Another substantial distinction between the two sets of officials is that under Section 55, Chapter 8,
Title I, Subsection A. Civil Service Commission, Book V of the Administrative Code of 1987
(Executive Order No. 292), appointive officials, as officers and employees in the civil service, are
strictly prohibited from engaging in any partisan political activity or take part in any election except
to vote. Under the same provision, elective officials, or officers or employees holding political offices,
are obviously expressly allowed to take part in political and electoral activities.49

By repealing Section 67 but retaining Section 66 of the Omnibus Election Code, the legislators
deemed it proper to treat these two classes of officials differently with respect to the effect on their
tenure in the office of the filing of the certificates of candidacy for any position other than those
occupied by them. Again, it is not within the power of the Court to pass upon or look into the
wisdom of this classification.

Since the classification justifying Section 14 of Rep. Act No. 9006, i.e., elected officials vis-a-vis
appointive officials, is anchored upon material and significant distinctions and all the persons
belonging under the same classification are similarly treated, the equal protection clause of the
Constitution is, thus, not infringed.

The Enrolled Bill Doctrine

Is Applicable In this Case

Not content with their plea for the nullification of Section 14 of Rep. Act No. 9006, the petitioners
insist that the entire law should be nullified. They contend that irregularities attended the passage
of the said law particularly in the House of Representatives catalogued thus:

a. Creation of two (2) sets of BCC (Bicameral Conference Committee) members by the House during
its session on February 5, 2001;

b. No communication from the Senate for a conference on the compromise bill submitted by the
BCC on November 29, 2000;

c. The new Report submitted by the 2nd/3rd BCC was presented for approval on the floor without
copies thereof being furnished the members;

d. The 2nd/3rd BCC has no record of its proceedings, and the Report submitted by it was not
signed by the Chairman (Sen. Roco) thereof as well as its senator-members at the time it was
presented to and rammed for approval by the House;

e. There was no meeting actually conducted by the 2nd/3rd BCC and that its alleged Report was
instantly made and passed around for the signature of the BCC members;

f. The Senate has no record of the creation of a 2nd BCC but only of the first one that convened on
November 23, 2000;
g. The "Effectivity" clauses of SB No. 1741 and HB No. 9000, as well as that of the compromise bill
submitted by the BCC that convened on November 20, 2000, were couched in terms that comply
with the publication required by the Civil Code and jurisprudence, to wit:

...

However, it was surreptitiously replaced in its final form as it appears in § 16, R.A. No. 9006, with
the provision that "This Act shall take effect immediately upon its approval;"

h. The copy of the compromise bill submitted by the 2nd/3rd BCC that was furnished the members
during its consideration on February 7, 2001, did not have the same § 16 as it now appears in RA
No. 9006, but § 16 of the compromise bill, HB 9000 and SB 1742, reasons for which no objection
thereto was made;

i. The alleged BCC Report presented to the House on February 7, 2001, did not "contain a detailed,
sufficiently explicit statement of the changes in or amendments to the subject measure;" and

j. The disappearance of the "Cayetano amendment," which is Section 12 of the compromise bill
submitted by the BCC. In fact, this was the subject of the purported proposed amendment to the
compromise bill of Member Paras as stated in paragraph 7 hereof. The said provision states, thusly:

Sec. 12. Limitation on Elected Officials. – Any elected official who runs for president and vice-
president shall be considered ipso facto resigned from his office upon the filing of the certificate of
candidacy.50

The petitioners, thus, urge the Court to go behind the enrolled copy of the bill. The Court is not
persuaded. Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the House and
the Senate President and the certification of the Secretaries of both Houses of Congress that it was
passed are conclusive of its due enactment. A review of cases51 reveals the Court’s consistent
adherence to the rule. The Court finds no reason to deviate from the salutary rule in this case
where the irregularities alleged by the petitioners mostly involved the internal rules of Congress,
e.g., creation of the 2nd or 3rd Bicameral Conference Committee by the House. This Court is not
the proper forum for the enforcement of these internal rules of Congress, whether House or Senate.
Parliamentary rules are merely procedural and with their observance the courts have no concern.52
Whatever doubts there may be as to the formal validity of Rep. Act No. 9006 must be resolved in its
favor. The Court reiterates its ruling in Arroyo v. De Venecia,53 viz.:

