1.

G.R. No. 101279 August 6, 1992

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,

vs.
HON. RUBEN D. TORRES, as Secretary of the Department of Labor & Employment, and JOSE N. SARMIENTO, as
Administrator of the PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, respondents.

De Guzman, Meneses & Associates for petitioner.

GRIÑO-AQUINO, J.:

This petition for prohibition with temporary restraining order was filed by the Philippine Association of Service Exporters
(PASEI, for short), to prohibit and enjoin the Secretary of the Department of Labor and Employment (DOLE) and the
Administrator of the Philippine Overseas Employment Administration (or POEA) from enforcing and implementing DOLE
Department Order No. 16, Series of 1991 and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, temporarily
suspending the recruitment by private employment agencies of Filipino domestic helpers for Hong Kong and vesting in the
DOLE, through the facilities of the POEA, the task of processing and deploying such workers.

PASEI is the largest national organization of private employment and recruitment agencies duly licensed and authorized
by the POEA, to engaged in the business of obtaining overseas employment for Filipino landbased workers, including
domestic helpers.

On June 1, 1991, as a result of published stories regarding the abuses suffered by Filipino housemaids employed in Hong
Kong, DOLE Secretary Ruben D. Torres issued Department Order No. 16, Series of 1991, temporarily suspending the
recruitment by private employment agencies of "Filipino domestic helpers going to Hong Kong" (p. 30, Rollo). The DOLE
itself, through the POEA took over the business of deploying such Hong Kong-bound workers.

In view of the need to establish mechanisms that will enhance the protection for Filipino domestic helpers
going to Hong Kong, the recruitment of the same by private employment agencies is hereby temporarily
suspended effective 1 July 1991. As such, the DOLE through the facilities of the Philippine Overseas
Employment Administration shall take over the processing and deployment of household workers bound
for Hong Kong, subject to guidelines to be issued for said purpose.

In support of this policy, all DOLE Regional Directors and the Bureau of Local Employment's regional
offices are likewise directed to coordinate with the POEA in maintaining a manpower pool of prospective
domestic helpers to Hong Kong on a regional basis.

For compliance. (Emphasis ours; p. 30, Rollo.)

Pursuant to the above DOLE circular, the POEA issued Memorandum Circular No. 30, Series of 1991, dated July 10,
1991, providing GUIDELINES on the Government processing and deployment of Filipino domestic helpers to Hong Kong
and the accreditation of Hong Kong recruitment agencies intending to hire Filipino domestic helpers.

Subject: Guidelines on the Temporary Government Processing and Deployment of Domestic Helpers to
Hong Kong.

Pursuant to Department Order No. 16, series of 1991 and in order to operationalize the temporary
government processing and deployment of domestic helpers (DHs) to Hong Kong resulting from the
temporary suspension of recruitment by private employment agencies for said skill and host market, the
following guidelines and mechanisms shall govern the implementation of said policy.

I. Creation of a joint POEA-OWWA Household Workers Placement Unit (HWPU)

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 An ad hoc, one stop Household Workers Placement Unit [or HWPU] under the supervision of the POEA
shall take charge of the various operations involved in the Hong Kong-DH industry segment:

The HWPU shall have the following functions in coordination with appropriate units and other entities
concerned:

1. Negotiations with and Accreditation of Hong Kong Recruitment Agencies

2. Manpower Pooling

3. Worker Training and Briefing

4. Processing and Deployment

5. Welfare Programs

II. Documentary Requirements and Other Conditions for Accreditation of Hong Kong Recruitment
Agencies or Principals

Recruitment agencies in Hong Kong intending to hire Filipino DHs for their employers may negotiate with
the HWPU in Manila directly or through the Philippine Labor Attache's Office in Hong Kong.

xxx xxx xxx

X. Interim Arrangement

All contracts stamped in Hong Kong as of June 30 shall continue to be processed by POEA until 31 July
1991 under the name of the Philippine agencies concerned. Thereafter, all contracts shall be processed
with the HWPU.

Recruitment agencies in Hong Kong shall submit to the Philippine Consulate General in Hong kong a list
of their accepted applicants in their pool within the last week of July. The last day of acceptance shall be
July 31 which shall then be the basis of HWPU in accepting contracts for processing. After the exhaustion
of their respective pools the only source of applicants will be the POEA manpower pool.

For strict compliance of all concerned. (pp. 31-35, Rollo.)

