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Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 141994 January 17, 2005
FILIPINAS BROADCASTING NETWORK, INC., petitioner,
vs.
AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and
ANGELITA F. AGO, respondents.
D E C I S I O N
CARPIO, J.:
The Case
This petition for review
1
assails the 4 January 1999 Decision
2
and 26 January 2000 Resolution of the Court of
Appeals in CA-G.R. CV No. 40151. The Court of Appeals affirmed with modification the 14 December 1992
Decision
3
of the Regional Trial Court of Legazpi City, Branch 10, in Civil Case No. 8236. The Court of Appeals held
Filipinas Broadcasting Network, Inc. and its broadcasters Hermogenes Alegre and Carmelo Rima liable for libel and
ordered them to solidarily pay Ago Medical and Educational Center-Bicol Christian College of Medicine moral
damages, attorneys fees and costs of suit.
The Antecedents
"Expos" is a radio documentary
4
program hosted by Carmelo Mel Rima ("Rima") and Hermogenes Jun Alegre
("Alegre").
5
Expos is aired every morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc.
("FBNI"). "Expos" is heard over Legazpi City, the Albay municipalities and other Bicol areas.
6

In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints from students,
teachers and parents against Ago Medical and Educational Center-Bicol Christian College of Medicine ("AMEC")
and its administrators. Claiming that the broadcasts were defamatory, AMEC and Angelita Ago ("Ago"), as Dean of
AMECs College of Medicine, filed a complaint for damages
7
against FBNI, Rima and Alegre on 27 February 1990.
Quoted are portions of the allegedly libelous broadcasts:
JUN ALEGRE:
Let us begin with the less burdensome: if you have children taking medical course at AMEC-BCCM, advise them to
pass all subjects because if they fail in any subject they will repeat their year level, taking up all subjects
including those they have passed already. Several students had approached me stating that they had consulted
with the DECS which told them that there is no such regulation. If [there] is no such regulation why is AMEC doing
the same?
xxx
Second: Earlier AMEC students in Physical Therapy had complained that the course is not recognized by DECS.
xxx
Third: Students are required to take and pay for the subject even if the subject does not have an instructor - such
greed for money on the part of AMECs administration. Take the subject Anatomy: students would pay for the
subject upon enrolment because it is offered by the school. However there would be no instructor for such
subject. Students would be informed that course would be moved to a later date because the school is still
searching for the appropriate instructor.
xxx
It is a public knowledge that the Ago Medical and Educational Center has survived and has been surviving for the
past few years since its inception because of funds support from foreign foundations. If you will take a look at the
AMEC premises youll find out that the names of the buildings there are foreign soundings. There is a McDonald
Hall. Why not Jose Rizal or Bonifacio Hall? That is a very concrete and undeniable evidence that the support of
foreign foundations for AMEC is substantial, isnt it? With the report which is the basis of the expose in DZRC
today, it would be very easy for detractors and enemies of the Ago family to stop the flow of support of foreign
foundations who assist the medical school on the basis of the latters purpose. But if the purpose of the institution
(AMEC) is to deceive students at cross purpose with its reason for being it is possible for these foreign foundations
to lift or suspend their donations temporarily.
8

xxx
On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and the AMEC-Institute of
Mass Communication in their effort to minimize expenses in terms of salary are absorbing or continues to
accept "rejects". For example how many teachers in AMEC are former teachers of Aquinas University but were
removed because of immorality? Does it mean that the present administration of AMEC have the total definite
moral foundation from catholic administrator of Aquinas University. I will prove to you my friends, that AMEC is a
dumping ground, garbage, not merely of moral and physical misfits. Probably they only qualify in terms of
intellect. The Dean of Student Affairs of AMEC is Justita Lola, as the family name implies. She is too old to work,
being an old woman. Is the AMEC administration exploiting the very [e]nterprising or compromising and
undemanding Lola? Could it be that AMEC is just patiently making use of Dean Justita Lola were if she is very old.
As in atmospheric situation zero visibility the plane cannot land, meaning she is very old, low pay follows. By
the way, Dean Justita Lola is also the chairman of the committee on scholarship in AMEC. She had retired from
Bicol University a long time ago but AMEC has patiently made use of her.
xxx
MEL RIMA:
xxx My friends based on the expose, AMEC is a dumping ground for moral and physically misfit people. What does
this mean? Immoral and physically misfits as teachers.
May I say Im sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no longer fit to teach.
You are too old. As an aviation, your case is zero visibility. Dont insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship committee at that. The
reason is practical cost saving in salaries, because an old person is not fastidious, so long as she has money to buy
the ingredient of beetle juice. The elderly can get by thats why she (Lola) was taken in as Dean.
xxx
xxx On our end our task is to attend to the interests of students. It is likely that the students would be influenced
by evil. When they become members of society outside of campus will be liabilities rather than assets. What do
you expect from a doctor who while studying at AMEC is so much burdened with unreasonable imposition? What
do you expect from a student who aside from peculiar problems because not all students are rich in their
struggle to improve their social status are even more burdened with false regulations. xxx
9
(Emphasis supplied)
The complaint further alleged that AMEC is a reputable learning institution. With the supposed exposs, FBNI,
Rima and Alegre "transmitted malicious imputations, and as such, destroyed plaintiffs (AMEC and Ago)
reputation." AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in the
selection and supervision of its employees, particularly Rima and Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer
10
alleging that the broadcasts
against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were plainly impelled by a sense of
public duty to report the "goings-on in AMEC, [which is] an institution imbued with public interest."
Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty. Edmundo Cea,
collaborating counsel of Atty. Lozares, filed a Motion to Dismiss
11
on FBNIs behalf. The trial court denied the
motion to dismiss. Consequently, FBNI filed a separate Answer claiming that it exercised due diligence in the
selection and supervision of Rima and Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster
should (1) file an application; (2) be interviewed; and (3) undergo an apprenticeship and training program after
passing the interview. FBNI likewise claimed that it always reminds its broadcasters to "observe truth, fairness and
objectivity in their broadcasts and to refrain from using libelous and indecent language." Moreover, FBNI requires
all broadcasters to pass the Kapisanan ng mga Brodkaster sa Pilipinas ("KBP") accreditation test and to secure a
KBP permit.
On 14 December 1992, the trial court rendered a Decision
12
finding FBNI and Alegre liable for libel except Rima.
The trial court held that the broadcasts are libelous per se. The trial court rejected the broadcasters claim that
their utterances were the result of straight reporting because it had no factual basis. The broadcasters did not
even verify their reports before airing them to show good faith. In holding FBNI liable for libel, the trial court found
that FBNI failed to exercise diligence in the selection and supervision of its employees.
In absolving Rima from the charge, the trial court ruled that Rimas only participation was when he agreed with
Alegres expos. The trial court found Rimas statement within the "bounds of freedom of speech, expression, and
of the press." The dispositive portion of the decision reads:
WHEREFORE, premises considered, this court finds for the plaintiff. Considering the degree of damages caused by
the controversial utterances, which are not found by this court to be really very serious and damaging, and there
being no showing that indeed the enrollment of plaintiff school dropped, defendants Hermogenes "Jun" Alegre,
Jr. and Filipinas Broadcasting Network (owner of the radio station DZRC), are hereby jointly and severally ordered
to pay plaintiff Ago Medical and Educational Center-Bicol Christian College of Medicine (AMEC-BCCM) the amount
of P300,000.00 moral damages, plus P30,000.00 reimbursement of attorneys fees, and to pay the costs of suit.
SO ORDERED.
13
(Emphasis supplied)
Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the other, appealed the decision
to the Court of Appeals. The Court of Appeals affirmed the trial courts judgment with modification. The appellate
court made Rima solidarily liable with FBNI and Alegre. The appellate court denied Agos claim for damages and
attorneys fees because the broadcasts were directed against AMEC, and not against her. The dispositive portion of
the Court of Appeals decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification that broadcaster Mel
Rima is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes Alegre.
SO ORDERED.
14

FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied in its 26 January 2000
Resolution.
Hence, FBNI filed this petition.
15

The Ruling of the Court of Appeals
The Court of Appeals upheld the trial courts ruling that the questioned broadcasts are libelous per se and that
FBNI, Rima and Alegre failed to overcome the legal presumption of malice. The Court of Appeals found Rima and
Alegres claim that they were actuated by their moral and social duty to inform the public of the students gripes as
insufficient to justify the utterance of the defamatory remarks.
Finding no factual basis for the imputations against AMECs administrators, the Court of Appeals ruled that the
broadcasts were made "with reckless disregard as to whether they were true or false." The appellate court pointed
out that FBNI, Rima and Alegre failed to present in court any of the students who allegedly complained against
AMEC. Rima and Alegre merely gave a single name when asked to identify the students. According to the Court of
Appeals, these circumstances cast doubt on the veracity of the broadcasters claim that they were "impelled by
their moral and social duty to inform the public about the students gripes."
The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-BCCM is a dumping ground
for morally and physically misfit teachers; (2) AMEC obtained the services of Dean Justita Lola to minimize
expenses on its employees salaries; and (3) AMEC burdened the students with unreasonable imposition and false
regulations."
16

The Court of Appeals held that FBNI failed to exercise due diligence in the selection and supervision of its
employees for allowing Rima and Alegre to make the radio broadcasts without the proper KBP accreditation. The
Court of Appeals denied Agos claim for damages and attorneys fees because the libelous remarks were directed
against AMEC, and not against her. The Court of Appeals adjudged FBNI, Rima and Alegre solidarily liable to pay
AMEC moral damages, attorneys fees and costs of suit.1awphi1.nt
Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;
III. WHETHER THE AWARD OF ATTORNEYS FEES IS PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR PAYMENT OF MORAL DAMAGES,
ATTORNEYS FEES AND COSTS OF SUIT.
The Courts Ruling
We deny the petition.
This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and Alegre against
AMEC.
17
While AMEC did not point out clearly the legal basis for its complaint, a reading of the complaint reveals
that AMECs cause of action is based on Articles 30 and 33 of the Civil Code. Article 30
18
authorizes a separate civil
action to recover civil liability arising from a criminal offense. On the other hand, Article 33
19
particularly provides
that the injured party may bring a separate civil action for damages in cases of defamation, fraud, and physical
injuries. AMEC also invokes Article 19
20
of the Civil Code to justify its claim for damages. AMEC cites Articles
2176
21
and 2180
22
of the Civil Code to hold FBNI solidarily liable with Rima and Alegre.
I.
Whether the broadcasts are libelous
A libel
23
is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act or
omission, condition, status, or circumstance tending to cause the dishonor, discredit, or contempt of a natural or
juridical person, or to blacken the memory of one who is dead.
24

There is no question that the broadcasts were made public and imputed to AMEC defects or circumstances tending
to cause it dishonor, discredit and contempt. Rima and Alegres remarks such as "greed for money on the part of
AMECs administrators"; "AMEC is a dumping ground, garbage of xxx moral and physical misfits"; and AMEC
students who graduate "will be liabilities rather than assets" of the society are libelous per se. Taken as a whole,
the broadcasts suggest that AMEC is a money-making institution where physically and morally unfit teachers
abound.
However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and Alegre were plainly
impelled by their civic duty to air the students gripes. FBNI alleges that there is no evidence that ill will or spite
motivated Rima and Alegre in making the broadcasts. FBNI further points out that Rima and Alegre exerted efforts
to obtain AMECs side and gave Ago the opportunity to defend AMEC and its administrators. FBNI concludes that
since there is no malice, there is no libel.
FBNIs contentions are untenable.
Every defamatory imputation is presumed malicious.
25
Rima and Alegre failed to show adequately their good
intention and justifiable motive in airing the supposed gripes of the students. As hosts of a documentary or public
affairs program, Rima and Alegre should have presented the public issues "free from inaccurate and misleading
information."
26
Hearing the students alleged complaints a month before the expos,
27
they had sufficient time to
verify their sources and information. However, Rima and Alegre hardly made a thorough investigation of the
students alleged gripes. Neither did they inquire about nor confirm the purported irregularities in AMEC from the
Department of Education, Culture and Sports. Alegre testified that he merely went to AMEC to verify his report
from an alleged AMEC official who refused to disclose any information. Alegre simply relied on the words of the
students "because they were many and not because there is proof that what they are saying is true."
28
This plainly
shows Rima and Alegres reckless disregard of whether their report was true or not.
Contrary to FBNIs claim, the broadcasts were not "the result of straight reporting." Significantly, some courts in
the United States apply the privilege of "neutral reportage" in libel cases involving matters of public interest or
public figures. Under this privilege, a republisher who accurately and disinterestedly reports certain defamatory
statements made against public figures is shielded from liability, regardless of the republishers subjective
awareness of the truth or falsity of the accusation.
29
Rima and Alegre cannot invoke the privilege of neutral
reportage because unfounded comments abound in the broadcasts. Moreover, there is no existing controversy
involving AMEC when the broadcasts were made. The privilege of neutral reportage applies where the defamed
person is a public figure who is involved in an existing controversy, and a party to that controversy makes the
defamatory statement.
30

However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal v. Court of
Appeals,
31
FBNI contends that the broadcasts "fall within the coverage of qualifiedly privileged communications"
for being commentaries on matters of public interest. Such being the case, AMEC should prove malice in fact or
actual malice. Since AMEC allegedly failed to prove actual malice, there is no libel.
FBNIs reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of fair comment," thus:
[F]air commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel
or slander. The doctrine of fair comment means that while in general every discreditable imputation publicly made
is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false
imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a public
person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a
public official may be actionable, it must either be a false allegation of fact or a comment based on a false
supposition. If the comment is an expression of opinion, based on established facts, then it is immaterial that the
opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.
32
(Emphasis supplied)
True, AMEC is a private learning institution whose business of educating students is "genuinely imbued with public
interest." The welfare of the youth in general and AMECs students in particular is a matter which the public has
the right to know. Thus, similar to the newspaper articles in Borjal, the subject broadcasts dealt with matters of
public interest. However, unlike in Borjal, the questioned broadcasts are not based on established facts. The
record supports the following findings of the trial court:
xxx Although defendants claim that they were motivated by consistent reports of students and parents against
plaintiff, yet, defendants have not presented in court, nor even gave name of a single student who made the
complaint to them, much less present written complaint or petition to that effect. To accept this defense of
defendants is too dangerous because it could easily give license to the media to malign people and establishments
based on flimsy excuses that there were reports to them although they could not satisfactorily establish it. Such
laxity would encourage careless and irresponsible broadcasting which is inimical to public interests.
Secondly, there is reason to believe that defendant radio broadcasters, contrary to the mandates of their duties,
did not verify and analyze the truth of the reports before they aired it, in order to prove that they are in good faith.
Alegre contended that plaintiff school had no permit and is not accredited to offer Physical Therapy courses. Yet,
plaintiff produced a certificate coming from DECS that as of Sept. 22, 1987 or more than 2 years before the
controversial broadcast, accreditation to offer Physical Therapy course had already been given the plaintiff, which
certificate is signed by no less than the Secretary of Education and Culture herself, Lourdes R. Quisumbing (Exh. C-
rebuttal). Defendants could have easily known this were they careful enough to verify. And yet, defendants were
very categorical and sounded too positive when they made the erroneous report that plaintiff had no permit to
offer Physical Therapy courses which they were offering.
The allegation that plaintiff was getting tremendous aids from foreign foundations like Mcdonald Foundation
prove not to be true also. The truth is there is no Mcdonald Foundation existing. Although a big building of plaintiff
school was given the name Mcdonald building, that was only in order to honor the first missionary in Bicol of
plaintiffs religion, as explained by Dr. Lita Ago. Contrary to the claim of defendants over the air, not a single
centavo appears to be received by plaintiff school from the aforementioned McDonald Foundation which does not
exist.
Defendants did not even also bother to prove their claim, though denied by Dra. Ago, that when medical students
fail in one subject, they are made to repeat all the other subject[s], even those they have already passed, nor their
claim that the school charges laboratory fees even if there are no laboratories in the school. No evidence was
presented to prove the bases for these claims, at least in order to give semblance of good faith.
As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers, defendant[s] singled
out Dean Justita Lola who is said to be so old, with zero visibility already. Dean Lola testified in court last Jan. 21,
1991, and was found to be 75 years old. xxx Even older people prove to be effective teachers like Supreme Court
Justices who are still very much in demand as law professors in their late years. Counsel for defendants is past 75
but is found by this court to be still very sharp and effective.l^vvphi1.net So is plaintiffs counsel.
Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally infirmed, but is still alert and
docile.
The contention that plaintiffs graduates become liabilities rather than assets of our society is a mere conclusion.
Being from the place himself, this court is aware that majority of the medical graduates of plaintiffs pass the board
examination easily and become prosperous and responsible professionals.
33

Had the comments been an expression of opinion based on established facts, it is immaterial that the opinion
happens to be mistaken, as long as it might reasonably be inferred from the facts.
34
However, the comments of
Rima and Alegre were not backed up by facts. Therefore, the broadcasts are not privileged and remain libelous per
se.
The broadcasts also violate the Radio Code
35
of the Kapisanan ng mga Brodkaster sa Pilipinas, Ink. ("Radio Code").
Item I(B) of the Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free from personal bias, prejudice and inaccurate and
misleading information. x x x Furthermore, the station shall strive to present balanced discussion of issues. x x x.
x x x
7. The station shall be responsible at all times in the supervision of public affairs, public issues and commentary
programs so that they conform to the provisions and standards of this code.
8. It shall be the responsibility of the newscaster, commentator, host and announcer to protect public interest,
general welfare and good order in the presentation of public affairs and public issues.
36
(Emphasis supplied)
The broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the code of ethical
conduct governing practitioners in the radio broadcast industry. The Radio Code is a voluntary code of conduct
imposed by the radio broadcast industry on its own members. The Radio Code is a public warranty by the radio
broadcast industry that radio broadcast practitioners are subject to a code by which their conduct are measured
for lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast practitioners live up to the code of conduct of
their profession, just like other professionals. A professional code of conduct provides the standards for
determining whether a person has acted justly, honestly and with good faith in the exercise of his rights and
performance of his duties as required by Article 19
37
of the Civil Code. A professional code of conduct also provides
the standards for determining whether a person who willfully causes loss or injury to another has acted in a
manner contrary to morals or good customs under Article 21
38
of the Civil Code.
II.
Whether AMEC is entitled to moral damages
FBNI contends that AMEC is not entitled to moral damages because it is a corporation.
39

A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.
40
The
Court of Appeals cites Mambulao Lumber Co. v. PNB, et al.
41
to justify the award of moral damages. However, the
Courts statement in Mambulao that "a corporation may have a good reputation which, if besmirched, may also be
a ground for the award of moral damages" is an obiter dictum.
42

Nevertheless, AMECs claim for moral damages falls under item 7 of Article 2219
43
of the Civil Code. This provision
expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation.
Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person
such as a corporation can validly complain for libel or any other form of defamation and claim for moral
damages.
44

Moreover, where the broadcast is libelous per se, the law implies damages.
45
In such a case, evidence of an honest
mistake or the want of character or reputation of the party libeled goes only in mitigation of damages.
46
Neither in
such a case is the plaintiff required to introduce evidence of actual damages as a condition precedent to the
recovery of some damages.
47
In this case, the broadcasts are libelous per se. Thus, AMEC is entitled to moral
damages.
However, we find the award of P300,000 moral damages unreasonable. The record shows that even though the
broadcasts were libelous per se, AMEC has not suffered any substantial or material damage to its reputation.
Therefore, we reduce the award of moral damages from P300,000 to P150,000.
III.
Whether the award of attorneys fees is proper
FBNI contends that since AMEC is not entitled to moral damages, there is no basis for the award of attorneys fees.
FBNI adds that the instant case does not fall under the enumeration in Article 2208
48
of the Civil Code.
The award of attorneys fees is not proper because AMEC failed to justify satisfactorily its claim for attorneys fees.
AMEC did not adduce evidence to warrant the award of attorneys fees. Moreover, both the trial and appellate
courts failed to explicitly state in their respective decisions the rationale for the award of attorneys fees.
49
In Inter-
Asia Investment Industries, Inc. v. Court of Appeals ,
50
we held that:
[I]t is an accepted doctrine that the award thereof as an item of damages is the exception rather than the rule, and
counsels fees are not to be awarded every time a party wins a suit. The power of the court to award attorneys
fees under Article 2208 of the Civil Code demands factual, legal and equitable justification, without which the
award is a conclusion without a premise, its basis being improperly left to speculation and conjecture. In all
events, the court must explicitly state in the text of the decision, and not only in the decretal portion thereof, the
legal reason for the award of attorneys fees.
51
(Emphasis supplied)
While it mentioned about the award of attorneys fees by stating that it "lies within the discretion of the court and
depends upon the circumstances of each case," the Court of Appeals failed to point out any circumstance to justify
the award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorneys fees and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of damages and attorneys fees
because it exercised due diligence in the selection and supervision of its employees, particularly Rima and Alegre.
FBNI maintains that its broadcasters, including Rima and Alegre, undergo a "very regimented process" before they
are allowed to go on air. "Those who apply for broadcaster are subjected to interviews, examinations and an
apprenticeship program."
FBNI further argues that Alegres age and lack of training are irrelevant to his competence as a broadcaster. FBNI
points out that the "minor deficiencies in the KBP accreditation of Rima and Alegre do not in any way prove that
FBNI did not exercise the diligence of a good father of a family in selecting and supervising them." Rimas
accreditation lapsed due to his non-payment of the KBP annual fees while Alegres accreditation card was delayed
allegedly for reasons attributable to the KBP Manila Office. FBNI claims that membership in the KBP is merely
voluntary and not required by any law or government regulation.
FBNIs arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are jointly and severally liable for the tort which they
commit.
52
Joint tort feasors are all the persons who command, instigate, promote, encourage, advise,
countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for
their benefit.
53
Thus, AMEC correctly anchored its cause of action against FBNI on Articles 2176 and 2180 of the
Civil Code.1a\^/phi1.net
As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable to pay for damages arising from
the libelous broadcasts. As stated by the Court of Appeals, "recovery for defamatory statements published by radio
or television may be had from the owner of the station, a licensee, the operator of the station, or a person who
procures, or participates in, the making of the defamatory statements."
54
An employer and employee are solidarily
liable for a defamatory statement by the employee within the course and scope of his or her employment, at least
when the employer authorizes or ratifies the defamation.
55
In this case, Rima and Alegre were clearly performing
their official duties as hosts of FBNIs radio program Expos when they aired the broadcasts. FBNI neither alleged
nor proved that Rima and Alegre went beyond the scope of their work at that time. There was likewise no showing
that FBNI did not authorize and ratify the defamatory broadcasts.
Moreover, there is insufficient evidence on record that FBNI exercised due diligence in
the selection andsupervision of its employees, particularly Rima and Alegre. FBNI merely showed that it exercised
diligence in theselection of its broadcasters without introducing any evidence to prove that it observed the same
diligence in thesupervision of Rima and Alegre. FBNI did not show how it exercised diligence in supervising its
broadcasters. FBNIs alleged constant reminder to its broadcasters to "observe truth, fairness and objectivity and
to refrain from using libelous and indecent language" is not enough to prove due diligence in the supervision of its
broadcasters. Adequate training of the broadcasters on the industrys code of conduct, sufficient information on
libel laws, and continuous evaluation of the broadcasters performance are but a few of the many ways of showing
diligence in the supervision of broadcasters.
FBNI claims that it "has taken all the precaution in the selection of Rima and Alegre as broadcasters, bearing in
mind their qualifications." However, no clear and convincing evidence shows that Rima and Alegre underwent
FBNIs "regimented process" of application. Furthermore, FBNI admits that Rima and Alegre had deficiencies in
their KBP accreditation,
56
which is one of FBNIs requirements before it hires a broadcaster. Significantly,
membership in the KBP, while voluntary, indicates the broadcasters strong commitment to observe the broadcast
industrys rules and regulations. Clearly, these circumstances show FBNIs lack of diligence in
selecting andsupervising Rima and Alegre. Hence, FBNI is solidarily liable to pay damages together with Rima and
Alegre.
WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January 1999 and Resolution of 26
January 2000 of the Court of Appeals in CA-G.R. CV No. 40151 with the MODIFICATION that the award of moral
damages is reduced from P300,000 to P150,000 and the award of attorneys fees is deleted. Costs against
petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

Footnotes
17
In Lopez, etc., et al. v. CA, et al., 145 Phil. 219 (1970), the Court stated the following:
It was held in Lu Chu Sing v. Lu Tiong Gui, that "the repeal of the old Libel Law (Act No. 277) did not abolish the civil
action for libel." A libel was defined in that Act as a "malicious defamation, expressed either in writing, printing, or
by signs or pictures, or the like, ***, tending to blacken the memory of one who is dead or to impeach the honesty,
virtue, or reputation, or publish the alleged or natural defects of one who is alive, and thereby expose him to
public hatred, contempt, or ridicule." There was an express provision in such legislation for a tort or quasi-delict
action arising from libel. There is reinforcement to such a view in the new Civil Code providing for the recovery of
moral damages for libel, slander or any other form of defamation. (Emphasis supplied)
18
Art. 30. When a separate civil action is brought to demand civil liability arising from a criminal offense, and no
criminal proceedings are instituted during the pendency of the civil case, a preponderance of evidence shall
likewise be sufficient to prove the act complained of.
19
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and
distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed
independently of the criminal prosecution, and shall require only a preponderance of evidence.
20
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.
21
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this Chapter.
22
Art. 2180. The obligation imposed by article 2176 is demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.
xxx
The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their
employees in the service of the branches in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.
xxx
23
Should be difamacin as stated in Lu Chu Sing and Lu Tian Chiong v. Lu Tiong Gui, 76 Phil. 669 (1946).
Art. 354. Requirement of publicity. Every defamatory imputation is presumed to be malicious, even if it be true, if
no good intention and justifiable motive for making it is shown, except in the following cases:
1. A private communication made by any person to another in the performance of any legal, moral or social duty;
and
2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other
official proceedings which are not of confidential nature, or of any statement, report or speech delivered in said
proceedings, or of any other act performed by public officers in the exercise of their functions.
38
Article 21 of the Civil Code provides: "Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the damage."
43
Article 2219(7) of the Civil Code provides: "Moral damages may be recovered in the following and analogous
cases: x x x (7) Libel, slander or any other form of defamation; x x x."
44
See Yap, et al. v. Carreon, 121 Phil. 883 (1965), where the appellants included Philippine Harvardian College
which was an educational institution.
47
Ibid. Article 2216 of the Civil Code also provides that "No proof of pecuniary loss is necessary in order that moral,
xxx damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion
of the court, according to the circumstances of each case."
48
Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just
and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation
should be recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable.

























G.R. No. 170338 December 23, 2008
VIRGILIO O. GARCILLANO, petitioner,
vs.
THE HOUSE OF REPRESENTATIVES COMMITTEES ON PUBLIC INFORMATION, PUBLIC ORDER AND SAFETY,
NATIONAL DEFENSE AND SECURITY, INFORMATION AND COMMUNICATIONS TECHNOLOGY, and SUFFRAGE AND
ELECTORAL REFORMS, respondents.
x - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 179275 December 23, 2008
SANTIAGO JAVIER RANADA and OSWALDO D. AGCAOILI, petitioners,
vs.
THE SENATE OF THE REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE SENATE PRESIDENT THE HONORABLE
MANUEL VILLAR, respondents.
x - - - - - - - - - - - - - - - - - - - - - - x
MAJ. LINDSAY REX SAGGE, petitioner-in-intervention
x - - - - - - - - - - - - - - - - - - - - - - x
AQUILINO Q. PIMENTEL, JR., BENIGNO NOYNOY C. AQUINO, RODOLFO G. BIAZON, PANFILO M. LACSON, LOREN
B. LEGARDA, M.A. JAMBY A.S. MADRIGAL, and ANTONIO F. TRILLANES, respondents-intervenors
D E C I S I O N
NACHURA, J.:
More than three years ago, tapes ostensibly containing a wiretapped conversation purportedly between the
President of the Philippines and a high-ranking official of the Commission on Elections (COMELEC) surfaced. They
captured unprecedented public attention and thrust the country into a controversy that placed the legitimacy of
the present administration on the line, and resulted in the near-collapse of the Arroyo government. The tapes,
notoriously referred to as the "Hello Garci" tapes, allegedly contained the Presidents instructions to COMELEC
Commissioner Virgilio Garcillano to manipulate in her favor results of the 2004 presidential elections. These
recordings were to become the subject of heated legislative hearings conducted separately by committees of both
Houses of Congress.
1

In the House of Representatives (House), on June 8, 2005, then Minority Floor Leader Francis G. Escudero
delivered a privilege speech, "Tale of Two Tapes," and set in motion a congressional investigation jointly conducted
by the Committees on Public Information, Public Order and Safety, National Defense and Security, Information and
Communications Technology, and Suffrage and Electoral Reforms (respondent House Committees). During the
inquiry, several versions of the wiretapped conversation emerged. But on July 5, 2005, National Bureau of
Investigation (NBI) Director Reynaldo Wycoco, Atty. Alan Paguia and the lawyer of former NBI Deputy Director
Samuel Ong submitted to the respondent House Committees seven alleged "original" tape recordings of the
supposed three-hour taped conversation. After prolonged and impassioned debate by the committee members on
the admissibility and authenticity of the recordings, the tapes were eventually played in the chambers of the
House.
2

On August 3, 2005, the respondent House Committees decided to suspend the hearings indefinitely. Nevertheless,
they decided to prepare committee reports based on the said recordings and the testimonies of the resource
persons.
3

Alarmed by these developments, petitioner Virgilio O. Garcillano (Garcillano) filed with this Court a Petition for
Prohibition and Injunction, with Prayer for Temporary Restraining Order and/or Writ of Preliminary
Injunction
4
docketed as G.R. No. 170338. He prayed that the respondent House Committees be restrained from
using these tape recordings of the "illegally obtained" wiretapped conversations in their committee reports and for
any other purpose. He further implored that the said recordings and any reference thereto be ordered stricken off
the records of the inquiry, and the respondent House Committees directed to desist from further using the
recordings in any of the House proceedings.
5

Without reaching its denouement, the House discussion and debates on the "Garci tapes" abruptly stopped.
After more than two years of quiescence, Senator Panfilo Lacson roused the slumbering issue with a privilege
speech, "The Lighthouse That Brought Darkness." In his discourse, Senator Lacson promised to provide the public
"the whole unvarnished truth the whats, whens, wheres, whos and whys" of the alleged wiretap, and sought
an inquiry into the perceived willingness of telecommunications providers to participate in nefarious wiretapping
activities.
On motion of Senator Francis Pangilinan, Senator Lacsons speech was referred to the Senate Committee on
National Defense and Security, chaired by Senator Rodolfo Biazon, who had previously filed two bills
6
seeking to
regulate the sale, purchase and use of wiretapping equipment and to prohibit the Armed Forces of the Philippines
(AFP) from performing electoral duties.
7

In the Senates plenary session the following day, a lengthy debate ensued when Senator Richard Gordon aired his
concern on the possible transgression of Republic Act (R.A.) No. 4200
8
if the body were to conduct a legislative
inquiry on the matter. On August 28, 2007, Senator Miriam Defensor-Santiago delivered a privilege speech,
articulating her considered view that the Constitution absolutely bans the use, possession, replay or
communication of the contents of the "Hello Garci" tapes. However, she recommended a legislative investigation
into the role of the Intelligence Service of the AFP (ISAFP), the Philippine National Police or other government
entities in the alleged illegal wiretapping of public officials.
9

On September 6, 2007, petitioners Santiago Ranada and Oswaldo Agcaoili, retired justices of the Court of Appeals,
filed before this Court a Petition for Prohibition with Prayer for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction,
10
docketed as G.R. No. 179275, seeking to bar the Senate from conducting
its scheduled legislative inquiry. They argued in the main that the intended legislative inquiry violates R.A. No.
4200 and Section 3, Article III of the Constitution.
11

As the Court did not issue an injunctive writ, the Senate proceeded with its public hearings on the "Hello Garci"
tapes on September 7,
12
17
13
and October 1,
14
2007.
Intervening as respondents,
15
Senators Aquilino Q. Pimentel, Jr., Benigno Noynoy C. Aquino, Rodolfo G. Biazon,
Panfilo M. Lacson, Loren B. Legarda, M.A. Jamby A.S. Madrigal and Antonio F. Trillanes filed their Comment
16
on
the petition on September 25, 2007.
The Court subsequently heard the case on oral argument.
17

On October 26, 2007, Maj. Lindsay Rex Sagge, a member of the ISAFP and one of the resource persons summoned
by the Senate to appear and testify at its hearings, moved to intervene as petitioner in G.R. No. 179275.
18

On November 20, 2007, the Court resolved to consolidate G.R. Nos. 170338 and 179275.
19

It may be noted that while both petitions involve the "Hello Garci" recordings, they have different objectivesthe
first is poised at preventing the playing of the tapes in the House and their subsequent inclusion in the committee
reports, and the second seeks to prohibit and stop the conduct of the Senate inquiry on the wiretapped
conversation.
The Court dismisses the first petition, G.R. No. 170338, and grants the second, G.R. No. 179275.
- I -
Before delving into the merits of the case, the Court shall first resolve the issue on the parties standing, argued at
length in their pleadings.
In Tolentino v. COMELEC,
20
we explained that "*l+egal standing or locus standi refers to a personal and substantial
interest in a case such that the party has sustained or will sustain direct injury because of the challenged
governmental act x x x," thus,
generally, a party will be allowed to litigate only when (1) he can show that he has personally suffered some actual
or threatened injury because of the allegedly illegal conduct of the government; (2) the injury is fairly traceable to
the challenged action; and (3) the injury is likely to be redressed by a favorable action.
21

The gist of the question of standing is whether a party has "alleged such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the
court so largely depends for illumination of difficult constitutional questions."
22

However, considering that locus standi is a mere procedural technicality, the Court, in recent cases, has relaxed the
stringent direct injury test. David v. Macapagal-Arroyo
23
articulates that a "liberal policy has been observed,
allowing ordinary citizens, members of Congress, and civic organizations to prosecute actions involving the
constitutionality or validity of laws, regulations and rulings."
24
The fairly recent Chavez v. Gonzales
25
even
permitted a non-member of the broadcast media, who failed to allege a personal stake in the outcome of the
controversy, to challenge the acts of the Secretary of Justice and the National Telecommunications Commission.
The majority, in the said case, echoed the current policy that "this Court has repeatedly and consistently refused to
wield procedural barriers as impediments to its addressing and resolving serious legal questions that greatly
impact on public interest, in keeping with the Courts duty under the 1987 Constitution to determine whether or
not other branches of government have kept themselves within the limits of the Constitution and the laws, and
that they have not abused the discretion given to them."
26

In G.R. No. 170338, petitioner Garcillano justifies his standing to initiate the petition by alleging that he is the
person alluded to in the "Hello Garci" tapes. Further, his was publicly identified by the members of the respondent
committees as one of the voices in the recordings.
27
Obviously, therefore, petitioner Garcillano stands to be
directly injured by the House committees actions and charges of electoral fraud. The Court recognizes his standing
to institute the petition for prohibition.
In G.R. No. 179275, petitioners Ranada and Agcaoili justify their standing by alleging that they are concerned
citizens, taxpayers, and members of the IBP. They are of the firm conviction that any attempt to use the "Hello
Garci" tapes will further divide the country. They wish to see the legal and proper use of public funds that will
necessarily be defrayed in the ensuing public hearings. They are worried by the continuous violation of the laws
and individual rights, and the blatant attempt to abuse constitutional processes through the conduct of legislative
inquiries purportedly in aid of legislation.
28

Intervenor Sagge alleges violation of his right to due process considering that he is summoned to attend the Senate
hearings without being apprised not only of his rights therein through the publication of the Senate Rules of
Procedure Governing Inquiries in Aid of Legislation, but also of the intended legislation which underpins the
investigation. He further intervenes as a taxpayer bewailing the useless and wasteful expenditure of public funds
involved in the conduct of the questioned hearings.
29

Given that petitioners Ranada and Agcaoili allege an interest in the execution of the laws and that intervenor Sagge
asserts his constitutional right to due process,
30
they satisfy the requisite personal stake in the outcome of the
controversy by merely being citizens of the Republic.
Following the Courts ruling in Francisco, Jr. v. The House of Representatives,
31
we find sufficient petitioners
Ranadas and Agcaoilis and intervenor Sagges allegation that the continuous conduct by the Senate of the
questioned legislative inquiry will necessarily involve the expenditure of public funds.
32
It should be noted that
inFrancisco, rights personal to then Chief Justice Hilario G. Davide, Jr. had been injured by the alleged
unconstitutional acts of the House of Representatives, yet the Court granted standing to the petitioners therein
for, as in this case, they invariably invoked the vindication of their own rightsas taxpayers, members of Congress,
citizens, individually or in a class suit, and members of the bar and of the legal professionwhich were also
supposedly violated by the therein assailed unconstitutional acts.
33

Likewise, a reading of the petition in G.R. No. 179275 shows that the petitioners and intervenor Sagge advance
constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as
precedents. The issues are of transcendental and paramount importance not only to the public but also to the
Bench and the Bar, and should be resolved for the guidance of all.
34

Thus, in the exercise of its sound discretion and given the liberal attitude it has shown in prior cases climaxing in
the more recent case of Chavez, the Court recognizes the legal standing of petitioners Ranada and Agcaoili and
intervenor Sagge.
- II -
The Court, however, dismisses G.R. No. 170338 for being moot and academic. Repeatedly stressed in our prior
decisions is the principle that the exercise by this Court of judicial power is limited to the determination and
resolution of actual cases and controversies.
35
By actual cases, we mean existing conflicts appropriate or ripe for
judicial determination, not conjectural or anticipatory, for otherwise the decision of the Court will amount to an
advisory opinion. The power of judicial inquiry does not extend to hypothetical questions because any attempt at
abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to
actualities.
36
Neither will the Court determine a moot question in a case in which no practical relief can be granted.
A case becomes moot when its purpose has become stale.
37
It is unnecessary to indulge in academic discussion of a
case presenting a moot question as a judgment thereon cannot have any practical legal effect or, in the nature of
things, cannot be enforced.
38

In G.R. No. 170338, petitioner Garcillano implores from the Court, as aforementioned, the issuance of an injunctive
writ to prohibit the respondent House Committees from playing the tape recordings and from including the same
in their committee report. He likewise prays that the said tapes be stricken off the records of the House
proceedings. But the Court notes that the recordings were already played in the House and heard by its
members.
39
There is also the widely publicized fact that the committee reports on the "Hello Garci" inquiry were
completed and submitted to the House in plenary by the respondent committees.
40
Having been overtaken by
these events, the Garcillano petition has to be dismissed for being moot and academic. After all, prohibition is a
preventive remedy to restrain the doing of an act about to be done, and not intended to provide a remedy for an
act already accomplished.
41

- III -
As to the petition in G.R. No. 179275, the Court grants the same. The Senate cannot be allowed to continue with
the conduct of the questioned legislative inquiry without duly published rules of procedure, in clear derogation of
the constitutional requirement.
Section 21, Article VI of the 1987 Constitution explicitly provides that "[t]he Senate or the House of
Representatives, or any of its respective committees may conduct inquiries in aid of legislation in accordance with
its duly published rules of procedure." The requisite of publication of the rules is intended to satisfy the basic
requirements of due process.
42
Publication is indeed imperative, for it will be the height of injustice to punish or
otherwise burden a citizen for the transgression of a law or rule of which he had no notice whatsoever, not even a
constructive one.
43
What constitutes publication is set forth in Article 2 of the Civil Code, which provides that
"[l]aws shall take effect after 15 days following the completion of their publication either in the Official Gazette, or
in a newspaper of general circulation in the Philippines."
44

The respondents in G.R. No. 179275 admit in their pleadings and even on oral argument that the Senate Rules of
Procedure Governing Inquiries in Aid of Legislation had been published in newspapers of general circulation only in
1995 and in 2006.
45
With respect to the present Senate of the 14
th
Congress, however, of which the term of half of
its members commenced on June 30, 2007, no effort was undertaken for the publication of these rules when they
first opened their session.
Recently, the Court had occasion to rule on this very same question. In Neri v. Senate Committee on Accountability
of Public Officers and Investigations,
46
we said:
Fourth, we find merit in the argument of the OSG that respondent Committees likewise violated Section 21 of
Article VI of the Constitution, requiring that the inquiry be in accordance with the "duly published rules of
procedure." We quote the OSGs explanation:
The phrase "duly published rules of procedure" requires the Senate of every Congress to publish its rules of
procedure governing inquiries in aid of legislation because every Senate is distinct from the one before it or after
it. Since Senatorial elections are held every three (3) years for one-half of the Senates membership, the
composition of the Senate also changes by the end of each term. Each Senate may thus enact a different set of
rules as it may deem fit. Not having published its Rules of Procedure, the subject hearings in aid of legislation
conducted by the 14
th
Senate, are therefore, procedurally infirm.
Justice Antonio T. Carpio, in his Dissenting and Concurring Opinion, reinforces this ruling with the following
rationalization:
The present Senate under the 1987 Constitution is no longer a continuing legislative body. The present Senate has
twenty-four members, twelve of whom are elected every three years for a term of six years each. Thus, the term
of twelve Senators expires every three years, leaving less than a majority of Senators to continue into the next
Congress. The 1987 Constitution, like the 1935 Constitution, requires a majority of Senators to "constitute a
quorum to do business." Applying the same reasoning in Arnault v. Nazareno, the Senate under the 1987
Constitution is not a continuing body because less than majority of the Senators continue into the next Congress.
The consequence is that the Rules of Procedure must be republished by the Senate after every expiry of the term
of twelve Senators.
47

The subject was explained with greater lucidity in our Resolution
48
(On the Motion for Reconsideration) in the same
case, viz.:
On the nature of the Senate as a "continuing body," this Court sees fit to issue a clarification. Certainly, there is no
debate that the Senate as an institution is "continuing," as it is not dissolved as an entity with each national
election or change in the composition of its members. However, in the conduct of its day-to-day business the
Senate of each Congress acts separately and independently of the Senate of the Congress before it. The Rules of
the Senate itself confirms this when it states:
RULE XLIV
UNFINISHED BUSINESS
SEC. 123. Unfinished business at the end of the session shall be taken up at the next session in the same status.
All pending matters and proceedings shall terminate upon the expiration of one (1) Congress, but may be taken
by the succeeding Congress as if present for the first time.
Undeniably from the foregoing, all pending matters and proceedings, i.e., unpassed bills and even legislative
investigations, of the Senate of a particular Congress are considered terminated upon the expiration of that
Congress and it is merely optional on the Senate of the succeeding Congress to take up such unfinished
matters, not in the same status, but as if presented for the first time. The logic and practicality of such a rule is
readily apparent considering that the Senate of the succeeding Congress (which will typically have a different
composition as that of the previous Congress) should not be bound by the acts and deliberations of the Senate of
which they had no part. If the Senate is a continuing body even with respect to the conduct of its business, then
pending matters will not be deemed terminated with the expiration of one Congress but will, as a matter of
course, continue into the next Congress with the same status.
This dichotomy of the continuity of the Senate as an institution and of the opposite nature of the conduct of its
business is reflected in its Rules. The Rules of the Senate (i.e. the Senates main rules of procedure) states:
RULE LI
AMENDMENTS TO, OR REVISIONS OF, THE RULES
SEC. 136. At the start of each session in which the Senators elected in the preceding elections shall begin their
term of office, the President may endorse the Rules to the appropriate committee for amendment or revision.
The Rules may also be amended by means of a motion which should be presented at least one day before its
consideration, and the vote of the majority of the Senators present in the session shall be required for its approval.
RULE LII
DATE OF TAKING EFFECT
SEC. 137. These Rules shall take effect on the date of their adoption and shall remain in force until they are
amended or repealed.
Section 136 of the Senate Rules quoted above takes into account the new composition of the Senate after an
election and the possibility of the amendment or revision of the Rules at the start of each session in which the
newly elected Senators shall begin their term.
However, it is evident that the Senate has determined that its main rules are intended to be valid from the date of
their adoption until they are amended or repealed. Such language is conspicuously absent from theRules.
The Rules simply state "(t)hese Rules shall take effect seven (7) days after publication in two (2) newspapers of
general circulation." The latter does not explicitly provide for the continued effectivity of such rules until they are
amended or repealed. In view of the difference in the language of the two sets of Senate rules, it cannot be
presumed that the Rules (on legislative inquiries) would continue into the next Congress. The Senate of the next
Congress may easily adopt different rules for its legislative inquiries which come within the rule on unfinished
business.
The language of Section 21, Article VI of the Constitution requiring that the inquiry be conducted in accordance
with the duly published rules of procedure is categorical. It is incumbent upon the Senate to publish the rules for
its legislative inquiries in each Congress or otherwise make the published rules clearly state that the same shall be
effective in subsequent Congresses or until they are amended or repealed to sufficiently put public on notice.
If it was the intention of the Senate for its present rules on legislative inquiries to be effective even in the next
Congress, it could have easily adopted the same language it had used in its main rules regarding effectivity.
Respondents justify their non-observance of the constitutionally mandated publication by arguing that the rules
have never been amended since 1995 and, despite that, they are published in booklet form available to anyone for
free, and accessible to the public at the Senates internet web page.
49