But the cases, both here and abroad, in varying forms of expression, all deny to the courts the
power to inquire into allegations that, in enacting a law, a House of Congress failed to comply with
its own rules, in the absence of showing that there was a violation of a constitutional provision or
the rights of private individuals. In Osmeña v. Pendatun, it was held: "At any rate, courts have
declared that ‘the rules adopted by deliberative bodies are subject to revocation, modification or
waiver at the pleasure of the body adopting them.’ And it has been said that ‘Parliamentary rules
are merely procedural, and with their observance, the courts have no concern. They may be waived
or disregarded by the legislative body.’ Consequently, ‘mere failure to conform to parliamentary
usage will not invalidate the action (taken by a deliberative body) when the requisite number of
members have agreed to a particular measure.’"

The Effectivity Clause

Is Defective

Finally, the "Effectivity" clause (Section 16) of Rep. Act No. 9006 which provides that it "shall take
effect immediately upon its approval," is defective. However, the same does not render the entire law
invalid. In Tañada v. Tuvera,54 this Court laid down the rule:
... the clause "unless it is otherwise provided" refers to the date of effectivity and not to the
requirement of publication itself, which cannot in any event be omitted. This clause does not mean
that the legislator may make the law effective immediately upon approval, or on any other date
without its previous publication.

Publication is indispensable in every case, but the legislature may in its discretion provide that the
usual fifteen-period shall be shortened or extended….55

Following Article 2 of the Civil Code56 and the doctrine enunciated in Tañada, Rep. Act No. 9006,
notwithstanding its express statement, took effect fifteen days after its publication in the Official
Gazette or a newspaper of general circulation.

In conclusion, it bears reiterating that one of the firmly entrenched principles in constitutional law
is that the courts do not involve themselves with nor delve into the policy or wisdom of a statute.
That is the exclusive concern of the legislative branch of the government. When the validity of a
statute is challenged on constitutional grounds, the sole function of the court is to determine
whether it transcends constitutional limitations or the limits of legislative power.57 No such
transgression has been shown in this case.

WHEREFORE, the petitions are DISMISSED. No pronouncement as to costs.

SO ORDERED.
8. G.R. No. 159333 July 31, 2006

ARSENIO T. MENDIOLA, petitioner,

vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST
RESOURCES, PHILS., INC. and/or CELLMARK AB, respondents.

DECISION

PUNO, J.:

On appeal are the Decision1 and Resolution2 of the Court of Appeals, dated January 30, 2003 and
July 30, 2003, respectively, in CA-G.R. SP No. 71028, affirming the ruling3 of the National Labor
Relations Commission (NLRC), which in turn set aside the July 30, 2001 Decision4 of the labor
arbiter. The labor arbiter declared illegal the dismissal of petitioner from employment and awarded
separation pay, moral and exemplary damages, and attorney's fees.

The facts are as follows:

Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and
existing under the laws of California, USA. It is a subsidiary of Cellulose Marketing International, a
corporation duly organized under the laws of Sweden, with principal office in Gothenburg, Sweden.

Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific
Forest Resources (Phils.), Inc."5 with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995,
"assuming that Pacfor-Phils. is already approved by the Securities and Exchange Commission [SEC]
on the said date."6 The Side Agreement outlines the business relationship of the parties with regard
to the Philippine operations of Pacfor. Private respondent will establish a Pacfor representative office
in the Philippines, to be known as Pacfor Phils, and petitioner ATM will be its President. Petitioner's
base salary and the overhead expenditures of the company shall be borne by the representative
office and funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50 equity by ATM
and Pacfor-usa.

On July 14, 1995, the SEC granted the application of private respondent Pacfor for a license to
transact business in the Philippines under the name of Pacfor or Pacfor Phils.7 In its application,
private respondent Pacfor proposed to establish its representative office in the Philippines with the
purpose of monitoring and coordinating the market activities for paper products. It also designated
petitioner as its resident agent in the Philippines, authorized to accept summons and processes in
all legal proceedings, and all notices affecting the corporation.8

In March 1997, the Side Agreement was amended through a "Revised Operating and Profit Sharing
Agreement for the Representative Office Known as Pacific Forest Resources (Philippines),"9 where
the salary of petitioner was increased to $78,000 per annum. Both agreements show that the
operational expenses will be borne by the representative office and funded by all parties "as equal
partners," while the profits and commissions will be shared among them.