On August 1, 1991, the POEA Administrator also issued Memorandum Circular No. 37, Series of 1991, on the processing
of employment contracts of domestic workers for Hong Kong.

TO: All Philippine and Hong Kong Agencies engaged in the recruitment of Domestic helpers for Hong
Kong

Further to Memorandum Circular No. 30, series of 1991 pertaining to the government processing and
deployment of domestic helpers (DHs) to Hong Kong, processing of employment contracts which have
been attested by the Hong Kong Commissioner of Labor up to 30 June 1991 shall be processed by the
POEA Employment Contracts Processing Branch up to 15 August 1991 only.

Effective 16 August 1991, all Hong Kong recruitment agent/s hiring DHs from the Philippines shall recruit
under the new scheme which requires prior accreditation which the POEA.

Recruitment agencies in Hong Kong may apply for accreditation at the Office of the Labor Attache,
Philippine Consulate General where a POEA team is posted until 31 August 1991. Thereafter, those who
failed to have themselves accredited in Hong Kong may proceed to the POEA-OWWA Household
Workers Placement Unit in Manila for accreditation before their recruitment and processing of DHs shall
be allowed.
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 Recruitment agencies in Hong Kong who have some accepted applicants in their pool after the cut-off
period shall submit this list of workers upon accreditation. Only those DHs in said list will be allowed
processing outside of the HWPU manpower pool.

For strict compliance of all concerned. (Emphasis supplied, p. 36, Rollo.)

On September 2, 1991, the petitioner, PASEI, filed this petition for prohibition to annul the aforementioned DOLE and
POEA circulars and to prohibit their implementation for the following reasons:

1. that the respondents acted with grave abuse of discretion and/or in excess of their rule-making
authority in issuing said circulars;

2. that the assailed DOLE and POEA circulars are contrary to the Constitution, are unreasonable, unfair
and oppressive; and

3. that the requirements of publication and filing with the Office of the National Administrative Register
were not complied with.

There is no merit in the first and second grounds of the petition.

Article 36 of the Labor Code grants the Labor Secretary the power to restrict and regulate recruitment and placement
activities.

Art. 36. Regulatory Power. — The Secretary of Labor shall have the power to restrict and regulate the
recruitment and placement activities of all agencies within the coverage of this title [Regulation of
Recruitment and Placement Activities] and is hereby authorized to issue orders and promulgate rules and
regulations to carry out the objectives and implement the provisions of this title. (Emphasis ours.)

On the other hand, the scope of the regulatory authority of the POEA, which was created by Executive Order No. 797 on
May 1, 1982 to take over the functions of the Overseas Employment Development Board, the National Seamen Board,
and the overseas employment functions of the Bureau of Employment Services, is broad and far-ranging for:

1. Among the functions inherited by the POEA from the defunct Bureau of Employment Services was the
power and duty:

"2. To establish and maintain a registration and/or licensing system to regulate private
sector participation in the recruitment and placement of workers, locally and overseas, . .
." (Art. 15, Labor Code, Emphasis supplied). (p. 13, Rollo.)

2. It assumed from the defunct Overseas Employment Development Board the power and duty:

3. To recruit and place workers for overseas employment of Filipino contract workers on
a government to government arrangement and in such other sectors as policy may
dictate . . . (Art. 17, Labor Code.) (p. 13, Rollo.)

3. From the National Seamen Board, the POEA took over:

2. To regulate and supervise the activities of agents or representatives of shipping

companies in the hiring of seamen for overseas employment; and secure the best
possible terms of employment for contract seamen workers and secure compliance
therewith. (Art. 20, Labor Code.)

The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional, unreasonable
and oppressive. It has been necessitated by "the growing complexity of the modern society" (Solid Homes, Inc. vs.
Payawal, 177 SCRA 72, 79). More and more administrative bodies are necessary to help in the regulation of society's

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ramified activities. "Specialized in the particular field assigned to them, they can deal with the problems thereof with more
expertise and dispatch than can be expected from the legislature or the courts of justice" (Ibid.).