The Court does not agree. The absence of any amendment to the rules cannot justify the Senates defiance of the
clear and unambiguous language of Section 21, Article VI of the Constitution. The organic law instructs, without
more, that the Senate or its committees may conduct inquiries in aid of legislation only in accordance with duly
published rules of procedure, and does not make any distinction whether or not these rules have undergone
amendments or revision. The constitutional mandate to publish the said rules prevails over any custom, practice or
tradition followed by the Senate.
Justice Carpios response to the same argument raised by the respondents is illuminating:
The publication of the Rules of Procedure in the website of the Senate, or in pamphlet form available at the Senate,
is not sufficient under the Taada v. Tuvera ruling which requires publication either in the Official Gazette or in a
newspaper of general circulation. The Rules of Procedure even provide that the rules "shall take effect seven (7)
days after publication in two (2) newspapers of general circulation," precluding any other form of publication.
Publication in accordance with Taada is mandatory to comply with the due process requirement because
the Rules of Procedure put a persons liberty at risk. A person who violates the Rules of Procedure could be
arrested and detained by the Senate.
The invocation by the respondents of the provisions of R.A. No. 8792,
50
otherwise known as the Electronic
Commerce Act of 2000, to support their claim of valid publication through the internet is all the more incorrect.
R.A. 8792 considers an electronic data message or an electronic document as the functional equivalent of a written
document only for evidentiary purposes.
51
In other words, the law merely recognizes the admissibility in evidence
(for their being the original) of electronic data messages and/or electronic documents.
52
It does not make the
internet a medium for publishing laws, rules and regulations.
Given this discussion, the respondent Senate Committees, therefore, could not, in violation of the Constitution,
use its unpublished rules in the legislative inquiry subject of these consolidated cases. The conduct of inquiries in
aid of legislation by the Senate has to be deferred until it shall have caused the publication of the rules, because it
can do so only "in accordance with its duly published rules of procedure."
Very recently, the Senate caused the publication of the Senate Rules of Procedure Governing Inquiries in Aid of
Legislation in the October 31, 2008 issues of Manila Bulletin and Malaya. While we take judicial notice of this fact,
the recent publication does not cure the infirmity of the inquiry sought to be prohibited by the instant petitions.
Insofar as the consolidated cases are concerned, the legislative investigation subject thereof still could not be
undertaken by the respondent Senate Committees, because no published rules governed it, in clear contravention
of the Constitution.
With the foregoing disquisition, the Court finds it unnecessary to discuss the other issues raised in the consolidated
petitions.
WHEREFORE, the petition in G.R. No. 170338 is DISMISSED, and the petition in G.R. No. 179275 is GRANTED. Let a
writ of prohibition be issued enjoining the Senate of the Republic of the Philippines and/or any of its committees
from conducting any inquiry in aid of legislation centered on the "Hello Garci" tapes.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING
Associate Justice
CONSUELO YNARES-SANTIAGO
Associate Justice
ANTONIO T. CARPIO
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice








G.R. No. 186228 March 15, 2010
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
vs.
ANTONIO LAUGA Y PINA ALIAS TERIO, Accused-Appellant.
D E C I S I O N
PEREZ, J.:
Before Us for final review is the trial courts conviction of the appellant for the rape of his thirteen-year old
daughter.
Consistent with the ruling of this Court in People v. Cabalquinto,
1
the real name and the personal circumstances of
the victim, and any other information tending to establish or compromise her identity, including those of her
immediate family or household members, are not disclosed in this decision.
The Facts
In an Information dated 21 September 2000,
2
the appellant was accused of the crime of QUALIFIED RAPE allegedly
committed as follows:
That on or about the 15th day of March 2000, in the evening, at Barangay xxx, municipality of xxx, province of
Bukidnon, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, being the
father of AAA with lewd design, with the use of force and intimidation, did then and there, willfully, unlawfully and
criminally have carnal knowledge with his own daughter AAA, a 13 year[s]old minor against her will.
3

On 12 October 2000, appellant entered a plea of not guilty.
4
During the pre-trial conference, the prosecution and
the defense stipulated and admitted: (a) the correctness of the findings indicated in the medical certificate of the
physician who examined AAA; (b) that AAA was only thirteen (13) years old when the alleged offense was
committed; and (c) that AAA is the daughter of the appellant.
5
On trial, three (3) witnesses testified for the
prosecution, namely: victim AAA;
6
her brother BBB;
7
and one Moises Boy Banting,
8
a "bantay bayan" in the
barangay. Their testimonies revealed the following:
In the afternoon of 15 March 2000, AAA was left alone at home.
9
AAAs father, the appellant, was having a drinking
spree at the neighbors place.
10
Her mother decided to leave because when appellant gets drunk, he has the habit
of mauling AAAs mother.
11
Her only brother BBB also went out in the company of some neighbors.
12

At around 10:00 oclock in the evening, appellant woke AAA up;
13
removed his pants, slid inside the blanket
covering AAA and removed her pants and underwear;
14
warned her not to shout for help while threatening her
with his fist;
15
and told her that he had a knife placed above her head.
16
He proceeded to mash her breast, kiss her
repeatedly, and "inserted his penis inside her vagina."
17

Soon after, BBB arrived and found AAA crying.
18
Appellant claimed he scolded her for staying out late.
19
BBB
decided to take AAA with him.
20
While on their way to their maternal grandmothers house, AAA recounted her
harrowing experience with their father.
21
Upon reaching their grandmothers house, they told their grandmother
and uncle of the incident,
22
after which, they sought the assistance of Moises Boy Banting.
23

Moises Boy Banting found appellant in his house wearing only his underwear.
24
He invited appellant to the police
station,
25
to which appellant obliged. At the police outpost, he admitted to him that he raped AAA because he was
unable to control himself.
26

The following day, AAA submitted herself to physical examination.
27
Dra. Josefa Arlita L. Alsula, Municipal Health
Officer of x x x, Bukidnon, issued the Medical Certificate, which reads:
hyperemic vulvae with 4 oclock & 6 oclock freshly lacerated hymen; (+) minimal to moderate bloody discharges 2
to an alleged raping incident
28

On the other hand, only appellant testified for the defense. He believed that the charge against him was ill-
motivated because he sometimes physically abuses his wife in front of their children after engaging in a heated
argument,
29
and beats the children as a disciplinary measure.
30
He went further to narrate how his day was on the
date of the alleged rape.
He alleged that on 15 March 2000, there was no food prepared for him at lunchtime.
31
Shortly after, AAA
arrived.
32
She answered back when confronted.
33
This infuriated him that he kicked her hard on her buttocks.
34

Appellant went back to work and went home again around 3 oclock in the afternoon.
35
Finding nobody at
home,
36
he prepared his dinner and went to sleep.
37

Later in the evening, he was awakened by the members of the "Bantay Bayan" headed by Moises Boy
Banting.
38
They asked him to go with them to discuss some matters.
39
He later learned that he was under detention
because AAA charged him of rape.
40

On 8 July 2006, the Regional Trial Court, Branch 9, Malaybalay City, Bukidnon, rendered its decision
41
in Criminal
Case No. 10372-0, finding appellant guilty of rape qualified by relationship and minority, and sentenced him to
suffer the penalty of reclusion perpetua.
42
It also ordered him to indemnify AAA P50,000.00 as moral damages,
and P50,000.00 as civil indemnity with exemplary damages of P25,000.00.
43

On 30 September 2008, the decision of the trial court was AFFIRMED with MODIFICATIONS
44
by the Court of
Appeals in CA-G.R. CR HC No. 00456-MIN.
45
The appellate court found that appellant is not eligible for parole and it
increased both the civil indemnity and moral damages from P50,000.00 to P75,000.00.
46

On 24 November 2008, the Court of Appeals gave due course to the appellants notice of appeal.
47
This Court
required the parties to simultaneously file their respective supplemental briefs,
48
but both manifested that they
will no longer file supplemental pleadings.
49

The lone assignment of error in the appellants brief is that, the trial court gravely erred in finding him guilty as
charged despite the failure of the prosecution to establish his guilt beyond reasonable doubt,
50
because: (1) there
were inconsistencies in the testimonies of AAA and her brother BBB;
51
(2) his extrajudicial confession before
Moises Boy Banting was without the assistance of a counsel, in violation of his constitutional right;
52
and (3) AAAs
accusation was ill-motivated.
53

Our Ruling
Appellant contests the admissibility in evidence of his alleged confession with a "bantay bayan" and the credibility
of the witnesses for the prosecution.
Admissibility in Evidence of an Extrajudicial Confession before a "Bantay Bayan"
Appellant argues that even if he, indeed, confessed to Moises Boy Banting, a "bantay bayan," the confession was
inadmissible in evidence because he was not assisted by a lawyer and there was no valid waiver of such
requirement.
54

The case of People v. Malngan
55
is the authority on the scope of the Miranda doctrine provided for under Article
III, Section 12(1)
56
and (3)
57
of the Constitution. In Malngan, appellant questioned the admissibility of her
extrajudicial confessions given to the barangay chairman and a neighbor of the private complainant. This Court
distinguished. Thus:
Arguably, the barangay tanods, including the Barangay Chairman, in this particular instance, may be deemed as
law enforcement officer for purposes of applying Article III, Section 12(1) and (3), of the Constitution. When
accused-appellant was brought to the barangay hall in the morning of 2 January 2001, she was already a suspect,
actually the only one, in the fire that destroyed several houses x x x. She was, therefore, already under custodial
investigation and the rights guaranteed by x x x [the] Constitution should have already been observed or applied to
her. Accused-appellants confession to Barangay Chairman x x x was made in response to the interrogation made
by the latter admittedly conducted without first informing accused-appellant of her rights under the Constitution
or done in the presence of counsel. For this reason, the confession of accused-appellant, given to Barangay
Chairman x x x, as well as the lighter found x x x in her bag are inadmissible in evidence against her x x x.1avvphi1
[But such does] not automatically lead to her acquittal. x x x [T]he constitutional safeguards during custodial
investigations do not apply to those not elicited through questioning by the police or their agents but given in an
ordinary manner whereby the accused verbally admits x x x as x x x in the case at bar when accused-appellant
admitted to Mercedita Mendoza, one of the neighbors x x x [of the private complainant].
58
(Emphasis supplied)
Following the rationale behind the ruling in Malngan, this Court needs to ascertain whether or not a "bantay
bayan" may be deemed a law enforcement officer within the contemplation of Article III, Section 12 of the
Constitution.
In People of the Philippines v. Buendia,
59
this Court had the occasion to mention the nature of a "bantay bayan,"
that is, "a group of male residents living in [the] area organized for the purpose of keeping peace in their
community[,which is] an accredited auxiliary of the x x x PNP."
60

Also, it may be worthy to consider that pursuant to Section 1(g) of Executive Order No. 309 issued on 11 November
1987, as amended, a Peace and Order Committee in each barangay shall be organized "to serve as implementing
arm of the City/Municipal Peace and Order Council at the Barangay level."
61
The composition of the Committee
includes, among others: (1) the Punong Barangay as Chairman; (2) the Chairman of the Sangguniang Kabataan; (3)
a Member of the Lupon Tagapamayapa; (4) a Barangay Tanod; and (5) at least three (3) Members of existing
Barangay-Based Anti-Crime or neighborhood Watch Groups or a Non Government Organization Representative
well-known in his community.
62

This Court is, therefore, convinced that barangay-based volunteer organizations in the nature of watch groups, as
in the case of the "bantay bayan," are recognized by the local government unit to perform functions relating to the
preservation of peace and order at the barangay level. Thus, without ruling on the legality of the actions taken by
Moises Boy Banting, and the specific scope of duties and responsibilities delegated to a "bantay bayan,"
particularly on the authority to conduct a custodial investigation, any inquiry he makes has the color of a state-
related function and objective insofar as the entitlement of a suspect to his constitutional rights provided for
under Article III, Section 12 of the Constitution, otherwise known as the Miranda Rights, is concerned.
We, therefore, find the extrajudicial confession of appellant, which was taken without a counsel, inadmissible in
evidence.
Be that as it may, We agree with the Court of Appeals that the conviction of the appellant was not deduced solely
from the assailed extrajudicial confession but "from the confluence of evidence showing his guilt beyond
reasonable doubt."
63

Credibility of the Witnesses for the Prosecution
Appellant assails the inconsistencies in the testimonies of AAA and her brother BBB. AAA testified that BBB
accompanied her to the house of their grandmother. Thereafter, they, together with her relatives, proceeded to
look for a "bantay bayan." On the other hand, BBB testified that he brought her sister to the house of their "bantay
bayan" after he learned of the incident.
Citing Bartocillo v. Court of Appeals,
64
appellant argues that "where the testimonies of two key witnesses cannot
stand together, the inevitable conclusion is that one or both must be telling a lie, and their story a mere
concoction."
65

The principle, however, is not applicable in the case at bar. In Bartocillo, the two testimonies could not simply
stand together because:
On one hand, if we are to believe Susan, Orlando could not have possibly seen the hacking incident since he had
accompanied Vicente home. On the other hand, if we are to accept the testimony of Orlando, then Susan could
not have possibly witnessed the hacking incident since she was with Vicente at that time.
Here, the testimony of AAA does not run contrary to that of BBB. Both testified that they sought the help of a
"bantay bayan." Their respective testimonies differ only as to when the help was sought for, which this Court could
well attribute to the nature of the testimony of BBB, a shortcut version of AAAs testimony that dispensed with a
detailed account of the incident.
At any rate, the Court of Appeals is correct in holding that the assailed inconsistency is too trivial to affect the
veracity of the testimonies.
66
In fact, inconsistencies which refer to minor, trivial or inconsequential circumstances
even strengthen the credibility of the witnesses, as they erase doubts that such testimonies have been coached or
rehearsed.
67

Appellants contention that AAA charged him of rape only because she bore grudges against him is likewise
unmeritorious. This Court is not dissuaded from giving full credence to the testimony of a minor complainant by
motives of feuds, resentment or revenge.
68
As correctly pointed out by the Court of Appeals:
Indeed, mere disciplinary chastisement is not strong enough to make daughters in a Filipino family invent a charge
that would not only bring shame and humiliation upon them and their families but also bring their fathers into the
gallows of death.
69
The Supreme Court has repeatedly held that it is unbelievable for a daughter to charge her own
father with rape, exposing herself to the ordeal and embarrassment of a public trial and subjecting her private
parts to examination if such heinous crime was not in fact committed.
70
No person, much less a woman, could
attain such height of cruelty to one who has sired her, and from whom she owes her very existence, and for which
she naturally feels loving and lasting gratefulness.
71
Even when consumed with revenge, it takes a certain amount
of psychological depravity for a young woman to concoct a story which would put her own father to jail for the
most of his remaining life and drag the rest of the family including herself to a lifetime of shame.
72
It is highly
improbable for [AAA] against whom no proof of sexual perversity or loose morality has been shown to fake
charges much more against her own father. In fact her testimony is entitled to greater weight since her accusing
words were directed against a close relative.
73

Elements of Rape
Having established the credibility of the witnesses for the prosecution, We now examine the applicability of the
Anti-Rape Law of 1997
74
to the case at bar.
The law provides, in part, that rape is committed, among others, "[b]y a man who shall have carnal knowledge of a
woman" "through force, threat or intimidation."
75
The death penalty shall be imposed if it is committed with
aggravating/qualifying circumstances, which include, "[w]hen the victim is under eighteen (18) years of age and
the offender is a parent."
76

The consistent and forthright testimony of AAA detailing how she was raped, culminating with the penetration of
appellants penis into her vagina, suffices to prove that appellant had carnal knowledge of her. When a woman
states that she has been raped, she says in effect all that is necessary to show that rape was committed.
77
Further,
when such testimony corresponds with medical findings, there is sufficient basis to conclude that the essential
requisites of carnal knowledge have been established.
78

The Court of Appeals pointed out that the element of force or intimidation is not essential when the accused is the
father of the victim, inasmuch as his superior moral ascendancy or influence substitutes for violence and
intimidation.
79
At any rate, AAA was actually threatened by appellant with his fist and a knife allegedly placed
above AAAs head.
80

It may be added that the self-serving defense of appellant cannot prevail over the positive and straightforward
testimony of AAA. Settled is the rule that, "alibi is an inherently weak defense that is viewed with suspicion
because it is easy to fabricate."
81
"Alibi and denial must be supported by strong corroborative evidence in order to
merit credibility."
82
Moreover, for the defense of alibi to prosper, the accused must establish two elements (1) he
was not at the locus delicti at the time the offense was committed; and (2) it was physically impossible for him to
be at the scene at the time of its commission.
83
Appellant failed in this wise.
Aggravating/Qualifying Circumstances
The presence of the qualifying circumstances of minority and relationship with the offender in the instant case has
likewise been adequately established. Both qualifying circumstances were specifically alleged in the Information,
stipulated on and admitted during the pre-trial conference, and testified to by both parties in their respective
testimonies. Also, such stipulation and admission, as correctly pointed out by the Court of Appeals, are binding
upon this Court because they are judicial admissions within the contemplation of Section 4, Rule 129 of the
Revised Rules of Court. It provides:
Sec. 4. Judicial admissions. - An admission, verbal or written, made by a party in the course of the proceedings in
the same case, does not require proof. The admission may be contradicted only by showing that it was made
through palpable mistake or that no such admission was made.
Penalty
Finally, in increasing the amount of civil indemnity and damages each from P50,000.00 to P75,000.00, the Court
of Appeals correctly considered controlling jurisprudence to the effect that where, as here, the rape is committed
with any of the qualifying/aggravating circumstances warranting the imposition of the death penalty, the victim is
entitled to P75,000.00 as civil indemnity ex delicto
84
and P75,000.00 as moral damages.
85
However, the award of
exemplary damages should have been increased from P25,000.00 to P30,000.00.
86
Also, the penalty of reclusion
perpetua in lieu of death was correctly imposed considering that the imposition of the death penalty upon
appellant would have been appropriate were it not for the enactment of Republic Act No. 9346, or An Act
Prohibiting the Imposition of Death Penalty in the Philippines.
87
We further affirm the ruling of the Court of
Appeals on appellants non-eligibility for parole. Sec. 3 of Republic Act No. 9346 clearly provides that "persons
convicted of offenses punished with reclusion perpetua, or whose sentences will be reduced to reclusion
perpetua by reason of the law, shall not be eligible for parole."
WHEREFORE, the Decision of the Court of Appeals dated 30 September 2008 in CA-G.R. CR HC No. 00456-MIN is
hereby AFFIRMED. Appellant Antonio Lauga is GUILTY beyond reasonable doubt of qualified rape, and is hereby
sentenced to suffer the penalty of reclusion perpetua without eligibility for parole and to pay AAA P75,000.00 as
civil indemnity, P75,000.00 as moral damages, and P30,000.00 as exemplary damages.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice



G.R. No. 160795 June 27, 2008
CORINTHIAN GARDENS ASSOCIATION, INC., petitioner,
vs.
SPOUSES REYNALDO and MARIA LUISA TANJANGCO, and SPOUSES FRANK and TERESITA CUASO,respondent.
D E C I S I O N
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari
1
under Rule 45 of the Rules of Civil Procedure seeking the
reversal of the Court of Appeals (CA) Decision
2
dated January 31, 2003 in CA-G.R. CV No. 43217, which reversed
and set aside the Decision
3
of the Regional Trial Court (RTC) of Quezon City, dated March 30, 1993.
The Antecedents:
Respondents-spouses Reynaldo and Maria Luisa Tanjangco (the Tanjangcos) own Lots 68 and 69 covered by
Transfer Certificates of Title (TCT) No. 242245
4
and 282961
5
respectively, located at Corinthian Gardens
Subdivision, Quezon City, which is managed by petitioner Corinthian Gardens Association, Inc. (Corinthian). On the
other hand, respondents-spouses Frank and Teresita Cuaso (the Cuasos) own Lot 65 which is adjacent to the
Tanjangcos lots.
Before the Cuasos constructed their house on Lot 65, a relocation survey was necessary. As Geodetic Engineer
Democrito De Dios (Engr. De Dios), operating under the business name D.M. De Dios Realty and Surveying,
conducted all the previous surveys for the subdivision's developer, Corinthian referred Engr. De Dios to the Cuasos.
Before, during and after the construction of the said house, Corinthian conducted periodic ocular inspections in
order to determine compliance with the approved plans pursuant to the Manual of Rules and Regulations of
Corinthian.
6
Unfortunately, after the Cuasos constructed their house employing the services of C.B. Paraz &
Construction Co., Inc. (C.B. Paraz) as builder, their perimeter fence encroached on the Tanjangcos Lot 69 by 87
square meters.
No amicable settlement was reached between the parties. Thus, the Tanjangcos demanded that the Cuasos
demolish the perimeter fence but the latter failed and refused, prompting the Tanjangcos to file with the RTC a
suit against the Cuasos for Recovery of Possession with Damages.
7

Eventually, the Cuasos filed a Third-Party Complaint
8
against Corinthian, C.B. Paraz and Engr. De Dios. The Cuasos
ascribed negligence to C.B. Paraz for its failure to ascertain the proper specifications of their house, and to Engr. De
Dios for his failure to undertake an accurate relocation survey, thereby, exposing them to litigation. The Cuasos
also faulted Corinthian for approving their relocation survey and building plans without verifying their accuracy
and in making representations as to Engr. De Dios' integrity and competence. The Cuasos alleged that had
Corinthian exercised diligence in performing its duty, they would not have been involved in a boundary dispute
with the Tanjangcos. Thus, the Cuasos opined that Corinthian should also be held answerable for any damages that
they might incur as a result of such construction.
On March 30, 1993, the RTC rendered a Decision in favor of the Tanjangcos. It ruled that the Cuasos perimeter
wall encroached on the land of the Tanjangos by 87 square meters. It, however, ruled that the Cuasos were
builders in good faith, and gave the Tanjangcos the option to sell and the Cuasos the option to buy the encroaching
portion of the land, at a price to be agreed upon by the parties within sixty (60) days from receipt of the said
Decision. In the event that the Cuasos were unable and unwilling to purchase the said portion, the perimeter wall
should be demolished at the latters expense. The RTC also ordered the Cuasos to pay monthly rentals of
P2,000.00 commencing from the time of the filing of the complaint. The RTC likewise held that C.B. Paraz was
grossly negligent in not taking into account the correct boundaries of Cuasos lot when it constructed the house. It,
thus, ordered C.B. Paraz to pay moral and exemplary damages as well as attorneys fees to the Tanjangcos and the
Cuasos. The third-party complaint against Corinthian and Engr. De Dios, on the other hand, was dismissed for lack
of cause of action.
The Tanjangcos filed a Motion for Reconsideration
9
of the said RTC Decision which the RTC, however, denied in its
Order
10
dated June 28, 1993.
Dissatisfied with the RTC ruling, the Tanjangcos, the Cuasos, and C.B. Paraz all appealed to the CA.
On appeal, the CA reversed and set aside the RTC Decision. It held that the Cuasos acted in bad faith in land-
grabbing the 87 square meter-portion of Lot 69 as of April 5, 1989. Correlatively, the CA allowed the Tanjangcos to
exercise the rights granted under Articles 449, 450, 451 and 549 of the New Civil Code, which include the right to
demand the demolition of the offending perimeter wall after reimbursing the Cuasos the necessary expenses for
the preservation of the encroached area. The Cuasos were ordered to pay monthly rentals of P10,000.00 for the
use, enjoyment and occupancy of the lot from 1989 up to the time they vacate the property considering the
location and category of the same. They were, likewise, ordered to pay the Tanjangcos P100,000.00, as moral
damages, P50,000.00 as exemplary damages, and P150,000.00 as attorneys fees. The CA also imposed six percent
(6%) interest per annum on all the awards. The Cuasos appeal against the Tanjangcos, on the other hand, was
dismissed for lack of merit. On the third-party complaints, Corinthian, C.B. Paraz and Engr. De Dios were all found
negligent in performing their respective duties and so they were ordered to contribute five percent (5%) each, or a
total of fifteen percent (15%) to all judgment sums and amounts that the Cuasos shall eventually pay under the
decision, also with interest of six percent (6%) per annum.
Only Corinthian filed a Motion for Reconsideration
11
of the CA Decision within the 15-day reglementary period. No
motion for reconsideration was filed by the Cuasos, C.B. Paraz and/or Engr. De Dios.
About six (6) months later, or on August 12, 2003, the Cuasos filed a Comment/Manifestation
12
praying that they
be allowed to adopt Corinthians Motion for Reconsideration.
In its Resolution
13
dated November 14, 2003, the CA denied Corinthians Motion for Reconsideration.
Hence, Corinthian filed the instant Petition for Review on Certiorari assailing the CA Decision and Resolution, and
impleading the Cuasos as one of the respondents being the third-party plaintiffs in the RTC.
This Court gave due course to Corinthians petition and required the parties to submit their respective
memorandum.
14
In compliance, the Cuasos submitted their Memorandum
15
and Supplement to
Memorandum,
16
which were both noted by this Court in its Resolutions dated January 10, 2005
17
and February 2,
2005,
18
respectively.
In the meantime, the Tanjangcos moved for partial entry of judgment of the CA Decision which was granted by the
CA in its Resolution
19
dated May 26, 2006, directing the issuance of an Entry of Judgment and a Certification that
its Decision dated January 31 2003 has become final and executory with respect to the Cuasos, C.B. Paraz and Engr.
De Dios for their failure to file an appeal assailing the said Decision before this Court.
The Tanjangcos then moved for the execution of the judgment against the Cuasos, specifically the demolition of
the perimeter fence,
20
which was also granted by the RTC in its Order
21
dated December 18, 2006.
Other than the filing of an Opposition
22
and a Motion for Reconsideration
23
before the RTC, the Cuasos prayed for
the issuance of a temporary restraining order (TRO) and/or preliminary injunction before this Court to enjoin the
demolition of the perimeter fence. They averred that the premature demolition of the alleged encroaching
perimeter wall and other improvements will cause grave and irreparable damage to them, because what is sought
to be demolished is part of their residence. They claimed that no amount of money will compensate for the
damage they stand to suffer should any demolition subsequently prove to be wrongful. They argued that before
any execution can be carried out, it is necessary to first determine whether or not Corinthian was negligent in
approving the building plan and whether or not it acted in good faith in doing so. Such determination, according to
the Cuasos, will in turn determine whether or not they were in good faith in constructing the house.
24

The Tanjangcos opposed the Cuasos' application for TRO. They countered that the only pending matter with this
Court is the appeal by Corinthian; hence, the implementation of the January 31, 2003 Decision of the CA against
the Cuasos will not preempt the outcome of the said pending incidents. Also, any action taken by this Court on
Corinthians petition would not benefit the Cuasos for they did not appeal the adverse decision against them.
Accordingly, they cannot obtain affirmative relief from this Court by reason or on account of the appeal taken by
Corinthian. The appeal, they added, is personal to Corinthian. Finally, they argued that the Cuasos are now
estopped from questioning the enforcement of the CA Decision since they issued a managers check to pay the
money judgment.
25

In this Court's Resolution dated July 18, 2007, we denied the Cuasos' application for TRO and/or writ of preliminary
injunction for lack of merit.
The denial was based on sound legal principles. It is axiomatic that to be entitled to the injunctive writ, one must
show that there exists a right to be protected which is directly threatened by the act sought to be enjoined.
Furthermore, there must be a showing that the invasion of the right is material and substantial, that the right of
complainant is clear and unmistakable, and that there is an urgent and paramount necessity for the writ to issue in
order to prevent serious damage.
26

In the Cuasos case, their right to injunctive relief had not been clearly and unmistakably demonstrated. They failed
to show proof that there is material and substantial invasion of their right to warrant the issuance of an injunctive
writ. Indeed, the enforcement of the writ of execution, which would demolish the Cuasos perimeter fence, is
manifestly prejudicial to their interest. However, they possess no clear and unmistakable legal right that merits
protection through the writ of preliminary injunction.
27
Their right to maintain the said fence had been declared
inferior to the Tanjangcos right to the demolition of the fence, after the CA judgment had become final and
executory as to the Cuasos.
It bears stressing that the Cuasos failed to appeal the ruling of the CA. This failure to contest the CA decision
before this Court was fatal to their cause. It had the effect of an admission that they indeed acted in bad faith, as
they accepted the CA ruling. The decision of the CA, therefore, became binding and final as to them.
28
As a matter
of fact, the CA already issued a partial entry of judgment against the Cuasos.
An injunction to stay a final and executory decision is unavailing except only after a showing that facts and
circumstances exist which would render execution unjust or inequitable, or that a change in the situation of the
parties occurred. Here, no such exception exists as shown by the facts earlier narrated.
29

While it is true that this Court noted the Memorandum and Supplemental Memorandum filed by the Cuasos, such
notation was made only insofar as Corinthian made them respondents in this petition. This Court cannot grant to
the Cuasos any affirmative relief as they did not file a petition questioning the CA ruling. Consequently, the
Decision of the CA holding that the Cuasos acted in bad faith and that the perimeter fence may now be demolished
cannot be put in issue by the Cuasos. It is a fundamental principle that a party who does not appeal, or file a
petition for certiorari, is not entitled to any affirmative relief.
30
An appellee who is not an appellant may assign
errors in his brief where his purpose is to maintain the judgment, but he cannot seek modification or reversal of
the judgment or claim affirmative relief unless he has also appealed.
31
This applies to C.B. Paraz and Engr. De Dios
who likewise failed to assail the aforementioned CA Decision.
With this matter put to rest, we now go to the main issues raised by Corinthian, the sole petitioner in this case, to
wit:
a) Whether or not there is legal basis for the Court of Appeals to hold petitioner Corinthian Gardens Association,
Inc. liable to pay 5% of the judgment money to Sps. Tanjangco on account of the encroachment made by Sps.
Cuaso[; and]
b) Whether or not the Court of Appeals has legal basis to increase unilaterally and without proof the amount
prayed for in the Complaint, i.e., P2,000.00, as reasonable compensation for the use and enjoyment of the portion
of the lot encroached upon, to P10,000.00.
32

Corinthian claims that the approval of the building plan of the Cuasos was not tainted with negligence as it did not
approve the survey relocation plan but merely the architectural, structural and sanitary plans for Cuasos' house;
that the purpose of the said approval is not to ensure that the house to be erected on a particular lot is
constructed within its boundaries but only to ensure compliance with the Manual of Rules and Regulations; that
while Corinthian conducts actual site inspections, the inspection and approval of the building plans are limited to
"table inspection" only; that the survey relocation plan was never submitted for Corinthian's approval; that the
acceptance of the builder's bond did not make Corinthian automatically liable for the encroachment and for
damages; and that Corinthian approved the building plan with the good faith and due diligence required under the
circumstances. It, thus, concludes that it cannot be held liable to pay five
percent (5%) of the money judgment to the Tanjangcos on account of the encroachment made by the Cuasos.
Likewise, it finds no legal basis for the CA to unilaterally increase the amount of the adjudged rent from P2,000.00
to P10,000.00 which was not prayed for by the Tanjangcos in their complaint and in the absence of evidence
adduced by the parties.
33

On the other hand, the Tanjangcos stand by the ruling of the CA and opine that Corinthian was negligent in
approving the building plan of the Cuasos. They submit that Corinthian's claim that it merely conducts "table
inspections" of buildings further bolsters their argument that Corinthian was negligent in conveniently and
unilaterally restricting and limiting the coverage of its approval, contrary to its own Manual of Rules and
Regulations; that the acceptance of a builder's bond does not automatically make Corinthian liable but the same
affirms the fact that a homeowner can hold it liable for the consequences of the approval of a building plan; and
that Corinthian, by regularly demanding and accepting membership dues, must be wary of its responsibility to
protect the rights and interests of its members. Lastly, the Tanjangcos contend that a court can take judicial notice
of the general increase in the rentals of real estate, as in this case, where the CA considered the value of their lot in
the "posh-and-swank" Corinthian Gardens Subdivision and the fact that they were deprived of it for almost two
decades. The Tanjangcos pray that this Court sustain the ruling of the CA.
34

The instant case is obviously one for tort, as governed by Article 2176 of the Civil Code, which provides:
ART. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this Chapter.
In every tort case filed under this provision, plaintiff has to prove by a preponderance of evidence: (1) the damages
suffered by the plaintiff; (2) the fault or negligence of the defendant or some other person for whose act he must
respond; and (3) the connection of cause and effect between the fault or negligence and the damages incurred.
35

Undeniably, the perimeter fence of the Cuasos encroached on Lot 69 owned by the Tanjangcos by 87 square
meters as duly found by both the RTC and the CA in accordance with the evidence on record. As a result, the
Tanjangcos suffered damage in having been deprived of the use of that portion of their lot encroached upon. Thus,
the primordial issue to be resolved in this case is whether Corinthian was negligent under the circumstances and, if
so, whether such negligence contributed to the injury suffered by the Tanjangcos.
A negligent act is an inadvertent act; it may be merely carelessly done from a lack of ordinary prudence and may
be one which creates a situation involving an unreasonable risk to another because of the expectable action of the
other, a third person, an animal, or a force of nature. A negligent act is one from which an ordinary prudent person
in the actor's position, in the same or similar circumstances, would foresee such an appreciable risk of harm to
others as to cause him not to do the act or to do it in a more careful manner.
36

The test to determine the existence of negligence in a particular case may be stated as follows: Did the defendant
in committing the alleged negligent act use that reasonable care and caution which an ordinary person would have
used in the same situation? If not, then he is guilty of negligence. The law, in effect, adopts the standard supplied
by the imaginary conduct of the discreet paterfamilias in Roman law. The existence of negligence in a given case is
not determined by reference to the personal judgment of the actor in the situation before him. The law considers
what would be reckless, blameworthy, or negligent in a man of ordinary intelligence and prudence, and
determines liability according to that standard.
37

By this test, we find Corinthian negligent.
While the issue of Corinthian's alleged negligence is factual in character,
38
a review by this Court is proper because
the CA's factual findings differ from those of the RTC's.
39
Thus, after a meticulous review of the evidence on record,
we hold that the CA committed no reversible error when it deviated from the findings of fact of the RTC. The CA's
findings and conclusions are substantiated by the evidence on record and are more in accord with law and reason.
Indeed, it is clear that Corinthian failed to exercise the requisite diligence in insuring that the Cuasos abide by its
Manual of Rules and Regulations, thereby resulting in the encroachment on the Tanjangcos property.
We agree with the CA when it aptly held:
Corinthian cannot and should not be allowed to justify or excuse its negligence by claiming that its approval of the
Cuasos building plans was only limited to a so-called "table inspection;" and not actual site measurement. To
accept some such postulate is to put a premium on negligence. Corinthian was not organized solely for the
defendants Cuasos. It is also the subdivision of the plaintiffs-spouses Tanjangcos - and of all others who have their
dwelling units or abodes therein. Pertinently, its Manual of Rules and Regulations stipulates in Section 3 thereof
(under the heading Construction), thus:
A. Rules and Regulations
No new construction can be started unless the building plans are approved by the Association and the
appropriate Builders cash bond and pre-construction fees are paid. The Association will not allow the entry of
construction materials and process identification cards for workers if the above conditions are not complied with.
Likewise, all renovations, repairs, additions and improvements to a finished house except electrical wiring, will
have to be approved by the Association. Water service connection of a homeowner who undertakes construction
work without prior approval of the Association will be cut-off in addition to the sanctions previously mentioned.
It goes without saying that this Manual of Rules and Regulations applies to all - or it does not apply at all. To
borrow a popular expression, what is sauce for the gander is sauce for the goose - or ought to be. To put it matter-
of-factly and bluntly, thus, its so-called "table inspection" approval of the Cuasos building plans is no less of an
approval, as approvals come and go. And since it is an approval tainted with negligence, the necessary and
inevitable consequences which law and justice attach to such negligence must, as a matter of law and justice, also
necessarily attach to Corinthian.
And then again third party defendant-appellee Corinthian Garden required the posting of a builders cash bond
(Exh. 5-Corinthian) from the defendants-appellants Cuasos and the third-party defendant C.B. Paraz Construction
to secure the performance of their undertaking. Surely, Corinthian does not imply that while it may take the
benefits from the Builders cash bond, it may, Pilate-like, wash its hands of any responsibility or liability that would
or might arise from the construction or building of the structure for which the cash bond was in the first place
posted. That is not only unjust and immoral, but downright unchristian and iniquitous.
Under the same parity of reasoning, the payment by the appellants-Cuasos to the appellee Corinthian of pre-
construction and membership fees in the Association must necessarily entail the creation of certain obligations on
the part of Corinthian. For duties and responsibilities always go hand in hand with rights and privileges. That is the
law of life - and that is the law of every civilized society. It is an axiom of equity that he who receives the benefits
must share the burdens.
40

By its Manual of Rules and Regulations, it is reasonable to assume that Corinthian, through its representative, in
the approval of building plans, and in the conduct of periodic inspections of on-going construction projects within
the subdivision, is responsible in insuring compliance with the approved plans, inclusive of the construction of
perimeter walls, which in this case is the subject of dispute between the Tanjangcos and the Cuasos.
41
It is not just
or equitable to relieve Corinthian of any liability when, by its very own rules, it imposes its authority over all its
members to the end that "no new construction can be started unless the plans are approved by the Association
and the appropriate cash bond and pre-construction fees are paid." Moreover, Corinthian can impose sanctions for
violating these rules. Thus, the proposition that the inspection is merely a "table inspection" and, therefore, should
exempt Corinthian from liability, is unacceptable. After all, if the supposed inspection is merely a "table inspection"
and the approval granted to every member is a mere formality, then the purpose of the rules would be defeated.
Compliance therewith would not be mandatory, and sanctions imposed for violations could be disregarded.
Corinthian's imprimatur on the construction of the Cuasos' perimeter wall over the property of the Tanjangcos
assured the Cuasos that everything was in order.
In sum, Corinthians failure to prevent the encroachment of the Cuasos perimeter wall into Tanjangcos property
despite the inspection conducted constitutes negligence and, at the very least, contributed to the injury suffered
by the Tanjangcos.
On the second issue, our ruling in Spouses Badillo v. Tayag
42
is instructive:
Citing Sia v. Court of Appeals [272 SCRA 141, May 5, 1997], petitioners argue that the MTC may take judicial notice
of the reasonable rental or the general price increase of land in order to determine the amount of rent that may be
awarded to them. In that case, however, this Court relied on the CA's factual findings, which were based on the
evidence presented before the trial court. In determining reasonable rent,
the RTC therein took account of the following factors: 1) the realty assessment of the land, 2) the increase in realty
taxes, and 3) the prevailing rate of rentals in the vicinity. Clearly, the trial court relied, not on mere judicial notice,
but on the evidence presented before it.
Indeed, courts may fix the reasonable amount of rent for the use and occupation of a disputed property. However,
petitioners herein erred in assuming that courts, in determining the amount of rent, could simply rely on their own
appreciation of land values without considering any evidence. As we have said earlier, a court may fix the
reasonable amount of rent, but it must still base its action on the evidence adduced by the parties.
In Herrera v. Bollos [G.R. No. 138258, January 18, 2002], the trial court awarded rent to the defendants in a forcible
entry case. Reversing the RTC, this Court declared that the reasonable amount of rent could be determined not by
mere judicial notice, but by supporting evidence:
x x x A court cannot take judicial notice of a factual matter in controversy. The court may take judicial notice of
matters of public knowledge, or which are capable of unquestionable demonstration, or ought to be known to
judges because of their judicial functions. Before taking such judicial notice, the court must "allow the parties to be
heard thereon." Hence, there can be no judicial notice on the rental value of the premises in question without
supporting evidence.
Truly, mere judicial notice is inadequate, because evidence is required for a court to determine the proper rental
value. But contrary to Corinthian's arguments, both the RTC and the CA found that indeed rent was due the
Tanjangcos because they were deprived of possession and use of their property. This uniform factual finding of the
RTC and the CA was based on the evidence presented below. Moreover, in Spouses Catungal v. Hao,
43
we
considered the increase in the award of rentals as reasonable given the particular circumstances of each case. We
noted therein that the respondent denied the petitioners the benefits, including rightful possession, of their
property for almost a decade.
Similarly, in the instant case, the Tanjangcos were deprived of possession and use of their property for more than
two decades through no fault of their own. Thus, we find no cogent reason to disturb the monthly rental fixed by
the CA.
All told, the CA committed no reversible error.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Costs against petitioner.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice






















SOCIAL JUSTICE SOCIETY (SJS), VLADIMIR ALARIQUE T. CABIGAO and BONIFACIO S. TUMBOKON,petitioners,
vs.
HON. JOSE L. ATIENZA, JR., in his capacity as Mayor of the City of Manila, respondent.
x - - - - - - - - - - - - - - - - - - - - - - x
CHEVRON PHILIPPINES INC., PETRON CORPORATION and PILIPINAS SHELL PETROLEUM CORPORATION, movants-
intervenors.
x - - - - - - - - - - - - - - - - - - - - - - x
DEPARTMENT OF ENERGY, movant-intervenor.
R E S O L U T I O N
CORONA, J.:
After we promulgated our decision in this case on March 7, 2007, Chevron Philippines Inc. (Chevron), Petron
Corporation (Petron) and Pilipinas Shell Petroleum Corporation (Shell) (collectively, the oil companies) and the
Republic of the Philippines, represented by the Department of Energy (DOE), filed their respective motions for
leave to intervene and for reconsideration of the decision.
Chevron
1
is engaged in the business of importing, distributing and marketing of petroleum products in the
Philippines while Shell and Petron are engaged in the business of manufacturing, refining and likewise importing,
distributing and marketing of petroleum products in the Philippines.
2
The DOE is a governmental agency created
under Republic Act (RA) No. 7638
3
and tasked to prepare, integrate, coordinate, supervise and control all plans,
programs, projects and activities of the government relative to energy exploration, development, utilization,
distribution and conservation.
4

The facts are restated briefly as follows:
Petitioners Social Justice Society, Vladimir Alarique T. Cabigao and Bonifacio S. Tumbokon, in an original petition
for mandamus under Rule 65 of the Rules of Court, sought to compel respondent Hon. Jose L. Atienza, Jr., then
mayor of the City of Manila, to enforce Ordinance No. 8027. This ordinance was enacted by the Sangguniang
Panlungsod of Manila on November 20, 2001,
5
approved by respondent Mayor on November 28, 2001,
6
and
became effective on December 28, 2001 after publication.
7
Sections 1 and 3 thereof state:
SECTION 1. For the purpose of promoting sound urban planning and ensuring health, public safety, and general
welfare of the residents of Pandacan and Sta. Ana as well as its adjoining areas, the land use of [those] portions of
land bounded by the Pasig River in the north, PNR Railroad Track in the east, Beata St. in the south, Palumpong St.
in the southwest, and Estero de Pandacan in the west[,] PNR Railroad in the northwest area, Estero de Pandacan in
the [n]ortheast, Pasig River in the southeast and Dr. M.L. Carreon in the southwest. The area of Punta, Sta. Ana
bounded by the Pasig River, Marcelino Obrero St., Mayo 28 St., and F. Manalo Street, are hereby reclassified from
Industrial II to Commercial I.
xxx xxx xxx
SEC. 3. Owners or operators of industries and other businesses, the operation of which are no longer permitted
under Section 1 hereof, are hereby given a period of six (6) months from the date of effectivity of this Ordinance
within which to cease and desist from the operation of businesses which are hereby in consequence, disallowed.
Ordinance No. 8027 reclassified the area described therein from industrial to commercial and directed the owners
and operators of businesses disallowed under the reclassification to cease and desist from operating their
businesses within six months from the date of effectivity of the ordinance. Among the businesses situated in the
area are the so-called "Pandacan Terminals" of the oil companies.
On June 26, 2002, the City of Manila and the Department of Energy (DOE) entered into a memorandum of
understanding (MOU)
8
with the oil companies. They agreed that "the scaling down of the Pandacan Terminals
[was] the most viable and practicable option." The Sangguniang Panlungsod ratified the MOU in Resolution No.
97.
9
In the same resolution, the Sanggunian declared that the MOU was effective only for a period of six months
starting July 25, 2002.
10
Thereafter, on January 30, 2003, the Sanggunian adopted Resolution No. 13
11
extending
the validity of Resolution No. 97 to April 30, 2003 and authorizing the mayor of Manila to issue special business
permits to the oil companies.
12