In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of
his 50% equity of Pacfor Phils.10 Private respondent Pacfor, through William Gleason, its President,
replied that petitioner is not a part-owner of Pacfor Phils. because the latter is merely Pacfor-USA's
representative office and not an entity separate and distinct from Pacfor-USA. "It's simply a
'theoretical company' with the purpose of dividing the income 50-50."11 Petitioner presumably
knew of this arrangement from the start, having been the one to propose to private respondent
Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save
on taxes.12
Petitioner claimed that he was all along made to believe that he was in a joint venture with them.
He alleged he would have been better off remaining as an independent agent or representative of
Pacfor-USA as ATM Marketing Corp.13 Had he known that no joint venture existed, he would not
have allowed Pacfor to take the profitable business of his own company, ATM Marketing Corp.14
Petitioner raised other issues, such as the rentals of office furniture, salary of the employees,
company car, as well as commissions allegedly due him. The issues were not resolved, hence, in
October 2000, petitioner wrote Pacfor-USA demanding payment of unpaid commissions and office
furniture and equipment rentals, amounting to more than one million dollars.15

On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn over
to it all papers, documents, files, records, and other materials in his or ATM Marketing
Corporation's possession that belong to Pacfor or Pacfor Phils.16 On December 18, 2000, private
respondent Pacfor also required petitioner to remit more than three hundred thousand-peso
Christmas giveaway fund for clients of Pacfor Phils.17 Lastly, private respondent Pacfor withdrew all
its offers of settlement and ordered petitioner to transfer title and turn over to it possession of the
service car.18

Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not to
deal with Pacfor Phils. In its letter to Intercontinental Paper Industries, Inc., dated November 21,
2000, private respondent Pacfor stated:

Until further notice, please course all inquiries and communications for Pacific Forest Resources
(Philippines) to:

Pacific Forest Resources

200 Tamal Plaza, Suite 200
Corte Madera, CA, USA 94925
(415) 927 1700 phone
(415) 381 4358 fax

Please do not send any communication to Mr. Arsenio "Boy" T. Mendiola or to the offices of ATM
Marketing Corporation at Room 504, Concorde Building, Legaspi Village, Makati City,
Philippines.19

In another letter addressed to Davao Corrugated Carton Corp. (DAVCOR), dated December 2000,
private respondent directed said client "to please communicate directly with us on any further
questions associated with these payments or any future business. Do not communicate with
[Pacfor] and/or [ATM]."20

Petitioner construed these directives as a severance of the "unregistered partnership" between him
and Pacfor, and the termination of his employment as resident manager of Pacfor Phils.21 In a
memorandum to the employees of Pacfor Phils., dated January 29, 2001, he stated:

I received a letter from Pacific Forest Resources, Inc. demanding the turnover of all records to them
effective December 19, 2000. The company records were turned over only on January 26, 2001.
This means our jobs with Pacific Forest were terminated effective December 19, 2000. I am
concerned about your welfare. I would like to help you by offering you to work with ATM Marketing
Corporation.

Please let me know if you are interested.22

On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor
Phils. Thus, it follows that he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office
furniture and equipment and the service car. He also reiterated his demand for unpaid
commissions, and proposed to offset these with the remaining Christmas giveaway fund in his
possession.23 Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the
lessor of the office premises of Pacfor Phils., wherein he was the signatory to the lease agreement.24

On February 2, 2001, private respondent Pacfor placed petitioner on preventive suspension and
ordered him to show cause why no disciplinary action should be taken against him. Private
respondent Pacfor charged petitioner with willful disobedience and serious misconduct for his
refusal to turn over the service car and the Christmas giveaway fund which he applied to his alleged
unpaid commissions. Private respondent also alleged loss of confidence and gross neglect of duty on
the part of petitioner for allegedly allowing another corporation owned by petitioner's relatives, High
End Products, Inc. (HEPI), to use the same telephone and facsimile numbers of Pacfor, to possibly
steal and divert the sales and business of private respondent for HEPI's principal, International
Forest Products, a competitor of private respondent.25

Petitioner denied the charges. He reiterated that he considered the import of Pacfor President
William Gleason's letters as a "cessation of his position and of the existence of Pacfor Phils." He
likewise informed private respondent Pacfor that ATM Marketing Corp. now occupies Pacfor Phils.'
office premises,26 and demanded payment of his separation pay.27 On February 15, 2001,
petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of
attorney's fees with the NLRC.28