It is noteworthy that the assailed circulars do not prohibit the petitioner from engaging in the recruitment and deployment
of Filipino landbased workers for overseas employment. A careful reading of the challenged administrative issuances
discloses that the same fall within the "administrative and policing powers expressly or by necessary implication
conferred" upon the respondents (People vs. Maceren, 79 SCRA 450). The power to "restrict and regulate conferred by
Article 36 of the Labor Code involves a grant of police power (City of Naga vs. Court of Appeals, 24 SCRA 898). To
"restrict" means "to confine, limit or stop" (p. 62, Rollo) and whereas the power to "regulate" means "the power to protect,
foster, promote, preserve, and control with due regard for the interests, first and foremost, of the public, then of the utility
and of its patrons" (Philippine Communications Satellite Corporation vs. Alcuaz, 180 SCRA 218).

The Solicitor General, in his Comment, aptly observed:

. . . Said Administrative Order [i.e., DOLE Administrative Order No. 16] merely restricted the scope or
area of petitioner's business operations by excluding therefrom recruitment and deployment of domestic
helpers for Hong Kong till after the establishment of the "mechanisms" that will enhance the protection of
Filipino domestic helpers going to Hong Kong. In fine, other than the recruitment and deployment of
Filipino domestic helpers for Hongkong, petitioner may still deploy other class of Filipino workers either for
Hongkong and other countries and all other classes of Filipino workers for other countries.

Said administrative issuances, intended to curtail, if not to end, rampant violations of the rule against
excessive collections of placement and documentation fees, travel fees and other charges committed by
private employment agencies recruiting and deploying domestic helpers to Hongkong. [They are
reasonable, valid and justified under the general welfare clause of the Constitution, since the recruitment
and deployment business, as it is conducted today, is affected with public interest.

xxx xxx xxx

The alleged takeover [of the business of recruiting and placing Filipino domestic helpers in Hongkong] is
merely a remedial measure, and expires after its purpose shall have been attained. This is evident from
the tenor of Administrative Order No. 16 that recruitment of Filipino domestic helpers going to Hongkong
by private employment agencies are hereby "temporarily suspended effective July 1, 1991."

The alleged takeover is limited in scope, being confined to recruitment of domestic helpers going to
Hongkong only.

xxx xxx xxx

. . . the justification for the takeover of the processing and deploying of domestic helpers for Hongkong
resulting from the restriction of the scope of petitioner's business is confined solely to the unscrupulous
practice of private employment agencies victimizing applicants for employment as domestic helpers for
Hongkong and not the whole recruitment business in the Philippines. (pp. 62-65, Rollo.)

The questioned circulars are therefore a valid exercise of the police power as delegated to the executive branch of
Government.

Nevertheless, they are legally invalid, defective and unenforceable for lack of power publication and filing in the Office of
the National Administrative Register as required in Article 2 of the Civil Code, Article 5 of the Labor Code and Sections
3(1) and 4, Chapter 2, Book VII of the Administrative Code of 1987 which provide:

Art. 2. Laws shall take effect after fifteen (15) days following the completion of their publication in the
Official Gazatte, unless it is otherwise provided. . . . (Civil Code.)

Art. 5. Rules and Regulations. — The Department of Labor and other government agencies charged with
the administration and enforcement of this Code or any of its parts shall promulgate the necessary
implementing rules and regulations. Such rules and regulations shall become effective fifteen (15)
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 days after announcement of their adoption in newspapers of general circulation. (Emphasis supplied,
Labor Code, as amended.)

Sec. 3. Filing. — (1) Every agency shall file with the University of the Philippines Law Center, three (3)
certified copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are
not filed within three (3) months shall not thereafter be the basis of any sanction against any party or
persons. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987.)

Sec. 4. Effectivity. — In addition to other rule-making requirements provided by law not inconsistent with
this Book, each rule shall become effective fifteen (15) days from the date of filing as above
provided unless a different date is fixed by law, or specified in the rule in cases of imminent danger to
public health, safety and welfare, the existence of which must be expressed in a statement accompanying
the rule. The agency shall take appropriate measures to make emergency rules known to persons who
may be affected by them. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987).

Once, more we advert to our ruling in Tañada vs. Tuvera, 146 SCRA 446 that:

. . . Administrative rules and regulations must also be published if their purpose is to enforce or implement
existing law pursuant also to a valid delegation. (p. 447.)

Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the
administrative agency and not the public, need not be published. Neither is publication required of the so-
called letters of instructions issued by administrative superiors concerning the rules or guidelines to be
followed by their subordinates in the performance of their duties. (p. 448.)

We agree that publication must be in full or it is no publication at all since its purpose is to inform the
public of the content of the laws. (p. 448.)