This was the factual backdrop presented to the Court which became the basis of our March 7, 2007 decision. We
ruled that respondent had the ministerial duty under the Local Government Code (LGC) to "enforce all laws and
ordinances relative to the governance of the city,"
13
including Ordinance No. 8027. We also held that we need not
resolve the issue of whether the MOU entered into by respondent with the oil companies and the subsequent
resolutions passed by the Sanggunian could amend or repeal Ordinance No. 8027 since the resolutions which
ratified the MOU and made it binding on the City of Manila expressly gave it full force and effect only until April 30,
2003. We concluded that there was nothing that legally hindered respondent from enforcing Ordinance No. 8027.
After we rendered our decision on March 7, 2007, the oil companies and DOE sought to intervene and filed
motions for reconsideration in intervention on March 12, 2007 and March 21, 2007 respectively. On April 11, 2007,
we conducted the oral arguments in Baguio City to hear petitioners, respondent and movants-intervenors oil
companies and DOE.
The oil companies called our attention to the fact that on April 25, 2003, Chevron had filed a complaint against
respondent and the City of Manila in the Regional Trial Court (RTC) of Manila, Branch 39, for the annulment of
Ordinance No. 8027 with application for writs of preliminary prohibitory injunction and preliminary mandatory
injunction.
14
The case was docketed as civil case no. 03-106377. On the same day, Shell filed a petition for
prohibition and mandamus likewise assailing the validity of Ordinance No. 8027 and with application for writs of
preliminary prohibitory injunction and preliminary mandatory injunction.
15
This was docketed as civil case no. 03-
106380. Later on, these two cases were consolidated and the RTC of Manila, Branch 39 issued an order dated May
19, 2003 granting the applications for writs of preliminary prohibitory injunction and preliminary mandatory
injunction:
WHEREFORE, upon the filing of a total bond of TWO MILLION (Php 2,000,000.00) PESOS, let a Writ of Preliminary
Prohibitory Injunction be issued ordering [respondent] and the City of Manila, their officers, agents,
representatives, successors, and any other persons assisting or acting in their behalf, during the pendency of the
case, to REFRAIN from taking steps to enforce Ordinance No. 8027, and let a Writ of Preliminary Mandatory
Injunction be issued ordering [respondent] to issue [Chevron and Shell] the necessary Business Permits to operate
at the Pandacan Terminal.
16

Petron likewise filed its own petition in the RTC of Manila, Branch 42, also attacking the validity of Ordinance No.
8027 with prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order (TRO). This
was docketed as civil case no. 03-106379. In an order dated August 4, 2004, the RTC enjoined the parties to
maintain the status quo.
17

Thereafter, in 2006, the city council of Manila enacted Ordinance No. 8119, also known as the Manila
Comprehensive Land Use Plan and Zoning Ordinance of 2006.
18
This was approved by respondent on June 16,
2006.
19

Aggrieved anew, Chevron and Shell filed a complaint in the RTC of Manila, Branch 20, asking for the nullification of
Ordinance No. 8119.
20
This was docketed as civil case no. 06-115334. Petron filed its own complaint on the same
causes of action in the RTC of Manila, Branch 41.
21
This was docketed as civil case no. 07-116700.
22
The court
issued a TRO in favor of Petron, enjoining the City of Manila and respondent from enforcing Ordinance No. 8119.
23

Meanwhile, in civil case no. 03-106379, the parties filed a joint motion to withdraw complaint and counterclaim on
February 20, 2007.
24
In an order dated April 23, 2007, the joint motion was granted and all the claims and
counterclaims of the parties were withdrawn.
25

Given these additional pieces of information, the following were submitted as issues for our resolution:
1. whether movants-intervenors should be allowed to intervene in this case;
26

2. whether the following are impediments to the execution of our March 7, 2007 decision:
(a) Ordinance No. 8119, the enactment and existence of which were not previously brought by the parties to the
attention of the Court and
(b) writs of preliminary prohibitory injunction and preliminary mandatory injunction and status quo order issued by
the RTC of Manila, Branches 39 and 42 and
3. whether the implementation of Ordinance No. 8027 will unduly encroach upon the DOEs powers and functions
involving energy resources.
During the oral arguments, the parties submitted to this Courts power to rule on the constitutionality and validity
of Ordinance No. 8027 despite the pendency of consolidated cases involving this issue in the RTC.
27
The
importance of settling this controversy as fully and as expeditiously as possible was emphasized, considering its
impact on public interest. Thus, we will also dispose of this issue here. The parties were after all given ample
opportunity to present and argue their respective positions. By so doing, we will do away with the delays
concomitant with litigation and completely adjudicate an issue which will most likely reach us anyway as the final
arbiter of all legal disputes.
Before we resolve these issues, a brief review of the history of the Pandacan Terminals is called for to put our
discussion in the proper context.
History Of The Pandacan Oil Terminals
Pandacan (one of the districts of the City of Manila) is situated along the banks of the Pasig river. At the turn of the
twentieth century, Pandacan was unofficially designated as the industrial center of Manila. The area, then largely
uninhabited, was ideal for various emerging industries as the nearby river facilitated the transportation of goods
and products. In the 1920s, it was classified as an industrial zone.
28
Among its early industrial settlers were the oil
companies. Shell established its installation there on January 30, 1914.
29
Caltex (now Chevron) followed suit in
1917 when the company began marketing its products in the country.
30
In 1922, it built a warehouse depot which
was later converted into a key distribution terminal.
31
The corporate presence in the Philippines of Esso (Petrons
predecessor) became more keenly felt when it won a concession to build and operate a refinery in Bataan in
1957.
32
It then went on to operate a state-of-the-art lube oil blending plant in the Pandacan Terminals where it
manufactures lubes and greases.
33

On December 8, 1941, the Second World War reached the shores of the Philippine Islands. Although Manila was
declared an open city, the Americans had no interest in welcoming the Japanese. In fact, in their zealous attempt
to fend off the Japanese Imperial Army, the United States Army took control of the Pandacan Terminals and hastily
made plans to destroy the storage facilities to deprive the advancing Japanese Army of a valuable logistics
weapon.
34
The U.S. Army burned unused petroleum, causing a frightening conflagration. Historian Nick Joaquin
recounted the events as follows:
After the USAFFE evacuated the City late in December 1941, all army fuel storage dumps were set on fire. The
flames spread, enveloping the City in smoke, setting even the rivers ablaze, endangering bridges and all riverside
buildings. For one week longer, the "open city" blazeda cloud of smoke by day, a pillar of fire by night.
35

The fire consequently destroyed the Pandacan Terminals and rendered its network of depots and service stations
inoperative.
36

After the war, the oil depots were reconstructed. Pandacan changed as Manila rebuilt itself. The three major oil
companies resumed the operation of their depots.
37
But the district was no longer a sparsely populated industrial
zone; it had evolved into a bustling, hodgepodge community. Today, Pandacan has become a densely populated
area inhabited by about 84,000 people, majority of whom are urban poor who call it home.
38
Aside from numerous
industrial installations, there are also small businesses, churches, restaurants, schools, daycare centers and
residences situated there.
39
Malacaang Palace, the official residence of the President of the Philippines and the
seat of governmental power, is just two kilometers away.
40
There is a private school near the Petron depot. Along
the walls of the Shell facility are shanties of informal settlers.
41
More than 15,000 students are enrolled in
elementary and high schools situated near these facilities.
42
A university with a student population of about 25,000
is located directly across the depot on the banks of the Pasig river.
43

The 36-hectare Pandacan Terminals house the oil companies distribution terminals and depot facilities.
44
The
refineries of Chevron and Shell in Tabangao and Bauan, both in Batangas, respectively, are connected to the
Pandacan Terminals through a 114-kilometer
45
underground pipeline system.
46
Petrons refinery in Limay, Bataan,
on the other hand, also services the depot.
47
The terminals store fuel and other petroleum products and supply
95% of the fuel requirements of Metro Manila,
48
50% of Luzons consumption and 35% nationwide.
49
Fuel can also
be transported through barges along the Pasig river or tank trucks via the South Luzon Expressway.
We now discuss the first issue: whether movants-intervenors should be allowed to intervene in this case.
Intervention Of The Oil Companies And The DOE Should Be Allowed In The Interest of Justice
Intervention is a remedy by which a third party, not originally impleaded in the proceedings, becomes a litigant
therein to enable him, her or it to protect or preserve a right or interest which may be affected by such
proceedings.
50
The pertinent rules are Sections 1 and 2, Rule 19 of the Rules of Court:
SEC. 1. Who may intervene. A person who has a legal interest in the matter in litigation, or in the success of
either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or
other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be
allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or
prejudice the adjudication of the rights of the original parties, and whether or not the intervenors rights may be
fully protected in a separate proceeding.
SEC. 2. Time to intervene. The motion to intervene may be filed at any time before rendition of judgment by the
trial court. A copy of the pleading-in-intervention shall be attached to the motion and served on the original
parties.
Thus, the following are the requisites for intervention of a non-party:
(1) Legal interest
(a) in the matter in controversy; or
(b) in the success of either of the parties; or
I against both parties; or
(d) person is so situated as to be adversely affected by a distribution or other disposition of property in the custody
of the court or of an officer thereof;
(2) Intervention will not unduly delay or prejudice the adjudication of rights of original parties;
(3) Intervenors rights may not be fully protected in a separate proceeding
51
and
(g)The motion to intervene may be filed at any time before rendition of judgment by the trial court.
For both the oil companies and DOE, the last requirement is definitely absent. As a rule, intervention is allowed
"before rendition of judgment" as Section 2, Rule 19 expressly provides. Both filed their separate motions after our
decision was promulgated. In Republic of the Philippines v. Gingoyon,
52
a recently decided case which was also an
original action filed in this Court, we declared that the appropriate time to file the motions-in-intervention was
before and not after resolution of the case.
53

The Court, however, has recognized exceptions to Section 2, Rule 19 in the interest of substantial justice:
The rule on intervention, like all other rules of procedure, is intended to make the powers of the Court fully and
completely available for justice. It is aimed to facilitate a comprehensive adjudication of rival claims overriding
technicalities on the timeliness of the filing thereof.
54

The oil companies assert that they have a legal interest in this case because the implementation of Ordinance No.
8027 will directly affect their business and property rights.
55

[T]he interest which entitles a person to intervene in a suit between other parties must be in the matter in
litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal
operation and effect of the judgment. Otherwise, if persons not parties to the action were allowed to intervene,
proceedings would become unnecessarily complicated, expensive and interminable. And this would be against the
policy of the law. The words "an interest in the subject" means a direct interest in the cause of action as pleaded,
one that would put the intervenor in a legal position to litigate a fact alleged in the complaint without the
establishment of which plaintiff could not recover.
56

We agree that the oil companies have a direct and immediate interest in the implementation of Ordinance No.
8027. Their claim is that they will need to spend billions of pesos if they are compelled to relocate their oil depots
out of Manila. Considering that they admitted knowing about this case from the time of its filing on December 4,
2002, they should have intervened long before our March 7, 2007 decision to protect their interests. But they did
not.
57
Neither did they offer any worthy explanation to justify their late intervention.
Be that as it may, although their motion for intervention was not filed on time, we will allow it because they raised
and presented novel issues and arguments that were not considered by the Court in its March 7, 2007 decision.
After all, the allowance or disallowance of a motion to intervene is addressed to the sound discretion of the court
before which the case is pending.
58
Considering the compelling reasons favoring intervention, we do not think that
this will unduly delay or prejudice the adjudication of rights of the original parties. In fact, it will be expedited since
their intervention will enable us to rule on the constitutionality of Ordinance No. 8027 instead of waiting for the
RTCs decision.
The DOE, on the other hand, alleges that its interest in this case is also direct and immediate as Ordinance No.
8027 encroaches upon its exclusive and national authority over matters affecting the oil industry. It seeks to
intervene in order to represent the interests of the members of the public who stand to suffer if the Pandacan
Terminals operations are discontinued. We will tackle the issue of the alleged encroachment into DOEs domain
later on. Suffice it to say at this point that, for the purpose of hearing all sides and considering the transcendental
importance of this case, we will also allow DOEs intervention.
The Injunctive Writs Are Not Impediments To The Enforcement Of Ordinance No. 8027
Under Rule 65, Section 3
59
of the Rules of Court, a petition for mandamus may be filed when any tribunal,
corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically
enjoins as a duty resulting from an office, trust or station. According to the oil companies, respondent did not
unlawfully fail or neglect to enforce Ordinance No. 8027 because he was lawfully prevented from doing so by
virtue of the injunctive writs and status quo order issued by the RTC of Manila, Branches 39 and 42.
First, we note that while Chevron and Shell still have in their favor the writs of preliminary injunction and
preliminary mandatory injunction, the status quo order in favor of Petron is no longer in effect since the court
granted the joint motion of the parties to withdraw the complaint and counterclaim.
60

Second, the original parties failed to inform the Court about these injunctive writs. Respondent (who was also
impleaded as a party in the RTC cases) defends himself by saying that he informed the court of the pendency of
the civil cases and that a TRO was issued by the RTC in the consolidated cases filed by Chevron and Shell. It is true
that had the oil companies only intervened much earlier, the Court would not have been left in the dark about
these facts. Nevertheless, respondent should have updated the Court, by way of manifestation, on such a relevant
matter.
In his memorandum, respondent mentioned the issuance of a TRO. Under Section 5 of Rule 58 of the Rules of
Court, a TRO issued by the RTC is effective only for a period of 20 days. This is why, in our March 7, 2007 decision,
we presumed with certainty that this had already lapsed.
61
Respondent also mentioned the grant of injunctive
writs in his rejoinder which the Court, however, expunged for being a prohibited pleading. The parties and their
counsels were clearly remiss in their duties to this Court.
In resolving controversies, courts can only consider facts and issues pleaded by the parties.
62
Courts, as well as
magistrates presiding over them are not omniscient. They can only act on the facts and issues presented before
them in appropriate pleadings. They may not even substitute their own personal knowledge for evidence. Nor may
they take notice of matters except those expressly provided as subjects of mandatory judicial notice.
We now proceed to the issue of whether the injunctive writs are legal impediments to the enforcement of
Ordinance No. 8027.
Section 3, Rule 58 of the Rules of Court enumerates the grounds for the issuance of a writ of preliminary
injunction:
SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is
established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining
the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts,
either for a limited period or perpetually;
(b) That the commission, continuance or nonperformance of the act or acts complained of during the litigation
would probably work injustice to the applicant; or
(g) IThat a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering
to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action
or proceeding, and tending to render the judgment ineffectual.
There are two requisites for the issuance of a preliminary injunction: (1) the right to be protected exists prima
facieand (2) the acts sought to be enjoined are violative of that right. It must be proven that the violation sought to
be prevented will cause an irreparable injustice.
The act sought to be restrained here was the enforcement of Ordinance No. 8027. It is a settled rule that an
ordinance enjoys the presumption of validity and, as such, cannot be restrained by injunction.
63
Nevertheless,
when the validity of the ordinance is assailed, the courts are not precluded from issuing an injunctive writ against
its enforcement. However, we have declared that the issuance of said writ is proper only when:
... the petitioner assailing the ordinance has made out a case of unconstitutionality strong enough to overcome,
in the mind of the judge, the presumption of validity, in addition to a showing of a clear legal right to the remedy
sought....
64
(Emphasis supplied)
Judge Reynaldo G. Ros, in his order dated May 19, 2003, stated his basis for issuing the injunctive writs:
The Court, in resolving whether or not a Writ of Preliminary Injunction or Preliminary Mandatory Injunction should
be issued, is guided by the following requirements: (1) a clear legal right of the complainant; (2) a violation of that
right; and (3) a permanent and urgent necessity for the Writ to prevent serious damage. The Court believes that
these requisites are present in these cases.
There is no doubt that the plaintiff/petitioners have been legitimately operating their business in the Pandacan
Terminal for many years and they have made substantial capital investment therein. Every year they were issued
Business Permits by the City of Manila. Its operations have not been declared illegal or contrary to law or morals.
In fact, because of its vital importance to the national economy, it was included in the Investment Priorities Plan as
mandated under the "Downstream Oil Industry Deregulation Act of 1988 (R.A. 8479). As a lawful business, the
plaintiff/petitioners have a right, therefore, to continue their operation in the Pandacan Terminal and the right to
protect their investments. This is a clear and unmistakable right of the plaintiff/petitioners.
The enactment, therefore, of City Ordinance No. 8027 passed by the City Council of Manila reclassifying the area
where the Pandacan Terminal is located from Industrial II to Commercial I and requiring the plaintiff/petitioners to
cease and desist from the operation of their business has certainly violated the rights of the plaintiff/petitioners to
continue their legitimate business in the Pandacan Terminal and deprived them of their huge investments they put
up therein. Thus, before the Court, therefore, determines whether the Ordinance in question is valid or not, a Writ
of Preliminary Injunction and a Writ of Mandatory Injunction be issued to prevent serious and irreparable damage
to plaintiff/petitioners.
65

Nowhere in the judges discussion can we see that, in addition to a showing of a clear legal right of Chevron and
Shell to the remedy sought, he was convinced that they had made out a case of unconstitutionality or invalidity
strong enough to overcome the presumption of validity of the ordinance. Statutes and ordinances are presumed
valid unless and until the courts declare the contrary in clear and unequivocal terms.
66
The mere fact that the
ordinance is alleged to be unconstitutional or invalid will not entitle a party to have its enforcement
enjoined.
67
The presumption is all in favor of validity. The reason for this is obvious:
The action of the elected representatives of the people cannot be lightly set aside. The councilors must, in the very
nature of things, be familiar with the necessities of their particular municipality and with all the facts and
circumstances which surround the subject and necessitate action. The local legislative body, by enacting the
ordinance, has in effect given notice that the regulations are essential to the well being of the people . . . The
Judiciary should not lightly set aside legislative action when there is not a clear invasion of personal or property
rights under the guise of police regulation.
68

X x x
...[Courts] accord the presumption of constitutionality to legislative enactments, not only because the legislature is
presumed to abide by the Constitution but also because the judiciary[,] in the determination of actual cases and
controversies[,] must reflect the wisdom and justice of the people as expressed through their representatives in
the executive and legislative departments of the government.
69

The oil companies argue that this presumption must be set aside when the invalidity or unreasonableness appears
on the face of the ordinance itself.
70
We see no reason to set aside the presumption. The ordinance, on its face,
does not at all appear to be unconstitutional. It reclassified the subject area from industrial to commercial. Prima
facie, this power is within the power of municipal corporations:
The power of municipal corporations to divide their territory into industrial, commercial and residential zones is
recognized in almost all jurisdictions inasmuch as it is derived from the police power itself and is exercised for the
protection and benefit of their inhabitants.
71

X x x
There can be no doubt that the City of Manila has the power to divide its territory into residential and industrial
zones, and to prescribe that offensive and unwholesome trades and occupations are to be established exclusively
in the latter zone.
xxx xxx xxx
Likewise, it cannot be denied that the City of Manila has the authority, derived from the police power, of
forbidding the appellant to continue the manufacture of toyo in the zone where it is now situated, which has been
declared residential....
72

Courts will not invalidate an ordinance unless it clearly appears that it is unconstitutional. There is no such showing
here. Therefore, the injunctive writs issued in the Manila RTCs May 19, 2003 order had no leg to stand on.
We are aware that the issuance of these injunctive writs is not being assailed as tainted with grave abuse of
discretion. However, we are confronted with the question of whether these writs issued by a lower court are
impediments to the enforcement of Ordinance No. 8027 (which is the subject of the mandamus petition). As
already discussed, we rule in the negative.
Ordinance No. 8027 Was Not Superseded By Ordinance No. 8119
The March 7, 2007 decision did not take into consideration the passage of Ordinance No. 8119 entitled "An
Ordinance Adopting the Manila Comprehensive Land Use Plan and Zoning Regulations of 2006 and Providing for
the Administration, Enforcement and Amendment thereto" which was approved by respondent on June 16, 2006.
The simple reason was that the Court was never informed about this ordinance.
While courts are required to take judicial notice of the laws enacted by Congress, the rule with respect to local
ordinances is different. Ordinances are not included in the enumeration of matters covered by mandatory judicial
notice under Section 1, Rule 129 of the Rules of Court.
73

Although, Section 50 of RA 409
74
provides that:
SEC. 50 Judicial notice of ordinances. - All courts sitting in the city shall take judicial notice of the ordinances passed
by the [Sangguniang Panglungsod].
This cannot be taken to mean that this Court, since it has its seat in the City of Manila, should have taken steps to
procure a copy of the ordinance on its own, relieving the party of any duty to inform the Court about it.
Even where there is a statute that requires a court to take judicial notice of municipal ordinances, a court is not
required to take judicial notice of ordinances that are not before it and to which it does not have access. The party
asking the court to take judicial notice is obligated to supply the court with the full text of the rules the party
desires it to have notice of.
75
Counsel should take the initiative in requesting that a trial court take judicial notice of
an ordinance even where a statute requires courts to take judicial notice of local ordinances.
76

The intent of a statute requiring a court to take judicial notice of a local ordinance is to remove any discretion a
court might have in determining whether or not to take notice of an ordinance. Such a statute does not direct the
court to act on its own in obtaining evidence for the record and a party must make the ordinance available to the
court for it to take notice.
77

In its defense, respondent claimed that he did not inform the Court about the enactment of Ordinance No. 8119
because he believed that it was different from Ordinance No. 8027 and that the two were not inconsistent with
each other.
78

In the same way that we deem the intervenors late intervention in this case unjustified, we find the failure of
respondent, who was an original party here, inexcusable.
The Rule On Judicial Admissions Is Not Applicable Against Respondent
The oil companies assert that respondent judicially admitted that Ordinance No. 8027 was repealed by Ordinance
No. 8119 in civil case no. 03-106379 (where Petron assailed the constitutionality of Ordinance No. 8027) when the
parties in their joint motion to withdraw complaint and counterclaim stated that "the issue ...has been rendered
moot and academic by virtue of the passage of [Ordinance No. 8119]."
79
They contend that such admission worked
as an estoppel against the respondent.
Respondent countered that this stipulation simply meant that Petron was recognizing the validity and legality of
Ordinance No. 8027 and that it had conceded the issue of said ordinances constitutionality, opting instead to
question the validity of Ordinance No. 8119.
80
The oil companies deny this and further argue that respondent, in
his answer in civil case no. 06-115334 (where Chevron and Shell are asking for the nullification of Ordinance No.
8119), expressly stated that Ordinance No. 8119 replaced Ordinance No. 8027:
81

... Under Ordinance No. 8027, businesses whose uses are not in accord with the reclassification were given six
months to cease [their] operation. Ordinance No. 8119, which in effect, replaced Ordinance [No.] 8027, merely
took note of the time frame provided for in Ordinance No. 8119.... Ordinance No. 8119 thus provided for an even
longer term, that is[,] seven years;
82
(Emphasis supplied)
Rule 129, Section 4 of the Rules of Court provides:
Section 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the
proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it
was made through palpable mistake or that no such admission was made. (Emphasis supplied)
While it is true that a party making a judicial admission cannot subsequently take a position contrary to or
inconsistent with what was pleaded,
83
the aforestated rule is not applicable here. Respondent made the
statements regarding the ordinances in civil case nos. 03-106379 and 06-115334 which are not "the same" as this
case before us.
84
To constitute a judicial admission, the admission must be made in the same case in which it is
offered.
Hence, respondent is not estopped from claiming that Ordinance No. 8119 did not supersede Ordinance No. 8027.
On the contrary, it is the oil companies which should be considered estopped. They rely on the argument that
Ordinance No. 8119 superseded Ordinance No. 8027 but, at the same time, also impugn its (8119s) validity. We
frown on the adoption of inconsistent positions and distrust any attempt at clever positioning under one or the
other on the basis of what appears advantageous at the moment. Parties cannot take vacillating or contrary
positions regarding the validity of a statute
85
or ordinance. Nonetheless, we will look into the merits of the
argument of implied repeal.
Ordinance No. 8119 Did Not Impliedly Repeal Ordinance No. 8027
Both the oil companies and DOE argue that Ordinance No. 8119 repealed Ordinance No. 8027. They assert that
although there was no express repeal
86
of Ordinance No. 8027, Ordinance No. 8119 impliedly repealed it.
According to the oil companies, Ordinance No. 8119 reclassified the area covering the Pandacan Terminals to "High
Density Residential/Mixed Use Zone (R-3/MXD)"
87
whereas Ordinance No. 8027 reclassified the same area from
Industrial II to Commercial I:
SECTION 1. For the purpose of promoting sound urban planning and ensuring health, public safety, and general
welfare of the residents of Pandacan and Sta. Ana as well as its adjoining areas, the land use of [those] portions of
land bounded by the Pasig River in the north, PNR Railroad Track in the east, Beata St. in the south, Palumpong St.
in the southwest, and Estero de Pancacan in the west[,] PNR Railroad in the northwest area, Estero de Pandacan in
the [n]ortheast, Pasig River in the southeast and Dr. M.L. Carreon in the southwest. The area of Punta, Sta. Ana
bounded by the Pasig River, Marcelino Obrero St., Mayo 28 St., and F. Manalo Street, are hereby reclassified from
Industrial II to Commercial I. (Emphasis supplied)
Moreover, Ordinance No. 8119 provides for a phase-out of seven years:
SEC. 72. Existing Non-Conforming Uses and Buildings. - The lawful use of any building, structure or land at the time
of the adoption of this Ordinance may be continued, although such use does not conform with the provision of the
Ordinance, provided:
xxx xxx xxx
(g) In case the non-conforming use is an industrial use:
xxx xxx xxx
d. The land use classified as non-conforming shall program the phase-out and relocation of the non-conforming
use within seven (7) years from the date of effectivity of this Ordinance. (Emphasis supplied)
This is opposed to Ordinance No. 8027 which compels affected entities to vacate the area within six months from
the effectivity of the ordinance:
SEC. 3. Owners or operators of industries and other businesses, the operation of which are no longer permitted
under Section 1 hereof, are hereby given a period of six (6) months from the date of effectivity of this Ordinance
within which to cease and desist from the operation of businesses which are hereby in consequence, disallowed.
Ordinance No. 8119 also designated the Pandacan oil depot area as a "Planned Unit Development/Overlay Zone
(O-PUD)":
SEC. 23. Use Regulations in Planned Unit Development/Overlay Zone (O-PUD). O-PUD Zones are identified
specific sites in the City of Manila wherein the project site is comprehensively planned as an entity via unitary site
plan which permits flexibility in planning/ design, building siting, complementarily of building types and land uses,
usable open spaces and the preservation of significant natural land features, pursuant to regulations specified for
each particular PUD. Enumerated below are identified PUD:
xxx xxx xxx
6. Pandacan Oil Depot Area
xxx xxx xxx
Enumerated below are the allowable uses:
1. all uses allowed in all zones where it is located
2. the [Land Use Intensity Control (LUIC)] under which zones are located shall, in all instances be complied with
3. the validity of the prescribed LUIC shall only be [superseded] by the development controls and regulations
specified for each PUD as provided for each PUD as provided for by the masterplan of respective PUDs.
88
(Emphasis
supplied)
Respondent claims that in passing Ordinance No. 8119, the Sanggunian did not intend to repeal Ordinance No.
8027 but meant instead to carry over 8027s provisions to 8119 for the purpose of making Ordinance No. 8027
applicable to the oil companies even after the passage of Ordinance No. 8119.
89
He quotes an excerpt from the
minutes of the July 27, 2004 session of the Sanggunian during the first reading of Ordinance No. 8119:
Member GARCIA: Your Honor, iyong patungkol po roon sa oil depot doon sa amin sa Sixth District sa Pandacan,
wala pong nakalagay eith sa ordinansa rito na taliwas o kakaiba roon sa ordinansang ipinasa noong nakaraang
Konseho, iyong Ordinance No. 8027. So kung ano po ang nandirito sa ordinansa na ipinasa ninyo last time, iyon
lang po ang ni-lift eithe at inilagay eith. At eith eith ordinansang iyong naipasa ng huling Konseho, niri-classify
[ninyo] from Industrial II to Commercial C-1 ang area ng Pandacan kung nasaan ang oil depot. So ini-lift lang po
[eithe] iyong definition, density, at saka po yon pong ng noong ordinansa ninyo na siya eith naming inilagay
eith, iniba lang po naming iyong title. So wala po kaming binago na taliwas o nailagay na taliwas doon sa
ordinansang ipinasa ninyo, ni-lift lang po [eithe] from Ordinance No. 8027."
90
(Emphasis supplied)
We agree with respondent.
Repeal by implication proceeds on the premise that where a statute of later date clearly reveals the intention of
the legislature to abrogate a prior act on the subject, that intention must be given effect.
91

There are two kinds of implied repeal. The first is: where the provisions in the two acts on the same subject matter
are irreconcilably contradictory, the latter act, to the extent of the conflict, constitutes an implied repeal of the
earlier one.
92
The second is: if the later act covers the whole subject of the earlier one and is clearly intended as a
substitute, it will operate to repeal the earlier law.
93
The oil companies argue that the situation here falls under the
first category.
Implied repeals are not favored and will not be so declared unless the intent of the legislators is manifest.
94
As
statutes and ordinances are presumed to be passed only after careful deliberation and with knowledge of all
existing ones on the subject, it follows that, in passing a law, the legislature did not intend to interfere with or
abrogate a former law relating to the same subject matter.
95
If the intent to repeal is not clear, the later act should
be construed as a continuation of, and not a substitute for, the earlier act.
96

These standards are deeply enshrined in our jurisprudence. We disagree that, in enacting Ordinance No. 8119,
there was any indication of the legislative purpose to repeal Ordinance No. 8027.
97
The excerpt quoted above is
proof that there was never such an intent. While it is true that both ordinances relate to the same subject
matter, i.e.classification of the land use of the area where Pandacan oil depot is located, if there is no intent to
repeal the earlier enactment, every effort at reasonable construction must be made to reconcile the ordinances so
that both can be given effect:
The fact that a later enactment may relate to the same subject matter as that of an earlier statute is not of itself
sufficient to cause an implied repeal of the prior act, since the new statute may merely be cumulative or a
continuation of the old one. What is necessary is a manifest indication of legislative purpose to repeal.
98

For the first kind of implied repeal, there must be an irreconcilable conflict between the two ordinances. There is
no conflict between the two ordinances. Ordinance No. 8027 reclassified the Pandacan area from Industrial II to
Commercial I. Ordinance No. 8119, in Section 23, designated it as a "Planned Unit Development/Overlay Zone (O-
PUD)." In its Annex C which defined the zone boundaries,












G HOLDINGS, INC.,
Petitioner,


- versus -


NATIONAL MINES AND
ALLIED WORKERS
UNION

Local 103 (NAMAWU); SHERIFFS
RICHARD H. APROSTA and
ALBERTO MUNOZ, all acting
Sheriffs; DEPARTMENT OF
LABOR AND EMPLOYMENT,
Region VI, Bacolod District Office,
Bacolod

City
,
Respondents.

G.R. No. 160236

Present:

CARPIO MORALES, J.,
*

CHICO-NAZARIO,
**

Acting Chairperson,
NACHURA,
PERALTA, and
ABAD,
***
JJ




Promulgated:

October 16, 2009

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


Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
October 14, 2003 Decision
[1]
of the Court of Appeals (CA) in CA-G.R. SP No. 75322.


The Facts

The petitioner, G Holdings, Inc. (GHI), is a domestic corporation primarily engaged in the business of
owning and holding shares of stock of different companies.
[2]
It was registered with the Securities and Exchange
Commission on August 3, 1992. Private respondent, National Mines and Allied Workers Union Local 103
(NAMAWU), was the exclusive bargaining agent of the rank and file employees of Maricalum Mining Corporation
(MMC),
[3]
an entity operating a copper mine and mill complex at Sipalay, Negros Occidental.
[4]


MMC was incorporated by the Development Bank of the Philippines (DBP) and the Philippine National Bank
(PNB) on October 19, 1984, on account of their foreclosure of Marinduque Mining and Industrial Corporations
assets. MMC started its commercial operations in August 1985. Later, DBP and PNB transferred it to the National
Government for disposition or privatization because it had become a non-performing asset.
[5]


On October 2, 1992, pursuant to a Purchase and Sale Agreement
[6]
executed between GHI and Asset
Privatization Trust (APT), the former bought ninety percent (90%) of MMCs shares and financial claims.
[7]
These
financial claims were converted into three Promissory Notes
[8]
issued by MMC in favor of GHI totaling P500M and
secured by mortgages over MMCs properties. The notes, which were similarly worded except for their amounts,
read as follows:

PROMISSORY NOTE

AMOUNT - Php114,715,360.00 [Php186,550,560.00 in the second
note, and Php248,734,080.00 in the
third note.]


MAKATI, METRO MANILA,
PHILIPPINES, October 2, 1992

For Value Received, MARICALUM MINING CORPORATION (MMC) with postal address at 4
th
Floor,
Manila Memorial Park Bldg., 2283 Pasong Tamo Extension, Makati, Metro Manila, Philippines, hereby
promises to pay G HOLDINGS, INC., at its office at Phimco Compound, F. Manalo Street, Punta, Sta. Ana,
Manila, the amount of PESOS ONE HUNDRED FOURTEEN MILLION, SEVEN HUNDRED FIFTEEN THOUSAND
AND THREE HUNDRED SIXTY (Php114,715,360.00) *PESOS ONE HUNDRED EIGHTY SIX MILLION FIVE
HUNDRED FIFTY THOUSAND FIFE HUNDRED AND SIXTY (Php186,550,560.00) in the second note, and
PESOS TWO HUNDRED FORTY EIGHT MILLION, SEVEN HUNDRED THIRTY FOUR THOUSAND AND EIGHTY
(Php248,734,080.00) in the third note+, PHILIPPINE CURRENCY, on or before October 2, 2002. Interest
shall accrue on the amount of this Note at a rate per annum equal to the interest of 90-day Treasury Bills
prevailing on the Friday preceding the maturity date of every calendar quarter.

As collateral security, MMC hereby establishes and constitutes in favor of G
HOLDINGS, INC., its successors and/or assigns:

1. A mortgage over certain parcels of land, more particularly listed and described in the Sheriffs
Certificate of Sale dated September 7, 1984 issued by the Ex-Officio Provincial Sheriff of Negros Occidental, Rolando
V. Ramirez, with office at Bacolod City following the auction sale conducted pursuant to the provisions of Act 3135,
a copy of which certificate of sale is hereto attached as Annex A and made an integral part hereof;

2. A chattel mortgage over assets and personal properties more particularly listed and described in the
Sheriffs Certificate of Sale dated September 7, 1984 issued by the Ex-Officio Provincial Sheriff of Negros Occidental,
Rolando V. Ramirez, with office at Bacolod City following the auction conducted pursuant to the provisions of Act
1508, a copy of which Certificate of Sale is hereto attached as Annex B and made an integral part hereof.

3. Mortgages over assets listed in APT Specific Catalogue GC-031 for MMC, a copy of which Catalogue is
hereby made an integral part hereof by way of reference, as well as assets presently in use by MMC but which are
not listed or included in paragraphs 1 and 2 above and shall include all assets that may hereinafter be acquired by
MMC.


MARICALUM MINING CORPORATION
(Maker)

x x x x
[9]



Upon the signing of the Purchase and Sale Agreement and upon the full satisfaction of the stipulated
down payment, GHI immediately took physical possession of the mine site and its facilities, and took full control of
the management and operation of MMC.
[10]


Almost four years thereafter, or on August 23, 1996, a labor dispute (refusal to bargain collectively and
unfair labor practice) arose between MMC and NAMAWU, with the latter eventually filing with the National
Conciliation and Mediation Board of Bacolod City a notice of strike.
[11]
Then Labor Secretary, now Associate Justice
of this Court, Leonardo A. Quisumbing, later assumed jurisdiction over the dispute and ruled in favor of
NAMAWU. In his July 30, 1997 Order in OS-AJ-10-96-014 (Quisumbing Order), Secretary Quisumbing declared that
the lay-off (of workers) implemented on May 7, 1996 and October 7, 1996 was illegal and that MMC committed
unfair labor practice. He then ordered the reinstatement of the laid-off workers, with payment of full backwages
and benefits, and directed the execution of a new collective bargaining agreement (CBA) incorporating the terms
and conditions of the previous CBA providing for an annual increase in the workers daily wage.
[12]
In two separate
casesG.R. Nos. 133519 and 138996filed with this Court, we sustained the validity of the Quisumbing Order,
which became final and executory on January 26, 2000.
[13]


On May 11, 2001, then Acting Department of Labor and Employment (DOLE) Secretary, now also an
Associate Justice of this Court, Arturo D. Brion, on motion of NAMAWU, directed the issuance of a partial writ of
execution (Brion Writ), and ordered the DOLE sheriffs to proceed to the MMC premises for the execution of the
same.
[14]
Much later, in 2006, this Court, in G.R. Nos. 157696-97, entitled Maricalum Mining Corporation v. Brion
and NAMAWU,
[15]
affirmed the propriety of the issuance of the Brion Writ.

The Brion Writ was not fully satisfied because MMCs resident manager resisted its enforcement.
[16]
On
motion of NAMAWU, then DOLE Secretary Patricia A. Sto. Tomas ordered the issuance of the July 18, 2002 Alias
Writ of Execution and Break-Open Order (Sto. Tomas Writ).
[17]
On October 11, 2002, the respondent acting
sheriffs, the members of the union, and several armed men implemented the Sto. Tomas Writ, and levied on the
properties of MMC located at its compound in Sipalay, Negros Occidental.
[18]


On October 14, 2002, GHI filed with the Regional Trial Court (RTC) of
Kabankalan

City
, Negros Occidental, Special Civil Action (SCA) No. 1127 for Contempt with Prayer for the Issuance of a Temporary
Restraining Order (TRO) and Writ of Preliminary Injunction and to Nullify the Sheriffs Levy on Properties.
[19]
GHI
contended that the levied properties were the subject of a Deed of Real Estate and Chattel Mortgage, dated
September 5, 1996
[20]
executed by MMC in favor of GHI to secure the aforesaid P550M promissory notes; that this
deed was registered on February 24, 2000;
[21]
and that the mortgaged properties were already extrajudicially
foreclosed in July 2001 and sold to GHI as the highest bidder on December 3, 2001, as evidenced by the Certificate
of Sale dated December 4, 2001.
[22]


The trial court issued ex parte a TRO effective for 72 hours, and set the hearing on the application for a
writ of injunction.
[23]
On October 17, 2002, the trial court ordered the issuance of a Writ of Injunction (issued on
October 18, 2002)
[24]
enjoining the DOLE sheriffs from further enforcing the Sto. Tomas Writ and from conducting
any public sale of the levied-on properties, subject to GHIs posting of a P5M bond.
[25]


Resolving, among others, NAMAWUs separate motions for the reconsideration of the injunction order
and for the dismissal of the case, the RTC issued its December 4, 2002 Omnibus Order,
[26]
the dispositive portion of
which reads:

WHEREFORE, premises considered, respondent NAMAWU Local 103s Motion for
Reconsideration dated October 23, 2002 for the reconsideration of the Order of this Court
directing the issuance of Writ of Injunction prayed for by petitioner and the Order dated October
18, 2002 approving petitioners Injunction Bond in the amount of P5,000,000.00 is hereby
DENIED.

Respondents Motion to Dismiss as embodied in its Opposition to Extension of
Temporary Restraining Order and Issuance of Writ of Preliminary Injunction with Motion to
Dismiss and Suspend Period to File Answer dated October 15, 2002 is likewise DENIED.

Petitioners Urgent Motion for the return of the levied firearms is GRANTED. Pursuant
thereto, respondent sheriffs are ordered to return the levied firearms and handguns to the
petitioner provided the latter puts [up] a bond in the amount of P332,200.00.


Respondents lawyer, Atty. Jose Lapak, is strictly warned not to resort again to
disrespectful and contemptuous language in his pleadings, otherwise, the same shall be dealt
with accordingly.

SO ORDERED.
[27]



Aggrieved, NAMAWU filed with the CA a petition for certiorari under Rule 65, assailing the October 17, 18
and December 4, 2002 orders of the RTC.
[28]


After due proceedings, on October 14, 2003, the appellate court rendered a Decision setting aside the
RTC issuances and directing the immediate execution of the Sto. Tomas Writ. The CA ruled, among others, that
the circumstances surrounding the execution of the September 5, 1996 Deed of Real Estate and Chattel Mortgage
yielded the conclusion that the deed was sham, fictitious and fraudulent; that it was executed two weeks after the
labor dispute arose in 1996, but surprisingly, it was registered only on February 24, 2000, immediately after the
Court affirmed with finality the Quisumbing Order. The CA also found that the certificates of title to MMCs real
properties did not contain any annotation of a mortgage lien, and, suspiciously, GHI did not intervene in the long
drawn-out labor proceedings to protect its right as a mortgagee of virtually all the properties of MMC.
[29]


The CA further ruled that the subsequent foreclosure of the mortgage was irregular, effected precisely to
prevent the satisfaction of the judgment against MMC. It noted that the foreclosure proceedings were initiated in
July 2001, shortly after the issuance of the Brion Writ; and, more importantly, the basis for the extrajudicial
foreclosure was not the failure of MMC to pay the mortgage debt, but its failure to satisfy any money judgment
against it rendered by a court or tribunal of competent jurisdiction, in favor of any person, firm or entity, without
any legal ground or reason.
[30]
Further, the CA pierced the veil of corporate fiction of the two
corporations.
[31]
The dispositive portion of the appellate courts decision reads:

WHEREFORE, in view of the foregoing considerations, the petition is GRANTED. The
October 17, 2002 and the December 4, 2002 Order of the RTC, Branch 61 of Kabankalan City,
Negros Occidental are hereby ANNULLED and SET ASIDE for having been issued in excess or
without authority. The Writ of Preliminary Injunction issued by the said court is lifted, and the
DOLE Sheriff is directed to immediately enforce the Writ of Execution issued by the Department
of Labor and Employment in the case In re: Labor Dispute in Maricalum Mining Corporation
docketed as OS-AJ-10-96-01 (NCMB-RB6-08-96).
[32]



The Issues


Dissatisfied, GHI elevated the case to this Court via the instant petition for review on certiorari, raising the
following issues:

I

WHETHER OR NOT GHI IS A PARTY TO THE LABOR DISPUTE BETWEEN NAMAWU AND MMC.


II

WHETHER OR NOT, ASSUMING ARGUENDO THAT THE PERTINENT DECISION OR ORDER IN THE
SAID LABOR DISPUTE BETWEEN MMC AND NAMAWU MAY BE ENFORCED AGAINST GHI, THERE IS
ALREADY A FINAL DEETERMINATION BY THE SUPREME COURT OF THE RIGHTS OF THE PARTIES IN
SAID LABOR DISPUTE CONSIDERING THE PENDENCY OF G.R. NOS. 157696-97.


III

WHETHER OR NOT GHI IS THE ABSOLUTE OWNER OF THE PROPERTIES UNLAWFULLY GARNISHED
BY RESPONDENTS SHERIFFS.



IV

WHETHER OR NOT THE HONORABLE HENRY D. ARLES CORRECTLY ISSUED A WRIT OF
INJUNCTION AGAINST THE UNLAWFUL
EXECUTIOIN

ON
GHIS PROPERTIES.


V

WHETHER OR NOT THE VALIDITY OF THE DEED OF REAL AND CHATTEL MORTGAGE OVER THE
SUBJECT PROPERTIES BETWEEN MMC AND GHI MAY BE COLLATERALLY ATTACKED.


VI

WHETHER OR NOT, ASSUMING ARGUENDO THAT THE VALIDITY OF THE SAID REAL AND CHATTEL
MORTGAGE MAY BE COLLATERALLY ATTACKED, THE SAID MORTGAGE IS SHAM, FICTITIOUS AND
FRAUDULENT.


VII

WHETHER OR NOT GHI IS A DISTINCT AND SEPARATE CORPORATE ENTITY FROM MMC.


VIII

WHETHER OR NOT GHI CAN BE PREVENTED THROUGH THE ISSUANCE OF A RESTRAINING ORDER
OR INJUNCTION FROM TAKING POSSESSION OR BE DISPOSSESSED OF ASSETS PURCHASED BY IT
FROM APT.
[33]



Stripped of non-essentials, the core issue is whether, given the factual circumstances obtaining, the RTC
properly issued the writ of injunction to prevent the enforcement of the Sto. Tomas Writ. The resolution of this
principal issue, however, will necessitate a ruling on the following key and interrelated questions:

1. Whether the mortgage of the MMCs properties to GHI was a sham;

2. Whether there was an effective levy by the DOLE upon the MMCs real and personal properties;
and

3. Whether it was proper for the CA to pierce the veil of corporate fiction between MMC and GHI.


Our Ruling


Before we delve into an extended discussion of the foregoing issues, it is essential to take judicial cognizance
of cases intimately linked to the present controversy which had earlier been elevated to and decided by this Court.