In the meantime, private respondent Pacfor lodged fresh charges against petitioner. In a
memorandum dated March 5, 2001, private respondent directed petitioner to explain why he should
not be disciplined for serious misconduct and conflict of interest. Private respondent charged
petitioner anew with serious misconduct for the latter's alleged act of fraud and misrepresentation
in authorizing the release of an additional peso salary for himself, besides the dollar salary agreed
upon by the parties. Private respondent also accused petitioner of disloyalty and representation of
conflicting interests for having continued using the Pacfor Phils.' office for operations of HEPI. In
addition, petitioner allegedly solicited business for HEPI from a competitor company of private
respondent Pacfor.29

Labor Arbiter Felipe Pati ruled in favor of petitioner, finding there was constructive dismissal. By
directing petitioner to turn over all office records and materials, regardless of whether he may have
retained copies, private respondent Pacfor virtually deprived petitioner of his job by the gradual
diminution of his authority as resident manager. Petitioner's position as resident manager whose
duty, among others, was to maintain the security of its business transactions and communications
was rendered meaningless. The dispositive portion of the decision of the Labor Arbiter reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering herein respondents

Cellmark AB and Pacific Forest Resources, Inc., jointly and severally to compensate complainant
Arsenio T. Mendiola separation pay equivalent to at least one month for every year of service,
whichever is higher (sic), as reinstatement is no longer feasible by reason of the strained relations of
the parties equivalent to five (5) months in the amount of $32,000.00 plus the sum of P250,000.00;
pay complainant the sum of P500,000.00 as moral and exemplary damages and ten percent (10%)
of the amounts awarded as and for attorney's fees.

All other claims are dismissed for lack of basis.

SO ORDERED.30

Private respondent Pacfor appealed to the NLRC which ruled in its favor. On December 20, 2001,
the NLRC set aside the July 30, 2001 decision of the labor arbiter, for lack of jurisdiction and lack
of merit.31 It held there was no employer-employee relationship between the parties. Based on the
two agreements between the parties, it concluded that petitioner is not an employee of private
respondent Pacfor, but a full co-owner (50/50 equity).
The NLRC denied petitioner's Motion for Reconsideration.32

Petitioner was not successful on his appeal to the Court of Appeals. The appellate court upheld the
ruling of the NLRC.

Petitioner's Motion for Reconsideration33 of the decision of the Court of Appeals was denied.

Hence, this appeal.34

Petitioner assigns the following errors:

A. The Respondent Court of Appeals committed reversible error and abused its discretion in
rendering judgment against petitioner since jurisdiction has been acquired over the subject matter
of the case as there exists employer-employee relationship between the parties.

B. The Respondent Court of Appeals committed reversible error and abused its discretion in ruling
that jurisdiction over the subject matter cannot be waived and may be alleged even for the first time
on appeal or considered by the court motu prop[r]io.35

The first issue is whether an employer-employee relationship exists between petitioner and private
respondent Pacfor.

Petitioner argues that he is an industrial partner of the partnership he formed with private
respondent Pacfor, and also an employee of the partnership. Petitioner insists that an industrial
partner may at the same time be an employee of the partnership, provided there is such an
agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit
Sharing Agreement." The Court of Appeals denied the appeal of petitioner, holding that "the legal
basis of the complaint is not employment but perhaps partnership, co-ownership, or independent
contractorship." Hence, the Labor Code cannot apply.

We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-
ownership exists between the parties.

In a partnership, the members become co-owners of what is contributed to the firm capital and of
all property that may be acquired thereby and through the efforts of the members.36 The property
or stock of the partnership forms a community of goods, a common fund, in which each party has a
proprietary interest.37 In fact, the New Civil Code regards a partner as a co-owner of specific
partnership property.38 Each partner possesses a joint interest in the whole of partnership
property. If the relation does not have this feature, it is not one of partnership.39 This essential
element, the community of interest, or co-ownership of, or joint interest in partnership property is
absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-
owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established this fact
when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the
income 50-50. He stressed that petitioner knew of this arrangement from the very start, having
been the one to propose to private respondent Pacfor the setting up of a representative office, and
"not a branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely
shared profits. This alone does not make a partnership.40

Besides, a corporation cannot become a member of a partnership in the absence of express

authorization by statute or charter.41 This doctrine is based on the following considerations: (1)
that the mutual agency between the partners, whereby the corporation would be bound by the acts
of persons who are not its duly appointed and authorized agents and officers, would be inconsistent
with the policy of the law that the corporation shall manage its own affairs separately and
exclusively; and, (2) that such an arrangement would improperly allow corporate property to
become subject to risks not contemplated by the stockholders when they originally invested in the
corporation.42 No such authorization has been proved in the case at bar.