For lack of proper publication, the administrative circulars in question may not be enforced and implemented.

WHEREFORE, the writ of prohibition is GRANTED. The implementation of DOLE Department Order No. 16, Series of
1991, and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, by the public respondents is hereby
SUSPENDED pending compliance with the statutory requirements of publication and filing under the aforementioned laws
of the land.

SO ORDERED.

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2.)

G.R. No. L-63915 April 24, 1985

LORENZO M. TAÑADA, ABRAHAM F. SARMIENTO, and MOVEMENT OF ATTORNEYS FOR BROTHERHOOD,

INTEGRITY AND NATIONALISM, INC. [MABINI], petitioners,
vs.
HON. JUAN C. TUVERA, in his capacity as Executive Assistant to the President, HON. JOAQUIN VENUS, in his
capacity as Deputy Executive Assistant to the President , MELQUIADES P. DE LA CRUZ, in his capacity as
Director, Malacañang Records Office, and FLORENDO S. PABLO, in his capacity as Director, Bureau of
Printing, respondents.

ESCOLIN, J.:

Invoking the people's right to be informed on matters of public concern, a right recognized in Section 6, Article IV of the
1973 Philippine Constitution, 1 as well as the principle that laws to be valid and enforceable must be published in the
Official Gazette or otherwise effectively promulgated, petitioners seek a writ of mandamus to compel respondent public
officials to publish, and/or cause the publication in the Official Gazette of various presidential decrees, letters of
instructions, general orders, proclamations, executive orders, letter of implementation and administrative orders.

Specifically, the publication of the following presidential issuances is sought:

a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64, 103, 171, 179, 184, 197, 200, 234, 265, 286, 298,
303, 312, 324, 325, 326, 337, 355, 358, 359, 360, 361, 368, 404, 406, 415, 427, 429, 445, 447, 473, 486,
491, 503, 504, 521, 528, 551, 566, 573, 574, 594, 599, 644, 658, 661, 718, 731, 733, 793, 800, 802, 835,
836, 923, 935, 961, 1017-1030, 1050, 1060-1061, 1085, 1143, 1165, 1166, 1242, 1246, 1250, 1278,
1279, 1300, 1644, 1772, 1808, 1810, 1813-1817, 1819-1826, 1829-1840, 1842-1847.

b] Letter of Instructions Nos.: 10, 39, 49, 72, 107, 108, 116, 130, 136, 141, 150, 153, 155, 161, 173, 180,
187, 188, 192, 193, 199, 202, 204, 205, 209, 211-213, 215-224, 226-228, 231-239, 241-245, 248, 251,
253-261, 263-269, 271-273, 275-283, 285-289, 291, 293, 297-299, 301-303, 309, 312-315, 325, 327,
343, 346, 349, 357, 358, 362, 367, 370, 382, 385, 386, 396-397, 405, 438-440, 444- 445, 473, 486, 488,
498, 501, 399, 527, 561, 576, 587, 594, 599, 600, 602, 609, 610, 611, 612, 615, 641, 642, 665, 702, 712-
713, 726, 837-839, 878-879, 881, 882, 939-940, 964,997,1149-1178,1180-1278.

c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63, 64 & 65.

d] Proclamation Nos.: 1126, 1144, 1147, 1151, 1196, 1270, 1281, 1319-1526, 1529, 1532, 1535, 1538,
1540-1547, 1550-1558, 1561-1588, 1590-1595, 1594-1600, 1606-1609, 1612-1628, 1630-1649, 1694-
1695, 1697-1701, 1705-1723, 1731-1734, 1737-1742, 1744, 1746-1751, 1752, 1754, 1762, 1764-1787,
1789-1795, 1797, 1800, 1802-1804, 1806-1807, 1812-1814, 1816, 1825-1826, 1829, 1831-1832, 1835-
1836, 1839-1840, 1843-1844, 1846-1847, 1849, 1853-1858, 1860, 1866, 1868, 1870, 1876-1889, 1892,
1900, 1918, 1923, 1933, 1952, 1963, 1965-1966, 1968-1984, 1986-2028, 2030-2044, 2046-2145, 2147-
2161, 2163-2244.

e] Executive Orders Nos.: 411, 413, 414, 427, 429-454, 457- 471, 474-492, 494-507, 509-510, 522, 524-
528, 531-532, 536, 538, 543-544, 549, 551-553, 560, 563, 567-568, 570, 574, 593, 594, 598-604, 609,
611- 647, 649-677, 679-703, 705-707, 712-786, 788-852, 854-857.

f] Letters of Implementation Nos.: 7, 8, 9, 10, 11-22, 25-27, 39, 50, 51, 59, 76, 80-81, 92, 94, 95, 107,
120, 122, 123.

g] Administrative Orders Nos.: 347, 348, 352-354, 360- 378, 380-433, 436-439.