Judicial Notice.

Judicial notice must be taken by this Court of its Decision in Maricalum Mining Corporation v. Hon. Arturo D.
Brion and NAMAWU,
[34]
in which we upheld the right of herein private respondent, NAMAWU, to its labor
claims. Upon the same principle of judicial notice, we acknowledge our Decision in Republic of the
Philippines
, through its trustee, the Asset Privatization Trust v. G Holdings, Inc.,
[35]
in which GHI was recognized as the
rightful purchaser of the shares of stocks of MMC, and thus, entitled to the delivery of the company notes
accompanying the said purchase. These company notes, consisting of three (3) Promissory Notes, were part of the
documents executed in 1992 in the privatization sale of MMC by the Asset Privatization Trust (APT) to GHI. Each
of these notes uniformly contains stipulations establishing andconstituting in favor of GHI mortgages over
MMCs real and personal properties. The stipulations were subsequently formalized in a separate document
denominated Deed of Real Estate and Chattel Mortgage on September 5, 1996. Thereafter, the Deed was
registered on February 4, 2000.
[36]

We find both decisions critically relevant to the instant dispute. In fact, they should have guided the courts
below in the disposition of the controversy at their respective levels. To repeat, these decisions respectively
confirm the right of NAMAWU to its labor claims
[37]
and affirm the right of GHI to its financial and mortgage claims
over the real and personal properties of MMC, as will be explained below. The assailed CA decision apparently
failed to consider the impact of these two decisions on the case at bar. Thus, we find it timely to reiterate that:
courts have also taken judicial notice of previous cases to determine whether or not the case pending is a moot
one or whether or not a previous ruling is applicable to the case under consideration.
[38]


However, the CA correctly assessed that the authority of the lower court to issue the challenged writ of
injunction depends on the validity of the third partys (GHIs) claim of ownership over the property subject of the
writ of execution issued by the labor department. Accordingly, the main inquiry addressed by the CA decision was
whether GHI could be treated as a third party or a stranger to the labor dispute, whose properties were beyond
the reach of the Writ of Execution dated December 18, 2001.
[39]


In this light, all the more does it become imperative to take judicial notice of the two cases aforesaid, as they
provide the necessary perspective to determine whether GHI is such a party with a valid ownership claim over the
properties subject of the writ of execution. In Juaban v. Espina,
[40]
we held that in some instances, courts have
also taken judicial notice of proceedings in other cases that are closely connected to the matter in
controversy. These cases may be so closely interwoven, or so clearly interdependent, as to invoke a rule of judicial
notice. The two cases that we have taken judicial notice of are of such character, and our review of the instant
case cannot stray from the findings and conclusions therein.

Having recognized these crucial Court rulings, situating the facts in proper perspective, we now proceed to
resolve the questions identified above.

The mortgage
was not a sham.

Republic etc., v. G Holdings, Inc. acknowledged the existence of the Purchase and Sale Agreement
between the APT and the GHI, and recounts the facts attendant to that transaction, as follows:

The series of negotiations between the
petitioner

Republic
of the
Philippines
, through the APT as its trustee, and G Holdings culminated in the execution of a purchase and sale agreement
on October 2, 1992. Under the agreement, the Republic undertook to sell and deliver 90% of the entire issued and
outstanding shares of MMC, as well as its company notes, to G Holdings in consideration of the purchase price
of P673,161,280. It also provided for a down payment of P98,704,000 with the balance divided into four tranches
payable in installment over a period of ten years.
[41]



The company notes mentioned therein were actually the very same three (3) Promissory Notes amounting to
P550M, issued by MMC in favor of GHI. As already adverted to above, these notes uniformly contained
stipulations establishing and constituting mortgages over MMCs real and personal properties.

It may be remembered that APT acquired the MMC from the PNB and the DBP. Then, in compliance with
its mandate to privatize government assets, APT sold the aforesaid MMC shares and notes to GHI. To repeat, this
Court has recognized this Purchase and Sale Agreement in Republic, etc., v. G Holdings, Inc.


The participation of the Government, through APT, in this transaction is significant. Because the
Government had actively negotiated and, eventually, executed the agreement, then the transaction is imbued
with an aura of official authority, giving rise to the presumption of regularity in its execution. This presumption
would cover all related transactional acts and documents needed to consummate the privatization sale, inclusive
of the Promissory Notes. It is obvious, then, that the Government, through APT, consented to the establishment
and constitution of the mortgages on the assets of MMC in favor of GHI, as provided in the notes. Accordingly,
the notes (and the stipulations therein) enjoy the benefit of the same presumption of regularity accorded to
government actions. Given the Government consent thereto, and clothed with the presumption of regularity, the
mortgages cannot be characterized as sham, fictitious or fraudulent.

Indeed, as mentioned above, the three (3) Promissory Notes, executed on October 2, 1992, established
and constituted in favor of GHI the following mortgages:

1. A mortgage over certain parcels of land, more particularly listed and described in
the Sheriffs Certificate of Sale dated September 7, 1984 issued by the Ex-Officio
Provincial Sheriff of Negros Occidental, Rolando V. Ramirez, with office at Bacolod City
following the auction sale conducted pursuant to the provisions of Act 3135, a copy of
which certificate of sale is hereto attached as Annex A and made an integral part
hereof;

2. A chattel mortgage over assets and personal properties more particularly
listed and described in the Sheriffs Certificate of Sale dated September 7, 1984 issued
by the Ex-Officio Provincial Sheriff of Negros Occidental, Rolando V. Ramirez, with office
at Bacolod City following the auction conducted pursuant to the provision of Act 1508, a
copy of which Certificate of Sale is hereto attached as Annex B and made an integral
part hereof.

3. Mortgages over assets listed in APT Specific catalogue GC-031 for MMC, a copy
of which Catalogue is hereby made an integral part hereof by way of reference, as well
as assets presently in use by MMC but which are not listed or included in paragraphs 1
and 2 above and shall include all assets that may hereinafter be acquired by MMC.
[42]


It is difficult to conceive that these mortgages, already existing in 1992, almost four (4) years before NAMAWU
filed its notice of strike, were a fictitious arrangement intended to defraud NAMAWU. After all, they were
agreed upon long before the seeds of the labor dispute germinated.

While it is true that the Deed of Real Estate and Chattel Mortgage was executed only on September 5,
1996, it is beyond cavil that this formal document of mortgage was merely a derivative of the original mortgage
stipulations contained in the Promissory Notes of October 2, 1992. The execution of this Deed in 1996 does not
detract from, but instead reinforces, the manifest intention of the parties to establish and constitute the
mortgages on MMCs real and personal properties.

Apparently, the move to execute a formal document denominated as the Deed of Real Estate and Chattel
Mortgage came about after the decision of the RTC of Manila in Civil Case No. 95-76132 became final in mid-
1996. This conclusion surfaces when we consider the genesis of Civil Case No. 95-76132 and subsequent incidents
thereto, as narrated in Republic, etc. v. G Holdings, Inc., viz:

Subsequently, a disagreement on the matter of when installment payments should
commence arose between the parties. The Republic claimed that it should be on the seventh
month from the signing of the agreement while G Holdings insisted that it should begin seven
months after the fulfillment of the closing conditions.

Unable to settle the issue, G Holdings filed a complaint for specific performance and
damages with the Regional Trial Court of Manila, Branch 49, against the Republic to compel it to
close the sale in accordance with the purchase and sale agreement. The complaint was docketed
as Civil Case No. 95-76132.

During the pre-trial, the respective counsels of the parties manifested that the issue
involved in the case was one of law and submitted the case for decision. On June 11, 1996, the
trial court rendered its decision. It ruled in favor of G Holdings and held:

In line with the foregoing, this Court having been convinced that the
Purchase and Sale Agreement is indeed subject to the final closing conditions
prescribed by Stipulation No. 5.02 and conformably to Rule 39, Section 10 of
the Rules of Court, accordingly orders that the Asset Privatization Trust
execute the corresponding Document of Transfer of the subject shares and
financial notes and cause the actual delivery of subject shares and notes to
G Holdings, Inc., within a period of thirty (30) days from receipt of this
Decision, and after G Holdings Inc., shall have paid in full the entire balance,
at its present value of P241,702,122.86, computed pursuant to the
prepayment provisions of the Agreement. Plaintiff shall pay the balance
simultaneously with the delivery of the Deed of Transfer and actual delivery of
the shares and notes.

SO ORDERED.


The Solicitor General filed a notice of appeal on behalf of the Republic on June 28,
1996. Contrary to the rules of procedure, however, the notice of appeal was filed with the Court
of Appeals (CA), not with the trial court which rendered the judgment appealed from.

No other judicial remedy was resorted to until July 2, 1999 when the Republic,
through the APT, filed a petition for annulment of judgment with the CA. It claimed that the
decision should be annulled on the ground of abuse of discretion amounting to lack of
jurisdiction on the part of the trial court. x x x

Finding that the grounds necessary for the annulment of judgment were inexistent, the
appellate court dismissed the petition. x x x x
[43]



With the RTC decision having become final owing to the failure of the Republic to perfect an appeal, it may have
become necessary to execute the Deed of Real Estate and Chattel Mortgage on September 5, 1996, in order to
enforce the trial courts decision of June 11, 1996. This appears to be the most plausible explanation for the
execution of the Deed of Real Estate and Chattel Mortgage only in September 1996. Even as the parties had
already validly constituted the mortgages in 1992, as explicitly provided in the Promissory Notes, a specific deed of
mortgage in a separate document may have been deemed necessary for registration purposes. Obviously, this
explanation is more logical and more sensible than the strained conjecture that the mortgage was executed on
September 5, 1996 only for the purpose of defrauding NAMAWU.

It is undeniable that the Deed of Real Estate and Chattel Mortgage was formally documented two weeks
after NAMAWU filed its notice of strike against MMC on August 23, 1996. However, this fact alone cannot give
rise to an adverse inference for two reasons. First, as discussed above, the mortgages had already been
established and constituted as early as October 2, 1992 in the Promissory Notes, showing the clear intent of the
parties to impose a lien upon MMCs properties. Second, the mere filing of a notice of strike by NAMAWU did not,
as yet, vest in NAMAWU any definitive right that could be prejudiced by the execution of the mortgage deed.

The fact that MMCs obligation to GHI is not reflected in the formers financial statementsa circumstance
made capital of by NAMAWU in order to cast doubt on the validity of the mortgage deedis of no moment. By
itself, it does not provide a sufficient basis to invalidate this public document. To say otherwise, and to invalidate
the mortgage deed on this pretext, would furnish MMC a convenient excuse to absolve itself of its mortgage
obligations by adopting the simple strategy of not including the obligations in its financial statements. It would
ignore our ruling in Republic, etc. v. G Holdings, Inc.,which obliged APT to deliver the MMC shares and financial
notes to GHI. Besides, the failure of the mortgagor to record in its financial statements its loan obligations is
surely not an essential element for the validity of mortgage agreements, nor will it independently affect the right
of the mortgagee to foreclose.

Contrary to the CA decision, Tanongon v. Samson
[44]
is not on all fours with the instant case. There are
material differences between the two cases. At issue in Tanongon was a third-party claim arising from a Deed of
Absolute Sale executed between Olizon and Tanongon on July 29, 1997, after the NLRC decision became final and
executory on April 29, 1997. In the case at bar, what is involved is a loan with mortgage agreement executed on
October 2, 1992, well ahead of the unions notice of strike on August 23, 1996. No presumption of regularity
inheres in the deed of sale in Tanongon, while the participation of APT in this case clothes the transaction in 1992
with such a presumption that has not been successfully rebutted. In Tanongon, the conduct of a full-blown trial
led to the findingduly supported by evidencethat the voluntary sale of the assets of the judgment debtor was
made in bad faith. Here, no trial was held, owing to the motion to dismiss filed by NAMAWU, and the CA failed to
consider the factual findings made by this Court in Republic, etc. v. G Holdings, Inc. Furthermore,
in Tanongon, the claimant did not exercise his option to file a separate action in court, thus allowing the NLRC
Sheriff to levy on execution and to determine the rights of third-party claimants.
[45]
In this case, a separate action
was filed in the regular courts by GHI, the third-party claimant. Finally, the questioned transaction
in Tanongon was a plain, voluntary transfer in the form of a sale executed by the judgment debtor in favor of a
dubious third-party, resulting in the inability of the judgment creditor to satisfy the judgment. On the other hand,
this case involves an involuntary transfer (foreclosure of mortgage) arising from a loan obligation that well-existed
long before the commencement of the labor claims of the private respondent.

Three other circumstances have been put forward by the CA to support its conclusion that the mortgage
contract is a sham. First, the CA considered it highly suspect that the Deed of Real Estate and Chattel Mortgage
was registered only on February 4, 2000, three years after its execution, and almost one month after the
Supreme Court rendered its decision in the labor dispute.
[46]
Equally suspicious, as far as the CA is concerned, is
the fact that the mortgages were foreclosed on July 31, 2001, after the DOLE had already issued a Partial Writ of
Execution on May 9, 2001.
[47]
To the appellate court, the timing of the registration of the mortgage deed was too
coincidental, while the date of the foreclosure signified that it was effected precisely to prevent the satisfaction
of the judgment awards.
[48]
Furthermore, the CA found that the mortgage deed itself was executed without any
consideration, because at the time of its execution, all the assets of MMC had already been transferred to GHI.
[49]


These circumstances provided the CA with sufficient justification to apply Article 1387 of the Civil Code on
presumed fraudulent transactions, and to declare that the mortgage deed was void for being simulated and
fictitious.
[50]


We do not agree. We find this Courts ruling in MR Holdings, Ltd. v. Sheriff Bajar
[51]
pertinent and instructive:

Article 1387 of the Civil Code of the
Philippines
provides:

Art. 1387. All contracts by virtue of which the debtor alienates
property by gratuitous title are presumed to have been entered into in fraud of
creditors, when the donor did not reserve sufficient property to pay all debts
contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made
by persons against whom some judgment has been rendered in any instance or
some writ of attachment has been issued. The decision or attachment need not
refer to the property alienated, and need not have been obtained by the party
seeking rescission.
In addition to these presumptions, the design to defraud creditors
may be proved in any other manner recognized by law and of evidence.


This article presumes the existence of fraud made by a debtor. Thus,
in the absence of satisfactory evidence to the contrary, an alienation of a
property will be held fraudulent if it is made after a judgment has been
rendered against the debtor making the alienation. This presumption of fraud
is not conclusive and may be rebutted by satisfactory and convincing
evidence. All that is necessary is to establish affirmatively that the
conveyance is made in good faith and for a sufficient and valuable
consideration.

The Assignment Agreement and the Deed of Assignment were executed for valuable
considerations. Patent from the Assignment Agreement is the fact that petitioner assumed the
payment of US$18,453,450.12 to ADB in satisfaction of Marcoppers remaining debt as of March
20, 1997. Solidbank cannot deny this fact considering that a substantial portion of the said
payment, in the sum of US$13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its
major stockholder.
The facts of the case so far show that the assignment contracts were executed in good
faith. The execution of the Assignment Agreement on March 20, 1997 and the Deed of
Assignment on December 8,1997 is not the alpha of this case. While the execution of these
assignment contracts almost coincided with the rendition on May 7, 1997 of the Partial
Judgment in Civil Case No. 96-80083 by the
Manila
RTC, however, there was no intention on the part of petitioner to defeat Solidbanks claim. It bears reiterating
that as early as November 4, 1992, Placer Dome had already bound itself under a Support and Standby Credit
Agreement to provide Marcopper with cash flow support for the payment to ADB of its obligations. When
Marcopper ceased operations on account of disastrous mine tailings spill into the Boac River and ADB pressed for
payment of the loan, Placer Dome agreed to have its subsidiary, herein petitioner, pay ADB the amount of
US$18,453,450.12.
Thereupon, ADB and Marcopper executed, respectively, in favor of petitioner an
Assignment Agreement and a Deed of Assignment. Obviously, the assignment contracts
were connected with transactions that happened long before the rendition in 1997 of the
Partial Judgment in Civil Case No. 96-80083 by the
Manila
RTC. Those contracts cannot be viewed in isolation. If we may add, it is highly inconceivable that ADB, a
reputable international financial organization, will connive with Marcopper to feign or simulate a contract in 1992
just to defraud Solidbank for its claim four years thereafter. And it is equally incredible for petitioner to be paying
the huge sum of US$18,453,450.12 to ADB only for the purpose of defrauding Solidbank of the sum of
P52,970,756.89.
It is said that the test as to whether or not a conveyance is fraudulent is does it prejudice
the rights of creditors? We cannot see how Solidbanks right was prejudiced by the assignment
contracts considering that substantially all of Marcoppers properties were already covered by
the registered Deed of Real Estate and Chattel Mortgage executed by Marcopper in favor of
ADB as early as November 11, 1992. As such, Solidbank cannot assert a better right than ADB,
the latter being a preferred creditor. It is basic that mortgaged properties answer primarily for
the mortgaged credit, not for the judgment credit of the mortgagors unsecured
creditor. Considering that petitioner assumed Marcoppers debt to ADB, it follows that
Solidbanks right as judgment creditor over the subject properties must give way to that of the
former.
[52]


From this ruling in MR Holdings, we can draw parallel conclusions. The execution of the subsequent Deed of
Real Estate and Chattel Mortgage on September 5, 1996 was simply the formal documentation of what had
already been agreed in the seminal transaction (the Purchase and Sale Agreement) between APT and GHI. It
should not be viewed in isolation, apart from the original agreement of October 2, 1992. And it cannot be denied
that this original agreement was supported by an adequate consideration. The APT was even ordered by the court
to deliver the shares and financial notes of MMC in exchange for the payments that GHI had made.

It was also about this time, in 1996, that NAMAWU filed a notice of strike to protest non-payment of its
rightful labor claims.
[53]
But, as already mentioned, the outcome of that labor dispute was yet unascertainable at
that time, and NAMAWU could only have hoped for, or speculated about, a favorable ruling. To paraphrase MR
Holdings, we cannot see how NAMAWUs right was prejudiced by the Deed of Real Estate and Chattel Mortgage,
or by its delayed registration, when substantially all of the properties of MMC were already mortgaged to GHI as
early as October 2, 1992. Given this reality, the Court of Appeals had no basis to conclude that this Deed of Real
Estate and Chattel Mortgage, by reason of its late registration, was a simulated or fictitious contract.


The importance of registration and its binding effect is stated in Section 51 of the Property Registration
Decree or Presidential Decree (P.D.) No. 1529,
[54]
which reads:
SECTION 51. Conveyance and other dealings by registered owner.An owner of registered
land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with
existing laws. He may use such forms, deeds, mortgages, leases or other voluntary instrument as
are sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or effect registered land, shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties and as evidence of authority to the
Registry of Deeds to make registration.

The act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned, and in all cases under this Decree, the registration shall be made in
the Office of the Register of Deeds for the province or the city where the land lies.
[55]


Under the
Torrens
system, registration is the operative act which gives validity to the transfer or creates a lien upon the land.
Further, entrenched in our jurisdiction is the doctrine that registration in a public registry creates constructive
notice to the whole world.
[56]
Thus, Section 51 of Act No. 496, as amended by Section 52 of P.D. No. 1529,
provides:

SECTION 52. Constructive notice upon registration.Every conveyance, mortgage, lease,
lien, attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed or entered in the Office of the Register of Deeds for the province or city where
the land to which it relates lies, be constructive notice to all persons from the time of such
registering, filing or entering.


But, there is nothing in Act No. 496, as amended by P.D. No. 1529, that imposes a period within which to
register annotations of conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry
affecting registered land. If liens were not so registered, then it shall operate only as a contract between the
parties and as evidence of authority to the Registry of Deeds to make registration. If registered, it shall be the
operative act to convey or affect the land insofar as third persons are concerned. The mere lapse of time from the
execution of the mortgage document to the moment of its registration does not affect the rights of a mortgagee.

Neither will the circumstance of GHIs foreclosure of MMCs properties on July 31, 2001, or after the DOLE
had already issued a Partial Writ of Execution on May 9, 2001 against MMC, support the conclusion of the CA that
GHIs act of foreclosing on MMCs properties was effected to prevent satisfaction of the judgment award. GHIs
mortgage rights, constituted in 1992, antedated the Partial Writ of Execution by nearly ten (10) years. GHIs resort
to foreclosure was a legitimate enforcement of a right to liquidate a bona fide debt. It was a reasonable option
open to a mortgagee which, not being a party to the labor dispute between NAMAWU and MMC, stood to suffer a
loss if it did not avail itself of the remedy of foreclosure.

The well-settled rule is that a mortgage lien is inseparable from the property mortgaged.
[57]
While it is
true that GHIs foreclosure of MMCs mortgaged properties may have had the effect to prevent satisfaction of
the judgment award against the specific mortgaged property that first answers for a mortgage obligation ahead of
any subsequent creditors, that same foreclosure does not necessarily translate to having been effected to
prevent satisfaction of the judgment award against MMC.

Likewise, we note the narration of subsequent facts contained in the Comment of the Office of the
Solicitor General. Therein, it is alleged that after the Partial Writ of Execution was issued on May 9, 2001, a motion
for reconsideration was filed by MMC; that the denial of the motion was appealed to the CA; that when the appeal
was dismissed by the CA on January 24, 2002, it eventually became the subject of a review petition before this
Court, docketed as G.R. No. 157696; and that G.R. No. 157696 was decided by this Court only on February 9,
2006.


This chronology of subsequent events shows that February 9, 2006 would have been the earliest date for
the unimpeded enforcement of the Partial Writ of Execution, as it was only then that this Court resolved the
issue. This happened four and a half years after July 31, 2001, the date when GHI foreclosed on the mortgaged
properties. Thus, it is not accurate to say that the foreclosure made on July 31, 2001 was effected [only] to
prevent satisfaction of the judgment award.

We also observe the error in the CAs finding that the 1996 Deed of Real Estate and Chattel Mortgage was
not supported by any consideration since at the time the deed was executed, all the real and personal property of
MMC had already been transferred in the hands of G Holdings.
[58]
It should be remembered that the Purchase
and Sale Agreement between GHI and APT involved large amounts ( P550M) and even spawned a subsequent
court action (Civil Case No. 95-76132, RTC of Manila). Yet, nowhere in the Agreement or in the RTC decision is
there any mention of real and personal properties of MMC being included in the sale to GHI in 1992. These
properties simply served as mortgaged collateral for the 1992 Promissory Notes.
[59]
The Purchase and Sale
Agreement and the Promissory Notes themselves are the best evidence that there was ample consideration for
the mortgage.

Thus, we must reject the conclusion of the CA that the Deed of Real Estate and Chattel Mortgage executed in
1996 was a simulated transaction.


On the issue of whether there
had been an effective levy upon
the properties of GHI.


The well-settled principle is that the rights of a mortgage creditor over the mortgaged properties are
superior to those of a subsequent attaching creditor. In Cabral v. Evangelista,
[60]
this Court declared that:

Defendants-appellants purchase of the mortgaged chattels at the public sheriff's sale
and the delivery of the chattels to them with a certificate of sale did not give them a superior
right to the chattels as against plaintiffs-mortgagees. Rule 39, Section 22 of the old Rules of Court
(now Rule 39, Section 25 of the Revised Rules), cited by appellants precisely provides that the
sale conveys to the purchaser all the right which the debtor had in such property on the day the
execution or attachment was levied. It has long been settled by this Court that The right of
those who so acquire said properties should not and can not be superior to that of the creditor
who has in his favor an instrument of mortgage executed with the formalities of the law, in good
faith, and without the least indication of fraud. This is all the more true in the present case,
because, when the plaintiff purchased the automobile in question on August 22, 1933, he knew,
or at least, it is presumed that he knew, by the mere fact that the instrument of mortgage,
Exhibit 2, was registered in the office of the register of deeds of Manila, that said automobile was
subject to a mortgage lien. In purchasing it, with full knowledge that such circumstances existed,
it should be presumed that he did so, very much willing to respect the lien existing thereon, since
he should not have expected that with the purchase, he would acquire a better right than that
which the vendor then had. In another case between two mortgagees, we held that As
between the first and second mortgagees, therefore, the second mortgagee has at most only the
right to redeem, and even when the second mortgagee goes through the formality of an
extrajudicial foreclosure, the purchaser acquires no more than the right of redemption from the
first mortgagee. The superiority of the mortgagee's lien over that of a subsequent judgment
creditor is now expressly provided in Rule 39, Section 16 of the Revised Rules of Court, which
states with regard to the effect of levy on execution as to third persons that The levy on
execution shall create a lien in favor of the judgment creditor over the right, title and interest of
the judgment debtor in such property at the time of the levy, subject to liens or encumbrances
then existing.


Even in the matter of possession, mortgagees over chattel have superior, preferential and paramount rights
thereto, and the mortgagor has mere rights of redemption.
[61]


Similar rules apply to cases of mortgaged real properties that are registered. Since the properties were
already mortgaged to GHI, the only interest remaining in the mortgagor was its right to redeem said properties
from the mortgage. The right of redemption was the only leviable or attachable property right of the mortgagor in
the mortgaged real properties. We have held that

The main issue in this case is the nature of the lien of a judgment creditor, like the
petitioner, who has levied an attachment on the judgment debtor's (CMI) real properties which
had been mortgaged to a consortium of banks and were subsequently sold to a third party, Top
Rate.

x x x x

The sheriff's levy on CMI's properties, under the writ of attachment obtained by the
petitioner, was actually a levy on the interest only of the judgment debtor CMI on those
properties. Since the properties were already mortgaged to the consortium of banks, the only
interest remaining in the mortgagor CMI was its right to redeem said properties from the
mortgage. The right of redemption was the only leviable or attachable property right of CMI in
the mortgaged real properties. The sheriff could not have attached the properties themselves,
for they had already been conveyed to the consortium of banks by mortgage (defined as a
conditional sale), so his levy must be understood to have attached only the mortgagor's
remaining interest in the mortgaged property the right to redeem it from the mortgage.
[62]


x x x x


There appears in the record a factual contradiction relating to whether the foreclosure by GHI on July 13,
2001
[63]
over some of the contested properties came ahead of the levy thereon, or the reverse. NAMAWU claims
that the levy on two trucks was effected on June 22, 2001,
[64]
which GHI disputes as a misstatement because the
levy was attempted on July 18, 2002, and not 2001
[65]
What is undisputed though is that the mortgage of GHI was
registered on February 4, 2000,
[66]
well ahead of any levy by NAMAWU. Prior registration of a lien creates a
preference, as the act of registration is the operative act that conveys and affects the land,
[67]
even against
subsequent judgment creditors, such as respondent herein. Its registration of the mortgage was not intended to
defraud NAMAWU of its judgment claims, since even the courts were already judicially aware of its existence since
1992. Thus, at that moment in time, with the registration of the mortgage, either NAMAWU had no properties of
MMC to attach because the same had been previously foreclosed by GHI as mortgagee thereof; or by virtue of the
DOLEs levy to enforce NAMAWUs claims, the latters rights are subject to the notice of the foreclosure on the
subject properties by a prior mortgagees right. GHIs mortgage right had already been registered by then, and it
is basic that mortgaged properties answer primarily for the mortgaged credit, not for the judgment credit of the
mortgagors unsecured creditor.
[68]

On the issue of piercing the
veil of corporate fiction.


The CA found that:

Ordinarily, the interlocking of directors and officers in two different corporations is not
a conclusive indication that the corporations are one and the same for purposes of applying the
doctrine of piercing the veil of corporate fiction. However, when the legal fiction of the separate
corporate personality is abused, such as when the same is used for fraudulent or wrongful ends,
the courts have not hesitated to pierce the corporate veil (Francisco vs. Mejia, 362 SCRA 738). In
the case at bar, the Deed of Real Estate and Chattel Mortgage was entered into between MMC
and G Holdings for the purpose of evading the satisfaction of the legitimate claims of the
petitioner against MMC. The notion of separate personality is clearly being utilized by the two
corporations to perpetuate the violation of a positive legal duty arising from a final judgment to
the prejudice of the petitioners right.
[69]



Settled jurisprudence
[70]
has it that

(A) corporation, upon coming into existence, is invested by law with a personality
separate and distinct from those persons composing it as well as from any other legal entity to
which it may be related. By this attribute, a stockholder may not, generally, be made to answer
for acts or liabilities of the said corporation, and vice versa. This separate and distinct personality
is, however, merely a fiction created by law for convenience and to promote the ends of justice.
For this reason, it may not be used or invoked for ends subversive to the policy and purpose
behind its creation or which could not have been intended by law to which it owes its being. This
is particularly true when the fiction is used to defeat public convenience, justify wrong, protect
fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or
otherwise circumvent the law. This is likewise true where the corporate entity is being used as
an alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another
corporate entity. In all these cases, the notion of corporate entity will be pierced or disregarded
with reference to the particular transaction involved.


Given this jurisprudential principle and the factual circumstances obtaining in this case, we now ask: Was the CA
correct in piercing the veil of corporate identity of GHI and MMC?



In our disquisition above, we have shown that the CAs finding that there was a simulated mortgage
between GHI and MMC to justify a wrong or protect a fraud has struggled vainly to find a foothold when
confronted with the ruling of this Court in Republic v. G Holdings, Inc.

The negotiations between the GHI and the Government--through APT, dating back to 1992--culminating in
the Purchase and Sale Agreement, cannot be depicted as a contrived transaction. In fact, in the said Republic, etc.,
v. G Holdings, Inc., this Court adjudged that GHI was entitled to its rightful claims not just to the shares of MMC
itself, or just to the financial notes that already contained the mortgage clauses over MMCs disputed assets, but
also to the delivery of those instruments. Certainly, we cannot impute to this Courts findings on the case any
badge of fraud. Thus, we reject the CAs conclusion that it was right to pierce the veil of corporate fiction, because
the foregoing circumstances belie such an inference. Furthermore, we cannot ascribe to the Government, or the
APT in particular, any undue motive to participate in a transaction designed to perpetrate fraud. Accordingly, we
consider the CA interpretation unwarranted.

We also cannot agree that the presumption of fraud in Article 1387 of the Civil Code relative to property
conveyances, when there was already a judgment rendered or a writ of attachment issued, authorizes piercing the
veil of corporate identity in this case. We find that Article 1387 finds less application to an involuntary alienation
such as the foreclosure of mortgage made before any final judgment of a court. We thus hold that when the
alienation is involuntary, and the foreclosure is not fraudulent because the mortgage deed has been previously
executed in accordance with formalities of law, and the foreclosure is resorted to in order to liquidate a bona
fide debt, it is not the alienation by onerous title contemplated in Article 1387 of the Civil Code wherein fraud is
presumed.


Since the factual antecedents of this case do not warrant a finding that the mortgage and loan
agreements between MMC and GHI were simulated, then their separate personalities must be recognized. To
pierce the veil of corporate fiction would require that their personalities as creditor and debtor be conjoined,
resulting in a merger of the personalities of the creditor (GHI) and the debtor (MMC) in one person, such that the
debt of one to the other is thereby extinguished. But the debt embodied in the 1992 Financial Notes has been
established, and even made subject of court litigation (Civil Case No. 95-76132, RTC Manila). This can only mean
that GHI and MMC have separate corporate personalities.

Neither was MMC used merely as an alter ego, adjunct, or business conduit for the sole benefit of GHI, to
justify piercing the formers veil of corporate fiction so that the latter could be held liable to claims of third-party
judgment creditors, like NAMAWU. In this regard, we find American jurisprudence persuasive. In a decision by the
Supreme Court of New York
[71]
bearing upon similar facts, the Court denied piercing the veil of corporate fiction to
favor a judgment creditor who sued the parent corporation of the debtor, alleging fraudulent corporate asset-
shifting effected after a prior final judgment. Under a factual background largely resembling this case at bar, viz:

In this action, plaintiffs seek to recover the balance due under judgments they obtained
against Lake George Ventures Inc. (hereinafter LGV), a subsidiary of defendant that was formed
to develop the Top O the World resort community overlooking Lake George, by piercing the
corporate veil or upon the theory that LGV's transfer of certain assets constituted fraudulent
transfers under the Debtor and Creditor Law. We previously upheld Supreme Court's denial of
defendant's motion for summary judgment dismissing the complaint (252 A.D.2d 609, 675
N.Y.S.2d 234) and the matter proceeded to a nonjury trial. Supreme Court thereafter rendered
judgment in favor of defendant upon its findings that, although defendant dominated LGV, it did
not use that domination to commit a fraud or wrong on plaintiffs. Plaintiffs appealed.




The trial evidence showed that LGV was incorporated in November 1985. Defendant's
principal, Francesco Galesi, initially held 90% of the stock and all of the stock was ultimately
transferred to defendant. Initial project funding was provided through a $2.5 million loan from
Chemical Bank, secured by defendant's guarantee of repayment of the loan and completion of
the project. The loan proceeds were utilized to purchase the real property upon which the
project was to be established. Chemical Bank thereafter loaned an additional $3.5 million to LGV,
again guaranteed by defendant, and the two loans were consolidated into a first mortgage loan
of $6 million. In 1989, the loan was modified by splitting the loan into a $1.9 term note on which
defendant was primary obligor and a $4.1 million project note on which LGV was the obligor and
defendant was a guarantor.


Due to LGV's lack of success in marketing the project's townhouses and in order to
protect itself from the exercise of Chemical Bank's enforcement remedies, defendant was
forced to make monthly installments of principal and interest on LGV's behalf. Ultimately,
defendant purchased the project note from Chemical Bank for $3.1 million, paid the $1.5 million
balance on the term note and took an assignment of the first mortgage on the project's realty.
After LGV failed to make payments on the indebtedness over the course of the succeeding two
years, defendant brought an action to foreclose its mortgage. Ultimately, defendant obtained a
judgment of foreclosure and sale in the amount of $6,070,246.50. Defendant bid in the property
at the foreclosure sale and thereafter obtained a deficiency judgment in the amount of
$3,070,246.50.

Following the foreclosure sale, LGV transferred to defendant all of the shares of Top of
the World Water Company, a separate entity that had been organized to construct and operate
the water supply and delivery system for the project, in exchange for a $950,000 reduction in the
deficiency judgment.


the U.S. Supreme Court of New York held


Based on the foregoing, and accepting that defendant exercised complete domination
and control over LGV, we are at a loss as to how plaintiffs perceive themselves to have been
inequitably affected by defendant's foreclosure action against LGV, by LGV's divestiture of the
water company stock or the sports complex property, or by defendant's transfer to LGV of a
third party's uncollectible note, accomplished solely for tax purposes. It is undisputed that LGV
was, and for some period of time had been, unable to meet its obligations and, at the time of
the foreclosure sale, liens against its property exceeded the value of its assets by several
million dollars, even including the water company and sports complex at the values plaintiffs
would assign to them. In fact, even if plaintiffs' analysis were utilized to eliminate the entire $3
million deficiency judgment, the fact remains that subordinatemortgages totaling nearly an
additional $2 million have priority over plaintiffs' judgments.

As properly concluded by Supreme Court, absent a finding of any inequitable
consequence to plaintiffs, both causes of action pleaded in the amended complaint must fail.
Fundamentally, a party seeking to pierce the corporate veil must show complete domination
and control of the subsidiary by the parent and also that such domination was used to commit
a fraud or wrong against the plaintiff that resulted in the plaintiff's injury ( 252 A.D.2d 609, 610,
675 N.Y.S.2d 234, supra; see, Matter of Morris v. New York State Dept. of Taxation & Fin., 82
N.Y.2d 135, 141, 603 N.Y.S.2d 807, 623 N.E.2d 1157). Notably, *e+vidence of domination alone
does not suffice without an additional showing that it led to inequity, fraud or
malfeasance (TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 703 N.E.2d
749).

x x x x

In reaching that conclusion, we specifically reject a number of plaintiffs' assertions,
including the entirely erroneous claims that our determination on the prior appeal (252 A.D.2d
609, 675 N.Y.S.2d 234, supra) set forth a roadmap for the proof required at trial and mandated
a verdict in favor of plaintiffs upon their production of evidence that supported the decision's
listed facts. To the contrary, our decision was predicated upon the existence of such evidence,
absent which we would have granted summary judgment in favor of defendant. We are equally
unpersuaded by plaintiffs' continued reliance upon defendant's December 1991 unilateral
conversion of its intercompany loans with LGV from debt to equity, which constituted nothing
more than a bookkeeping transaction and had no apparent effect on LGV's obligations to
defendant or defendant's right to foreclose on its mortgage.
[72]



This doctrine is good law under Philippine jurisdiction.

In Concept Builders, Inc. v. National Labor Relations Commission,
[73]
we laid down the test in determining
the applicability of the doctrine of piercing the veil of corporate fiction, to wit:

1. Control, not mere majority or complete control, but complete domination, not
only of finances but of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction had at the time no separate
mind, will or existence of its own.

2. Such control must have been used by the defendant to commit fraud or wrong,
to perpetuate the violation of a statutory or other positive legal duty, or dishonest and,
unjust act in contravention of plaintiffs legal rights; and,


3. The aforesaid control and breach of duty must proximately cause the injury or
unjust loss complained of.

x x x x


Time and again, we have reiterated that mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not, by itself, a sufficient ground for
disregarding a separate corporate personality.
[74]
It is basic that a corporation has a personality separate and
distinct from that composing it as well as from that of any other legal entity to which it may be related. Clear and
convincing evidence is needed to pierce the veil of corporate fiction.
[75]


In this case, the mere interlocking of directors and officers does not warrant piercing the separate
corporate personalities of MMC and GHI. Not only must there be a showing that there was majority or complete
control, but complete domination, not only of finances but of policy and business practice in respect to the
transaction attacked, so that the corporate entity as to this transaction had at the time no separate mind, will or
existence of its own. The mortgage deed transaction attacked as a basis for piercing the corporate veil was a
transaction that was an offshoot, a derivative, of the mortgages earlier constituted in the Promissory Notes dated
October 2, 1992. But these Promissory Notes with mortgage were executed by GHI with APT in the name of MMC,
in a full privatization process. It appears that if there was any control or domination exercised over MMC, it was
APT, not GHI, that wielded it. Neither can we conclude that the constitution of the loan nearly four (4) years prior
to NAMAWUs notice of strike could have been the proximate cause of the injury of NAMAWU for having been
deprived of MMCs corporate assets.


On the propriety of injunction
to prevent execution by the
NLRC on the properties
of third-party claimants


It is settled that a Regional Trial Court can validly issue a Temporary Restraining Order (TRO) and, later, a
writ of preliminary injunction to prevent enforcement of a writ of execution issued by a labor tribunal on the basis
of a third-partys claim of ownership over the properties levied upon.
[76]
While, as a rule, no temporary or
permanent injunction or restraining order in any case involving or growing out of a labor dispute shall be issued by
any court--where the writ of execution issued by a labor tribunal is sought to be enforced upon the property of a
stranger to the labor dispute, even upon a mere prima facieshowing of ownership of such claimant--a separate
action for injunctive relief against such levy may be maintained in court, since said action neither involves nor
grows out of a labor dispute insofar as the third party is concerned.
[77]
Instructively,National Mines and Allied
Workers
Union
v. Vera
[78]


Petitioners' reliance on the provision of Art. 254 of the New Labor Code (herein earlier
quoted) which prohibits injunctions or restraining orders in any case involving or growing out of
a 'labor dispute' is not well-taken. This has no application to the case at bar. Civil Case No. 2749
is one which neither "involves" nor "grows out" of a labor dispute. What 'involves' or 'grows out'
of a labor dispute is the NLRC case between petitioners and the judgment debtor, Philippine Iron
Mines. The private respondents are not parties to the said NLRC case. Civil Case No. 2749 does
not put in issue either the fact or validity of the proceeding in theNLRC case nor the decision
therein rendered, much less the writ of execution issued thereunder. It does not seek to enjoin
the execution of the decision against the properties of the judgment debtor. What is sought to
be tried in Civil Case No. 2749 is whether the NLRC's decision and writ of execution, above
mentioned, shall be permitted to be satisfied against properties of private respondents, and not
of the judgment debtor named in the NLRC decision and writ of execution. Such a recourse is
allowed under the provisions of Section 17, Rule 39 of the Rules of Court.


To sustain petitioners' theory will inevitably lead to disastrous consequences and lend
judicial imprimatur to deprivation of property without due process of law. Simply because a writ
of execution was issued by the NLRC does not authorize the sheriff implementing the same to
levy on anybody's property. To deny the victim of the wrongful levy, the recourse such as that
availed of by the herein private respondents, under the pretext that no court of general
jurisdiction can interfere with the writ of execution issued in a labor dispute, will be sanctioning
a greater evil than that sought to be avoided by the Labor Code provision in question. Certainly,
that could not have been the intendment of the law creating the NLRC. For well-settled is the
rule that the power of a court to execute its judgment extends only over properties
unquestionably belonging to the judgment debtor.


Likewise, since the third-party claimant is not one of the parties to the action, he cannot, strictly speaking,
appeal from the order denying his claim, but he should file a separate reivindicatory action against the execution
creditor or the purchaser of the property after the sale at public auction, or a complaint for damages against the
bond filed by the judgment creditor in favor of the sheriff.
[79]


A separate civil action for recovery of ownership of the property would not constitute interference with
the powers or processes of the labor tribunal which rendered the judgment to execute upon the levied
properties. The property levied upon being that of a stranger is not subject to levy. Thus, a separate action for
recovery, upon a claim and prima facie showing of ownership by the petitioner, cannot be considered as
interference.
[80]


Upon the findings and conclusions we have reached above, petitioner is situated squarely as such third-party
claimant. The questioned restraining order of the lower court, as well as the order granting preliminary injunction,
does not constitute interference with the powers or processes of the labor department. The registration of the
mortgage document operated as notice to all on the matter of the mortgagees prior claims. Official proceedings
relative to the foreclosure of the subject properties constituted a prima facie showing of ownership of such
claimant to support the issuance of injunctive reliefs.

As correctly held by the lower court:

The subject incidents for TRO and/or Writ of Injunction were summarily heard and
in resolving the same, the Court believes, that the petitioner has a clear and unmistakable right
over the levied properties. The existence of the subject Deed of Real Estate and Chattel
Mortgage, the fact that petitioner initiated a foreclosure of said properties before the Clerk of
Court and Ex-Officio Sheriff, RTC Branch 61, Kabankalan City on July 13, 2001, the fact that said
Ex-Officio Sheriff and the Clerk of Court issue a Notice of Foreclosure, Possession and Control
over said mortgaged properties on July 19, 2001 and the fact that a Sheriffs Certificate of Sale
was issued on December 3, 2001 are the basis of its conclusion. Unless said mortgage contract is
annulled or declared null and void, the presumption of regularity of transaction must be
considered and said document must be looked [upon] as valid.


Notably, the Office of the Solicitor General also aptly observed that when the respondent maintained that
the Deed of Real Estate and Chattel mortgage was entered into in fraud of creditors, it thereby admitted that the
mortgage was not void, but merely rescissible under Article 1381(3) of the Civil Code; and, therefore, an
independent action is needed to rescind the contract of mortgage.
[81]
We, however, hold that such an
independent action cannot now be maintained, because the mortgage has been previously recognized to exist,
with a valid consideration, in Republic, etc., v. G Holdings, Inc.

A final word

The Court notes that the case filed with the lower court involves a principal action for injunction to prohibit
execution over properties belonging to a third party not impleaded in the legal dispute between NAMAWU and
MMC. We have observed, however, that the lower court and the CA failed to take judicial notice of, or to
consider, our Decisions in Republic, etc., v. G Holdings, Inc., and Maricalum Mining Corporation v. Brion and
NAMAWU, in which we respectively recognized the entitlement of GHI to the shares and the company notes of
MMC (under the Purchase and Sale Agreement), and the rights of NAMAWU to its labor claims. At this stage,
therefore, neither the lower court nor the CA, nor even this Court, can depart from our findings in those two cases
because of the doctrine of stare decisis.

From our discussion above, we now rule that the trial court, in issuing the questioned orders, did not commit
grave abuse of discretion, because its issuance was amply supported by factual and legal bases.