Be that as it may, we hold that on the basis of the evidence, an employer-employee relationship is
present in the case at bar. The elements to determine the existence of an employment relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee's conduct. The most important
element is the employer's control of the employee's conduct, not only as to the result of the work to
be done, but also as to the means and methods to accomplish it.43

In the instant case, all the foregoing elements are present. First, it was private respondent Pacfor
which selected and engaged the services of petitioner as its resident agent in the Philippines.
Second, as stipulated in their Side Agreement, private respondent Pacfor pays petitioner his salary
amounting to $65,000 per annum which was later increased to $78,000. Third, private respondent
Pacfor holds the power of dismissal, as may be gleaned through the various memoranda it issued
against petitioner, placing the latter on preventive suspension while charging him with various
offenses, including willful disobedience, serious misconduct, and gross neglect of duty, and ordering
him to show cause why no disciplinary action should be taken against him.

Lastly and most important, private respondent Pacfor has the power of control over the means and
method of petitioner in accomplishing his work.

The power of control refers merely to the existence of the power, and not to the actual exercise
thereof. The principal consideration is whether the employer has the right to control the manner of
doing the work, and it is not the actual exercise of the right by interfering with the work, but the
right to control, which constitutes the test of the existence of an employer-employee relationship.44
In the case at bar, private respondent Pacfor, as employer, clearly possesses such right of control.
Petitioner, as private respondent Pacfor's resident agent in the Philippines, is, exactly so, only an
agent of the corporation, a representative of Pacfor, who transacts business, and accepts service on
its behalf.

This right of control was exercised by private respondent Pacfor during the period of November to
December 2000, when it directed petitioner to turn over to it all records of Pacfor Phils.; when it
ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils.; and,
when it withdrew all its offers of settlement and ordered petitioner to transfer title and turn over to
it the possession of the service car. It was also during this period when private respondent Pacfor
sent letters to its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and
DAVCOR, advising them not to deal with petitioner and/or Pacfor Phils. In its letter to DAVCOR,
private respondent Pacfor replied to the client's request for an invoice payment extension, and
formulated a revised payment program for DAVCOR. This is one unmistakable proof that private
respondent Pacfor exercises control over the petitioner.

Next, we shall determine if petitioner was constructively dismissed from employment.

The evidence shows that when petitioner insisted on his 50% equity in Pacfor Phils., and would not
quit however, private respondent Pacfor began to systematically deprive petitioner of his duties and
benefits to make him feel that his presence in the company was no longer wanted. First, private
respondent Pacfor directed petitioner to turn over to it all records of Pacfor Phils. This would
certainly make the work of petitioner very difficult, if not impossible. Second, private respondent
Pacfor ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils.
Then it ordered petitioner to transfer title and turn over to it the possession of the service car. It
also advised its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and
DAVCOR, not to deal with petitioner and/or Pacfor Phils. Lastly, private respondent Pacfor
appointed a new resident agent for Pacfor Phils.45
Although there is no reduction of the salary of petitioner, constructive dismissal is still present
because continued employment of petitioner is rendered, at the very least, unreasonable.46 There is
an act of clear discrimination, insensibility or disdain by the employer that continued employment
may become so unbearable on the part of the employee so as to foreclose any choice on his part
except to resign from such employment.47

The harassing acts of the private respondent are unjustified. They were undertaken when petitioner
sought clarification from the private respondent about his supposed 50% equity on Pacfor Phils.
Private respondent Pacfor invokes its rights as an owner. Allegedly, its issuance of the foregoing
directives against petitioner was a valid exercise of management prerogative. We remind private
respondent Pacfor that the exercise of management prerogative is not absolute. "By its very nature,
encompassing as it could be, management prerogative must be exercised in good faith and with due
regard to the rights of labor – verily, with the principles of fair play at heart and justice in mind."
The exercise of management prerogative cannot be utilized as an implement to circumvent our laws
and oppress employees.48

As resident agent of private respondent corporation, petitioner occupied a position involving trust
and confidence. In the light of the strained relations between the parties, the full restoration of an
employment relationship based on trust and confidence is no longer possible. He should be
awarded separation pay, in lieu of reinstatement.

IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals' January 30, 2003 Decision in
CA-G.R. SP No. 71028 and July 30, 2003 Resolution, affirming the December 20, 2001 Decision of
the National Labor Relations Commission, are ANNULED and SET ASIDE. The July 30, 2001
Decision of the Labor Arbiter is REINSTATED with the MODIFICATION that the amount of
P250,000.00 representing an alleged increase in petitioner's salary shall be deducted from the grant
of separation pay for lack of evidence.

SO ORDERED.
9. G.R. No. L-37048 March 7, 1933

MANUELA BARRETTO GONZALEZ, Plaintiff-Appellee, vs. AUGUSTO C. GONZALEZ, Defendant-

Appellant.
AUGUSTO C. GONZALEZ, Jr., ET AL., intervenors-appellees.

Quintin Paredes and Barrera and Reyes for appellant.

DeWitt, Perkins and Brady for plaintiff-appellee.
Camus and Delgado for intervenors-appellees.

HULL, J.:

Plaintiff and defendant are citizens of the Philippine Islands and at present residents of the City of
Manila. They were married in the City of Manila on January 19, 1919, and lived together as man
and wife in the Philippine Islands until the spring of 1926. They voluntarily separated and since
that time have not lived together as man and wife. Of this union four children were born who are
now 11, 10, 8 and 6 years of age. Negotiations between the parties, both being represented by
attorneys, continued for several months, whereupon it was mutually agreed to allow the plaintiff for
her support and that of her children, five hundred pesos (P500) monthly; this amount to be
increased in case of illness or necessity, and the title of certain properties to be put in her name.
Shortly after this agreement the husband left the Islands, betook himself to Reno, Nevada, and
secured in that jurisdiction an absolute divorce on the ground of desertion, which decree was dated
November 28, 1927. Shortly thereafter the defendant moved to California and returned to these
Islands in August 1928, where he has since remained. On the same date that he secured a divorce
in Nevada he went through the forms of marriage with another citizen of these Islands and now has
three children as a result of that marriage. Defendant, after his departure from these Islands,
reduced the amount he had agreed to pay monthly for the support of his wife and four minor
children and has not made the payments fixed in the Reno divorce as alimony.

Shortly after his return his wife brought action in the Court of First Instance of Manila requesting
that the courts of the Philippine Islands confirm and ratify the decree of divorce issued by the
courts of the State of Nevada; that section 9 of Act No. 2710, which reads as follows:

The decree of divorce shall dissolve the community of property as soon as such decree becomes
final, but shall not dissolve the bonds of matrimony until one year thereafter.

The bonds of matrimony shall not be considered as dissolved with regard to the spouse who, having
legitimate children, has not delivered to each of them or to the guardian appointed by the court,
within said period of one year, the equivalent of what would have been due to them as their legal
portion if said spouse had died intestate immediately after the dissolution of the community of
property be enforced, and that she and the defendant deliver to the guardian ad litem the equivalent
of what would have been due to their children as their legal portion from the respective estates had
their parents did intestate on November 28, 1927. It is also prayed that the community existing
between plaintiff and defendant be declared dissolved and the defendant be ordered to render an
accounting and to deliver to the plaintiff her share of the community property, that the defendant
be ordered to pay the plaintiff alimony at the rate of five hundred pesos (P500) per month, that the
defendant be ordered to pay the plaintiff, as counsel fees, the sum of five thousand pesos (P5000),
and that the defendant be ordered to pay plaintiff the expenses incurred in educating the three
minor sons.

A guardian ad litem was appointed for the minor children, and they appear as intervenors and join
their mother in these proceedings. The Court of First Instance, after hearing, found against the
defendant and granted judgment as prayed for by the plaintiff and intervenors, with the exception of
reducing attorneys fees to three thousand, and also granted costs of the action against the
defendant. From this judgment defendant appeals and makes the following assignment of errors:
I. The lower court erred in not declaring that paragraph 2 of section 9 of the Philippine Divorce Law,
is unconstitutional, null and void.