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The respondents, through the Solicitor General, would have this case dismissed outright on the ground that petitioners
have no legal personality or standing to bring the instant petition. The view is submitted that in the absence of any
showing that petitioners are personally and directly affected or prejudiced by the alleged non-publication of the
presidential issuances in question 2 said petitioners are without the requisite legal personality to institute this mandamus
proceeding, they are not being "aggrieved parties" within the meaning of Section 3, Rule 65 of the Rules of Court, which
we quote:

SEC. 3. Petition for Mandamus.—When any tribunal, corporation, board or person unlawfully neglects the
performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station,
or unlawfully excludes another from the use a rd enjoyment of a right or office to which such other is
entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the
person aggrieved thereby may file a verified petition in the proper court alleging the facts with certainty
and praying that judgment be rendered commanding the defendant, immediately or at some other
specified time, to do the act required to be done to Protect the rights of the petitioner, and to pay the
damages sustained by the petitioner by reason of the wrongful acts of the defendant.

Upon the other hand, petitioners maintain that since the subject of the petition concerns a public right and its object is to
compel the performance of a public duty, they need not show any specific interest for their petition to be given due course.

The issue posed is not one of first impression. As early as the 1910 case of Severino vs. Governor General, 3 this Court
held that while the general rule is that "a writ of mandamus would be granted to a private individual only in those cases
where he has some private or particular interest to be subserved, or some particular right to be protected, independent of
that which he holds with the public at large," and "it is for the public officers exclusively to apply for the writ when public
rights are to be subserved [Mithchell vs. Boardmen, 79 M.e., 469]," nevertheless, "when the question is one of public right
and the object of the mandamus is to procure the enforcement of a public duty, the people are regarded as the real party
in interest and the relator at whose instigation the proceedings are instituted need not show that he has any legal or
special interest in the result, it being sufficient to show that he is a citizen and as such interested in the execution of the
laws [High, Extraordinary Legal Remedies, 3rd ed., sec. 431].

Thus, in said case, this Court recognized the relator Lope Severino, a private individual, as a proper party to the
mandamus proceedings brought to compel the Governor General to call a special election for the position of municipal
president in the town of Silay, Negros Occidental. Speaking for this Court, Mr. Justice Grant T. Trent said:

We are therefore of the opinion that the weight of authority supports the proposition that the relator is a
proper party to proceedings of this character when a public right is sought to be enforced. If the general
rule in America were otherwise, we think that it would not be applicable to the case at bar for the reason
'that it is always dangerous to apply a general rule to a particular case without keeping in mind the reason
for the rule, because, if under the particular circumstances the reason for the rule does not exist, the rule
itself is not applicable and reliance upon the rule may well lead to error'

No reason exists in the case at bar for applying the general rule insisted upon by counsel for the
respondent. The circumstances which surround this case are different from those in the United States,
inasmuch as if the relator is not a proper party to these proceedings no other person could be, as we
have seen that it is not the duty of the law officer of the Government to appear and represent the people
in cases of this character.

The reasons given by the Court in recognizing a private citizen's legal personality in the aforementioned case apply
squarely to the present petition. Clearly, the right sought to be enforced by petitioners herein is a public right recognized
by no less than the fundamental law of the land. If petitioners were not allowed to institute this proceeding, it would indeed
be difficult to conceive of any other person to initiate the same, considering that the Solicitor General, the government
officer generally empowered to represent the people, has entered his appearance for respondents in this case.

Respondents further contend that publication in the Official Gazette is not a sine qua non requirement for the effectivity of
laws where the laws themselves provide for their own effectivity dates. It is thus submitted that since the presidential
issuances in question contain special provisions as to the date they are to take effect, publication in the Official Gazette is
not indispensable for their effectivity. The point stressed is anchored on Article 2 of the Civil Code:

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 Art. 2. Laws shall take effect after fifteen days following the completion of their publication in the Official
Gazette, unless it is otherwise provided, ...