We are not unmindful, however, of the fact that the labor claims of NAMAWU, acknowledged by this Court
inMaricalum, still awaits final execution. As success fades from NAMAWUs efforts to execute on the properties of
MMC, which were validly foreclosed by GHI, we see that NAMAWU always had, and may still have, ample
supplemental remedies found in Rule 39 of the Rules of Court in order to protect its rights against MMC. These
include the examination of the judgment obligor when judgment is unsatisfied,
[82]
the examination of the obligors
of judgment obligors,
[83]
or even the resort to receivership.
[84]


While, theoretically, this case is not ended by this decision, since the lower court is still to try the case
filed with it and decide it on the merits, the matter of whether the mortgage and foreclosure of the assets that are
the subject of said foreclosure is ended herein, for the third and final time. So also is the consequential issue of
the separate and distinct personalities of GHI and MMC. Having resolved these principal issues with certainty, we
find no more need to remand the case to the lower court, only for the


purpose of resolving again the matter of whether GHI owns the properties that were the subject of the latters
foreclosure.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated October 14, 2003
is SET ASIDE. The Omnibus Order dated December 4, 2002 of the Regional Trial Court, Branch 61 of Kabankalan
City, Negros Occidental is AFFIRMED. No costs.

SO ORDERED.


ANTONIO EDUARDO B. NACHURA
Associate Justice





Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 177809 October 16, 2009
SPOUSES OMAR and MOSHIERA LATIP, Petitioners,
vs.
ROSALIE PALAA CHUA, Respondent.
D E C I S I O N
NACHURA, J.:
Challenged in this petition for review on certiorari is the Court of Appeals (CA) Decision in CA-G.R. SP No.
89300:
1
(1) reversing the decision of the Regional Trial Court (RTC), Branch 274, Paraaque City in Civil Case No. 04-
0052;
2
and (2) reinstating and affirming in toto the decision of the Metropolitan Trial Court (MeTC), Branch 78, of
the same city in Civil Case No. 2001-315.
3

First, we sift through the varying facts found by the different lower courts.
The facts parleyed by the MeTC show that respondent Rosalie Chua (Rosalie) is the owner of Roferxane Building, a
commercial building, located at No. 158 Quirino Avenue corner Redemptorist Road, Barangay Baclaran, Paraaque
City.
On July 6, 2001, Rosalie filed a complaint for unlawful detainer plus damages against petitioners, Spouses Omar
and Moshiera Latip (Spouses Latip). Rosalie attached to the complaint a contract of lease over two cubicles in
Roferxane Bldg., signed by Rosalie, as lessor, and by Spouses Latip, as lessees thereof.1 a vv p h ! 1
The contract of lease reads:
CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
This Contract of Lease is entered into by and between:
ROSALIE PALAA CHUA, Filipino, of legal age, married with office at 2/F JOFERXAN Building, F.B. Harrison St., Brgy.
Baclaran, Paraaque City, and hereinafter referred to as the LESSOR,
- and -
OMAR LATIEF marriage to MOSHIERA LATIEF, also both Filipino, of legal age with address at 24 Anahan St. RGV
Homes Paraaque City, and hereinafter referred to as the LESSEES.
W I T N E S S E T H
1. That the LESSOR is the owner of the commercial building erected at the lot of the Toribio G. Reyes Realty, Inc.
situated at 158 Quirino Ave. corner Redemptorist Road, Barangay Baclaran in Paraaque Ctiy;
2. That LESSOR hereby leases two (2) cubicles located at the 1st & 2nd Floor, of said building with an area of 56
square meters under the following terms and conditions, to wit:
a. That the monthly rental of the two (2) cubicles in PESOS, SIXTY THOUSAND ( P60,000.00), Philippine Currency.
However, due to unstable power of the peso LESSEES agrees to a yearly increase of ten (10%) percent of the
monthly rental;
b. That any rental in-arrears shall be paid before the expiration of the contract to the LESSOR;
c. That LESSEES agree to pay their own water and electric consumptions in the said premises;
d. That the LESSEES shall not sub-let or make any alteration in the cubicles without a written permission from the
LESSOR. Provided, however, that at the termination of the Contract, the lessee shall return the two cubicles in its
original conditions at their expenses;
e. That the LESSEES agree to keep the cubicles in a safe and sanitary conditions, and shall not keep any kinds of
flammable or combustible materials.
f. That in case the LESSEES fail to pay the monthly rental every time it falls due or violate any of the above
conditions shall be enough ground to terminate this Contract of Lease. Provided, further, that, if the LESSEES pre-
terminate this Contract they shall pay the rentals for the unused month or period by way of liquidated damages in
favor of the LESSOR.
3. That this Contract of Lease is for six (6) yrs. only starting from December _____, 1999 or up to December
______, 2005.
IN WITNESS WHEREOF, the parties have hereunto affixed their hands this ___th day of December, 1999 at City of
Manila, Philippines.
(sgd.)
ROSALIE PALAA-CHUA
L E S S O R
(sgd.)
MOSHIERA LATIEF
L E S S E E
(sgd.)
OMAR LATIEF
L E S S E E
SIGNED IN THE PRESENCE OF:
(sgd.)
1. Daisy C. Ramos
(sgd.)
2. Ferdinand C. Chua
Republic of the Philippines)
City of Manila)s.s.
A C K N O W L E D G M E N T
BEFORE ME, a Notary Public for and in the City of Manila personally appeared the following persons:
Rosalie P. Chua with CTC No. 05769706 at Paraaque City on 2/1/99; Moshiera Latief with CTC No. 12885654 at
Paraaque City on 11/11/99; Omar Latief with CTC No. 12885653 Paraaque City on Nov. 11, 1999.
known to me and to me known to be the same persons who executed this instrument consisting of two (2) pages
duly signed by them and the two (2) instrumental witnesses and acknowledged to me that the same is their free
and voluntarily acts and deeds.
IN FAITH AND TESTIMONY WHEREOF, I have hereunto affixed my hand and Notarial Seal this ____th day of
December, 1999 at the City of Manila, Philippines.
Doc. No. _____
Page No. _____
Book No. LXV
Series of 1999
ATTY. CALIXTRO B. RAMOS
NOTARY PUBLIC
Until December 31, 2000
PTR # 374145-1/11/99/-Mla.
IBP # 00262-Life Member
4

A year after the commencement of the lease and with Spouses Latip already occupying the leased cubicles,
Rosalie, through counsel, sent the spouses a letter demanding payment of back rentals and should they fail to do
so, to vacate the leased cubicles. When Spouses Latip did not heed Rosalies demand, she instituted the aforesaid
complaint.
In their Answer, Spouses Latip refuted Rosalies claims. They averred that the lease of the two (2) cubicles had
already been paid in full as evidenced by receipts showing payment to Rosalie of the total amount of
P2,570,000.00. The three (3) receipts, in Rosalies handwriting, read:
1. I received the amount of P2,000,000.00 (two million pesos) from [O]mar Latip & Moshi[e]ra Latip for the
payment of 2 cubicles located at 158 Quirino Ave. corner Redemptorist Rd.[,] Baclaran P[ara]aque City.
ROFERLAND
5
Bldg. with the terms 6 yrs. Contract.
P2,000,000.00
CHECK # 3767924
FAR EAST BANK
(sgd.)
____________________
Rosalie Chua


(sgd.)
____________________
Ferdinand Chua
2. Received cash
P500,000.00
From Moshiera Latip
12/10/99
(sgd.)
Rosalie Chua
____________________
Received by
3. Received cash
P70,000.00 from
Moshiera Latip
12-11-99
(sgd.)
____________________
Received by:
6

Spouses Latip asseverated that sometime in October 1999, Rosalie offered for sale lease rights over two (2)
cubicles in Roferxane Bldg. Having in mind the brisk sale of goods during the Christmas season, they readily
accepted Rosalies offer to purchase lease rights in Roferxane Bldg., which was still under construction at the time.
According to Spouses Latip, the immediate payment of P2,570,000.00 would be used to finish construction of the
building giving them first priority in the occupation of the finished cubicles.
Thereafter, in December 1999, as soon as two (2) cubicles were finished, Spouses Latip occupied them without
waiting for the completion of five (5) other stalls. Spouses Latip averred that the contract of lease they signed had
been novated by their purchase of lease rights of the subject cubicles. Thus, they were surprised to receive a
demand letter from Rosalies counsel and the subsequent filing of a complaint against them.
The MeTC ruled in favor of Rosalie, viz.:
WHEREFORE, premises considered, the [Spouses Latip] and all persons claiming rights under them are hereby
ordered to VACATE the property subject of this case located at the 1st and 2nd floors of a Roferxane Building
situated at No. 158 Quirino Avenue corner Redemptorist Road, Barangay Baclaran, Paraaque City. The [Spouses
Latip] are also ordered to PAY [Rosalie] the amount of SEVEN HUNDRED TWENTY THOUSAND PESOS ( P720,000.00)
as rent arrearages for the period of December 1999 to December 2000 and thereafter to PAY [Rosalie] the amount
of SEVENTY TWO THOUSAND PESOS ( P72,000.00) per month from January 2001 to December 2002, plus ten
percent (10%) increase for each and every succeeding years thereafter as stipulated in paragraph 2(a) of the
Contract of Lease x x x, until the [Spouses Latip] have completely vacated the leased premises subject of this lease.
Finally[,] the [Spouses Latip] are hereby ordered to PAY [Rosalie] the amount of TWENTY THOUSAND PESOS (
P20,000.00) as attorneys fees and TWO THOUSAND PESOS ( P2,000.00) per *Rosalies+ appearance in Court as
appearance fee and to PAY the cost of this suit.
*Spouses Latips+ counterclaim is hereby DISMISSED for lack of merit.
SO ORDERED.
7

In stark contrast, the RTC reversed the MeTC and ruled in favor of Spouses Latip. The RTC did not give credence to
the contract of lease, ruling that it was not notarized and, in all other substantial aspects, incomplete. Further on
this point, the RTC noted that the contract of lease lacked: (1) the signature of Ferdinand Chua, Rosalies husband;
(2) the signatures of Spouses Latip on the first page thereof; (3) the specific dates for the term of the contract
which only stated that the lease is for "six (6) y[ea]rs only starting from December 1999 or up to December 2005";
(4) the exact date of execution of the document, albeit the month of December and year 1999 are indicated
therein; and (5) the provision for payment of deposit or advance rental which is supposedly uncommon in big
commercial lease contracts.
The RTC believed the claim of Spouses Latip that the contract of lease was modified and supplemented; and the
entire lease rentals for the two (2) cubicles for six (6) years had already been paid by Spouses Latip in the amount
of P2,570,000.00. As to Rosalies claim that her receipt of P2,570,000.00 was simply goodwill payment by
prospective lessees to their lessor, and not payment for the purchase of lease rights, the RTC shot this down and
pointed out that, apart from her bare allegations, Rosalie did not adduce evidence to substantiate this claim. On
the whole, the RTC declared an existent lease between the parties for a period of six (6) years, and already fully
paid for by Spouses Latip. Thus, Spouses Latip could not be ejected from the leased premises until expiration of the
lease period.
The RTC disposed of the appeal, viz.:
WHEREFORE, all the foregoing considered, the appealed decision of the [MeTC] dated January 13, 2004 is reversed
as judgment is hereby rendered for the [Spouses Latip] and against [Rosalie], ordering the latter to pay the former

(1) the sum of PhP1,000,000.00 as moral damages;
(2) the sum of PhP500,000.00 as exemplary damages;
(3) the sum of PhP250,000.00 plus PhP3,000.00 per court appearance as and for attorneys fees; and
(4) costs of suit.
SO ORDERED.
8

In yet another turn of events, the CA, as previously mentioned, reversed the RTC and reinstated the decision of the
MeTC. The CA ruled that the contract of lease, albeit lacking the signature of Ferdinand and not notarized,
remained a complete and valid contract. As the MeTC had, the CA likewise found that the alleged defects in the
contract of lease did not render the contract ineffective. On the issue of whether the amount of P2,570,000.00
merely constituted payment of goodwill money, the CA took judicial notice of this common practice in the area of
Baclaran, especially around the Redemptorist Church. According to the appellate court, this judicial notice was
bolstered by the Joint Sworn Declaration of the stallholders at Roferxane Bldg. that they all had paid goodwill
money to Rosalie prior to occupying the stalls thereat. Thus, ruling on Rosalies appeal, the CA disposed of the
case:
WHEREFORE, in view of the foregoing, the Petition for Review is hereby GRANTED. The assailed decision of RTC
Paraaque City Branch 274 dated September 24, 2004 is hereby REVERSED and SET ASIDE, and the January 13,
2004 decision of the MeTC is REINSTATED and AFFIRMED en toto.
SO ORDERED.
9

Not surprisingly, Spouses Latip filed the present appeal.
The singular issue for our resolution is whether Spouses Latip should be ejected from the leased cubicles.
As previously adverted to, the CA, in ruling for Rosalie and upholding the ejectment of Spouses Latip, took judicial
notice of the alleged practice of prospective lessees in the Baclaran area to pay goodwill money to the lessor.
We disagree.
Sections 1 and 2 of Rule 129 of the Rules of Court declare when the taking of judicial notice is mandatory or
discretionary on the courts, thus:
SECTION 1. Judicial notice, when mandatory. A court shall take judicial notice, without the introduction of
evidence, of the existence and territorial extent of states, their political history, forms of government and symbols
of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of the legislative, executive and judicial departments of
the Philippines, the laws of nature, the measure of time, and the geographical divisions.
SEC. 2. Judicial notice, when discretionary. A court may take judicial notice of matters which are of public
knowledge, or are capable of unquestionable demonstration or ought to be known to judges because of their
judicial functions.
On this point, State Prosecutors v. Muro
10
is instructive:
I. The doctrine of judicial notice rests on the wisdom and discretion of the courts. The power to take judicial notice
is to be exercised by courts with caution; care must be taken that the requisite notoriety exists; and every
reasonable doubt on the subject should be promptly resolved in the negative.
Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of
common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and
(3) it must be known to be within the limits of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence, it can be said that judicial notice is limited
to facts evidenced by public records and facts of general notoriety.
To say that a court will take judicial notice of a fact is merely another way of saying that the usual form of evidence
will be dispensed with if knowledge of the fact can be otherwise acquired. This is because the court assumes that
the matter is so notorious that it will not be disputed. But judicial notice is not judicial knowledge. The mere
personal knowledge of the judge is not the judicial knowledge of the court, and he is not authorized to make his
individual knowledge of a fact, not generally or professionally known, the basis of his action. Judicial cognizance is
taken only of those matters which are "commonly" known.
Things of "common knowledge," of which courts take judicial notice, may be matters coming to the knowledge of
men generally in the course of the ordinary experiences of life, or they may be matters which are generally
accepted by mankind as true and are capable of ready and unquestioned demonstration. Thus, facts which are
universally known, and which may be found in encyclopedias, dictionaries or other publications, are judicially
noticed, provided they are of such universal notoriety and so generally understood that they may be regarded as
forming part of the common knowledge of every person.
11

We reiterated the requisite of notoriety for the taking of judicial notice in the recent case of Expertravel & Tours,
Inc. v. Court of Appeals,
12
which cited State Prosecutors:
Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of
common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and
(3) it must be known to be within the limits of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence, it can be said that judicial notice is limited
to facts evidenced by public records and facts of general notoriety. Moreover, a judicially noticed fact must be one
not subject to a reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the
trial court; or (2) capable of accurate and ready determination by resorting to sources whose accuracy cannot
reasonably be questionable.
Things of "common knowledge," of which courts take judicial notice, may be matters coming to the knowledge of
men generally in the course of the ordinary experiences of life, or they may be matters which are generally
accepted by mankind as true and are capable of ready and unquestioned demonstration. Thus, facts which are
universally known, and which may be found in encyclopedias, dictionaries or other publications, are judicially
noticed, provided, they are such of universal notoriety and so generally understood that they may be regarded as
forming part of the common knowledge of every person. As the common knowledge of man ranges far and wide, a
wide variety of particular facts have been judicially noticed as being matters of common knowledge. But a court
cannot take judicial notice of any fact which, in part, is dependent on the existence or non-existence of a fact of
which the court has no constructive knowledge.1avvphi1
From the foregoing provisions of law and our holdings thereon, it is apparent that the matter which the appellate
court took judicial notice of does not meet the requisite of notoriety. To begin with, only the CA took judicial
notice of this supposed practice to pay goodwill money to the lessor in the Baclaran area. Neither the MeTC nor
the RTC, with the former even ruling in favor of Rosalie, found that the practice was of "common knowledge" or
notoriously known.
We note that the RTC specifically ruled that Rosalie, apart from her bare allegation, adduced no evidence to prove
her claim that the amount of P2,570,000.00 simply constituted the payment of goodwill money. Subsequently,
Rosalie attached an annex to her petition for review before the CA, containing a joint declaration under oath by
other stallholders in Roferxane Bldg. that they had paid goodwill money to Rosalie as their lessor. On this score, we
emphasize that the reason why our rules on evidence provide for matters that need not be proved under Rule 129,
specifically on judicial notice, is to dispense with the taking of the usual form of evidence on a certain matter so
notoriously known, it will not be disputed by the parties.
However, in this case, the requisite of notoriety is belied by the necessity of attaching documentary evidence, i.e.,
the Joint Affidavit of the stallholders, to Rosalies appeal before the CA. In short, the alleged practice still had to be
proven by Rosalie; contravening the title itself of Rule 129 of the Rules of Court What need not be proved.
Apparently, only that particular division of the CA had knowledge of the practice to pay goodwill money in the
Baclaran area. As was held in State Prosecutors, justices and judges alike ought to be reminded that the power to
take judicial notice must be exercised with caution and every reasonable doubt on the subject should be ample
reason for the claim of judicial notice to be promptly resolved in the negative.
Ultimately, on the issue of whether Spouses Latip ought to be ejected from the leased cubicles, what remains in
evidence is the documentary evidence signed by both parties the contract of lease and the receipts evidencing
payment of P2,570,000.00.
We need not be unduly detained by the issue of which documents were executed first or if there was a novation of
the contract of lease. As had been found by the RTC, the lease contract and the receipts for the amount of
P2,570,000.00 can be reconciled or harmonized. The RTC declared:
Definitely, the parties entered into a lease agreement over two (2) cubicles of the 1st and 2nd floors of Roferxane
(Roferland) Building, a commercial building located at 158 Quirino Avenue, corner Redemptorist Road, Baclaran,
Paraaque City and belonging to [Rosalie]. The lease agreement is for a term of six (6) years commencing in
December 1999 up to December 2005. This agreement was embodied in a Contract of Lease x x x. The terms of this
lease contract, however, are modified or supplemented by another agreement between the parties executed and
or entered into in or about the time of execution of the lease contract, which exact date of execution of the latter
is unclear.
13

We agree with the RTCs holding only up to that point. There exists a lease agreement between the parties as set
forth in the contract of lease which is a complete document. It need not be signed by Ferdinand Chua as he
likewise did not sign the other two receipts for P500,000.00 and P70,000.00, respectively, which contained only
the signature of Rosalie. Besides, it is undisputed that Rosalie owns and leases the stalls in Roferxane Bldg.; thus,
doing away with the need for her husbands consent. The findings of the three lower courts concur on this fact.
The contract of lease has a period of six (6) years commencing in December 1999. This fact is again buttressed by
Spouses Latips admission that they occupied the property forthwith in December 1999, bearing in mind the brisk
sales during the holiday season.
On the conflicting interpretations by the lower courts of the receipts amounting to P2,570,000.00, we hold that
the practice of payment of goodwill money in the Baclaran area is an inadequate subject of judicial notice. Neither
was Rosalie able to provide sufficient evidence that, apart from the belatedly submitted Joint Affidavit of the
stallholders of Roferxane Bldg., the said amount was simply for the payment of goodwill money, and not payment
for advance rentals by Spouses Latip.
In interpreting the evidence before us, we are guided by the Civil Code provisions on interpretation of contracts, to
wit:
Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered.
Art. 1372. However general the terms of a contract may be, they shall not be understood to comprehend things
that are distinct and cases that are different from those which the parties intended to agree.
Art. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing
that import which is most adequate to render it effectual.
The RTC was already on the right track when it declared that the receipts for P2,570,000.00 modified or
supplemented the contract of lease. However, it made a quantum leap when it ruled that the amount was
payment for rentals of the two (2) cubicles for the entire six-year period. We cannot subscribe to this finding. To
obviate confusion and for clarity, the contents of the receipts, already set forth above, are again reproduced:
1. I received the amount of P2,000,000.00 (two million pesos) from [O]mar Latip & Moshi[e]ra Latip for the
payment of 2 cubicles located at 158 Quirino Ave. corner Redemptorist Rd.[,] Baclaran P[ara]que City.
ROFERLAND Bldg. with the terms 6 yrs. Contract.
P2,000,000.00
CHECK # 3767924
FAR EAST BANK
(sgd.)
____________________
Rosalie Chua


(sgd.)
____________________
Ferdinand Chua
2. Received cash
P500,000.00
From Moshiera Latip
12/10/99
(sgd.)
Rosalie Chua
____________________
Received by
3. Received cash
P70,000.00 from
Moshiera Latip
12-11-99
(sgd.)
____________________
Received by:
14

There is nothing on the receipts and on record that the payment and receipt of P2,570,000.00 referred to full
payment of rentals for the whole period of the lease. All three receipts state Rosalies receipt of cash in varying
amounts. The first receipt for P2,000,000.00 did state payment for two (2) cubicles, but this cannot mean full
payment of rentals for the entire lease period when there are no words to that effect. Further, two receipts were
subsequently executed pointing to the obvious fact that the P2,000,000.00 is not for full payment of rentals. Thus,
since the contract of lease remained operative, we find that Rosalies receipt of the monies should be considered
as advanced rentals on the leased cubicles. This conclusion is bolstered by the fact that Rosalie demanded
payment of the lease rentals only in 2000, a full year after the commencement of the lease.
Finally, we note that the lease ended in 2005. Consequently, Spouses Latip can be ejected from the leased
premises. They are liable to Rosalie for unpaid rentals on the lease of the two (2) cubicles in accordance with the
stipulations on rentals in the Contract of Lease. However, the amount of P2,570,000.00, covering advance rentals,
must be deducted from this liability of Spouses Latip to Rosalie.
WHEREFORE, premises considered, the petition is hereby GRANTED. The decision of the Court of Appeals in CA-
G.R. SP No. 89300 is REVERSED. The petitioners, spouses Omar and Moshiera Latip, are liable to respondent
Rosalie Chua for unpaid rentals minus the amount of P2,570,000.00 already received by her as advance rentals.
No costs.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:
CONCHITA CARPIO MORALES
*

Associate Justice

MINITA V. CHICO-NAZARIO
**

Associate Justice
DIOSDADO M. PERALTA
Associate Justice
ROBERTO A. ABAD
***

Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
MINITA V. CHICO-NAZARIO
Associate Justice
Acting Chairperson, Third Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson's Attestation, I certify
that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING
Acting Chief Justice


















G.R. No. 174154 July 30, 2009
JESUS CUENCO, Petitioner,
vs.
TALISAY TOURIST SPORTS COMPLEX, INCORPORATED and MATIAS B. AZNAR III, Respondents.
R E S O L U T I O N
NACHURA, J.:
For resolution are the Partial Motion for Reconsideration
1
filed by petitioner and the Motion for
Reconsideration
2
filed by respondents of the Decision
3
of the Court dated October 17, 2008.
The factual background of the case is as follows:
Petitioner leased from respondents the Talisay Tourist Sports Complex for the operation of a cockpit. The lease
was for a period of two (2) years, but was subsequently renewed for a period of four (4) years. Compliant with the
lease contract, petitioner gave respondents a deposit equivalent to six (6) months rental, amounting to Five
Hundred Thousand Pesos ( P500,000.00), to answer for whatever damages may be caused to the premises during
the period of the lease.
Upon expiration of the lease contract on May 8, 1998, a public bidding was conducted. The contract was awarded
to a new lessee. Thus, petitioner demanded the return of the amount deposited. However, petitioners four (4)
demand letters remained unheeded. Thus, petitioner filed a complaint for sum of money, damages and attorneys
fees before the Regional Trial Court (RTC) of Cebu City.
The trial court ruled in favor of petitioner and directed the respondents to return the full amount of the deposit
plus interest of three percent (3%) per month from August 18, 1998 until full payment thereof. On appeal, the
Court of Appeals (CA) reversed the decision of the trial court. Hence, petitioner filed a petition for review on
certiorari
4
before this Court.
On October 17, 2008, the Court rendered a Decision,
5
the dispositive portion of which reads:
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals is hereby REVERSED AND SET
ASIDE. The Decision of the RTC in Civil Case No. CEB-22847 is hereby REINSTATED with the following modifications:
(1) Talisay Tourist Sports Complex, Inc. is solely liable to return the amount of the deposit after deducting the
amount of the two-months arrears in rentals; and
(2) The rate of legal interest to be paid is SIX PERCENT (6%) on the amount due computed from October 21, 1998,
and TWELVE PERCENT (12%) interest, thereon upon finality of this decision until full payment thereof.
SO ORDERED.
6

Unsatisfied, both parties moved for reconsideration. Petitioner moves for partial reconsideration as he denies that
he overstayed for two months in the leased premises. On the other hand, respondents aver that the expenses they
incurred for the repair of the cockpit amounting to Twenty-four Thousand Nine Hundred Pesos ( P24,900.00)
should be deducted from the amount of deposit that will be returned to petitioner. They also pray that the Court
reconsider its decision and issue a new one affirming the decision of the Court of Appeals.
The motions for reconsideration filed by the contending parties are substantially factual and must be denied for
lack of merit.
As a rule, the Supreme Court is not a trier of facts. In a petition for review on certiorari, it is discretionary upon the
Court whether it will look into the factual determinations of the lower courts. However, due to the conflicting
findings of the RTC and the CA, the Court took exception and reviewed the records of the case to arrive at a
judicious resolution of the controversy, i.e., whether petitioner is entitled to the return of the amount of the
deposit.lavvphil
Borne out by the records of the case is the testimony of Ateniso Coronado that petitioner continued to hold
cockfights for two months beyond the expiration of the lease contract. Such declaration was neither questioned
nor denied by petitioner during the trial of the case in the RTC and on appeal before the CA. Neither was it
contested by petitioner in his Memorandum
7
filed with this Court. Binding is the finding of the CA on the matter,
viz.:
Witness Ateniso Coronado whose credibility has not been impeached, and whose testimony has neither been
overthrown by contradictory evidence, gave the most telltale factual account. There is no gainsaying that the
contract of lease between herein parties for the occupation and use of the complex expired on May 8, 1998, but
appellee [petitioner] did not refute the pronouncement of witness that he (appellee) [petitioner] continued to
hold cockfights during the months of June and July despite knowledge that his lease would no longer be renewed
as evidenced by the very first letter he sent to appellants [respondents] dated June 8, 1998, and albeit the non-
objection of appellants [respondents] on his extended stay. The assessment of rentals from appellee [petitoner]
for two (2) extended months therefore came as a necessary consequence pursuant to Articles 1670 and 1687 of
the Civil Code of the Philippines in relation to the contract of lease. The rental for the last month immediately
preceding the expiration of the contract is pegged at P97,916.67, hence the two month extension requires a rent
in the amount of P195,833.34.
8
1avvph!1
Well-settled is the rule that issues or grounds not raised below cannot be resolved on review by the Supreme
Court, for to allow the parties to raise new issues is antithetical to the sporting idea of fair play, justice and due
process.
9
Issues not raised during the trial cannot be raised for the first time on appeal and more especially on
motion for reconsideration. Litigation must end at some point; once the case is finally adjudged, the parties must
learn to accept victory or defeat.
Furthermore, on June 27 2007, the Court required the parties to submit their memoranda, and were apprised that
no new issues may be raised; and the issues raised in the pleadings not included in the memoranda shall be
deemed waived or abandoned, per Supreme Court Administrative Matter No. 99-2-04-SC.
As to the amount of repairs that respondents want to be credited in their favor, the RTC ruled, as affirmed by the
CA, that the new lessee underwrote the repairs and not the respondents.
10
Thus, there is no basis for respondents
claim for reimbursement.
WHEREFORE, the Partial Motion for Reconsideration of Petitioner dated November 26, 2008 and the Motion for
Reconsideration of Respondents dated November 25, 2008 of the Decision of the Court dated October 17, 20078
are hereby DENIED.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

ANTONIO T. CARPIO
*

Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
LUCAS P. BERSAMIN
**

Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Resolution were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice









In this Petition for Review on Certiorari
[1]
under Rule 45 of the Rules of Court, petitioner Toshiba
Information Equipment (Philippines), Inc. (Toshiba) seeks the reversal and setting aside of (1) the Decision
[2]
dated
August 29, 2002 of the Court of Appeals in CA-G.R. SP No. 63047, which found that Toshiba was not entitled to the
credit/refund of its unutilized input Value-Added Tax (VAT) payments attributable to its export sales, because it
was a tax-exempt entity and its export sales were VAT-exempt transactions; and (2) the Resolution
[3]
dated
February 19, 2003 of the appellate court in the same case, which denied the Motion for Reconsideration of
Toshiba. The herein assailed judgment of the Court of Appeals reversed and set aside the Decision
[4]
dated
October 16, 2000 of the Court of Tax Appeals (CTA) in CTA Case No. 5762 granting the claim for credit/refund of
Toshiba in the amount of P1,385,282.08.

Toshiba is a domestic corporation principally engaged in the business of manufacturing and exporting of
electric machinery, equipment systems, accessories, parts, components, materials and goods of all kinds, including
those relating to office automation and information technology and all types of computer hardware and software,
such as but not limited to HDD-CD-ROM and personal computer printed circuit board.
[5]
It is registered with the
Philippine Economic Zone Authority (PEZA) as an Economic Zone (ECOZONE) export enterprise in the Laguna
Technopark, Inc., as evidenced by Certificate of Registration No. 95-99 dated September 27, 1995.
[6]
It is also
registered with Regional District Office No. 57 of the Bureau of Internal Revenue (BIR) in San Pedro, Laguna, as a
VAT-taxpayer with Taxpayer Identification No. (TIN) 004-739-137.
[7]


In its VAT returns for the first and second quarters of 1997,
[8]
filed on April 14, 1997 and July 21, 1997,
respectively, Toshiba declared input VAT payments on its domestic purchases of taxable goods and services in the
aggregate sum of P3,875,139.65,
[9]
with no zero-rated sales. Toshiba subsequently submitted to the BIR on July 23,
1997 its amended VAT returns for the first and second quarters of 1997,
[10]
reporting the same amount of input
VAT payments but, this time, with zero-rated sales totaling P7,494,677,000.00.
[11]


On March 30, 1999, Toshiba filed with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center of the Department of Finance (DOF One-Stop Shop) two separate applications for tax credit/refund
[12]
of its
unutilized input VAT payments for the first half of 1997 in the total amount of P3,685,446.73.
[13]


The next day, on March 31, 1999, Toshiba likewise filed with the CTA a Petition for Review
[14]
to toll the
running of the two-year prescriptive period under Section 230 of the Tax Code of 1977,
[15]
as amended.
[16]
In said
Petition, docketed as CTA Case No. 5762, Toshiba prayed that

[A]fter due hearing, judgment be rendered ordering [herein respondent Commissioner of
Internal Revenue (CIR)] to refund or issue to [Toshiba] a tax refund/tax credit certificate in the
amount of P3,875,139.65 representing unutilized input taxes paid on its purchase of taxable
goods and services for the period January 1 to June 30, 1997.
[17]



The Commissioner of Internal Revenue (CIR) opposed the claim for tax refund/credit of Toshiba, setting up
the following special and affirmative defenses in his Answer
[18]


5. *Toshibas+ alleged claim for refund/tax credit is subject to administrative
routinary investigation/examination by *CIRs+ Bureau;

6. [Toshiba] failed miserably to show that the total amount of P3,875,139.65
claimed as VAT input taxes, were erroneously or illegally collected, or that the same are properly
documented;

7. Taxes paid and collected are presumed to have been made in accordance with
law; hence, not refundable;

8. In an action for tax refund, the burden is on the taxpayer to establish its right to
refund, and failure to sustain the burden is fatal to the claim for refund;

9. It is incumbent upon [Toshiba] to show that it has complied with the provisions of
Section 204 in relation to Section 229 of the Tax Code;

10. Well-established is the rule that claims for refund/tax credit are construed
in strictissimi juris against the taxpayer as it partakes the nature of exemption from tax.
[19]



Upon being advised by the CTA,
[20]
Toshiba and the CIR filed a Joint Stipulation of Facts and
Issues,
[21]
wherein the opposing parties agreed and admitted that

1. [Toshiba] is a duly registered value-added tax entity in accordance with Section
107 of the Tax Code, as amended.

2. [Toshiba] is subject to zero percent (0%) value-added tax on its export sales in
accordance with then Section 100(a)(2)(A) of the Tax Code, as amended.

3. [Toshiba] filed its quarterly VAT returns for the first two quarters of 1997 within
the legally prescribed period.

x x x x

7. [Toshiba] is subject to zero percent (0%) value-added tax on its export sales.

8. [Toshiba] has duly filed the instant Petition for Review within the two-year
prescriptive period prescribed by then Section 230 of the Tax Code.
[22]



In the same pleading, Toshiba and the CIR jointly submitted the following issues for determination by the
CTA

Whether or not [Toshiba] has incurred input taxes in the amount of P3,875,139.65 for the period
January 1 to June 30, 1997 which are directly attributable to its export sales[.]

Whether or not the input taxes incurred by [Toshiba] for the period January 1 to June 30, 1997
have not been carried over to the succeeding quarters[.]

Whether or not input taxes incurred by [Toshiba] for the first two quarters of 1997 have not
been offset against any output tax[.]

Whether or not input taxes incurred by [Toshiba] for the first two quarters of 1997 are properly
substantiated by official receipts and invoices.
[23]



During the trial before the CTA, Toshiba presented documentary evidence in support of its claim for tax
credit/refund, while the CIR did not present any evidence at all.

With both parties waiving the right to submit their respective memoranda, the CTA rendered its Decision
in CTA Case No. 5762 on October 16, 2000 favoring Toshiba. According to the CTA, the CIR himself admitted that
the export sales of Toshiba were subject to zero percent (0%) VAT based on Section 100(a)(2)(A)(i) of the Tax Code
of 1977, as amended. Toshiba could then claim tax credit or refund of input VAT paid on its purchases of goods,
properties, or services, directly attributable to such zero-rated sales, in accordance with Section 4.102-2 of
Revenue Regulations No. 7-95. The CTA, though, reduced the amount to be credited or refunded to Toshiba to
P1,385,292.02.

The dispositive portion of the October 16, 2000 Decision of the CTA fully reads

WHEREFORE, *Toshibas+ claim for refund of unutilized input VAT payments is
hereby GRANTED but in a reduced amount of P1,385,282.08 computed as follows:

1
st
Quarter 2
nd
Quarter Total
Amount of claimed input taxes filed
with the DOF One Stop Shop Center P3,268,682.34 P416,764.39 P3,685,446.73
Less: 1) Input taxes not properly
supported by VAT invoices
and official receipts
a. Per SGVs verification
(Exh. I) P 242,491.45 P154,391.13 P 396,882.58
b. Per this courts further
verification (Annex A) P1,852,437.65 P 35,108.00 P1,887,545.65
P189,499.13 P2,300,164.65
Amount Refundable P1,158,016.82 P227,265.26 P1,385,282.08

Respondent Commissioner of Internal Revenue is ORDERED to REFUND to [Toshiba] or
in the alternative, ISSUE a TAX CREDIT CERTIFICATE in the amount of P1,385,282.08 representing
unutilized input taxes paid by [Toshiba] on its purchases of taxable goods and services for the
period January 1 to June 30, 1997.
[24]



Both Toshiba and the CIR sought reconsideration of the foregoing CTA Decision.

Toshiba asserted in its Motion for Reconsideration
[25]
that it had presented proper substantiation for the
P1,887,545.65 input VAT disallowed by the CTA.

The CIR, on the other hand, argued in his Motion for Reconsideration
[26]
that Toshiba was not entitled to
the credit/refund of its input VAT payments because as a PEZA-registered ECOZONE export enterprise, Toshiba was
not subject to VAT. The CIR invoked the following statutory and regulatory provisions

Section 24 of Republic Act No. 7916
[27]


SECTION 24. Exemption from Taxes Under the National Internal Revenue Code. Any
provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local
and national, shall be imposed on business establishments operating within the ECOZONE. In
lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and
enterprises within the ECOZONE shall be remitted to the national government. x x x.


Section 103(q) of the Tax Code of 1977, as amended

Sec. 103. Exempt transactions. The following shall be exempt from the value-added tax:

x x x x

(q) Transactions which are exempt under special laws, except those granted under
Presidential Decree Nos. 66, 529, 972, 1491, and 1950, and non-electric cooperatives under
Republic Act No. 6938, or international agreements to which the Philippines is a signatory.


Section 4.103-1 of Revenue Regulations No. 7-95

SEC. 4.103-1. Exemptions. (A) In general. An exemption means that the sale of goods
or properties and/or services and the use or lease of properties is not subject to VAT (output tax)
and the seller is not allowed any tax credit on VAT (input tax) previously paid.

The person making the exempt sale of goods, properties or services shall not bill any
output tax to his customers because the said transaction is not subject to VAT. On the other
hand, a VAT-registered purchaser of VAT-exempt goods, properties or services which are exempt
from VAT is not entitled to any input tax on such purchase despite the issuance of a VAT invoice
or receipt.


The CIR contended that under Section 24 of Republic Act No. 7916, a special law, all businesses and
establishments within the ECOZONE were to remit to the government five percent (5%) of their gross income
earned within the zone, in lieu of all taxes, including VAT. This placed Toshiba within the ambit of Section 103(q) of
the Tax Code of 1977, as amended, which exempted from VAT the transactions that were exempted under special
laws. Following Section 4.103-1(A) of Revenue Regulations No. 7-95, the VAT-exemption of Toshiba meant that its
sale of goods was not subject to output VAT and Toshiba as seller was not allowed any tax credit on the input VAT
it had previously paid.

On January 17, 2001, the CTA issued a Resolution
[28]
denying both Motions for Reconsideration of Toshiba
and the CIR.

The CTA took note that the pieces of evidence referred to by Toshiba in its Motion for Reconsideration
were insufficient substantiation, being mere schedules of input VAT payments it had purportedly paid for the first
and second quarters of 1997. While the CTA gives credence to the report of its commissioned certified public
accountant (CPA), it does not render its decision based on the findings of the said CPA alone. The CTA has its own
CPA and the tax court itself conducts an investigation/examination of the documents presented. The CTA stood by
its earlier disallowance of the amount of P1,887,545.65 as tax credit/refund because it was not supported by VAT
invoices and/or official receipts.

The CTA refused to consider the argument that Toshiba was not entitled to a tax credit/refund under
Section 24 of Republic Act No. 7916 because it was only raised by the CIR for the first time in his Motion for
Reconsideration. Also, contrary to the assertions of the CIR, the CTA held that Section 23, and not Section 24, of
Republic Act No. 7916, applied to Toshiba. According to Section 23 of Republic Act No. 7916

SECTION 23. Fiscal Incentives. Business establishments operating within the
ECOZONES shall be entitled to the fiscal incentives as provided for under Presidential Decree No.
66, the law creating the Export Processing Zone Authority, or those provided under Book VI of
Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987.

Furthermore, tax credits for exporters using local materials as inputs shall enjoy the
benefits provided for in the Export Development Act of 1994.


Among the fiscal incentives granted to PEZA-registered enterprises by the Omnibus Investments Code of
1987 was the income tax holiday, to wit

Art. 39. Incentives to Registered Enterprises. All registered enterprises shall be granted
the following incentives to the extent engaged in a preferred area of investment:
(a) Income Tax Holiday.
(1) For six (6) years from commercial operation for pioneer firms and four (4) years for
non-pioneer firms, new registered firms shall be fully exempt from income taxes levied by the
national government. Subject to such guidelines as may be prescribed by the Board, the income
tax exemption will be extended for another year in each of the following cases:
(i) The project meets the prescribed ratio of capital equipment to number of workers set
by the Board;
(ii) Utilization of indigenous raw materials at rates set by the Board;
(iii) The net foreign exchange savings or earnings amount to at least US$500,000.00
annually during the first three (3) years of operation.
The preceding paragraph notwithstanding, no registered pioneer firm may avail of this
incentive for a period exceeding eight (8) years.
(2) For a period of three (3) years from commercial operation, registered expanding
firms shall be entitled to an exemption from income taxes levied by the National Government
proportionate to their expansion under such terms and conditions as the Board may
determine: Provided, however, That during the period within which this incentive is availed of by
the expanding firm it shall not be entitled to additional deduction for incremental labor expense.
(3) The provision of Article 7(14) notwithstanding, registered firms shall not be entitled
to any extension of this incentive.


The CTA pointed out that Toshiba availed itself of the income tax holiday under the Omnibus Investments
Code of 1987, so Toshiba was exempt only from income tax but not from other taxes such as VAT. As a
result, Toshiba was liable for output VAT on its export sales, but at zero percent (0%) rate, and entitled to the
credit/refund of the input VAT paid on its purchases of goods and services relative to such zero-rated export sales.

Unsatisfied, the CIR filed a Petition for Review
[29]
with the Court of Appeals, docketed as CA-G.R. SP No.
63047.

In its Decision dated August 29, 2002, the Court of Appeals granted the appeal of the CIR, and reversed
and set aside the Decision dated October 16, 2000 and the Resolution dated January 17, 2001 of the CTA. The
appellate court ruled thatToshiba was not entitled to the refund of its alleged unused input VAT payments because
it was a tax-exempt entity under Section 24 of Republic Act No. 7916. As a PEZA-registered corporation, Toshiba
was liable for remitting to the national government the five percent (5%) preferential rate on its gross income
earned within the ECOZONE, in lieu of all other national and local taxes, including VAT.

The Court of Appeals further adjudged that the export sales of Toshiba were VAT-exempt, not zero-rated,
transactions. The appellate court found that the Answer filed by the CIR in CTA Case No. 5762 did not contain any
admission that the export sales of Toshiba were zero-rated transactions under Section 100(a)(2)(A) of the Tax Code
of 1977, as amended. At the least, what was admitted by the CIR in said Answer was that the Tax Code provisions
cited in the Petition for Review of Toshiba in CTA Case No. 5762 were correct. As to the Joint Stipulation of Facts
and Issues filed by the parties in CTA Case No. 5762, which stated that Toshiba was subject to zero percent (0%)
VAT on its export sales, the appellate court declared that the CIR signed the said pleading through palpable
mistake. This palpable mistake in the stipulation of facts should not be taken against the CIR, for to do otherwise
would result in suppressing the truth through falsehood. In addition, the State could not be put in estoppel by the
mistakes or errors of its officials or agents.

Given that Toshiba was a tax-exempt entity under Republic Act No. 7916, a special law, the Court of
Appeals concluded that the export sales of Toshiba were VAT-exempt transactions under Section 109(q) of the Tax
Code of 1997, formerly Section 103(q) of the Tax Code of 1977. Therefore, Toshiba could not claim refund of its
input VAT payments on its domestic purchases of goods and services.

The Court of Appeals decreed at the end of its August 29, 2002 Decision

WHEREFORE, premises considered, the appealed decision of the Court of Tax Appeals in
CTA Case No. 5762, is hereby REVERSED and SET ASIDE, and a new one is hereby rendered
finding [Toshiba], being a tax exempt entity under R.A. No. 7916, not entitled to refund the VAT
payments made in its domestic purchases of goods and services.
[30]



Toshiba filed a Motion for Reconsideration
[31]
of the aforementioned Decision, anchored on the following
arguments: (a) the CIR never raised as an issue before the CTA that Toshiba was tax-exempt under Section 24 of
Republic Act No. 7916; (b) Section 24 of Republic Act No. 7916, subjecting the gross income earned by a PEZA-
registered enterprise within the ECOZONE to a preferential rate of five percent (5%), in lieu of all taxes, did not
apply to Toshiba, which availed itself of the income tax holiday under Section 23 of the same statute; (c) the
conclusion of the CTA that the export sales of Toshiba were zero-rated was supported by substantial evidence,
other than the admission of the CIR in the Joint Stipulation of Facts and Issues; and (d) the judgment of the CTA
granting the refund of the input VAT payments was supported by substantial evidence and should not have been
set aside by the Court of Appeals.

In a Resolution dated February 19, 2003, the Court of Appeals denied the Motion for Reconsideration of
Toshiba since the arguments presented therein were mere reiterations of those already passed upon and found to
be without merit by the appellate court in its earlier Decision. The Court of Appeals, however, mentioned that it
was incorrect for Toshiba to say that the issue of the applicability of Section 24 of Republic Act No. 7916 was only
raised for the first time on appeal before the appellate court. The said issue was adequately raised by the CIR in
his Motion for Reconsideration before the CTA, and was even ruled upon by the tax court.