II. The lower court erred in holding that section 9 of Act No. 2710 (Divorce Law) applies to the
Nevada decree of divorce issued in favor of appellant Augusto C. Gonzalez, said decree being
entitled to confirmation and recognition.

III. The lower court erred in not dismissing the complaint in intervention for lack of cause of action
against appellant and appellee.

IV. The lower court erred in not declaring the notice of lis pendens filed by intervenors to be null
and void.

V. The lower court erred in ordering the appellant to pay the sum of P500 per month for the support
not only of his children but also of his ex-wife, appellee herein, Manuela Barretto.

VI. The lower court erred in not holding that plaintiff- appellee, Manuela Barretto, is not entitled to
support from her ex-husband, herein appellant, over and beyond the alimony fixed by the divorce
decree in Exhibit A.

VII. The lower court erred in condemning defendant appellant to pay to plaintiff-appellee P3,000
attorney's fees.

VIII. The lower court erred in denying appellant's motion for new trial.

While the parties in this action are in dispute over financial matters they are in unity in trying to
secure the courts of this jurisdiction to recognize and approve of the Reno divorce. On the record
here presented this can not be done. The public policy in this jurisdiction on the question of divorce
is clearly set forth in Act No. 2710, and the decisions of this court: Goitia vs. Campos Rueda (35
Phil., 252); Garcia Valdez vs. Sotera�a Tuason (40 Phil., 943-952); Ramirez vs. Gmur (42 Phil.,
855); Chereau vs. Fuentebella (43 Phil., 216); Fernandez vs. De Castro (48 Phil., 123); Gorayeb vs.
Hashim (50 Phil., 22); Francisco vs. Tayao (50 Phil., 42); Alkuino Lim Pang vs. Uy Pian Ng Shun and
Lim Tingco (52 Phil., 571); and the late case of Cousins Hix vs. Fluemer, decided March 21, 1931,
and reported in 55 Phil., 851.

The entire conduct of the parties from the time of their separation until the case was submitted to
this court, in which they all prayed that the Reno divorce be ratified and confirmed, clearly
indicates a purpose to circumvent the laws of the Philippine Islands regarding divorce and to secure
for themselves a change of status for reasons and under conditions not authorized by our law. At all
times the matrimonial domicile of this couple has been within the Philippine Islands and the
residence acquired in the State of Nevada by the husband of the purpose of securing a divorce was
not a bona fide residence and did not confer jurisdiction upon the Court of that State to dissolve the
bonds if matrimony in which he had entered in 1919. While the decisions of this court heretofore in
refusing to recognize the validity of foreign divorce has usually been expressed in the negative and
have been based upon lack of matrimonial domicile or fraud or collusion, we have not overlooked
the provisions of the Civil Code now in force in these Islands. Article 9 thereof reads as follows:

The laws relating to family rights and duties, or to the status, condition and legal capacity or
persons, are binding upon Spaniards even though they reside in a foreign country.

And article 11, the last part of which reads:

. . . the prohibitive laws concerning persons, their acts and their property, and those intended to
promote public order and good morals, shall nor be rendered without effect by any foreign laws or
judgments or by anything done or any agreements entered into a foreign country.

It is therefore a serious question whether any foreign divorce relating to citizens of the Philippine
Islands, will be recognized in this jurisdiction, except it be for a cause, and under conditions for
which the courts of Philippine Islands would grant a divorce. The lower court in granting relief as
prayed for frankly stated that the securing of the divorce, the contracting of another marriage and
the bringing into the world of innocent children brings about such a condition that the court must
grant relief. The hardships of the existing divorce laws of the Philippine Islands are well known to
the members of the Legislature. It is of no moment in this litigation what he personal views of the
writer on the subject of divorce may be. It is the duty of the courts to enforce the laws of divorce as
written by the Legislature if they are constitutional. Courts have no right to say that such laws are
too strict or too liberal.

Litigants by mutual agreement can not compel the courts to approve of their own actions or permit
the personal relations of the citizens of these Islands to be affected by decrees of foreign courts in a
manner which our Government believes is contrary to public order and good morals. Holding the
above views it becomes unnecessary to discuss the serious constitutional question presented by
appellant in his first assignment of error.

The judgment of the Court of First Instance of the City of Manila must therefore be reversed and
defendant absolved from the demands made against him in this action. This, however, without
prejudice to any right of maintenance that plaintiff and the intervenors may have against defendant.
No special pronouncement as to costs. So ordered.