The interpretation given by respondent is in accord with this Court's construction of said article. In a long line of
decisions, 4 this Court has ruled that publication in the Official Gazette is necessary in those cases where the legislation
itself does not provide for its effectivity date-for then the date of publication is material for determining its date of
effectivity, which is the fifteenth day following its publication-but not when the law itself provides for the date when it goes
into effect.

Respondents' argument, however, is logically correct only insofar as it equates the effectivity of laws with the fact of
publication. Considered in the light of other statutes applicable to the issue at hand, the conclusion is easily reached that
said Article 2 does not preclude the requirement of publication in the Official Gazette, even if the law itself provides for the
date of its effectivity. Thus, Section 1 of Commonwealth Act 638 provides as follows:

Section 1. There shall be published in the Official Gazette [1] all important legisiative acts and resolutions
of a public nature of the, Congress of the Philippines; [2] all executive and administrative orders and
proclamations, except such as have no general applicability; [3] decisions or abstracts of decisions of the
Supreme Court and the Court of Appeals as may be deemed by said courts of sufficient importance to be
so published; [4] such documents or classes of documents as may be required so to be published by law;
and [5] such documents or classes of documents as the President of the Philippines shall determine from
time to time to have general applicability and legal effect, or which he may authorize so to be published.
...

The clear object of the above-quoted provision is to give the general public adequate notice of the various laws which are
to regulate their actions and conduct as citizens. Without such notice and publication, there would be no basis for the
application of the maxim "ignorantia legis non excusat." It would be the height of injustice to punish or otherwise burden a
citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one.

Perhaps at no time since the establishment of the Philippine Republic has the publication of laws taken so vital
significance that at this time when the people have bestowed upon the President a power heretofore enjoyed solely by the
legislature. While the people are kept abreast by the mass media of the debates and deliberations in the Batasan
Pambansa—and for the diligent ones, ready access to the legislative records—no such publicity accompanies the law-
making process of the President. Thus, without publication, the people have no means of knowing what presidential
decrees have actually been promulgated, much less a definite way of informing themselves of the specific contents and
texts of such decrees. As the Supreme Court of Spain ruled: "Bajo la denominacion generica de leyes, se comprenden
tambien los reglamentos, Reales decretos, Instrucciones, Circulares y Reales ordines dictadas de conformidad con las
mismas por el Gobierno en uso de su potestad. 5

The very first clause of Section I of Commonwealth Act 638 reads: "There shall be published in the Official Gazette ... ."
The word "shall" used therein imposes upon respondent officials an imperative duty. That duty must be enforced if the
Constitutional right of the people to be informed on matters of public concern is to be given substance and reality. The law
itself makes a list of what should be published in the Official Gazette. Such listing, to our mind, leaves respondents with
no discretion whatsoever as to what must be included or excluded from such publication.

The publication of all presidential issuances "of a public nature" or "of general applicability" is mandated by law.
Obviously, presidential decrees that provide for fines, forfeitures or penalties for their violation or otherwise impose a
burden or. the people, such as tax and revenue measures, fall within this category. Other presidential issuances which
apply only to particular persons or class of persons such as administrative and executive orders need not be published on
the assumption that they have been circularized to all concerned. 6

It is needless to add that the publication of presidential issuances "of a public nature" or "of general applicability" is a
requirement of due process. It is a rule of law that before a person may be bound by law, he must first be officially and
specifically informed of its contents. As Justice Claudio Teehankee said in Peralta vs. COMELEC 7:

In a time of proliferating decrees, orders and letters of instructions which all form part of the law of the
land, the requirement of due process and the Rule of Law demand that the Official Gazette as the official
government repository promulgate and publish the texts of all such decrees, orders and instructions so
that the people may know where to obtain their official and specific contents.
8
The Court therefore declares that presidential issuances of general application, which have not been published, shall have
no force and effect. Some members of the Court, quite apprehensive about the possible unsettling effect this decision
might have on acts done in reliance of the validity of those presidential decrees which were published only during the
pendency of this petition, have put the question as to whether the Court's declaration of invalidity apply to P.D.s which had
been enforced or implemented prior to their publication. The answer is all too familiar. In similar situations in the past this
Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank 8 to wit:

The courts below have proceeded on the theory that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and
hence affording no basis for the challenged decree. Norton v. Shelby County, 118 U.S. 425, 442;
Chicago, 1. & L. Ry. Co. v. Hackett, 228 U.S. 559, 566. It is quite clear, however, that such broad
statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The
actual existence of a statute, prior to such a determination, is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a new judicial
declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects-with respect to particular conduct, private and official. Questions of rights claimed to have
become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of
public policy in the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have engaged the attention of
courts, state and federal and it is manifest from numerous decisions that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified.