Hence, Toshiba filed the instant Petition for Review with the following assignment of errors

5.1 THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT [TOSHIBA],
BEING A PEZA-REGISTERED ENTERPRISE, IS EXEMPT FROM VAT UNDER SECTION 24 OF R.A. 7916,
AND FURTHER HOLDING THAT *TOSHIBAS+ EXPORT SALES ARE EXEMPT TRANSACTIONS UNDER
SECTION 109 OF THE TAX CODE.

5.2 THE HONORABLE COURT OF APPEALS ERRED WHEN IT FAILED TO DISMISS
OUTRIGHT AND GAVE DUE COURSE TO *CIRS+ PETITION NOTWITHSTANDING *CIRS+ FAILURE TO
ADEQUATELY RAISE IN ISSUE DURING THE TRIAL IN THE COURT OF TAX APPEALS THE
APPLICABILITY OF SECTION 24 OF R.A. 7916 TO *TOSHIBAS+ CLAIM FOR REFUND.

5.3 THE HONORABLE COURT OF APPEALS ERRED WHEN [IT] RULED THAT THE COURT
OF TAX APPEALS FINDINGS, WITH REGARD *TOSHIBAS+ EXPORT SALES BEING ZERO RATED SALES
FOR VAT PURPOSES, WERE BASED MERELY ON THE ADMISSIONS MADE BY *CIRS+ COUNSEL AND
NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

5.4 THE HONORABLE COURT OF APPEALS ERRED WHEN IT REVERSED THE DECISION
OF THE COURT OF TAX APPEALS GRANTING *TOSHIBAS+ CLAIM FOR REFUND*;+
[32]



and the following prayer

WHEREFORE, premises considered, Petitioner TOSHIBA INFORMATION EQUIPMENT
(PHILS.), INC. most respectfully prays that the decision and resolution of the Honorable Court of
Appeals, reversing the decision of the CTA in CTA Case No. 5762, be set aside and further prays
that a new one be rendered AFFIRMING AND UPHOLDING the Decision of the CTA promulgated
on October 16, 2000 in CTA Case No. 5762.

Other reliefs, which the Honorable Court may deem just and equitable under the
circumstances, are likewise prayed for.
[33]



The Petition is impressed with merit.

The CIR did not timely raise before the CTA the issues on the
VAT-exemptions of Toshiba and its export sales.

Upon the failure of the CIR to timely plead and prove before the CTA the defenses or objections that
Toshiba was VAT-exempt under Section 24 of Republic Act No. 7916, and that its export sales were VAT-exempt
transactions under Section 103(q) of the Tax Code of 1977, as amended, the CIR is deemed to have waived the
same.

During the pendency of CTA Case No. 5762, the proceedings before the CTA were governed by the Rules
of the Court of Tax Appeals,
[34]
while the Rules of Court were applied suppletorily.
[35]


Rule 9, Section 1 of the Rules of Court provides:

SECTION 1. Defenses and objections not pleaded. Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it
appears from the pleadings or the evidence on record that the court has no jurisdiction over the
subject matter, that there is another action pending between the same parties for the same
cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall
dismiss the claim.


The CIR did not argue straight away in his Answer in CTA Case No. 5762 that Toshiba had no right to the
credit/refund of its input VAT payments because the latter was VAT-exempt and its export sales were VAT-exempt
transactions. The Pre-Trial Brief
[36]
of the CIR was equally bereft of such allegations or arguments. The CIR passed
up the opportunity to prove the supposed VAT-exemptions of Toshiba and its export sales when the CIR chose not
to present any evidence at all during the trial before the CTA.
[37]
He missed another opportunity to present the
said issues before the CTA when he waived the submission of a Memorandum.
[38]
The CIR had waited until the CTA
already rendered its Decision dated October 16, 2000 in CTA Case No. 5762, which granted the claim for
credit/refund of Toshiba, before asserting in his Motion for Reconsideration that Toshiba was VAT-exempt and its
export sales were VAT-exempt transactions.

The CIR did not offer any explanation as to why he did not argue the VAT-exemptions of Toshiba and its
export sales before and during the trial held by the CTA, only doing so in his Motion for Reconsideration of the
adverse CTA judgment. Surely, said defenses or objections were already available to the CIR when the CIR filed his
Answer to the Petition for Review of Toshiba in CTA Case No. 5762.

It is axiomatic in pleadings and practice that no new issue in a case can be raised in a pleading which by
due diligence could have been raised in previous pleadings.
[39]
The Court cannot simply grant the plea of the CIR
that the procedural rules be relaxed based on the general averment of the interest of substantive justice. It should
not be forgotten that the first and fundamental concern of the rules of procedure is to secure a just determination
of every action.
[40]
Procedural rules are designed to facilitate the adjudication of cases. Courts and litigants alike
are enjoined to abide strictly by the rules. While in certain instances, the Court allows a relaxation in the
application of the rules, it never intends to forge a weapon for erring litigants to violate the rules with
impunity. The liberal interpretation and application of rules apply only in proper cases of demonstrable merit and
under justifiable causes and circumstances. While it is true that litigation is not a game of technicalities, it is
equally true that every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly
and speedy administration of justice. Party litigants and their counsel are well advised to abide by, rather than
flaunt, procedural rules for these rules illumine the path of the law and rationalize the pursuit of justice.
[41]


The CIR judicially admitted that Toshiba was VAT-registered
and its export sales were subject to VAT at zero percent (0%)
rate.


More importantly, the arguments of the CIR that Toshiba was VAT-exempt and the latters export sales
were VAT-exempt transactions are inconsistent with the explicit admissions of the CIR in the Joint Stipulation of
Facts and Issues (Joint Stipulation) that Toshiba was a registered VAT entity and that it was subject to zero percent
(0%) VAT on its export sales.

The Joint Stipulation was executed and submitted by Toshiba and the CIR upon being advised to do so by
the CTA at the end of the pre-trial conference held on June 23, 1999.
[42]
The approval of the Joint Stipulation by
the CTA, in its Resolution
[43]
dated July 12, 1999, marked the culmination of the pre-trial process in CTA Case No.
5762.

Pre-trial is an answer to the clarion call for the speedy disposition of cases. Although it was discretionary
under the 1940 Rules of Court, it was made mandatory under the 1964 Rules and the subsequent amendments in
1997. It has been hailed as the most important procedural innovation in Anglo-Saxon justice in the nineteenth
century.
[44]


The nature and purpose of a pre-trial have been laid down in Rule 18, Section 2 of the Rules of Court:

SECTION 2. Nature and purpose. The pre-trial is mandatory. The court shall consider:

(a) The possibility of an amicable settlement or of a submission to alternative modes
of dispute resolution;

(b) The simplification of the issues;

(c) The necessity or desirability of amendments to the pleadings;

(d) The possibility of obtaining stipulations or admissions of facts and of
documents to avoid unnecessary proof;

(e) The limitation of the number of witnesses;

(f) The advisability of a preliminary reference of issues to a commissioner;

(g) The propriety of rendering judgment on the pleadings, or summary judgment, or
of dismissing the action should a valid ground therefor be found to exist;

(h) The advisability or necessity of suspending the proceedings; and

(i) Such other matters as may aid in the prompt disposition of the action. (Emphasis
ours.)


The admission having been made in a stipulation of facts at pre-trial by the parties, it must be treated as a
judicial admission.
[45]
Under Section 4, Rule 129 of the Rules of Court, a judicial admission requires no proof. The
admission may be contradicted only by a showing that it was made through palpable mistake or that no such
admission was made. The Court cannot lightly set aside a judicial admission especially when the opposing party
relied upon the same and accordingly dispensed with further proof of the fact already admitted. An admission
made by a party in the course of the proceedings does not require proof.
[46]


In the instant case, among the facts expressly admitted by the CIR and Toshiba in their CTA-approved Joint
Stipulation are that Toshiba is a duly registered value-added tax entity in accordance with Section 107 of the Tax
Code, as amended*,+
[47]
that is subject to zero percent (0%) value-added tax on its export sales in accordance
with then Section 100(a)(2)(A) of the Tax Code, as amended.
[48]
The CIR was bound by these admissions, which he
could not eventually contradict in his Motion for Reconsideration of the CTA Decision dated October 16, 2000, by
arguing that Toshiba was actually a VAT-exempt entity and its export sales were VAT-exempt
transactions. Obviously, Toshiba could not have beensubject to VAT and exempt from VAT at the same
time. Similarly, the export sales of Toshiba could not have been subject to zero percent (0%) VAT and exempt
from VAT as well.

The CIR cannot escape the binding effect of his judicial
admissions.


The Court disagrees with the Court of Appeals when it ruled in its Decision dated August 29, 2002 that the
CIR could not be bound by his admissions in the Joint Stipulation because (1) the said admissions were made
through palpable mistake
[49]
which, if countenanced, would result in falsehood, unfairness and injustice;
[50]
and
(2) the State could not be put in estoppel by the mistakes of its officials or agents. This ruling of the Court of
Appeals is rooted in its conclusion that a palpable mistake had been committed by the CIR in the signing of the
Joint Stipulation. However, this Court finds no evidence of the commission of a mistake, much more, of a palpable
one.

The CIR does not deny that his counsel, Atty. Joselito F. Biazon, Revenue Attorney II of the BIR, signed the
Joint Stipulation, together with the counsel of Toshiba, Atty. Patricia B. Bisda. Considering the presumption of
regularity in the performance of official duty,
[51]
Atty. Biazon is presumed to have read, studied, and understood
the contents of the Joint Stipulation before he signed the same. It rests on the CIR to present evidence to the
contrary.

Yet, the Court observes that the CIR himself never alleged in his Motion for Reconsideration of the CTA
Decision dated October 16, 2000, nor in his Petition for Review before the Court of Appeals, that Atty. Biazon
committed a mistake in signing the Joint Stipulation. Since the CIR did not make such an allegation, neither did he
present any proof in support thereof. The CIR began to aver the existence of a palpable mistake only after the
Court of Appeals made such a declaration in its Decision dated August 29, 2002.

Despite the absence of allegation and evidence by the CIR, the Court of Appeals, on its own, concluded
that the admissions of the CIR in the Joint Stipulation were due to a palpable mistake based on the following
deduction

Scrutinizing the Answer filed by [the CIR], we rule that the Joint Stipulation of Facts and
Issues signed by [the CIR] was made through palpable mistake. Quoting paragraph 4 of its
Answer, [the CIR] states:

4. He ADMITS the allegations contained in paragraph 5 of the
petition only insofar as the cited provisions of Tax Code is concerned, but
SPECIFICALLY DENIES the rest of the allegations therein for being mere
opinions, arguments or gratuitous assertions on the part of [Toshiba] and/or
because they are mere erroneous conclusions or interpretations of the quoted
law involved, the truth of the matter being those stated hereunder

x x x x

And paragraph 5 of the petition for review filed by [Toshiba] before the CTA states:

5. Petitioner is subject to zero percent (0%) value-added tax on its
export sales in accordance with then Section 100(a)(2)(A) of the Tax Code x x x.

x x x x

As we see it, nothing in said Answer did [the CIR] admit that the export sales of
[Toshiba] were indeed zero-rated transactions. At the least, what was admitted only by [the CIR]
concerning paragraph 4 of his Answer, is the fact that the provisions of the Tax Code, as cited by
[Toshiba] in its petition for review filed before the CTA were correct.
[52]



The Court of Appeals provided no explanation as to why the admissions of the CIR in his Answer in CTA
Case No. 5762 deserved more weight and credence than those he made in the Joint Stipulation. The appellate
court failed to appreciate that the CIR, through counsel, Atty. Biazon, also signed the Joint Stipulation; and that
absent evidence to the contrary, Atty. Biazon is presumed to have signed the Joint Stipulation willingly and
knowingly, in the regular performance of his official duties. Additionally, the Joint Stipulation
[53]
of Toshiba and the
CIR was a more recent pleading than the Answer
[54]
of the CIR. It was submitted by the parties after the pre-trial
conference held by the CTA, and subsequently approved by the tax court. If there was any discrepancy between
the admissions of the CIR in his Answer and in the Joint Stipulation, the more logical and reasonable explanation
would be that the CIR changed his mind or conceded some points to Toshiba during the pre-trial conference which
immediately preceded the execution of the Joint Stipulation. To automatically construe that the discrepancy was
the result of a palpable mistake is a wide leap which this Court is not prepared to take without substantial basis.

The judicial admissions of the CIR in the Joint Stipulation are
not intrinsically false, wrong, or illegal, and are consistent
with the ruling on the VAT treatment of PEZA-registered
enterprises in the previous Toshiba case.


There is no basis for believing that to bind the CIR to his judicial admissions in the Joint Stipulation that
Toshiba was a VAT-registered entity and its export sales were zero-rated VAT transactions would result in
falsehood, unfairness and injustice. The judicial admissions of the CIR are not intrinsically false, wrong, or
illegal. On the contrary, they are consistent with the ruling of this Court in a previous case involving the same
parties, Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.) Inc.
[55]
(Toshiba case),
explaining the VAT treatment of PEZA-registered enterprises.

In the Toshiba case, Toshiba sought the refund of its unutilized input VAT on its purchase of capital goods
and services for the first and second quarters of 1996, based on Section 106(b) of the Tax Code of 1977, as
amended.
[56]
In the Petition at bar, Toshiba is claiming refund of its unutilized input VAT on its local purchase of
goods and services which are attributable to its export sales for the first and second quarters of 1997, pursuant to
Section 106(a), in relation to Section 100(a)(1)(A)(i) of the Tax Code of 1977, as amended, which read

SEC. 106. Refunds or tax credits of creditable input tax. (a) Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated, may, within two (2) years after the
close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been applied against output
tax: Provided, however, That in the case of zero-rated sales under Section 100(a)(2)(A)(i),(ii) and
(b) and Section 102(b)(1) and (2), the acceptable foreign currency exchange proceeds thereof has
been duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas
(BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-
rated sale and also in taxable or exempt sale of goods or properties of services, and the amount
of creditable input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume sales.

SEC. 100. Value-added tax on sale of goods or properties. (a) Rate and base of tax. x
x x

x x x x

(2) The following sales by VAT-registered persons shall be subject to 0%:

(A) Export sales. The term export sales means:

(i) The sale and actual shipment of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement that may be agreed upon which may influence or
determine the transfer of ownership of the goods so exported and paid for in acceptable foreign
currency or its equivalent in goods or services, and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipnas (BSP).


Despite the difference in the legal bases for the claims for credit/refund in the Toshiba case and the case
at bar, the CIR raised the very same defense or objection in both that Toshiba and its transactions were VAT-
exempt. Hence, the ruling of the Court in the former case is relevant to the present case.

At the outset, the Court establishes that there is a basic distinction in the VAT-exemption of a person and
the VAT-exemption of a transaction

It would seem that petitioner CIR failed to differentiate between VAT-exempt
transactions from VAT-exempt entities. In the case of Commissioner of Internal Revenue v.
Seagate Technology (Philippines), this Court already made such distinction

An exempt transaction, on the one hand, involves goods or services
which, by their nature, are specifically listed in and expressly exempted from
the VAT under the Tax Code, without regard to the tax status VAT-exempt or
not of the party to the transaction

An exempt party, on the other hand, is a person or entity granted VAT
exemption under the Tax Code, a special law or an international agreement to
which the Philippines is a signatory, and by virtue of which its taxable
transactions become exempt from VAT x x x.
[57]



In effect, the CIR is opposing the claim for credit/refund of input VAT of Toshiba on two grounds: (1) that
Toshiba was a VAT-exempt entity; and (2) that its export sales were VAT-exempt transactions.

It is now a settled rule that based on the Cross Border Doctrine, PEZA-registered enterprises, such as
Toshiba, are VAT-exempt and no VAT can be passed on to them. The Court explained in the Toshiba case that

PEZA-registered enterprise, which would necessarily be located within ECOZONES, are VAT-
exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the
five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of
all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that
ECOZONES are foreign territory.

x x x x

The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no
VAT shall be imposed to form part of the cost of goods destined for consumption outside of the
territorial border of the taxing authority. Hence, actual export of goods and services from the
Philippines to a foreign country must be free of VAT; while, those destined for use or
consumption within the Philippines shall be imposed with ten percent (10%) VAT.

Applying said doctrine to the sale of goods, properties, and services to and from the
ECOZONES, the BIR issued Revenue Memorandum Circular (RMC) No. 74-99, on 15 October
1999. Of particular interest to the present Petition is Section 3 thereof, which reads

SECTION 3. Tax Treatment of Sales Made by a VAT Registered
Supplier from the Customs Territory, to a PEZA Registered Enterprise.

(1) If the Buyer is a PEZA registered enterprise which is subject to the
5% special tax regime, in lieu of all taxes, except real property tax, pursuant to
R.A. No. 7916, as amended:

(a) Sale of goods (i.e., merchandise). This shall be treated as
indirect export hence, considered subject to zero percent (0%) VAT, pursuant
to Sec. 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916, in relation to ART.
77(2) of the Omnibus Investments Code.

(b) Sale of service. This shall be treated subject to zero percent (0%)
VAT under the cross border doctrine of the VAT System, pursuant to VAT
Ruling No. 032-98 dated Nov. 5, 1998.

(2) If Buyer is a PEZA registered enterprise which is not embraced by
the 5% special tax regime, hence, subject to taxes under the NIRC, e.g., Service
Establishments which are subject to taxes under the NIRC rather than the 5%
special tax regime:

(a) Sale of goods (i.e., merchandise). This shall be treated as
indirect export hence, considered subject to zero percent (0%) VAT, pursuant
to Sec. 106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916 in relation to ART.
77(2) of the Omnibus Investments Code.

(b) Sale of Service. This shall be treated subject to zero percent (0%)
VAT under the cross border doctrine of the VAT System, pursuant to VAT
Ruling No. 032-98 dated Nov. 5, 1998.

(3) In the final analysis, any sale of goods, property or services made
by a VAT registered supplier from the Customs Territory to any registered
enterprise operating in the ecozone, regardless of the class or type of the
latters PEZA registration, is actually qualified and thus legally entitled to the
zero percent (0%) VAT. Accordingly, all sales of goods or property to such
enterprise made by a VAT registered supplier from the Customs Territory shall
be treated subject to 0% VAT, pursuant to Sec. 106(A)(2)(a)(5), NIRC, in relation
to ART. 77(2) of the Omnibus Investments Code, while all sales of services to
the said enterprises, made by VAT registered suppliers from the Customs
Territory, shall be treated effectively subject to the 0% VAT, pursuant to
Section 108(B)(3), NIRC, in relation to the provisions of R.A. No. 7916 and the
Cross Border Doctrine of the VAT system.

This Circular shall serve as a sufficient basis to entitle such supplier of
goods, property or services to the benefit of the zero percent (0%) VAT for
sales made to the aforementioned ECOZONE enterprises and shall serve as
sufficient compliance to the requirement for prior approval of zero-rating
imposed by Revenue Regulations No. 7-95 effective as of the date of the
issuance of this Circular.

Indubitably, no output VAT may be passed on to an ECOZONE enterprise since it is a
VAT-exempt entity. x x x.
[58]



The Court, nevertheless, noted in the Toshiba case that the rule which considers any sale by a supplier
from the Customs Territory to a PEZA-registered enterprise as export sale, which should not be burdened by
output VAT, was only clearly established on October 15, 1999, upon the issuance by the BIR of RMC No. 74-
99. Prior to October 15, 1999, whether a PEZA-registered enterprise was exempt or subject to VAT depended on
the type of fiscal incentives availed of by the said enterprise.
[59]
The old rule, then followed by the BIR, and
recognized and affirmed by the CTA, the Court of Appeals, and this Court, was described as follows

According to the old rule, Section 23 of Rep. Act No. 7916, as amended, gives the PEZA-
registered enterprise the option to choose between two sets of fiscal incentives: (a) The five
percent (5%) preferential tax rate on its gross income under Rep. Act No. 7916, as amended; and
(b) the income tax holiday provided under Executive Order No. 226, otherwise known as the
Omnibus Investment Code of 1987, as amended.

The five percent (5%) preferential tax rate on gross income under Rep. Act No. 7916, as
amended, is in lieu of all taxes. Except for real property taxes, no other national or local tax may
be imposed on a PEZA-registered enterprise availing of this particular fiscal incentive, not even
an indirect tax like VAT.

Alternatively, Book VI of Exec. Order No. 226, as amended, grants income tax holiday to
registered pioneer and non-pioneer enterprises for six-year and four-year periods,
respectively. Those availing of this incentive are exempt only from income tax, but shall be
subject to all other taxes, including the ten percent (10%) VAT.

This old rule clearly did not take into consideration the Cross Border Doctrine essential
to the VAT system or the fiction of the ECOZONE as a foreign territory. It relied totally on the
choice of fiscal incentives of the PEZA-registered enterprise. Again, for emphasis, the old VAT
rule for PEZA-registered enterprises was based on their choice of fiscal incentives: (1) If the PEZA-
registered enterprise chose the five percent (5%) preferential tax on its gross income, in lieu of
all taxes, as provided by Rep. Act No. 7916, as amended, then it would be VAT-exempt; (2) If the
PEZA-registered enterprise availed of the income tax holiday under Exec. Order No. 226, as
amended, it shall be subject to VAT at ten percent (10%). Such distinction was abolished by RMC
No. 74-99, which categorically declared that all sales of goods, properties, and services made by a
VAT-registered supplier from the Customs Territory to an ECOZONE enterprise shall be subject to
VAT, at zero percent (0%) rate, regardless of the latters type or class of PEZA registration; and,
thus, affirming the nature of a PEZA-registered or an ECOZONE enterprise as a VAT-exempt
entity.
[60]



To recall, Toshiba is herein claiming the refund of unutilized input VAT payments on its local purchases of
goods and services attributable to its export sales for the first and second quarters of 1997. Such export sales
took place before October 15, 1999, when the old rule on the VAT treatment of PEZA-registered enterprises still
applied. Under this old rule, it was not only possible, but even acceptable, for Toshiba, availing itself of the income
tax holiday option under Section 23 of Republic Act No. 7916, in relation to Section 39 of the Omnibus Investments
Code of 1987, to be subject to VAT, both indirectly (as purchaser to whom the seller shifts the VAT burden) and
directly (as seller whose sales were subject to VAT, either at ten percent [10%] or zero percent [0%]).

A VAT-registered seller of goods and/or services who made zero-rated sales can claim tax credit or refund
of the input VAT paid on its purchases of goods, properties, or services relative to such zero-rated sales, in
accordance with Section 4.102-2 of Revenue Regulations No. 7-95, which provides

Sec. 4.102-2. Zero-rating. (a) In general. - A zero-rated sale by a VAT-registered person,
which is a taxable transaction for VAT purposes, shall not result in any output tax. However, the
input tax on his purchases of goods, properties or services related to such zero-rated sale shall be
available as tax credit or refund in accordance with these regulations.


The BIR, as late as July 15, 2003, when it issued RMC No. 42-2003, accepted applications for credit/refund
of input VAT on purchases prior to RMC No. 74-99, filed by PEZA-registered enterprises which availed themselves
of the income tax holiday. The BIR answered Question Q-5(1) of RMC No. 42-2003 in this wise

Q-5: Under Revenue Memorandum Circular (RMC) No. 74-99, purchases by PEZA-
registered firms automatically qualify as zero-rated without seeking prior approval from
the BIR effective October 1999.
1) Will the OSS-DOF Center still accept applications from PEZA-registered
claimants who were allegedly billed VAT by their suppliers before and during the
effectivity of the RMC by issuing VAT invoices/receipts?

x x x x

A-5(1): If the PEZA-registered enterprise is paying the 5% preferential tax in lieu of all
other taxes, the said PEZA-registered taxpayer cannot claim TCC or refund for the VAT
paid on purchases. However, if the taxpayer is availing of the income tax holiday, it
can claim VAT credit provided:

a. The taxpayer-claimant is VAT-registered;

b. Purchases are evidenced by VAT invoices or receipts, whichever is
applicable, with shifted VAT to the purchaser prior to the implementation of
RMC No. 74-99; and

c. The supplier issues a sworn statement under penalties of perjury that it
shifted the VAT and declared the sales to the PEZA-registered purchaser as
taxable sales in its VAT returns.

For invoices/receipts issued upon the effectivity of RMC No. 74-99, the claims for input VAT by
PEZA-registered companies, regardless of the type or class of PEZA-registration, should be
denied. (Emphases ours.)


Consequently, the CIR cannot herein insist that all PEZA-registered enterprises are VAT-exempt in every
instance. RMC No. 42-2003 contains an express acknowledgement by the BIR that prior to RMC No. 74-99, there
were PEZA-registered enterprises liable for VAT and entitled to credit/refund of input VAT paid under certain
conditions.

This Court already rejected in the Toshiba case the argument that sale transactions of a PEZA-registered
enterprise were VAT-exempt under Section 103(q) of the Tax Code of 1977, as amended, ratiocinating that

Section 103(q) of the Tax Code of 1977, as amended, relied upon by petitioner CIR,
relates to VAT-exempt transactions. These are transactions exempted from VAT by special laws
or international agreements to which the Philippines is a signatory. Since such transactions are
not subject to VAT, the sellers cannot pass on any output VAT to the purchasers of goods,
properties, or services, and they may not claim tax credit/refund of the input VAT they had paid
thereon.

Section 103(q) of the Tax Code of 1977, as amended, cannot apply to transactions of
respondent Toshiba because although the said section recognizes that transactions covered by
special laws may be exempt from VAT, the very same section provides that those falling under
Presidential Decree No. 66 are not. Presidential Decree No. 66, creating the Export Processing
Zone Authority (EPZA), is the precursor of Rep. Act No. 7916, as amended, under which the
EPZA evolved into the PEZA. Consequently, the exception of Presidential Decree No. 66 from
Section 103(q) of the Tax Code of 1977, as amended, extends likewise to Rep. Act No. 7916, as
amended.
[61]
(Emphasis ours.)


In light of the judicial admissions of Toshiba, the CTA
correctly confined itself to the other factual issues submitted
for resolution by the parties.


In accord with the admitted facts that Toshiba was a VAT-registered entity and that its export sales were
zero-rated transactions the stated issues in the Joint Stipulation were limited to other factual matters,
particularly, on the compliance by Toshiba with the rest of the requirements for credit/refund of input VAT on
zero-rated transactions. Thus, during trial, Toshiba concentrated on presenting evidence to establish that it
incurred P3,875,139.65 of input VAT for the first and second quarters of 1997 which were directly attributable to
its export sales; that said amount of input VAT were not carried over to the succeeding quarters; that said amount
of input VAT has not been applied or offset against any output VAT liability; and that said amount of input VAT was
properly substantiated by official receipts and invoices.

After what truly appears to be an exhaustive review of the evidence presented by Toshiba, the CTA made
the following findings

(1) The amended quarterly VAT returns of Toshiba for 1997 showed that it made no other sales, except
zero-rated export sales, for the entire year, in the sum of P2,083,305,000.00 for the first quarter and
P5,411,372,000.00 for the second quarter. That being the case, all input VAT allegedly incurred by Toshiba for the
first two quarters of 1997, in the amount of P3,875,139.65, was directly attributable to its zero-rated sales for the
same period.

(2) Toshiba did carry-over the P3,875,139.65 input VAT it reportedly incurred during the first two
quarters of 1997 to succeeding quarters, until the first quarter of 1999. Despite the carry-over of the subject input
VAT of P3,875,139.65, the claim of Toshiba was not affected because it later on deducted the said amount as VAT
Refund/TCC Claimed from its total available input VAT of P6,841,468.17 for the first quarter of 1999.

(3) Still, the CTA could not allow the credit/refund of the total input VAT of P3,875,139.65 being claimed
by Toshiba because not all of said amount was actually incurred by the company and duly substantiated by
invoices and official receipts. From the P3,875,139.65 claim, the CTA deducted the amounts of (a) P189,692.92 ,
which was in excess of the P3,685,446.23 input VAT Toshiba originally claimed in its application for credit/refund
filed with the DOF One-Stop Shop; (b) P396,882.58 , which SGV & Co., the commissioned CPA, disallowed for
being improperly substantiated, i.e., supported only by provisional acknowledgement receipts, or by documents
other than official receipts, or not supported by TIN or TIN VAT or by any document at all; (c) P1,887,545.65 ,
which the CTA itself verified as not being substantiated in accordance with Section 4.104-5
[62]
of Revenue
Regulations No. 7-95, in relation to Sections 108
[63]
and 238
[64]
of the Tax Code of 1977, as amended; and (d)
P15,736.42 , which Toshiba already applied to its output VAT liability for the fourth quarter of 1998.

(4) Ultimately, Toshiba was entitled to the credit/refund of unutilized input VAT payments attributable to
its zero-rated sales in the amounts of P1,158,016.82 and P227,265.26, for the first and second quarters of 1997,
respectively, or in the total amount of P1,385,282.08 .

Since the aforementioned findings of fact of the CTA are borne by substantial evidence on record,
unrefuted by the CIR, and untouched by the Court of Appeals, they are given utmost respect by this Court.

The Court will not lightly set aside the conclusions reached by the CTA which, by the very nature of its
functions, is dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on
the subject unless there has been an abuse or improvident exercise of authority.
[65]
In Barcelon, Roxas Securities,
Inc. (now known as UBP Securities, Inc.) v. Commissioner of Internal Revenue,
[66]
this Court more explicitly
pronounced

Jurisprudence has consistently shown that this Court accords the findings of fact by the
CTA with the highest respect. In Sea-Land Service Inc. v. Court of Appeals [G.R. No. 122605, 30
April 2001, 357 SCRA 441, 445-446], this Court recognizes that the Court of Tax Appeals, which by
the very nature of its function is dedicated exclusively to the consideration of tax problems, has
necessarily developed an expertise on the subject, and its conclusions will not be overturned
unless there has been an abuse or improvident exercise of authority. Such findings can only be
disturbed on appeal if they are not supported by substantial evidence or there is a showing of
gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing
proof to the contrary, this Court must presume that the CTA rendered a decision which is valid in
every respect.


WHEREFORE, the assailed Decision dated August 29, 2002 and the Resolution dated February 19, 2003 of
the Court of Appeals in CA-G.R. SP No. 63047 are REVERSED and SET ASIDE, and the Decision dated October 16,
2000 of the Court of Tax Appeals in CTA Case No. 5762 is REINSTATED. Respondent Commissioner of Internal
Revenue isORDERED to REFUND or, in the alternative, to ISSUE a TAX CREDIT CERTIFICATE in favor of petitioner
Toshiba Information Equipment (Phils.), Inc. in the amount of P1,385,282.08, representing the latters unutilized
input VAT payments for the first and second quarters of 1997. No pronouncement as to costs.








G.R. No. 163217 April 18, 2006
CELESTINO MARTURILLAS, Petitioner
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
D E C I S I O N
PANGANIBAN, CJ:
Well-rooted is the principle that factual findings of trial courts, especially when affirmed by the appellate court, are
generally binding on the Supreme Court. In convicting the accused in the present case, the Court not merely relied
on this doctrine, but also meticulously reviewed the evidence on record. It has come to the inevitable conclusion
that petitioner is indeed guilty beyond reasonable doubt of the crime charged.
The Case
Before us is a Petition for Review
1
under Rule 45 of the Rules of Court, seeking to set aside the November 28, 2003
Decision
2
and the March 10, 2004 Resolution
3
of the Court of Appeals (CA) in CA-GR CR No. 25401. The CA
affirmed, with modifications as to the award of damages, the Decision
4
of Branch 10 of the Regional Trial Court
(RTC) of Davao City. The RTC had found Celestino Marturillas guilty of homicide in Criminal Case No. 42091-98. The
assailed CA Decision disposed as follows:
"WHEREFORE, subject to the modification thus indicated, the judgment appealed from must be, as it hereby is,
AFFIRMED. With the costs of this instance to be assessed against the accused-appellant."
5

The challenged CA Resolution denied petitioners Motion for Reconsideration.
6

Petitioner was charged with homicide in an Information
7
dated November 5, 1998, worded as follows:
"[T]hat on or about November 4 1998, in the City of Davao, Philippines, and within the jurisdiction of this
Honorable Court, the above-mentioned accused, armed with a gun, and with intent to kill, wilfully, unlawfully and
feloniously shot one Artemio Pantinople, thereby inflicting fatal wound upon the latter which caused his death."
8

The Facts
Version of the Prosecution
The Office of the Solicitor General (OSG) summarized the Peoples version of the facts:
"4. The prosecution presented Lito Santos, Ernita Pantinople, PO2 Mariano Operario, Alicia Pantinople and Dr.
Danilo Ledesma as its witnesses from whose testimonies, the following facts were established.
"Lito Santos, a forty-three-year old farmer and resident of Barangay Gatungan, Bunawan District, Davao City,
testified that about 6:00 oclock in the afternoon of November 4, 1998, he saw his neighbor and kumpare
Artemio Pantinople arrive on board a jeepney from Bunawan, Davao City. Artemio was carrying a truck battery,
some corn bran and rice. They talked for a while concerning their livelihood afterwhich, Artemio proceeded to
connect the battery to the fluorescent lamps in his store. Artemios store was located about five (5) meters away
from Litos house.
"After installing the battery to the fluorescent lamps, Artemio sat for a while on a bench located in front of his
store. Then, Cecilia Santos, Litos wife, called him and Artemio for supper. Artemio obliged. Lito, opting to eat later,
served Artemio and Cecilia the food. After eating, Artemio returned to the bench and sat on it again together with
his tree (3) children, namely: Janice, Saysay and Pitpit.
"Lito was eating supper in their kitchen when he heard a gunshot. From a distance of about ten (10) meters, he
also noticed smoke and fire coming from the muzzle of a big gun. Moments later, he saw Artemio clasping his
chest and staggering backwards to the direction of his (Litos) kitchen. Artemio shouted to him, Tabangi ko Pre,
gipusil ko ni kapitan, meaning Help me, Pre, I was shot by the captain. However, Lito did not approach Artemio
right after the shooting incident because Cecilia warned him that he might also be shot.
"Lito did not see the person who shot Artemio because his attention was then focused on Artemio.
"Shortly, Lito saw Ernita Pantinople, the wife of Artemio, coming from her house towards the direction where
Artemio was sprawled on the ground. Ernita was hysterical, jumping and shouting, Kapitan, bakit mo binaril and
aking asawa. She also repeatedly cried for help.
"Lito then went out of their house and approached Artemio who was lying dead near a banana trunk more than
five (5) meters from his house. Some of their neighbors, namely: Antenero, Loloy Libre and Lapis answered Ernitas
call for help and approached them.
"When the shooting incident happened about 7:30 in the evening of November 4, 1998, Litos house was illumined
by a lamp. Their kitchen has no walls. It is an open-type kitchen giving him an unobstructed view of Artemio who
was about five (5) meters away from where he was positioned at that time. Although there was a gemilina tree
growing in the space in between his house and the store of Artemio, the same did not block his view of Artemio.
Likewise, the coconut trees and young banana plants growing at the scene of the crime did not affect his view.
"At the same instance, Ernita was also in their kitchen preparing milk for her baby. Her baby was then lying on the
floor of their kitchen. When she was about to put the bottle into the babys mouth, she suddenly heard the sound
of a gunburst followed by a shout, Help me Pre, I was shot by the captain. She immediately pushed open the
window of their kitchen and saw appellant wearing a black jacket and camouflage pants running towards the
direction of the back portion of Litos house. From there, appellant crossed the street and disappeared.
"Ernita saw appellant carrying with him a long firearm which looked like an M-14 rifle. Ernita also sensed that
appellant had some companions with him because she heard the crackling sound of the dried leaves around the
place. Ernita had a clear view of appellant at that time because their place was well-illumined by the full moon that
night and by the two (2) fluorescent lamps in their store which were switched on at the time of the incident.
"Ernita immediately went out of their house and ran towards Artemio. Artemio tried to speak to her but he could
not do so because his mouth was full of blood. Upon seeing the pitiful sight of her husband, Ernita shouted several
times, Kapitan, ngano nimo gipatay and akong bana. She also repeatedly called her neighbors for help but only
Lito Santos, Eufemio Antenero, Norman Libre and some residents of Poblacion Gatungan responded to her calls
and approached them. She noted that no member of the CFO and CAFGU came to help them. Also, no barangay
tanod came to offer them to help.
"While waiting for the police, Ernita did not allow Artemios body to be touched by anybody. After more than two
(2) hours, the police arrived, together with a photographer by the name of Fe Mendez of Bunawan District, Davao
City who took pictures of the crime scene.
"PO2 Mariano Operario, Investigation Officer of the Investigation Section of the Bunawan Police Station, Philippine
National Police, Davao City, testified that about 9:05 in the evening of November 4, 1998, he received a report of
an alleged shooting incident at Barangay Gatungan, Bunawan District in Davao City. Together with SPO1 Rodel C.
Estrellan and a member of the mobile police patrol on board their mobile car, PO2 Operario proceeded
immediately to the crime scene. They reached the crime scene about 10:00 oclock in the evening of the same
date. They found the lifeless body of Artemio sprawled on the ground. Ernita and Lito then approached PO2
Operario and informed him that appellant was the one responsible for the shooting.
"PO2 Operario stayed at the crime scene for about one (1) hour and waited for the funeral vehicle to pick up the
body of Artemio. When the funeral hearse arrived, PO2 Operario told the crew to load Artemios body into the
vehicle. Thereafter, he then boarded again their mobile car together with Lito Santos.
"Armed with the information that appellant was the one responsible for the shooting of Artemio, PO2 Operario
proceeded to the house of appellant and informed him that he was a suspect in the killing of Artemio. He then
invited appellant to go with him to the police station and also to bring along with him his M-14 rifle. Appellant did
not say anything. He just got his M-14 rifle and went with the police to the police station where he was detained
the whole night of November 4, 1998. Appellant did not also give any statement to anybody about the incident.
The following day, appellant was transferred by the police to Tibungco Police Station where he was detained.
"Alicia Pantinople, the 44-year old sister of Artemio, testified that on the night of November 4, 1998, she was at
home watching television. She heard a gunshot but did not mind it because she was already used to hearing the
sound of guns fired indiscriminately in their place.
"After a few minutes, Junjun, a child and resident of Sitio Centro, Barangay Gatungan, Bunawan District, Davao City
came knocking at their door. Junjun informed them that: Yoyo, Uncle Titing was shot, referring to Artemio.
"Upon hearing the report, Alicia looked for some money thinking that it might be needed for Artemios
hospitalization because she expected Artemio to be still alive. Artemios two (2) children, namely: Jonel and
Genesis who were staying with her hurriedly left. She then ran to the place where her brother was shot and found
Artemios dead body on the ground surrounded by his four (4) children.
"At the Bunawan Police Station, Alicia was informed by the police that appellant was at Tibungco Police Station.
She sent her male cousin to proceed to Tibungco Police Station to find out if appellant was indeed in the said
place. However, her cousin immediately returned and informed her that appellant was not in Tibungco Police
Station. She then went around the Bunawan Police Station and noticed a locked door. When she peeped through
the hole of the said door, she saw appellant reclining on a bench about two and a half (2 ) meters away from the
door. Appellants left leg was on top of the bench while his right leg was on the ground. Appellant was wearing a
brown shirt, black jacket and a pair of camouflage pants. He was also wearing brown shoes but he had no socks on
his feet.
"At the police station, Alicia confronted appellant: Nong Listing I know that you can recognize my voice. It is me.
Why did you kill my brother? What has he done wrong to you?
"Appellant did not answer her. Nevertheless, she was sure that appellant was awake because he was tapping the
floor with his right foot.
"Dr. Danilo Ledesma, a medico-legal officer of the Davao City Health Department, conducted an autopsy on
Artemios cadaver about 9:30 in the morning of November 5, 1998 at the Rivera Funeral Homes located at Licanan,
Lasang. His findings are summarized in his Necropsy Report No. 76:
POSTMORTEM FINDINGS
Pallor, marked generalized.
Body in rigor mortis.
Wound, gunshot, ENTRANCE, 0.9 x 0.8 cm. Ovaloid located at the anterior chestwall, rightside, 1.0 cm; from the
anterior median line, at the level of the third (3rd) intercoastal space and 131.0 cms. above the right heel, directed
backwards, upwards, medially crossing the midline from the right to left, involving the soft tissues, perforating the
body of the sternum, into the pericardial cavity, perforating the heart into the left thoracic cavity, perforating the
heart into the left thoracic cavity, perforating the upper lobe of the left lung, forming an irregular EXIT, 1.5 x 1.1
cms. at the posterior chest wall left side, 13.0 cms. from the posterior median line and 139.0 cms. above the left
heel.
Hemopericadium, 300 ml.
Hemothorax, left, 1,000 ml.
Stomach, filled with partially digested food particles.
Other visceral organs, pale.
CAUSE OF DEATH: Gunshot wound of the chest.
Signed by: DANILO P. LEDESMA
Medico-Legal Officer IV
"During the trial, Dr. Ledesma explained that Artemio died of a gunshot wound, 0.9 x 0.8 centimeters in size
located about one (1) inch away from the centerline of Artemios Adams apple down to his navel and about 1:00
oclock from his right nipple.
"The trajectory of the bullet passing through Artemios body indicates that his assailant was in a lower position
than Artemio when the gun was fired. Dr. Ledesma also found the wound of Artemio negative of powder burns
indicating that the assailant was at a distance of more than twenty-four (24) inches when he fired his gun at
Artemio. He did not also find any bullet slug inside the body of Artemio indicating that the bullet went through
Artemios body. Artemios heart and lungs were lacerated and his stomach contained partially digested food
particles indicating that he had just eaten his meal when he was shot.
"In the certificate of death of Artemio, Dr. Ledesma indicated that the cause of his death was a gunshot wound on
the chest.
"5. After the defense presented its evidence, the case was submitted for decision."
9