Consistently with the above principle, this Court in Rutter vs. Esteban 9 sustained the right of a party under the Moratorium
Law, albeit said right had accrued in his favor before said law was declared unconstitutional by this Court.

Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is "an
operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new
judicial declaration ... that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified."

From the report submitted to the Court by the Clerk of Court, it appears that of the presidential decrees sought by
petitioners to be published in the Official Gazette, only Presidential Decrees Nos. 1019 to 1030, inclusive, 1278, and 1937
to 1939, inclusive, have not been so published. 10 Neither the subject matters nor the texts of these PDs can be
ascertained since no copies thereof are available. But whatever their subject matter may be, it is undisputed that none of
these unpublished PDs has ever been implemented or enforced by the government. In Pesigan vs. Angeles, 11 the Court,
through Justice Ramon Aquino, ruled that "publication is necessary to apprise the public of the contents of [penal]
regulations and make the said penalties binding on the persons affected thereby. " The cogency of this holding is
apparently recognized by respondent officials considering the manifestation in their comment that "the government, as a
matter of policy, refrains from prosecuting violations of criminal laws until the same shall have been published in the
Official Gazette or in some other publication, even though some criminal laws provide that they shall take effect
immediately.

WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all unpublished presidential
issuances which are of general application, and unless so published, they shall have no binding force and effect.

SO ORDERED.

Separate Opinions

FERNANDO, C.J., concurring (with qualification):

9
There is on the whole acceptance on my part of the views expressed in the ably written opinion of Justice Escolin. I am
unable, however, to concur insofar as it would unqualifiedly impose the requirement of publication in the Official Gazette
for unpublished "presidential issuances" to have binding force and effect.

I shall explain why.

1. It is of course true that without the requisite publication, a due process question would arise if made to apply adversely
to a party who is not even aware of the existence of any legislative or executive act having the force and effect of law. My
point is that such publication required need not be confined to the Official Gazette. From the pragmatic standpoint, there is
an advantage to be gained. It conduces to certainty. That is too be admitted. It does not follow, however, that failure to do
so would in all cases and under all circumstances result in a statute, presidential decree or any other executive act of the
same category being bereft of any binding force and effect. To so hold would, for me, raise a constitutional question. Such
a pronouncement would lend itself to the interpretation that such a legislative or presidential act is bereft of the attribute of
effectivity unless published in the Official Gazette. There is no such requirement in the Constitution as Justice Plana so
aptly pointed out. It is true that what is decided now applies only to past "presidential issuances". Nonetheless, this
clarification is, to my mind, needed to avoid any possible misconception as to what is required for any statute or
presidential act to be impressed with binding force or effectivity.

2. It is quite understandable then why I concur in the separate opinion of Justice Plana. Its first paragraph sets forth what
to me is the constitutional doctrine applicable to this case. Thus: "The Philippine Constitution does not require the
publication of laws as a prerequisite for their effectivity, unlike some Constitutions elsewhere. It may be said though that
the guarantee of due process requires notice of laws to affected Parties before they can be bound thereby; but such
notice is not necessarily by publication in the Official Gazette. The due process clause is not that precise. 1 I am likewise
in agreement with its closing paragraph: "In fine, I concur in the majority decision to the extent that it requires notice
before laws become effective, for no person should be bound by a law without notice. This is elementary fairness.
However, I beg to disagree insofar as it holds that such notice shall be by publication in the Official Gazette. 2