Version of the Defense
On the other hand, petitioner presented the following statement of facts:
"9. This is a criminal case for Homicide originally lodged before the Regional Trial Court, Branch 10 of Davao City
against herein Petitioner Celestino Marturillas, former Barangay Captain of Gatungan, Bunawan District[,] Davao
City and docketed as Criminal Case No. 42,091-98. The criminal charge against Petitioner was the result of a
shooting incident in Barangay Gatungan, Bunawan District, Davao City which resulted in the slaying of Artemio
Pantinople while the latter was on his way home in the evening of November 4, 1998.
"10. On that same evening at around 8:30 p.m. herein Petitioner former Barangay Captain Celestino Marturillas
was roused from his sleep at his house in Barangay Gatungan, Bunawan District, Davao City by his wife since
Kagawads Jimmy Balugo and Norman Libre (Barangay Kagawads of Gatungan, Bunawan District, Davao City)
wanted to see him. Dazed after just having risen from bed, Petitioner was rubbing his eyes when he met the two
Kagawads inside his house. He was informed that a resident of his barangay, Artemio Pantinople, had just been
shot. Petitioner at once ordered his Kagawads to assemble the members of the SCAA (Special Civilian Armed
[Auxiliary]) so that they could be escorted to the crime scene some 250 meters away. As soon as the SCAAs were
contacted, they (Petitioner, Kagawads Libre and Balugo including Wiliam Gabas, Eddie Loyahan and Junior
Marturillas - the last three being SCAA members) then proceeded to the crime scene to determine what assistance
they could render.
"11. While approaching the store owned by the Pantinoples and not very far from where the deceased lay
sprawled, Petitioner was met by Ernita Pantinople (wife of the deceased-Artemio Pantinople) who was very mad
and belligerent. She immediately accused Petitioner of having shot her husband instead of Lito Santos who was his
enemy. Petitioner was taken aback by the instant accusation against him. He explained that he just came from his
house where he was roused by his Kagawads from his sleep. Not being able to talk sense with Ernita Pantinople,
Petitioner and his companions backed off to avoid a heated confrontation. Petitioner instead decided to go back to
his house along with his companions.
"12. Upon reaching his house, Petitioner instructed Kagawad Jimmy Balugo to contact the Bunawan Police Station
and inform them what transpired. Not knowing the radio frequency of the local police, Kagawad Balugo instead
radioed officials of nearby Barangay San Isidro requesting them to contact the Bunawan PNP for police assistance
since someone was shot in their locality.
"13. Moments later, PO2 Mariano Operario and another police officer arrived at the house of Petitioner and when
confronted by the latter, he was informed by PO2 Operario that he was the principal suspect in the slaying of
Artemio Pantinople. Upon their invitation, Petitioner immediately went with the said police officers for questioning
at the Bunawan Police Station. He also took with him his government-issued M-14 Rifle and one magazine of live
M-14 ammunition which Petitioner turned over for safe keeping with the Bunawan PNP. The police blotter showed
that Petitioner surrendered his M-14 rifle with live ammunition to SPO1 Estrellan and PO3 Sendrijas of the
Bunawan PNP at around 10:45 p.m. of November 4, 1998.
"14. When the shooting incident was first recorded in the Daily Record of Events of the Bunawan PNP it was
indicated therein that deceased may have been shot by unidentified armed men viz:
Entry No. Date Time Incident/Events
2289 110498 2105H SHOOTING INCIDENT-
One Dominador Lopez 43 years old, married, farmer and a resident of Puro*k+ 5, Barangay Gatungan, Davao City
appeared at this Precinct and reported that shortly before this writing, one ARTEMIO PANTINOPLE, former
barangay kagawad of Barangay Gatungan was allegedly shot to death by an unidentified armed men at the
aforementioned Barangay. x x x.
"15. The extract from the police blotter prepared by SPO2 Dario B. Undo dated November 9, 1998 already had a
little modification indicating therein that deceased was shot by an unidentified armed man and the following entry
was made.
2105H: Shooting Incident: One Dominador Lopez, 43 years old, married, farmer and a resident of Purok 5,
Barangay Gatungan Bunawan District, Davao City appeared at this Police Precinct and reported that prior to these
writing, one Artemio Pantinople, former Barangay Kagawad of Barangay Gatungan was allegedly shot to death by
unidentified armed man at the aforementioned barangay. x x x.
"16. On November 5, 1998 at around 7:15 a.m. PO2 Mariano Operario indorsed with the Bunawan PNP an empty
shell fired from a carbine rifle which was recovered by the said police officer from the crime scene in the night of
the incident. Owing to his pre-occupation in organizing and preparing the affidavits of the Complainant and her
witnesses the previous evening, he was only able to indorse the same the following morning. At the same time,
P/Chief Insp. Julito M. Diray, Station Commander of the Bunawan PNP made a written request addressed to the
District Commander of the PNP Crime Laboratory requesting that a paraffin test be conducted on Petitioner and
that a ballistics examination be made on the M-14 rifle which he surrendered to Bunawan PNP.
"17. At around 9:30 a.m. of November 5, 1998, Dr. Danilo P. Ledesma, M.D., Medico-Legal Officer for Davao City
conducted an autopsy on the cadaver of deceased and made the following Post-Mortem Findings contained in
Necropsy Report No. 76 dated November 6, 1998, viz:
Pallor, marked, generalized
Body in rigor mortis
Wound, gunshot, ENTRANCE, 0.9-0.8 cm. ovaloid located at the anterior chest wall, right side, .0 cm. from the
anterior median line, at the level of the third (3rd) intercostal space and 131.0 cms. above the right neck, directed
backwards, upwards, medially, crossing the midline from the right to left, involving the soft tissues, perforating the
body of the sternum into the pericardial cavity, perforating the heart into the left thoracic cavity, perforating the
upper lobe of the left lung forming an irregular EXIT, 1.5x1.1 cms. at the posterior chest wall, left side, 13.0 cms.
from the posterior median line and 139.0 cms. above the left neck.
Hemopericadium, 300 ml.
Hemothorax, left 1,000 ml.
Stomach filled with partially digested food particles.
Other visceral organs, pale
CAUSE OF DEATH: Gunshot wound of the chest.
"18. After the fatal shooting of deceased, Celestino Marturillas was subjected to paraffin testing by the PNP Crime
Laboratory in Davao City at 10:30 a.m. November 5, 1998. The next day, November 6, 1998, the PNP Crime
Laboratory released Physical Sciences Report No. C-074-98 regarding the paraffin test results which found
Petitioner NEGATIVE for gunpowder nitrates based on the following findings of the PNP Crime Laboratory:
FINDINGS:
Qualitative examination conducted on the above-mentioned specimen gave NEGATIVE result to the test for the
presence of gunpowder nitrates. x x x
CONCLUSION:
Both hands of Celestino Marturillas do not contain gunpowder nitrates*.+
"19. After preparing all the affidavits of Ernita Pantinople and her witnesses PO2 Mariano R. Operario Jr., the police
officer as[s]igned to investigate the shooting of the deceased, prepared and transmitted, on November 5, 1998, a
Complaint to the City Prosecution Office recommending that Petitioner be indicted for Murder, attaching
therewith the Sworn Affidavits of Ernita O. Pantinople (Complainant), Lito D. Santos (witness) and the Sworn Joint
Affidavit of SPO1 Rodel Estrellan and PO2 Mariano R. Operario Jr. of the PNP.
"20. The following is the Affidavit-Complaint of Ernita Pantinople as well as the supporting affidavits of her
witnesses all of which are quoted in full hereunder:
Ernita Pantinoples Affidavit-Complaint dated November 5, 1998:
That last November 4, 1998 at about 7:30 in the evening, I was attending and caring my baby boy at that time to
let him sleep and that moment I heard first one gun shot burst after then somebody shouting seeking for help in
Visayan words tabangi ko Pre gipusil ko ni Kapitan I estimated a distance to more or less ten (10) meters away
from my house;
That I immediately peep at the windows, wherein I very saw a person of Brgy. Capt. Celestino Marturillas of Brgy.
Gatungan, Bunawan District, Davao City, wearing black jacket and camouflage pants carrying his M-14 rifle running
to the direction to the left side portion of the house of Lito Santos who was my neighbor respectively;
That I hurriedly go down from my house and proceeded to the victims body, wherein when I came nearer I got
surprised for the victim was my beloved husband;
That I was always shouting in visayan words kapitan nganong imo mang gipatay and akong bana;
That I let my husband body still at that placed until the police officers will arrived and investigate the incident;
That I know personally Brgy. Capt. Celestino Marturillas for he is my nearby neighbor at that placed;
That I am executing this affidavit to apprise the authorities concern of the truthfulness of the foregoing and my
desire to file necessary charges against Celestino Marturillas.
Witness-Affidavit of Lito Santos dated November 5, 1998 reads:
I, LITO D. SANTOS, 43 yrs. old, married, farmer, a resident of Purok 5, Brgy. Gatungan, Bunawan District, Davao
City after having been duly sworn to in accordance with law do hereby depose and say:
That last November 4, 1998 at about 7:30 in the evening I was taking my dinner at the kitchen of my house and
after finished eating I stood up then got a glass of water and at that time I heard one gun shot burst estimated to
more or less ten (10) meters from my possession then followed somebody shouting seeking for help in Visayan
words tabangi ko pre gipusil ko ni Kapitan;
That I really saw the victim moving backward to more or less five (5) meters away from where he was shot then
and there the victim slumped at the grassy area;
That I immediately go out from my house and proceeded to the victims body, wherein, when I came nearer I
found and identified the victim one Artemio Pantinople who was my nearby neighbor sprawled on his own blood
at the grassy area;
That no other person named by the victim other than Brgy. Capt. Celestino Marturillas of Brgy. Gatungan,
Bunawan District, Davao City;
That I am executing this affidavit to apprised the authorities concern of the true facts and circumstances that
surrounds the incident.
"21. Based on the Affidavits executed by Ernita Pantinople and Lito Santos, then 2nd Asst. City Prosecutor Raul B.
Bendigo issued a Resolution on November 5, 1998 finding sufficient evidence to indict Appellant for the crime of
Homicide and not Murder as alleged in Private Complainants Affidavit Complaint. The Information states:
Above-mentioned Accused, armed with a gun, and with intent to kill, willfully, unlawfully and feloniously shot one
Artemio Pantinople, thereby inflicting fatal wound upon the latter which caused his death.
CONTRARY TO LAW.
x x x x x x x x x
"23. The theory of the Defense was anchored on the testimony of the following individuals:
23.1 Jimmy Balugo, was one of the Barangay Kagawads who went to the house of Petitioner after receiving a radio
message from Brgy. Kagawad Glenda Lascua that a shooting incident took place in their barangay. He also
testified that together with Kagawad Norberto Libre, he proceeded to the house of Petitioner to inform him of the
shooting incident involving a certain Artemio Titing Pantinople. After informing Petitioner about what happened,
the latter instructed him and Norberto Libre to gather the SCAAs and to accompany them to the crime scene. He
also narrated to the court that Petitioner and their group were not able to render any assistance at the crime
scene since the widow and the relatives of deceased were already belligerent. As a result of which, the group of
Petitioner including himself, went back to the formers house where he asked Petitioner if it would be alright to
contact the police and request for assistance. He claimed that he was able to contact the Bunawan PNP with the
help of the Barangay Police of Barangay San Isidro.
23.2) Norberto Libre testified that in the evening of November 4, 1998, he heard a gunburst which resembled a
firecracker and after a few minutes Barangay Kagawad Jimmy Balugo went to his house and informed him that
their neighbor Titing Pantinople was shot. Kagawad Balugo requested him to accompany the former to go to the
house of then Barangay Captain Celestino Marturillas; that he and Kagawad Balugo proceeded to the house of
Petitioner and shouted to awaken the latter; that Barangay Captain Marturillas went out rubbing his eyes
awakened from his sleep and was informed of the killing of Artemio Pantinople; that Petitioner immediately
instructed them to fetch the SCAA and thereafter their group went to the crime scene.
23.3) Ronito Bedero testified that he was in his house on the night Artemio Pantinop[l]e was shot. The material
point raised by this witness in his testimony was the fact that he saw an unidentified armed man flee from the
crime scene who later joined two other armed men near a nangka tree not far from where deceased was shot. All
three later fled on foot towards the direction of the Purok Center in Barangay Gatungan. This witness noticed that
one of the three men was armed with a rifle but could not make out their identities since the area where the three
men converged was a very dark place. After the three men disappeared, he saw from the opposite direction
Petitioner, Barangay Kagawad Jimmy Balugo and three (3) SCAA members going to the scene of the crime but they
did not reach the crime scene. A little later, he saw the group of Petitioner return to where they came from.
23.4) Police C/Insp. Noemi Austero, Forensic Chemist of the PNP Crime Laboratory, testified that she conducted a
paraffin test on both hands of Petitioner on November 5, 1999 at around 10:30 a.m. She also testified that
Petitioner tested NEGATIVE for gunpowder nitrates indicating that he never fired a weapon at any time between
7:30 p.m. of November 4, 1999 until the next day, November 5, 1999. She also testified that as a matter of
procedure at the PNP Crime Laboratory, they do not conduct paraffin testing on a crime suspect seventy two (72)
hours after an alleged shooting incident. She also testified that based on her experience she is not aware of any
chemical that could extract gunpowder nitrates from the hands of a person who had just fired his weapon.
23.5) Dominador Lapiz testified that he lived on the land of the victim, Artemio Pantinople for ten (10) years. He
was one of the first persons who went to the crime scene where he personally saw the body of deceased lying at a
very dark portion some distance from the victims house and that those with him at that time even had to light the
place with a lamp so that they could clearly see the deceased. He also testified that there were many coconut and
other trees and bananas in the crime scene. He also testified that the house of Lito Santos was only about four (4)
meters from the crime scene, while the house of victim-Artemio Pantinople was about FIFTY (50) meters away. He
testified that there was no lighted fluorescent at the store of deceased at the time of the shooting. He was also the
one who informed Kagawad Glenda Lascuna about the shooting of Artemio Pantinople. His testimony also
revealed that when the responding policemen arrived, Lito Santos immediately approached the policemen,
volunteered himself as a witness and even declared that he would testify that it was Petitioner who shot Artemio
Pantinople.
On cross-examination, this witness declared that the crime scene was very dark and one cannot see the body of
the victim without light. On cross-examination, this witness also testified that Lito Santos approached the service
vehicle of the responding policemen and volunteered to be a witness that Petitioner was the assailant of the
victim, Artemio Pantinople. This witness further testified that immediately after he went to the crime scene, the
widow of the victim and the children were merely shouting and crying and it was only after the policemen arrived
that the widow uttered in a loud voice, Kapitan nganong gipatay mo and akong bana?
23.6) Celestino Marturillas, former Barangay Captain of Barangay Gatungan, Bunawan District, Davao City testified
that he learned of Pantinoples killing two hours later through information personally relayed to him by Kagawads
Jimmy Balugo and Norberto Libre. He intimated to the Court that he did try to extend some assistance to the
family of the deceased but was prevented from so doing since the wife of deceased herself and her relatives were
already hostile with him when he was about to approach the crime scene. He also testified that he voluntarily went
with the police officers who arrested him at his residence on the same evening after the victim was shot. He also
turned over to police custody the M-14 rifle issued to him and voluntarily submitted himself to paraffin testing a
few hours after he was taken in for questioning by the Bunawan PNP. Petitioner, during the trial consistently
maintained that he is innocent of the charge against him."
10

Ruling of the Court of Appeals
The CA affirmed the findings of the RTC that the guilt of petitioner had been established beyond reasonable doubt.
According to the appellate court, he was positively identified as the one running away from the crime scene
immediately after the gunshot. This fact, together with the declaration of the victim himself that he had been shot
by the captain, clearly established the latters complicity in the crime.
No ill motive could be ascribed by the CA to the prosecution witnesses. Thus, their positive, credible and
unequivocal testimonies were accepted as sufficient to establish the guilt of petitioner beyond reasonable doubt.
On the other hand, the CA also rejected his defenses of denial and alibi. It held that they were necessarily suspect,
especially when established by friends or relatives, and should thus be subjected to the strictest scrutiny. At any
rate, his alibi and denial cannot prevail over the positive testimonies of the prosecution witnesses found to be
more credible.
The appellate court upheld petitioners conviction, as well as the award of damages. In addition, it awarded actual
damages representing unearned income.
Hence, this Petition.
11

The Issues
In his Memorandum, petitioner submits the following issues for the Courts consideration:
"I
The Court of Appeals committed a reversible error when it gave credence to the claim of the solicitor general that
the prosecutions witnesses positively identified petitioner as the alleged triggerman
"II
The Court of Appeals was in serious error when it affirmed the trial courts blunder in literally passing the blame on
petitioner for the lapses in the investigation conducted by the police thereby shifting on him the burden of proving
his innocence
"III
The Court of Appeals committed a serious and palpable error when it failed to consider that the deceased was cut
off by death before he could convey a complete or sensible communication to whoever heard such declaration
assuming there was any
"IV
Petit*i+oners alibi assumed significance considering that evidence and testimonies of the prosecutions witnesses
arrayed against petitioner failed to prove that he was responsible for the commission of the crime."
12

In sum, petitioner raises two main issues: 1) whether the prosecutions evidence is credible; and 2) whether it is
sufficient to convict him of homicide. Under the first main issue, he questions the positive identification made by
the prosecution witnesses; the alleged inconsistencies between their Affidavits and court testimonies; and the
plausibility of the allegation that the victim had uttered, "Tabangi ko pre, gipusil ko ni kapitan" ("Help me pre, I
was shot by the captain"), which was considered by the two lower courts either as his dying declaration or as part
of res gestae.
Under the second main issue, petitioner contends that the burden of proof was erroneously shifted to him; that
there should have been no finding of guilt because of the negative results of the paraffin test; and that the
prosecution miserably failed to establish the type of gun used in the commission of the crime.
The Courts Ruling
The Petition is unmeritorious.
First Main Issue:
Credibility of the Prosecution Evidence
According to petitioner, the charge of homicide should be dismissed, because the inherent weakness of the
prosecutions case against him was revealed by the evidence presented. He submits that any doubt as to who
really perpetrated the crime should be resolved in his favor.
We do not agree. This Court has judiciously reviewed the findings and records of this case and finds no reversible
error in the CAs ruling affirming petitioners conviction for homicide.
Basic is the rule that this Court accords great weight and a high degree of respect to factual findings of the trial
court, especially when affirmed by the CA, as in the present case.
13
Here, the RTC was unequivocally upheld by the
CA, which was clothed with the power to review whether the trial courts conclusions were in accord with the facts
and the relevant laws.
14
Indeed, the findings of the trial court are not to be disturbed on appeal, unless it has
overlooked or misinterpreted some facts or circumstances of weight and substance.
15
Although there are
recognized exceptions
16
to the conclusiveness of the findings of fact of the trial and the appellate courts, petitioner
has not convinced this Court of the existence of any.
Having laid that basic premise, the Court disposes seriatim the arguments proffered by petitioner under the first
main issue.
Positive Identification
Petitioner contends that it was inconceivable for Prosecution Witness Ernita Pantinople -- the victims wife -- to
have identified him as the assassin. According to him, her house was "a good fifty (50) meters away from the crime
scene,"
17
which was "enveloped in pitch darkness."
18
Because of the alleged improbability, he insists that her
testimony materially contradicted her Affidavit. The Affidavit supposedly proved that she had not recognized her
husband from where she was standing during the shooting. If she had failed to identify the victim, petitioner asks,
"how was it possible for her to conclude that it was [p]etitioner whom she claims she saw fleeing from the
scene?"
19

All these doubts raised by petitioner are sufficiently addressed by the clear, direct and convincing testimony of the
witness. She positively identified him as the one "running away" immediately after the sound of a gunshot. Certain
that she had seen him, she even described what he was wearing, the firearm he was carrying, and the direction
towards which he was running. She also clarified that she had heard the statement, "Help me pre, I was shot by
the captain," uttered after the shooting incident. Accepting her testimony, the CA ruled thus:
"Ernitas testimony that she saw *petitioner+ at the crime scene is credible because the spot where Artemio was
shot was only 30 meters away from her house. Undoubtedly, Ernita is familiar with [petitioner], who is her
neighbor, and a long-time barangay captain of Barangay Gatungan, Bunawan District, Davao City when the incident
took place. Ernita was also able to see his face while he was running away from the crime scene. The identification
of a person can be established through familiarity with ones physical features. Once a person has gained
familiarity with one another, identification becomes quite an easy task even from a considerable distance. Judicial
notice can also be taken of the fact that people in rural communities generally know each other both by face and
name, and can be expected to know each others distinct and particular features and characteristics."
20

This holding confirms the findings of fact of the RTC. Settled is the rule that on questions of the credibility of
witnesses and the veracity of their testimonies, findings of the trial court are given the highest degree of
respect.
21
It was the trial court that had the opportunity to observe the manner in which the witnesses had
testified; as well as their furtive glances, calmness, sighs, and scant or full realization of their oaths.
22
It had the
better opportunity to observe them firsthand; and to note their demeanor, conduct and attitude under grueling
examination.
23

Petitioner doubts whether Ernita could have accurately identified him at the scene of the crime, considering that it
was dark at that time; that there were trees obstructing her view; and that her house was fifty (50) meters away
from where the crime was committed.
These assertions are easily belied by the findings of the courts below, as borne by the records. Ernita testified on
the crime scene conditions that had enabled her to make a positive identification of petitioner. Her testimony was
even corroborated by other prosecution witnesses, who bolstered the truth and veracity of those declarations.
Consequently, the CA ruled as follows:
"x x x Ernitas recognition of the assailant was made possible by the lighted two fluorescent lamps in their store
and by the full moon. x x x. In corroboration, Lito testified that the place where the shooting occurred was bright.
"The trees and plants growing in between Ernitas house and the place where Artemio was shot to death did not
impede her view of the assailant. To be sure, the prosecution presented photographs of the scene of the crime and
its immediate vicinities. These photographs gave a clear picture of the place where Artemio was shot. Admittedly,
there are some trees and plants growing in between the place where the house of Ernita was located and the spot
where Artemio was shot. Notably, however, there is only one gemilina tree, some coconut trees and young banana
plants growing in the place where Artemio was shot. The trees and banana plants have slender trunks which could
not have posed an obstacle to Ernitas view of the crime scene from the kitchen window of her house especially so
that she was in an elevated position."
24

This Court has consistently held that -- given the proper conditions -- the illumination produced by a kerosene
lamp, a flashlight, a wick lamp, moonlight, or starlight is considered sufficient to allow the identification of
persons.
25
In this case, the full moon and the light coming from two fluorescent lamps of a nearby store were
sufficient to illumine the place where petitioner was; and to enable the eyewitness to identify him as the person
who was present at the crime scene. Settled is the rule that when conditions of visibility are favorable and the
witnesses do not appear to be biased, their assertion as to the identity of the malefactor should normally be
accepted.
26

But even where the circumstances were less favorable, the familiarity of Ernita with the face of petitioner
considerably reduced any error in her identification of him.
27
Since the circumstances in this case were reasonably
sufficient for the identification of persons, this fact of her familiarity with him erases any doubt that she could have
erred in identifying him. Those related to the victim of a crime have a natural tendency to remember the faces of
those involved in it. These relatives, more than anybody else, would be concerned with seeking justice for the
victim and bringing the malefactor before the law.
28

Neither was there any indication that Ernita was impelled by ill motives in positively identifying petitioner. The CA
was correct in observing that it would be "unnatural for a relative who is interested in vindicating the crime to
accuse somebody else other than the real culprit. For her to do so is to let the guilty go free."
29
Where there is
nothing to indicate that witnesses were actuated by improper motives on the witness stand, their positive
declarations made under solemn oath deserve full faith and credence.
30

Inconsistency Between Affidavit and Testimony
Petitioner contends that the testimony of Ernita materially contradicted her Affidavit. According to him, she said in
her testimony that she had immediately recognized her husband as the victim of the shooting; but in her Affidavit
she stated that it was only when she had approached the body that she came to know that he was the victim.
We find no inconsistency. Although Ernita stated in her testimony that she had recognized the victim as her
husband through his voice, it cannot necessarily be inferred that she did not see him. Although she recognized him
as the victim, she was still hoping that it was not really he. Thus, the statement in her Affidavit that she was
surprised to see that her husband was the victim of the shooting.
To be sure, ex parte affidavits are usually incomplete, as these are frequently prepared by administering officers
and cast in their language and understanding of what affiants have said.
31
Almost always, the latter would simply
sign the documents after being read to them. Basic is the rule that, taken ex parte, affidavits are considered
incomplete and often inaccurate. They are products sometimes of partial suggestions and at other times of want of
suggestions and inquiries, without the aid of which witnesses may be unable to recall the connected circumstances
necessary for accurate recollection.
32

Nevertheless, the alleged inconsistency is inconsequential to the ascertainment of the presence of petitioner at
the crime scene. Ruled the CA:
"x x x. They referred only to that point wherein Ernita x x x ascertained the identity of Artemio as the victim. They
did not relate to Ernitas identification of *petitioner+ as the person running away from the crime scene
immediately after she heard a gunshot."
33

Statements Uttered Contemporaneous with the Crime
Ernita positively testified that immediately after the shooting, she had heard her husband say, "Help me pre, I was
shot by the captain." This statement was corroborated by another witness, Lito Santos, who testified on the events
immediately preceding and subsequent to the shooting.
It should be clear that Santos never testified that petitioner was the one who had actually shot the victim. Still, the
testimony of this witness is valuable, because it validates the statements made by Ernita. He confirms that after
hearing the gunshot, he saw the victim and heard the latter cry out those same words.
Petitioner insinuates that it was incredible for Santos to have seen the victim, but not the assailant. The CA
dismissed this argument thus:
"x x x. The natural reaction of a person who hears a loud or startling command is to turn towards the speaker.
Moreover, witnessing a crime is an unusual experience that elicits different reactions from witnesses, for which no
clear-cut standard of behavior can be prescribed. Litos reaction is not unnatural. He was more concerned about
Artemios condition than the need to ascertain the identity of Artemios assailant."
34

It was to be expected that, after seeing the victim stagger and hearing the cry for help, Santos would shift his
attention to the person who had uttered the plea quoted earlier. A shift in his focus of attention would sufficiently
explain why Santos was not able to see the assailant. Petitioner then accuses this witness of harboring "a deep-
seated grudge,"
35
which would explain why the latter allegedly fabricated a serious accusation.
This contention obviously has no basis. No serious accusation against petitioner was ever made by Santos. What
the latter did was merely to recount what he heard the victim utter immediately after the shooting. Santos never
pointed to petitioner as the perpetrator of the crime. The statements of the former corroborated those of Ernita
and therefore simply added credence to the prosecutions version of the facts. If it were true that he had an
ulterior motive, it would have been very easy for him to say that he had seen petitioner shoot the victim.
The two witnesses unequivocally declared and corroborated each other on the fact that the plea, "Help me pre, I
was shot by the captain," had been uttered by the victim. Nevertheless, petitioner contends that it was highly
probable that the deceased died instantly and was consequently unable to shout for help. We do not discount this
possibility, which petitioner himself admits to be a probability. In the face of the positive declaration of two
witnesses that the words were actually uttered, we need not concern ourselves with speculations, probabilities or
possibilities. Said the CA:
"x x x. Thus, as between the positive and categorical declarations of the prosecution witnesses and the mere
opinion of the medical doctor, the former must necessarily prevail.
"Moreover, it must be stressed that the post-mortem examination of the cadaver of Artemio was conducted by Dr.
Ledesma only about 9:30 in the morning of November 5, 1998 or the day following the fatal shooting of Artemio.
Evidently, several hours had elapsed prior to the examination. Thus, Dr. Ledesma could not have determined
Artemios physical condition a few seconds after the man was shot."
36

Dying Declaration
Having established that the victim indeed uttered those words, the question to be resolved is whether they can be
considered as part of the dying declaration of the victim.
Rule 130, Section 37 of the Rules of Court, provides:
"The declaration of a dying person, made under the consciousness of impending death, may be received in any
case wherein his death is the subject of inquiry, as evidence of the cause and surrounding circumstances of such
death."
Generally, witnesses can testify only to those facts derived from their own perception. A recognized exception,
though, is a report in open court of a dying persons declaration made under the consciousness of an impending
death that is the subject of inquiry in the case.
37

Statements identifying the assailant, if uttered by a victim on the verge of death, are entitled to the highest degree
of credence and respect.
38
Persons aware of an impending death have been known to be genuinely truthful in their
words and extremely scrupulous in their accusations.
39
The dying declaration is given credence, on the premise
that no one who knows of ones impending death will make a careless and false accusation.
40
Hence, not
infrequently, pronouncements of guilt have been allowed to rest solely on the dying declaration of the deceased
victim.
41

To be admissible, a dying declaration must 1) refer to the cause and circumstances surrounding the declarants
death; 2) be made under the consciousness of an impending death; 3) be made freely and voluntarily without
coercion or suggestions of improper influence; 4) be offered in a criminal case, in which the death of the declarant
is the subject of inquiry; and 5) have been made by a declarant competent to testify as a witness, had that person
been called upon to testify.
42

The statement of the deceased certainly concerned the cause and circumstances surrounding his death. He
pointed to the person who had shot him. As established by the prosecution, petitioner was the only person
referred to as kapitan in their place.
43
It was also established that the declarant, at the time he had given the dying
declaration, was under a consciousness of his impending death.
True, he made no express statement showing that he was conscious of his impending death. The law, however,
does not require the declarant to state explicitly a perception of the inevitability of death.
44
The perception may be
established from surrounding circumstances, such as the nature of the declarants injury and conduct that would
justify a conclusion that there was a consciousness of impending death.
45
Even if the declarant did not make an
explicit statement of that realization, the degree and seriousness of the words and the fact that death occurred
shortly afterwards may be considered as sufficient evidence that the declaration was made by the victim with full
consciousness of being in a dying condition.
46

Also, the statement was made freely and voluntarily, without coercion or suggestion, and was offered as evidence
in a criminal case for homicide. In this case, the declarant was the victim who, at the time he uttered the dying
declaration, was competent as a witness.
As found by the CA, the dying declaration of the victim was complete, as it was "a full expression of all that he
intended to say as conveying his meaning. It [was] complete and [was] not merely fragmentary."
47
Testified to by
his wife and neighbor, his dying declaration was not only admissible in evidence as an exception to the hearsay
rule, but was also a weighty and telling piece of evidence.
Res Gestae
The fact that the victims statement constituted a dying declaration does not preclude it from being admitted as
part of the res gestae, if the elements of both are present.
48

Section 42 of Rule 130 of the Rules of Court provides:
"Part of the res gestae. -- Statements made by a person while a startling occurrence is taking place or immediately
prior or subsequent thereto with respect to the circumstances thereof, may be given in evidence as part of the res
gestae. So, also, statements accompanying an equivocal act material to the issue, and giving it a legal significance,
may be received as part of the res gestae."
Res gestae refers to statements made by the participants or the victims of, or the spectators to, a crime
immediately before, during, or after its commission.
49
These statements are a spontaneous reaction or utterance
inspired by the excitement of the occasion, without any opportunity for the declarant to fabricate a false
statement.
50
An important consideration is whether there intervened, between the occurrence and the statement,
any circumstance calculated to divert the mind and thus restore the mental balance of the declarant; and afford an
opportunity for deliberation.
51

A declaration is deemed part of the res gestae and admissible in evidence as an exception to the hearsay rule,
when the following requisites concur: 1) the principal act, the res gestae, is a startling occurrence; 2) the
statements were made before the declarant had time to contrive or devise; and 3) the statements concerned the
occurrence in question and its immediately attending circumstances.
52

All these requisites are present in this case. The principal act, the shooting, was a startling occurrence. Immediately
after, while he was still under the exciting influence of the startling occurrence, the victim made the declaration
without any prior opportunity to contrive a story implicating petitioner. Also, the declaration concerned the one
who shot the victim. Thus, the latters statement was correctly appreciated as part of the res gestae.
Aside from the victims statement, which is part of the res gestae, that of Ernita -- "Kapitan, ngano nimo gipatay
ang akong bana?" ("Captain, why did you shoot my husband?") -- may be considered to be in the same category.
Her statement was about the same startling occurrence; it was uttered spontaneously, right after the shooting,
while she had no opportunity to concoct a story against petitioner; and it related to the circumstances of the
shooting.
Second Main Issue:
Sufficiency of Evidence
Having established the evidence for the prosecution, we now address the argument of petitioner that the
appellate court had effectively shifted the burden of proof to him. He asserts that the prosecution should never
rely on the weakness of the defense, but on the strength of its evidence, implying that there was no sufficient
evidence to convict him.
We disagree. The totality of the evidence presented by the prosecution is sufficient to sustain the conviction of
petitioner. The dying declaration made by the victim immediately prior to his death constitutes evidence of the
highest order as to the cause of his death and of the identity of the assailant.
53
This damning evidence, coupled
with the proven facts presented by the prosecution, leads to the logical conclusion that petitioner is guilty of the
crime charged.
The following circumstances proven by the prosecution produce a conviction beyond reasonable doubt:
First. Santos testified that he had heard a gunshot; and seen smoke coming from the muzzle of a gun, as well as
the victim staggering backwards while shouting, "Help me pre, I was shot by the captain." This statement was duly
established, and the testimony of Santos confirmed the events that had occurred. It should be understandable that
"pre" referred to Santos, considering that he and the victim were conversing just before the shooting took place.
It was also established that the two called each other "pre," because Santos was the godfather of the victims
child.
54

Second. Ernita testified that she had heard a gunshot and her husbands utterance, "Help me pre, I was shot by
the captain," then saw petitioner in a black jacket and camouflage pants running away from the crime scene while
carrying a firearm.
Third. Ernitas statement, "Captain, why did you shoot my husband?" was established as part of the res gestae.
Fourth. The version of the events given by petitioner is simply implausible. As the incumbent barangay captain, it
should have been his responsibility to go immediately to the crime scene and investigate the shooting. Instead, he
avers that when he went to the situs of the crime, the wife of the victim was already shouting and accusing him of
being the assailant, so he just left. This reaction was very unlikely of an innocent barangay captain, who would
simply want to investigate a crime. Often have we ruled that the first impulse of innocent persons when accused of
wrongdoing is to express their innocence at the first opportune time.
55

Fifth. The prosecution was able to establish motive on the part of petitioner. The victims wife positively testified
that prior to the shooting, her husband was trying to close a real estate transaction which petitioner tried to block.
This showed petitioners antagonism towards the victim.
56

These pieces of evidence indubitably lead to the conclusion that it was petitioner who shot and killed the victim.
This Court has consistently held that, where an eyewitness saw the accused with a gun seconds after the gunshot
and the victims fall, the reasonable conclusion is that the accused had killed the victim.
57
Further establishing
petitioners guilt was the definitive statement of the victim that he had been shot by the barangay captain.
Clearly, petitioners guilt was established beyond reasonable doubt. To be sure, conviction in a criminal case does
not require a degree of proof that, excluding the possibility of error, produces absolute certainty.
58
Only moral
certainty is required or that degree of proof that produces conviction in an unprejudiced mind.
59

That some pieces of the above-mentioned evidence are circumstantial does not diminish the fact that they are of a
nature that would lead the mind intuitively, or by a conscious process of reasoning, toward the conviction of
petitioner.
60
Circumstantial, vis--vis direct, evidence is not necessarily weaker.
61
Moreover, the circumstantial
evidence described above satisfies the requirements of the Rules of Court, which we quote:
"SEC. 4. Circumstantial evidence, when sufficient. -- Circumstantial evidence is sufficient for conviction if:
(a) There is more than one circumstance;
(b) The facts from which the inferences are derived are proven; and
(c) The combination of all the circumstances is such as to produce a conviction beyond reasonable doubt."
62

Paraffin Test
Petitioner takes issue with the negative results of the paraffin test done on him. While they were negative, that
fact alone did not ipso facto prove that he was innocent. Time and time again, this Court has held that a negative
paraffin test result is not a conclusive proof that a person has not fired a gun.
63
In other words, it is possible to fire
a gun and yet be negative for nitrates, as when culprits wear gloves, wash their hands afterwards, or are bathed in
perspiration.
64
Besides, the prosecution was able to establish the events during the shooting, including the
presence of petitioner at the scene of the crime. Hence, all other matters, such as the negative paraffin test result,
are of lesser probative value.
Corpus Delicti
Petitioner then argues that the prosecution miserably failed to establish the type of gun used in the shooting.
Suffice it to say that this contention hardly dents the latters case. As correctly found by the appellate court, the
prosecution was able to give sufficient proof of the corpus delicti -- the fact that a crime had actually been
committed. Ruled this Court in another case:
"[Corpus delicti] is the fact of the commission of the crime that may be proved by the testimony of eyewitnesses.
In its legal sense, corpus delicti does not necessarily refer to the body of the person murdered, to the firearms in
the crime of homicide with the use of unlicensed firearms, to the ransom money in the crime of kidnapping for
ransom, or x x x to the seized contraband cigarettes."
65

To undermine the case of the prosecution against him, petitioner depends heavily on its failure to present the gun
used in the shooting and on the negative paraffin test result. These pieces of evidence alone, according to him,
should exculpate him from the crime. His reliance on them is definitely misplaced, however. In a similar case, this
Court has ruled as follows:
"Petitioner likewise harps on the prosecutions failure to present the records from the Firearms and Explosives
Department of the Philippine National Police at Camp Crame of the .45 caliber Remington pistol owned by
petitioner for comparison with the specimen found at the crime scene with the hope that it would exculpate him
from the trouble he is in. Unfortunately for petitioner, we have previously held that the choice of what evidence
to present, or who should testify as a witness is within the discretionary power of the prosecutor and definitely not
of the courts to dictate.
"Anent the failure of the investigators to conduct a paraffin test on petitioner, this Court has time and again held
that such failure is not fatal to the case of the prosecution as scientific experts agree that the paraffin test is
extremely unreliable and it is not conclusive as to an accuseds complicity in the crime committed."
66

Finally, as regards petitioners alibi, we need not belabor the point. It was easily, and correctly, dismissed by the CA
thus:
"*Petitioners+ alibi is utterly untenable. For alibi to prosper, it must be shown that it was physically impossible for
the accused to have been at the scene of the crime at the time of its commission. Here, the locus criminis was only
several meters away from *petitioners+ home. In any event, this defense cannot be given credence in the face of
the credible and positive identification made by Ernita."
67

Third Issue:
Damages
An appeal in a criminal proceeding throws the whole case open for review.1avvphil.net It then becomes the duty
of this Court to correct any error in the appealed judgment, whether or not included in the assignment of
error.
68
The CA upheld the RTC in the latters award of damages, with the modification that unearned income be
added.
We uphold the award of P50,000 indemnity ex delicto
69
to the heirs of the victim. When death occurs as a result of
a crime, the heirs of the deceased are entitled to this amount as indemnity for the death, without need of any
evidence or proof of damages.
70
As to actual damages, we note that the prosecution was able to establish
sufficiently only P22,200 for funeral and burial costs. The rest of the expenses, although presented, were not duly
receipted. We cannot simply accept them as credible evidence. This Court has already ruled, though, that when
actual damages proven by receipts during the trial amount to less than P25,000, the award of P25,000 for
temperate damages is justified, in lieu of the actual damages of a lesser amount.
71
In effect, the award granted by
the lower court is upheld.
As to the award of moral damages, the P500,000 given by the RTC and upheld by the CA should be reduced to
P50,000, consistent with prevailing jurisprudence.
72
We also affirm the award of loss of earning capacity
73
in the
amount of P312,000; attorneys fees of P20,000; and payment of the costs.
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED, subject to the
modification in the award of damages set forth here. Costs against petitioner.
SO ORDERED.
ARTEMIO V. PANGANIBAN
Chief Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Asscociate Justice
ROMEO J. CALLEJO, SR.
Associate Justice
MINITA V. CHICO-NAZARIO
Asscociate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.



Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 187872 April 11, 2011
STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner,
vs.
STAR INFRASTRUCTURE DEVELOPMENT CORPORATION ET AL., Respondents.
R E S O L U T I O N
PEREZ, J.:
For resolution by the Court are the following motions and incidents filed by the parties, to wit:
1. Initial Motion for Reconsideration of the Grant of the Application for Writ of Preliminary Injunction (With Offer
to File Counterbond)
1
and Supplemental Motion for Reconsideration of the 17 November 2010 decision, filed by
respondent Cypress Tree Capital Investment, Inc. (CTCII);
2

2. Motions for Reconsideration of said 17 November 2010 decision filed by respondents Aderito Z. Yujuico and
Bonifacio C. Sumbilla,
3
Robert L. Wong,
4
and Star Infrastructure Development Corporation (SIDC);
5

3. Motion to Admit and Approve Preliminary Injunction Bond filed by petitioner Strategic Alliance Development
Corporation (STRADEC);
6

4. Oppositions to STRADECs Motion to Admit and Approve Preliminary Injunction Bond filed by respondents
Yujuico and Sumbilla
7
as well as CTCII and respondent Cynthia M. Laureta;
8

5. Manifestation
9
and Reply
10
filed by STRADEC and Rejoinder filed by respondents Yujuico and Sumbilla;
11
and
6. Comment (on CTCIIs Initial Motion for Reconsideration of the Grant of the Application for Writ of Preliminary
Injunction (With Offer to File Counterbond)
12
and Consolidated Comment (on Respondents Motion for
Reconsideration)
13
filed by STRADEC.
In their motions for reconsideration of the Courts 17 November 2010 decision, respondents essentially argue that
the issue of Ceasar Quiambaos authority to represent STRADEC is a prejudicial question to the resolution of the
dispute before the court a quo; that a declaration that respondent Yujuico and Sumbillas group constitutes
STRADECs legitimate Board of Directors would not only discount Quiambaos authority to represent said
corporation but would also validate the authority said respondents were given to execute the 8 October 2004
pledge of said corporations SIDC shares; that the record is bereft of any showing that the Board of Directors who
authorized Quiambao to file the 31 July 2006 amended petition before Branch 2 of the Regional Trial Court (RTC)
of Batangas City was the legitimate successor of STRADECs Board of Directors which was restored into office by
this Courts 29 January 2007 decision in G.R. No. 168639; that there was misjoinder of causes of action in said
amended complaint which incorporated claims both civil and intra-corporate in nature; that STRADEC has no clear
and unmistakable right as would entitle it to a writ of preliminary injunction which, at any rate, cannot be directed
against acts which had already been accomplished or consummated; and, that the preliminary injunction issued in
the premises amounted a prejudgment of the case.
14

In compliance with the 17 November 2010 decision sought be reconsidered, STRADEC, on the other hand, seeks
the admission and approval of the preliminary injunction bond issued by the Empire Insurance Company in the
sum of P10,000,000.00.
15
On the ground, however, that grave and irreparable damage will be wrought by the
issuance of the writ of preliminary injunction in these premises, CTCIIs motion for reconsideration of the grant of
said writ is accompanied by an offer to post a counterbond in the sum of P20,000,000.00. For this purpose, CTCII
calls our attention to the supposed fact, among other matters, that it is currently the principal shareholder of SIDC
which, as a public utility company, holds the concession for the construction, operation and maintenance of the
STAR toll road; that SIDC is scheduled to expand Stage II, Phase 2 of the STAR toll road with the construction of two
additional new lanes at an estimated cost of P2,000,000,000.00; that if it is prevented from exercising proprietary
rights over the subject shares and SIDC is inhibited from implementing the 20 July 2006 stockholders resolution
increasing its authorized capital stock, CTCII will be unable to infuse the equity participation commonly required
for bank loans; and, that since the security for said loans consisting of SIDCs assets requires the vote of
stockholders owning/controlling 2/3 of SIDCs outstanding capital stock, the writ of preliminary injunction would
cause grave and irreparable damage which cannot be indemnified by the injunction bond to be posted by
STRADEC.
16
In support of the foregoing arguments, CTCII submitted an affidavit of merit executed by its President,
Elizabeth Lee.
17

In their opposition to STRADECs motion to admit and approve preliminary injunction bond, respondents Yujuico
and Sumbilla, in turn, question Quiambaos authority to file and submit said bond. Calling attention to the fact that
the motion did not include a board resolution authorizing Quiambao to file the same for and in behalf of STRADEC,
respondents Yujuico and Quiambao once again argue that there is no showing in the record that Quiambao was so
authorized by a legitimate Board of Directors which succeeded the one restored in office by the 29 January 2007
decision in G.R. No. 168639.
18
The foregoing arguments having been adopted in the 28 January 2011 manifestation
filed by SIDC,
19
STRADEC filed its reply, contending that the decision in G.R. No. 168639 had reference only to the
election of its Board of Directors for the term 2004-2005; that since then, the annual meetings of its stockholders
had resulted in the consistent re-election of Quiambao as its Corporate President; that said subsequent elections
were recognized in the 2 February 2009 decision rendered by Branch 155 of the Pasig City RTC in SCA No. 3034-
PSG, entitled "Citra Metro Manila Tollways Corporation [CMMTC] vs. Strategic Alliance Development Corporation,
et al."; and, that the decision was effectively affirmed in G.R. No. 188864 when this Court denied the petition for
review on certiorari filed by respondents Yujuico and Sumbilla.
20
In their reply, however, the latter argue that said
decision in SCA No. 3034 only referred to the validity of the proxies issued by STRADEC for the stockholders
meetings of CMMTC for the years 2005 and 2006.
21

In its comment to CTCII's Initial Motion for Reconsideration of the Grant of the Application for Writ of Preliminary
Injunction (With Offer to File Counterbond), STRADEC additionally underscores the fact, among other matters, that
as its duly elected Corporate President, Quiambao has been duly authorized to file its 31 July 2006 amended
petition a quo and to obtain the requisite surety bond for the writ of preliminary injunction sought in connection
with its petition for review on certiorari from the Court of Appeals' (CA) 22 December 2008 decision in CA-G.R. No.
96945; that CTCII's continuing violations of STRADEC's rights over its SIDC shares justify the issuance of the writ of
preliminary injunction to which it is entitled as owner of said shares; and, that the grave and irreparable damage
pleaded by CTCII is attributable to its illegal acquisition of the subject shares and its continued usurpation of
STRADEC's rights could only result to instability in the conduct of SIDC's business.
22
Reiterating the foregoing
arguments in its consolidated comment to respondents' motions for reconsideration, STRADEC maintains that the
arguments presently raised by respondents had already been squarely passed upon in the decision sought to be
reconsidered; and, that the suspension of the proceedings regarding its third and fourth causes of action is not
justified by the pendency of other intra-corporate disputes between STRADEC's corporators.
23

We find respondents motions for reconsideration bereft of merit.
Having already discussed the matter extensively in the decision sought to be reconsidered, we no longer find any
reason to go into great detail in discussing the reasons why the first and second causes of action pleaded in
STRADECs 31 July 2006 amended complaint qualify as intra-corporate disputes cognizable by Branch 2 of the RTC
of Batangas City, sitting as a Special Commercial Court (SCC). Fundamental is the rule that nature of the action, as
well as the court or body which has jurisdiction over it, is determined based on the allegations contained in the
complaint, irrespective of whether or not plaintiff is entitled to recover upon all or some of the claims asserted
therein.
24
It has been held that only ultimate facts and not legal conclusions or evidentiary facts, which should not
be alleged in the complaint in the first place, are considered for purposes of applying the test.
25
Applying the
relationship test and the nature of the controversy test already discussed in our 17 November 2010 decision, we
find that STRADECs causes of action for the nullification of the loan and pledge over its SIDC shareholdings
contracted by respondents Yujuico and Sumbilla as well as the avoidance of the notarial sale conducted by
respondent Raymond M. Caraos both qualify as intra-corporate disputes.
26
It cannot, therefore, be argued that
said causes of action were misjoined with STRADECs third and fourth causes of action for the cancellation of the
transfer of its shares in SIDECs books, the invalidation of the 30 July 2005 and 20 July 2006 SIDC stockholders
meetings, attorneys fees and the costs.
Neither are we inclined to hospitably entertain respondents harping over the supposed fact that Quiambaos
authority to represent STRADEC as litigated in the cases pending before the courts of Pasig City and Urdaneta
City, involving the question of ownership of the controlling shares of stock of STRADEC as well as the legitimacy of
the Board of Directors headed by Quiambao pose a prejudicial question to the resolution of the dispute before
Branch 2 of the Batangas City RTC. A prejudicial question is defined as that which arises in a case, the resolution of
which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another
tribunal.
27
It is said to come into play when a civil action and a criminal action are both pending and there exists in
the former case an issue which must be preemptively resolved before the latter case may proceed since the
resolution of the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or
innocence of the accused in the criminal case. Aimed at avoiding two conflicting decisions,
28
a prejudicial question
requires the concurrence of two essential requisites, to wit: (a) the civil action involves an issue similar or
intimately related to the issue raised in the criminal action; and, (b) the resolution of such issue determines
whether or not the criminal action may proceed.
29
From the foregoing disquisition, it is evident that a prejudicial
question cannot be appreciated where, as in the case at bench, the subject actions are all civil in nature.
30

As an incident to the power inherent in every court to control the disposition of the cases on its dockets, the court
in which an action is pending may, concededly, hold the action in abeyance in the exercise of sound discretion, to
abide by the outcome of another case pending in another court,
31
especially where the parties and the issues are
the same.
32
While applicable as between the actions pending before the courts of Pasig City and Urdaneta City
which were supposedly instituted to determine the ownership of the controlling shares of stock of STRADEC as
well as its legitimate Board of Directors, said principle cannot, however, apply to said cases vis--vis the one at
bench which, at bottom, seek the nullification of the loan and pledge over said corporations shareholdings in SIDC
as well as the subsequent notarial sale thereof. Even then, we find that respondents cannot expediently argue that
the defects in the impugned loan, pledge and notarial sale would be automatically discounted by a declaration
from the Pasay City and Urdaneta City courts that respondents Yujuico and Sumbillas group constitute said
corporations legitimate Board of Directors. Assuming, arguendo, that respondents are justified in equating such
determination with due authorization for the loan and pledge over STRADEC's shares in SIDC, we find that it would
not still dispose of the issue of the alleged lack of consideration for the same transactions and the fraud which
supposedly attended the execution of the same.
We have likewise gone over the Court's 29 January 2007 decision in G.R. No. 168639 and found no pronouncement
therein that would bar the filing of the 31 July 2006 amended petition by STRADEC which, as a corporation with a
personality separate and distinct from its corporators,
33
has a right to protect its rights and interests over the
subject SIDC shares. Considered in this light, we find that respondents are out on a limb in asserting that the record
is be bereft of any showing that Quiambao's authority to said amended petition a quo was granted by the
legitimate successor to STRADEC's Board of Directors which was restored into office by this Courts 29 January
2007 decision in G.R. No. 168639. To a great extent, this situation is attributable to the fact that Civil Case No. 7956
was still on its preliminary stages when Branch 2 of the RTC of Batangas City issued its assailed 30 August 2006
order, withholding action on STRADEC's first and causes of action on the ground of improper venue and
suspending proceedings regarding the corporation's third and fourth causes of action in view of the then pendency
of G.R. No. 168639 before this Court. Given that responsive pleadings squarely questioning Quiambao's authority
to represent STRADEC have yet to be filed by respondents, the matter is clearly one better threshed out before the
court a quo, alongside such issues as the validity of the transfers of STRADECs shares to respondents Wong and
CTCII, the propriety of the recording of said transfers in SIDCs books, STRADECs status as a stockholder of SIDC
and the legality of the 30 July 2005 and 20 July 2006 SIDC stockholders meetings.1avvphi1
As an adjunct to the main action subject to the latters outcome,
34
on the other hand, a writ of preliminary
injunction may be issued upon the concurrence of the following essential requisites, to wit: (1) that the invasion of
the right is material and substantial; (2) that the right of complainant is clear and unmistakable; and, (3) that there
is an urgent and paramount necessity for the writ to prevent serious damage.
35
Concurrence of the foregoing
requisites is evident from the fact that STRADEC has been deprived of its rights to its shareholdings and to
participate in SIDC's corporate affairs as a consequence of the impugned loan and pledge as well as the transfer of
the shares to respondent Wong and CTCII. For these reasons alone, we find that STRADEC is entitled to a writ of
preliminary injunction to restrain: (a) CTCII from further exercising proprietary rights over the subject shares; (b)
SIDC and its officers from recognizing the transfer or further transfers of the same; (c) the implementation of the
resolutions passed during the 20 July 2006 SIDC stockholders special meeting; and, (d) the SEC from acting on any
report submitted in respect thereto. Far from amounting to a prejudgment of the case, the restraint of said acts is
merely in the service of the office of a writ of preliminary injunction, i.e., the restoration of the status quo ante as
well preservation and protection of the rights of the litigant during the pendency of the case.
36

In view of CTCII's acquisition of STRADEC's shares as well as the changes in SIDC's corporate structure which were
effected as a consequence thereof, respondents also argue that the writ of preliminary injunction granted in the
decision sought to be reconsidered is directed against acts already consummated. Although the general rule is to
the effect that a writ of preliminary injunction cannot be issued against acts already fait accompli,
37
it has been
held, however, that consummated acts which are continuing in nature may still be enjoined by the courts.
38
The
propriety of the grant of the provisional injunctive writ sought by STRADEC having been established, we find that
approval of said corporation's Motion to Admit and Approve Preliminary Injunction Bond is in order. Contrary to
respondents' harping about the lack of showing thereof in the record, Quiambao's authority to file said motion is
implicit in the following 21 May 2009 Directors Certification attached to STRADEC's petition for review on
certiorari, to wit:
"WE, as the incumbent members of the Board of Directors of the STRATEGIC ALLIANCE DEVELOPMENT
CORPORATION (the "Corporation"), a corporation duly organized and existing under and by virtue of the laws of
the Republic of the Philippines, with principal office address at Quezon Boulevard, Poblacion Sur, Bayambang,
Pangasinan, Philippines, do hereby certify that the following resolutions were approved by the Board, to wit:
RESOLVED, as it is hereby resolved that the Corporation shall file a Petition for Review on Certiorari under Rule 45
of the Rules of Court to assail the Decision dated 22 December 2008 and Resolution dated 30 April 2009 in CA-G.R.
SP No. 96945, entitled Strategic Alliance Development Corporation vs. RTC of Batangas City (Branch 2), Star
Infrastructure Development Corporation, et al.", with an application for the issuance of a temporary restraining
order and/or writ of injunction, if deemed necessary.
WHEREFORE, BE IT RESOLVED, as it is hereby resolved that the Corporations President, CEZAR T. QUIAMBAO, shall
be authorized, as he is hereby authorized: to cause the filing of the Petition before the Supreme Court; to verify
the pleadings; and to execute any affidavit in support thereof, hereby giving and granting to CEZAR T. QUIAMBAO
full power to carry into effect the foregoing, including the authority to appear on the Corporations behalf, as fully
to all intents and purposes as the Corporation might or could lawfully do if personally present, and hereby ratifying
and confirming all that CEZAR T. QUIAMBAO, or his representatives shall lawfully do by virtue hereof.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this May 21, 2009 at Quezon City, Philippines.
(Sgd.) DEMETRIO G. DEMETRIA
Chairman of the Board
(Sgd.) ANTHONY K. QUIAMBAO
Vice Chairman
CEZAR T. QUIAMBAO
(Out of the Country)
JULIUS K. QUIAMBAO
(Sgd.) GIOVANNI T. CASANOVA
Director"
39

Viewed in the light of the foregoing considerations, we find no merit in CTCII's objections to the writ of preliminary
injunction and offer to file a counterbond in the sum of P20,000,000.00, on the ground that the P10,000,000.00
injunction bond STRADEC has been required to post is grossly insufficient to cover the grave and irreparable
damage which would result from the issuance of said writ. Pursuant to Section 6, Rule 58 of the 1997 Rules of Civil
Procedure,
40
"a preliminary injunction may be dissolved if it appears after hearing that although the applicant is
entitled to the injunction or restraining order, the issuance or continuance thereof, as the case may be, would
cause irreparable damage to the party or person enjoined while the applicant can be fully compensated for such
damages as he may suffer, and the former files a bond in an amount fixed by the court on condition that he will
pay all damages which the applicant may suffer by the denial or the dissolution of the injunction or restraining
order. Two conditions must concur: first, the court in the exercise of its discretion, finds that the continuance of
the injunction would cause great damage to the defendant, while the plaintiff can be fully compensated for such
damages as he may suffer; second, the defendant files a counterbond."
41

Aside from the fact that the amount of injunction bond is equivalent to the sum of the supposed loan for which
STRADEC's shares were pledged by respondents Yujuico and Sumbilla, we find that the projected damage to SIDC's
construction, operation and maintenance of the STAR toll road is, to say the least, speculative. Even when
reckoned from the commencement of the action a quo on 17 July 2006, the damage STRADEC suffered and
continues to suffer as a consequence of the impugned transactions is, in contrast, clearly beyond monetary
recompense as it not only amounts to a divesture of its ownership over said shares but, more importantly,
translates into a denial of its rights to elect SIDC's officers, to participate in its corporate affairs and, as a major
stockholder, to determine the course of its business dealings, among other matters. Moreover, the mere offer of a
counterbond does not suffice to warrant the dissolution of the preliminary writ of injunction
42
issued to stop an
unauthorized act. A contrary holding would open the gates to the use of the counterbond as a vehicle of the
commission or continuance of an unauthorized or illegal act which the injunction precisely is intended to prevent.
43

WHEREFORE, premises considered, respondents' motions for reconsideration and CTCII's offer to file a counter
bond are DENIED for lack of merit. Accordingly, STRADEC's motion to admit and approve injunction bond is
GRANTED.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson

PRESBITERO J. VELASCO, JR.
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Resolution had
been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice

Footnotes
1
Additional member in lieu of Associate Justice Mariano C. Del Castillo per Special Order no. 913 dated 02
November 2010.
Rollo, pp. 1217-1242, CTCIIs Initial Motion for Reconsideration of the Grant of the Application for Writ of
Preliminary Injunction (With Offer to File Counterbond) dated 10 December 2010.
40
"Section 6. Grounds for objection to, or for motion of dissolution of, injunction or restraining order. The
application for injunction or restraining order may be denied, upon a showing of its insufficiency. The injunction or
restraining order may also be denied, or, if granted, may be dissolved, on other grounds upon affidavits of the
party or person enjoined, which may be opposed by the applicant also on affidavits. It may further be denied, or, if
granted, may be dissolved, if it appears after hearing that although the applicant is entitled to the injunction or
restraining order, the issuance or continuance thereof, as the case may be, would cause irreparable damage to the
party or person enjoined while the applicant can be fully compensated for such damages as he may suffer, and the
former files a bond in an amount fixed by the court conditioned that he will pay all damages which the applicant
may suffer by the denial or the dissolution of the injunction or restraining order. If it appears that the extent of the
preliminary injunction or restraining order granted is too great, it may be modified.



















RAYMUNDO ODANI SECOSA, EL BUENASENSO SY and DASSAD WAREHOUSING and PORT SERVICES,
INCORPORATED, petitioners, vs. HEIRS OF ERWIN SUAREZ FRANCISCO, respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the decision
[1]
of the
Court of Appeals dated
February 27, 2003
in CA-G.R. CV No. 61868, which affirmed in toto the
June 19, 1998
decision
[2]
of Branch 20 of the Regional Trial Court of Manila in Civil Case No. 96-79554.
The facts are as follows:
On
June 27, 1996
, at around
4:00 p.m.
, Erwin Suarez Francisco, an eighteen year old third year physical therapy student of the
Manila

Central

University
, was riding a motorcycle along Radial 10 Avenue, near the Veteran Shipyard Gate in the City of
Manila
. At the same time, petitioner, Raymundo Odani Secosa, was driving an Isuzu cargo truck with plate number PCU-
253 on the same road. The truck was owned by petitioner, Dassad Warehousing and Port Services, Inc.
Traveling behind the motorcycle driven by Francisco was a sand and gravel truck, which in turn was being
tailed by the Isuzu truck driven by Secosa. The three vehicles were traversing the southbound lane at a fairly high
speed. When Secosa overtook the sand and gravel truck, he bumped the motorcycle causing Francisco to fall. The
rear wheels of the Isuzu truck then ran over Francisco, which resulted in his instantaneous death. Fearing for his
life, petitioner Secosa left his truck and fled the scene of the collision.
[3]

Respondents, the parents of Erwin Francisco, thus filed an action for damages against Raymond Odani
Secosa, Dassad Warehousing and Port Services, Inc. and Dassads president, El Buenasucenso Sy. The complaint
was docketed as Civil Case No. 96-79554 of the RTC of
Manila
, Branch 20.
On June 19, 1998, after a full-blown trial, the court a quo rendered a decision in favor of herein respondents,
the dispositive portion of which states:
WHEREFORE, premised on the foregoing, judgment is hereby rendered in favor of the plaintiffs ordering the
defendants to pay plaintiffs jointly and severally:
1. The sum of P55,000.00 as actual and compensatory damages;
2. The sum of P20,000.00 for the repair of the motorcycle;
3. The sum of P100,000.00 for the loss of earning capacity;
4. The sum of P500,000.00 as moral damages;
5. The sum of P50,000.00 as exemplary damages;
6. The sum of P50,000.00 as attorneys fees plus cost of suit.
SO ORDERED.
Petitioners appealed the decision to the Court of Appeals, which affirmed the appealed decision in toto.
[4]

Hence the present petition, based on the following arguments:
I.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT THAT
PETITIONER DASSAD DID NOT EXERCISE THE DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND
SUPERVISION OF ITS EMPLOYEES WHICH IS NOT IN ACCORDANCE WITH ARTICLE 2180 OF THE NEW CIVIL CODE
AND RELATED JURISPRUDENCE ON THE MATTER.
II.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT AFFIRMED THE DECISION OF THE TRIAL COURT IN HOLDING
PETITIONER EL BUENASENSO SY SOLIDARILY LIABLE WITH PETITIONERS DASSAD AND SECOSA IN VIOLATION OF
THE CORPORATION LAW AND RELATED JURISPRUDENCE ON THE MATTER.
III.
THE JUDGMENT OF THE TRIAL COURT AS AFFIRMED BY THE COURT OF APPEALS AWARDING P500,000.00 AS
MORAL DAMAGES IS MANIFESTLY ABSURD, MISTAKEN AND UNJUST.
[5]

The petition is partly impressed with merit.
On the issue of whether petitioner Dassad Warehousing and Port Services, Inc. exercised the diligence of a
good father of a family in the selection and supervision of its employees, we find the assailed decision to be in full
accord with pertinent provisions of law and established jurisprudence.
Article 2176 of the Civil Code provides:
Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of this Chapter.
On the other hand, Article 2180, in pertinent part, states:
The obligation imposed by article 2176 is demandable not only for ones own acts or omissions, but also for those
of persons for whom one is responsible x x x.
Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry x x x.
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.
Based on the foregoing provisions, when an injury is caused by the negligence of an employee, there instantly
arises a presumption that there was negligence on the part of the employer either in the selection of his employee
or in the supervision over him after such selection. The presumption, however, may be rebutted by a clear
showing on the part of the employer that it exercised the care and diligence of a good father of a family in the
selection and supervision of his employee. Hence, to evade solidary liability for quasi-delict committed by an
employee, the employer must adduce sufficient proof that it exercised such degree of care.
[6]

How does an employer prove that he indeed exercised the diligence of a good father of a family in the
selection and supervision of his employee? The case of Metro Manila Transit Corporation v. Court of Appeals
[7]
is
instructive:
In fine, the party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of
presenting at the trial such amount of evidence required by law to obtain a favorable judgment
[8]
. . . In making
proof in its or his case, it is paramount that the best and most complete evidence is formally entered.
[9]

Coming now to the case at bar, while there is no rule which requires that testimonial evidence, to hold sway, must
be corroborated by documentary evidence, inasmuch as the witnesses testimonies dwelt on mere generalities, we
cannot consider the same as sufficiently persuasive proof that there was observance of due diligence in the
selection and supervision of employees. Petitioners attempt to prove its deligentissimi patris familias in the
selection and supervision of employees through oral evidence must fail as it was unable to buttress the same with
any other evidence, object or documentary, which might obviate the apparent biased nature of the testimony.
[10]

Our view that the evidence for petitioner MMTC falls short of the required evidentiary quantum as would
convincingly and undoubtedly prove its observance of the diligence of a good father of a family has its precursor in
the underlying rationale pronounced in the earlier case of Central Taxicab Corp. vs. Ex-Meralco Employees
Transportation Co., et al.,
[11]
set amidst an almost identical factual setting, where we held that:
The failure of the defendant company to produce in court any record or other documentary proof tending to
establish that it had exercised all the diligence of a good father of a family in the selection and supervision of its
drivers and buses, notwithstanding the calls therefor by both the trial court and the opposing counsel, argues
strongly against its pretensions.
We are fully aware that there is no hard-and-fast rule on the quantum of evidence needed to prove due
observance of all the diligence of a good father of a family as would constitute a valid defense to the legal
presumption of negligence on the part of an employer or master whose employee has by his negligence, caused
damage to another. x x x (R)educing the testimony of Albert to its proper proportion, we do not have enough
trustworthy evidence left to go by. We are of the considered opinion, therefore, that the believable evidence on
the degree of care and diligence that has been exercised in the selection and supervision of Roberto Leon y
Salazar, is not legally sufficient to overcome the presumption of negligence against the defendant company.
The above-quoted ruling was reiterated in a recent case again involving the Metro Manila Transit
Corporation,
[12]
thus:
In the selection of prospective employees, employers are required to examine them as to their qualifications,
experience, and service records.
[13]
On the other hand, with respect to the supervision of employees, employers
should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures
for breaches thereof. To establish these factors in a trial involving the issue of vicarious liability, employers must
submit concrete proof, including documentary evidence.
In this case, MMTC sought to prove that it exercised the diligence of a good father of a family with respect to the
selection of employees by presenting mainly testimonial evidence on its hiring procedure. According to MMTC,
applicants are required to submit professional driving licenses, certifications of work experience, and clearances
from the National Bureau of Investigation; to undergo tests of their driving skills, concentration, reflexes, and
vision; and, to complete training programs on traffic rules, vehicle maintenance, and standard operating
procedures during emergency cases.
x x x x x x x x x
Although testimonies were offered that in the case of Pedro Musa all these precautions were followed, the records
of his interview, of the results of his examinations, and of his service were not presented. . . [T]here is no record
that Musa attended such training programs and passed the said examinations before he was employed. No proof
was presented that Musa did not have any record of traffic violations. Nor were records of daily inspections,
allegedly conducted by supervisors, ever presented. . . The failure of MMTC to present such documentary proof
puts in doubt the credibility of its witnesses.
Jurisprudentially, therefore, the employer must not merely present testimonial evidence to prove that he
observed the diligence of a good father of a family in the selection and supervision of his employee, but he must
also support such testimonial evidence with concrete or documentary evidence. The reason for this is to obviate
the biased nature of the employers testimony or that of his witnesses.
[14]

Applying the foregoing doctrines to the present case, we hold that petitioner Dassad Warehousing and Port
Services, Inc. failed to conclusively prove that it had exercised the requisite diligence of a good father of a family in
the selection and supervision of its employees.
Edilberto Duerme, the lone witness presented by Dassad Warehousing and Port Services, Inc. to support its
position that it had exercised the diligence of a good father of a family in the selection and supervision of its
employees, testified that he was the one who recommended petitioner Raymundo Secosa as a driver to Dassad
Warehousing and Port Services, Inc.; that it was his duty to scrutinize the capabilities of drivers; and that he
believed petitioner to be physically and mentally fit for he had undergone rigid training and attended the PPA
safety seminar.
[15]

Petitioner Dassad Warehousing and Port Services, Inc. failed to support the testimony of its lone witness with
documentary evidence which would have strengthened its claim of due diligence in the selection and supervision
of its employees. Such an omission is fatal to its position, on account of which, Dassad can be rightfully held
solidarily liable with its co-petitioner Raymundo Secosa for the damages suffered by the heirs of Erwin Francisco.
However, we find that petitioner El Buenasenso Sy cannot be held solidarily liable with his co-petitioners.
While it may be true that Sy is the president of petitioner Dassad Warehousing and Port Services, Inc., such fact is
not by itself sufficient to hold him solidarily liable for the liabilities adjudged against his co-petitioners.
It is a settled precept in this jurisdiction that a corporation is invested by law with a personality separate from
that of its stockholders or members.
[16]
It has a personality separate and distinct from those of the persons
composing it as well as from that of any other entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not in itself
sufficient ground for disregarding the separate corporate personality.
[17]
A corporations authority to act and its
liability for its actions are separate and apart from the individuals who own it.
[18]

The so-called veil of corporation fiction treats as separate and distinct the affairs of a corporation and its
officers and stockholders. As a general rule, a corporation will be looked upon as a legal entity, unless and until
sufficient reason to the contrary appears. When the notion of legal entity is used to defeat public convenience,
justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of
persons.
[19]
Also, the corporate entity may be disregarded in the interest of justice in such cases as fraud that may
work inequities among members of the corporation internally, involving no rights of the public or third persons. In
both instances, there must have been fraud and proof of it. For the separate juridical personality of a corporation
to be disregarded, the wrongdoing must be clearly and convincingly established.
[20]
It cannot be presumed.
[21]

The records of this case are bereft of any evidence tending to show the presence of any grounds enumerated
above that will justify the piercing of the veil of corporate fiction such as to hold the president of Dassad
Warehousing and Port Services, Inc. solidarily liable with it.
The Isuzu cargo truck which ran over Erwin Francisco was registered in the name of Dassad Warehousing and
Port Services, Inc., and not in the name of El Buenasenso Sy. Raymundo Secosa is an employee of Dassad
Warehousing and Port Services, Inc. and not of El Buenasenso Sy. All these things, when taken collectively, point
toward El Buenasenso Sys exclusion from liability for damages arising from the death of Erwin Francisco.
Having both found Raymundo Secosa and Dassad Warehousing and Port Services, Inc. liable for negligence
for the death of Erwin Francisco on
June 27, 1996
, we now consider the question of moral damages which his parents, herein respondents, are entitled to
recover. Petitioners assail the award of moral damages of P500,000.00 for being manifestly absurd, mistaken and
unjust. We are not persuaded.
Under Article 2206, the spouse, legitimate and illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish for the death of the deceased. The reason for the grant of moral
damages has been explained in this wise:
. . . the award of moral damages is aimed at a restoration, within the limits possible, of the spiritual status quo
ante; and therefore, it must be proportionate to the suffering inflicted. The intensity of the pain experienced by
the relatives of the victim is proportionate to the intensity of affection for him and bears no relation whatsoever
with the wealth or means of the offender.
[22]

In the instant case, the spouses Francisco presented evidence of the searing pain that they felt when the
premature loss of their son was relayed to them. That pain was highly evident in the testimony of the father who
was forever deprived of a son, a son whose untimely death came at that point when the latter was nearing the
culmination of every parents wish to educate their children. The death of Francis has indeed left a void in the lives
of the respondents. Antonio Francisco testified on the effect of the death of his son, Francis, in this manner:
Q: (Atty. Balanag): What did you do when you learned that your son was killed on
June 27, 1996
?
A: (ANTONIO FRANCISCO): I boxed the door and pushed the image of St. Nio telling why this
happened to us.
Q: Mr. Witness, how did you feel when you learned of the untimely death of your son, Erwin
Suares (sic)?
A: Masakit po ang mawalan ng anak. Its really hard for me, the thought that my son is dead.
x x x x x x x x x
Q: How did your family react to the death of Erwin Suarez Francisco?
A: All of my family and relatives were felt (sic) sorrow because they knew that my son is (sic)
good.
Q: We know that it is impossible to put money terms(s) [on] the life of [a] human, but since you
are now in court and if you were to ask this court how much would you and your family
compensate? (sic)
A: Even if they pay me millions, they cannot remove the anguish of my son (sic).
[23]

Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are
awarded to allow the former to obtain means, diversion or amusements that will serve to alleviate the moral
suffering he has undergone due to the defendants culpable action and must, perforce, be proportional to the
suffering inflicted.
[24]
We have previously held as proper an award of P500,000.00 as moral damages to the heirs of
a deceased family member who died in a vehicular accident. In our 2002 decision inMetro Manila Transit
Corporation v. Court of Appeals, et al.,
[25]
we affirmed the award of moral damages of P500,000.00 to the heirs of
the victim, a mother, who died from injuries she sustained when a bus driven by an employee of the petitioner hit
her. In the case at bar, we likewise affirm the portion of the assailed decision awarding the moral damages.
Since the petitioners did not question the other damages adjudged against them by the court a quo, we
affirm the award of these damages to the respondents.
WHEREFORE, the petition is DENIED. The assailed decision is AFFIRMED with the MODIFICATION
that petitioner El Buenasenso Sy is ABSOLVED from any liability adjudged against his co-petitioners in this case.
Costs against petitioners.
SO ORDERED.















































Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 187872 April 11, 2011
STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner,
vs.
STAR INFRASTRUCTURE DEVELOPMENT CORPORATION ET AL., Respondents.
R E S O L U T I O N
PEREZ, J.:
For resolution by the Court are the following motions and incidents filed by the parties, to wit:
1. Initial Motion for Reconsideration of the Grant of the Application for Writ of Preliminary Injunction (With Offer
to File Counterbond)
1
and Supplemental Motion for Reconsideration of the 17 November 2010 decision, filed by
respondent Cypress Tree Capital Investment, Inc. (CTCII);
2

2. Motions for Reconsideration of said 17 November 2010 decision filed by respondents Aderito Z. Yujuico and
Bonifacio C. Sumbilla,
3
Robert L. Wong,
4
and Star Infrastructure Development Corporation (SIDC);
5

3. Motion to Admit and Approve Preliminary Injunction Bond filed by petitioner Strategic Alliance Development
Corporation (STRADEC);
6

4. Oppositions to STRADECs Motion to Admit and Approve Preliminary Injunction Bond filed by respondents
Yujuico and Sumbilla
7
as well as CTCII and respondent Cynthia M. Laureta;
8

5. Manifestation
9
and Reply
10
filed by STRADEC and Rejoinder filed by respondents Yujuico and Sumbilla;
11
and
6. Comment (on CTCIIs Initial Motion for Reconsideration of the Grant of the Application for Writ of Preliminary
Injunction (With Offer to File Counterbond)
12
and Consolidated Comment (on Respondents Motion for
Reconsideration)
13
filed by STRADEC.
In their motions for reconsideration of the Courts 17 November 2010 decision, respondents essentially argue that
the issue of Ceasar Quiambaos authority to represent STRADEC is a prejudicial question to the resolution of the
dispute before the court a quo; that a declaration that respondent Yujuico and Sumbillas group constitutes
STRADECs legitimate Board of Directors would not only discount Quiambaos authority to represent said
corporation but would also validate the authority said respondents were given to execute the 8 October 2004
pledge of said corporations SIDC shares; that the record is bereft of any showing that the Board of Directors who
authorized Quiambao to file the 31 July 2006 amended petition before Branch 2 of the Regional Trial Court (RTC)
of Batangas City was the legitimate successor of STRADECs Board of Directors which was restored into office by
this Courts 29 January 2007 decision in G.R. No. 168639; that there was misjoinder of causes of action in said
amended complaint which incorporated claims both civil and intra-corporate in nature; that STRADEC has no clear
and unmistakable right as would entitle it to a writ of preliminary injunction which, at any rate, cannot be directed
against acts which had already been accomplished or consummated; and, that the preliminary injunction issued in
the premises amounted a prejudgment of the case.
14

In compliance with the 17 November 2010 decision sought be reconsidered, STRADEC, on the other hand, seeks
the admission and approval of the preliminary injunction bond issued by the Empire Insurance Company in the
sum of P10,000,000.00.
15
On the ground, however, that grave and irreparable damage will be wrought by the
issuance of the writ of preliminary injunction in these premises, CTCIIs motion for reconsideration of the grant of
said writ is accompanied by an offer to post a counterbond in the sum of P20,000,000.00. For this purpose, CTCII
calls our attention to the supposed fact, among other matters, that it is currently the principal shareholder of SIDC
which, as a public utility company, holds the concession for the construction, operation and maintenance of the
STAR toll road; that SIDC is scheduled to expand Stage II, Phase 2 of the STAR toll road with the construction of two
additional new lanes at an estimated cost of P2,000,000,000.00; that if it is prevented from exercising proprietary
rights over the subject shares and SIDC is inhibited from implementing the 20 July 2006 stockholders resolution
increasing its authorized capital stock, CTCII will be unable to infuse the equity participation commonly required
for bank loans; and, that since the security for said loans consisting of SIDCs assets requires the vote of
stockholders owning/controlling 2/3 of SIDCs outstanding capital stock, the writ of preliminary injunction would
cause grave and irreparable damage which cannot be indemnified by the injunction bond to be posted by
STRADEC.
16
In support of the foregoing arguments, CTCII submitted an affidavit of merit executed by its President,
Elizabeth Lee.
17

In their opposition to STRADECs motion to admit and approve preliminary injunction bond, respondents Yujuico
and Sumbilla, in turn, question Quiambaos authority to file and submit said bond. Calling attention to the fact that
the motion did not include a board resolution authorizing Quiambao to file the same for and in behalf of STRADEC,
respondents Yujuico and Quiambao once again argue that there is no showing in the record that Quiambao was so
authorized by a legitimate Board of Directors which succeeded the one restored in office by the 29 January 2007
decision in G.R. No. 168639.
18
The foregoing arguments having been adopted in the 28 January 2011 manifestation
filed by SIDC,
19
STRADEC filed its reply, contending that the decision in G.R. No. 168639 had reference only to the
election of its Board of Directors for the term 2004-2005; that since then, the annual meetings of its stockholders
had resulted in the consistent re-election of Quiambao as its Corporate President; that said subsequent elections
were recognized in the 2 February 2009 decision rendered by Branch 155 of the Pasig City RTC in SCA No. 3034-
PSG, entitled "Citra Metro Manila Tollways Corporation [CMMTC] vs. Strategic Alliance Development Corporation,
et al."; and, that the decision was effectively affirmed in G.R. No. 188864 when this Court denied the petition for
review on certiorari filed by respondents Yujuico and Sumbilla.
20
In their reply, however, the latter argue that said
decision in SCA No. 3034 only referred to the validity of the proxies issued by STRADEC for the stockholders
meetings of CMMTC for the years 2005 and 2006.
21

In its comment to CTCII's Initial Motion for Reconsideration of the Grant of the Application for Writ of Preliminary
Injunction (With Offer to File Counterbond), STRADEC additionally underscores the fact, among other matters, that
as its duly elected Corporate President, Quiambao has been duly authorized to file its 31 July 2006 amended
petition a quo and to obtain the requisite surety bond for the writ of preliminary injunction sought in connection
with its petition for review on certiorari from the Court of Appeals' (CA) 22 December 2008 decision in CA-G.R. No.
96945; that CTCII's continuing violations of STRADEC's rights over its SIDC shares justify the issuance of the writ of
preliminary injunction to which it is entitled as owner of said shares; and, that the grave and irreparable damage
pleaded by CTCII is attributable to its illegal acquisition of the subject shares and its continued usurpation of
STRADEC's rights could only result to instability in the conduct of SIDC's business.
22
Reiterating the foregoing
arguments in its consolidated comment to respondents' motions for reconsideration, STRADEC maintains that the
arguments presently raised by respondents had already been squarely passed upon in the decision sought to be
reconsidered; and, that the suspension of the proceedings regarding its third and fourth causes of action is not
justified by the pendency of other intra-corporate disputes between STRADEC's corporators.
23

We find respondents motions for reconsideration bereft of merit.
Having already discussed the matter extensively in the decision sought to be reconsidered, we no longer find any
reason to go into great detail in discussing the reasons why the first and second causes of action pleaded in
STRADECs 31 July 2006 amended complaint qualify as intra-corporate disputes cognizable by Branch 2 of the RTC
of Batangas City, sitting as a Special Commercial Court (SCC). Fundamental is the rule that nature of the action, as
well as the court or body which has jurisdiction over it, is determined based on the allegations contained in the
complaint, irrespective of whether or not plaintiff is entitled to recover upon all or some of the claims asserted
therein.
24
It has been held that only ultimate facts and not legal conclusions or evidentiary facts, which should not
be alleged in the complaint in the first place, are considered for purposes of applying the test.
25
Applying the
relationship test and the nature of the controversy test already discussed in our 17 November 2010 decision, we
find that STRADECs causes of action for the nullification of the loan and pledge over its SIDC shareholdings
contracted by respondents Yujuico and Sumbilla as well as the avoidance of the notarial sale conducted by
respondent Raymond M. Caraos both qualify as intra-corporate disputes.
26
It cannot, therefore, be argued that
said causes of action were misjoined with STRADECs third and fourth causes of action for the cancellation of the
transfer of its shares in SIDECs books, the invalidation of the 30 July 2005 and 20 July 2006 SIDC stockholders
meetings, attorneys fees and the costs.
Neither are we inclined to hospitably entertain respondents harping over the supposed fact that Quiambaos
authority to represent STRADEC as litigated in the cases pending before the courts of Pasig City and Urdaneta
City, involving the question of ownership of the controlling shares of stock of STRADEC as well as the legitimacy of
the Board of Directors headed by Quiambao pose a prejudicial question to the resolution of the dispute before
Branch 2 of the Batangas City RTC. A prejudicial question is defined as that which arises in a case, the resolution of
which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another
tribunal.
27
It is said to come into play when a civil action and a criminal action are both pending and there exists in
the former case an issue which must be preemptively resolved before the latter case may proceed since the
resolution of the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or
innocence of the accused in the criminal case. Aimed at avoiding two conflicting decisions,
28
a prejudicial question
requires the concurrence of two essential requisites, to wit: (a) the civil action involves an issue similar or
intimately related to the issue raised in the criminal action; and, (b) the resolution of such issue determines
whether or not the criminal action may proceed.
29
From the foregoing disquisition, it is evident that a prejudicial
question cannot be appreciated where, as in the case at bench, the subject actions are all civil in nature.
30

As an incident to the power inherent in every court to control the disposition of the cases on its dockets, the court
in which an action is pending may, concededly, hold the action in abeyance in the exercise of sound discretion, to
abide by the outcome of another case pending in another court,
31
especially where the parties and the issues are
the same.
32
While applicable as between the actions pending before the courts of Pasig City and Urdaneta City
which were supposedly instituted to determine the ownership of the controlling shares of stock of STRADEC as
well as its legitimate Board of Directors, said principle cannot, however, apply to said cases vis--vis the one at
bench which, at bottom, seek the nullification of the loan and pledge over said corporations shareholdings in SIDC
as well as the subsequent notarial sale thereof. Even then, we find that respondents cannot expediently argue that
the defects in the impugned loan, pledge and notarial sale would be automatically discounted by a declaration
from the Pasay City and Urdaneta City courts that respondents Yujuico and Sumbillas group constitute said
corporations legitimate Board of Directors. Assuming, arguendo, that respondents are justified in equating such
determination with due authorization for the loan and pledge over STRADEC's shares in SIDC, we find that it would
not still dispose of the issue of the alleged lack of consideration for the same transactions and the fraud which
supposedly attended the execution of the same.
We have likewise gone over the Court's 29 January 2007 decision in G.R. No. 168639 and found no pronouncement
therein that would bar the filing of the 31 July 2006 amended petition by STRADEC which, as a corporation with a
personality separate and distinct from its corporators,
33
has a right to protect its rights and interests over the
subject SIDC shares. Considered in this light, we find that respondents are out on a limb in asserting that the record
is be bereft of any showing that Quiambao's authority to said amended petition a quo was granted by the
legitimate successor to STRADEC's Board of Directors which was restored into office by this Courts 29 January
2007 decision in G.R. No. 168639. To a great extent, this situation is attributable to the fact that Civil Case No. 7956
was still on its preliminary stages when Branch 2 of the RTC of Batangas City issued its assailed 30 August 2006
order, withholding action on STRADEC's first and causes of action on the ground of improper venue and
suspending proceedings regarding the corporation's third and fourth causes of action in view of the then pendency
of G.R. No. 168639 before this Court. Given that responsive pleadings squarely questioning Quiambao's authority
to represent STRADEC have yet to be filed by respondents, the matter is clearly one better threshed out before the
court a quo, alongside such issues as the validity of the transfers of STRADECs shares to respondents Wong and
CTCII, the propriety of the recording of said transfers in SIDCs books, STRADECs status as a stockholder of SIDC
and the legality of the 30 July 2005 and 20 July 2006 SIDC stockholders meetings.1avvphi1
As an adjunct to the main action subject to the latters outcome,
34
on the other hand, a writ of preliminary
injunction may be issued upon the concurrence of the following essential requisites, to wit: (1) that the invasion of
the right is material and substantial; (2) that the right of complainant is clear and unmistakable; and, (3) that there
is an urgent and paramount necessity for the writ to prevent serious damage.
35
Concurrence of the foregoing
requisites is evident from the fact that STRADEC has been deprived of its rights to its shareholdings and to
participate in SIDC's corporate affairs as a consequence of the impugned loan and pledge as well as the transfer of
the shares to respondent Wong and CTCII. For these reasons alone, we find that STRADEC is entitled to a writ of
preliminary injunction to restrain: (a) CTCII from further exercising proprietary rights over the subject shares; (b)
SIDC and its officers from recognizing the transfer or further transfers of the same; (c) the implementation of the
resolutions passed during the 20 July 2006 SIDC stockholders special meeting; and, (d) the SEC from acting on any
report submitted in respect thereto. Far from amounting to a prejudgment of the case, the restraint of said acts is
merely in the service of the office of a writ of preliminary injunction, i.e., the restoration of the status quo ante as
well preservation and protection of the rights of the litigant during the pendency of the case.
36

In view of CTCII's acquisition of STRADEC's shares as well as the changes in SIDC's corporate structure which were
effected as a consequence thereof, respondents also argue that the writ of preliminary injunction granted in the
decision sought to be reconsidered is directed against acts already consummated. Although the general rule is to
the effect that a writ of preliminary injunction cannot be issued against acts already fait accompli,
37
it has been
held, however, that consummated acts which are continuing in nature may still be enjoined by the courts.
38
The
propriety of the grant of the provisional injunctive writ sought by STRADEC having been established, we find that
approval of said corporation's Motion to Admit and Approve Preliminary Injunction Bond is in order. Contrary to
respondents' harping about the lack of showing thereof in the record, Quiambao's authority to file said motion is
implicit in the following 21 May 2009 Directors Certification attached to STRADEC's petition for review on
certiorari, to wit:
"WE, as the incumbent members of the Board of Directors of the STRATEGIC ALLIANCE DEVELOPMENT
CORPORATION (the "Corporation"), a corporation duly organized and existing under and by virtue of the laws of
the Republic of the Philippines, with principal office address at Quezon Boulevard, Poblacion Sur, Bayambang,
Pangasinan, Philippines, do hereby certify that the following resolutions were approved by the Board, to wit:
RESOLVED, as it is hereby resolved that the Corporation shall file a Petition for Review on Certiorari under Rule 45
of the Rules of Court to assail the Decision dated 22 December 2008 and Resolution dated 30 April 2009 in CA-G.R.
SP No. 96945, entitled Strategic Alliance Development Corporation vs. RTC of Batangas City (Branch 2), Star
Infrastructure Development Corporation, et al.", with an application for the issuance of a temporary restraining
order and/or writ of injunction, if deemed necessary.
WHEREFORE, BE IT RESOLVED, as it is hereby resolved that the Corporations President, CEZAR T. QUIAMBAO, shall
be authorized, as he is hereby authorized: to cause the filing of the Petition before the Supreme Court; to verify
the pleadings; and to execute any affidavit in support thereof, hereby giving and granting to CEZAR T. QUIAMBAO
full power to carry into effect the foregoing, including the authority to appear on the Corporations behalf, as fully
to all intents and purposes as the Corporation might or could lawfully do if personally present, and hereby ratifying
and confirming all that CEZAR T. QUIAMBAO, or his representatives shall lawfully do by virtue hereof.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this May 21, 2009 at Quezon City, Philippines.
(Sgd.) DEMETRIO G. DEMETRIA
Chairman of the Board
(Sgd.) ANTHONY K. QUIAMBAO
Vice Chairman
CEZAR T. QUIAMBAO
(Out of the Country)
JULIUS K. QUIAMBAO
(Sgd.) GIOVANNI T. CASANOVA
Director"
39

Viewed in the light of the foregoing considerations, we find no merit in CTCII's objections to the writ of preliminary
injunction and offer to file a counterbond in the sum of P20,000,000.00, on the ground that the P10,000,000.00
injunction bond STRADEC has been required to post is grossly insufficient to cover the grave and irreparable
damage which would result from the issuance of said writ. Pursuant to Section 6, Rule 58 of the 1997 Rules of Civil
Procedure,
40
"a preliminary injunction may be dissolved if it appears after hearing that although the applicant is
entitled to the injunction or restraining order, the issuance or continuance thereof, as the case may be, would
cause irreparable damage to the party or person enjoined while the applicant can be fully compensated for such
damages as he may suffer, and the former files a bond in an amount fixed by the court on condition that he will
pay all damages which the applicant may suffer by the denial or the dissolution of the injunction or restraining
order. Two conditions must concur: first, the court in the exercise of its discretion, finds that the continuance of
the injunction would cause great damage to the defendant, while the plaintiff can be fully compensated for such
damages as he may suffer; second, the defendant files a counterbond."
41

Aside from the fact that the amount of injunction bond is equivalent to the sum of the supposed loan for which
STRADEC's shares were pledged by respondents Yujuico and Sumbilla, we find that the projected damage to SIDC's
construction, operation and maintenance of the STAR toll road is, to say the least, speculative. Even when
reckoned from the commencement of the action a quo on 17 July 2006, the damage STRADEC suffered and
continues to suffer as a consequence of the impugned transactions is, in contrast, clearly beyond monetary
recompense as it not only amounts to a divesture of its ownership over said shares but, more importantly,
translates into a denial of its rights to elect SIDC's officers, to participate in its corporate affairs and, as a major
stockholder, to determine the course of its business dealings, among other matters. Moreover, the mere offer of a
counterbond does not suffice to warrant the dissolution of the preliminary writ of injunction
42
issued to stop an
unauthorized act. A contrary holding would open the gates to the use of the counterbond as a vehicle of the
commission or continuance of an unauthorized or illegal act which the injunction precisely is intended to prevent.
43

WHEREFORE, premises considered, respondents' motions for reconsideration and CTCII's offer to file a counter
bond are DENIED for lack of merit. Accordingly, STRADEC's motion to admit and approve injunction bond is
GRANTED.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson

PRESBITERO J. VELASCO, JR.
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Resolution had
been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice

Footnotes
1
Additional member in lieu of Associate Justice Mariano C. Del Castillo per Special Order no. 913 dated 02
November 2010.
Rollo, pp. 1217-1242, CTCIIs Initial Motion for Reconsideration of the Grant of the Application for Writ of
Preliminary Injunction (With Offer to File Counterbond) dated 10 December 2010.
40
"Section 6. Grounds for objection to, or for motion of dissolution of, injunction or restraining order. The
application for injunction or restraining order may be denied, upon a showing of its insufficiency. The injunction or
restraining order may also be denied, or, if granted, may be dissolved, on other grounds upon affidavits of the
party or person enjoined, which may be opposed by the applicant also on affidavits. It may further be denied, or, if
granted, may be dissolved, if it appears after hearing that although the applicant is entitled to the injunction or
restraining order, the issuance or continuance thereof, as the case may be, would cause irreparable damage to the
party or person enjoined while the applicant can be fully compensated for such damages as he may suffer, and the
former files a bond in an amount fixed by the court conditioned that he will pay all damages which the applicant
may suffer by the denial or the dissolution of the injunction or restraining order. If it appears that the extent of the
preliminary injunction or restraining order granted is too great, it may be modified.

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