3. It suffices, as was stated by Judge Learned Hand, that law as the command of the government "must be ascertainable
in some form if it is to be enforced at all. 3 It would indeed be to reduce it to the level of mere futility, as pointed out by
Justice Cardozo, "if it is unknown and unknowable. 4 Publication, to repeat, is thus essential. What I am not prepared to
subscribe to is the doctrine that it must be in the Official Gazette. To be sure once published therein there is the
ascertainable mode of determining the exact date of its effectivity. Still for me that does not dispose of the question of
what is the jural effect of past presidential decrees or executive acts not so published. For prior thereto, it could be that
parties aware of their existence could have conducted themselves in accordance with their provisions. If no legal
consequences could attach due to lack of publication in the Official Gazette, then serious problems could arise. Previous
transactions based on such "Presidential Issuances" could be open to question. Matters deemed settled could still be
inquired into. I am not prepared to hold that such an effect is contemplated by our decision. Where such presidential
decree or executive act is made the basis of a criminal prosecution, then, of course, its ex post facto character becomes
evident. 5 In civil cases though, retroactivity as such is not conclusive on the due process aspect. There must still be a
showing of arbitrariness. Moreover, where the challenged presidential decree or executive act was issued under the
police power, the non-impairment clause of the Constitution may not always be successfully invoked. There must still be
that process of balancing to determine whether or not it could in such a case be tainted by infirmity. 6 In traditional
terminology, there could arise then a question of unconstitutional application. That is as far as it goes.

4. Let me make therefore that my qualified concurrence goes no further than to affirm that publication is essential to the
effectivity of a legislative or executive act of a general application. I am not in agreement with the view that such
publication must be in the Official Gazette. The Civil Code itself in its Article 2 expressly recognizes that the rule as to
laws taking effect after fifteen days following the completion of their publication in the Official Gazette is subject to this
exception, "unless it is otherwise provided." Moreover, the Civil Code is itself only a legislative enactment, Republic Act
No. 386. It does not and cannot have the juridical force of a constitutional command. A later legislative or executive act
which has the force and effect of law can legally provide for a different rule.

5. Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that presidential decrees and
executive acts not thus previously published in the Official Gazette would be devoid of any legal character. That would be,
in my opinion, to go too far. It may be fraught, as earlier noted, with undesirable consequences. I find myself therefore
unable to yield assent to such a pronouncement.

I am authorized to state that Justices Makasiar, Abad Santos, Cuevas, and Alampay concur in this separate opinion.

10
Makasiar, Abad Santos, Cuevas and Alampay, JJ., concur.

TEEHANKEE, J., concurring:

I concur with the main opinion of Mr. Justice Escolin and the concurring opinion of Mme. Justice Herrera. The Rule of Law
connotes a body of norms and laws published and ascertainable and of equal application to all similarly circumstances
and not subject to arbitrary change but only under certain set procedures. The Court has consistently stressed that "it is
an elementary rule of fair play and justice that a reasonable opportunity to be informed must be afforded to the people
who are commanded to obey before they can be punished for its violation, 1 citing the settled principle based on due
process enunciated in earlier cases that "before the public is bound by its contents, especially its penal provisions, a law,
regulation or circular must first be published and the people officially and specially informed of said contents and its
penalties.

Without official publication in the Official Gazette as required by Article 2 of the Civil Code and the Revised Administrative
Code, there would be no basis nor justification for the corollary rule of Article 3 of the Civil Code (based on constructive
notice that the provisions of the law are ascertainable from the public and official repository where they are duly
published) that "Ignorance of the law excuses no one from compliance therewith.

Respondents' contention based on a misreading of Article 2 of the Civil Code that "only laws which are silent as to their
effectivity [date] need be published in the Official Gazette for their effectivity" is manifestly untenable. The plain text and
meaning of the Civil Code is that "laws shall take effect after fifteen days following the completion of their publication in the
Official Gazette, unless it is otherwise provided, " i.e. a different effectivity date is provided by the law itself. This proviso
perforce refers to a law that has been duly published pursuant to the basic constitutional requirements of due process.
The best example of this is the Civil Code itself: the same Article 2 provides otherwise that it "shall take effect [only] one
year [not 15 days] after such publication. 2 To sustain respondents' misreading that "most laws or decrees specify the date
of their effectivity and for this reason, publication in the Official Gazette is not necessary for their effectivity 3 would be to
nullify and render nugatory the Civil Code's indispensable and essential requirement of prior publication in the Official
Gazette by the simple expedient of providing for immediate effectivity or an earlier effectivity date in the law
itself before the completion of 15 days following its publication which is the period generally fixed by the Civil Code for its
proper dissemination.

MELENCIO-HERRERA, J., concurring:

I agree. There cannot be any question but that even if a decree provides for a date of effectivity, it has to be published.
What I would like to state in connection with that proposition is that when a date of effectivity is mentioned in the decree
but the decree becomes effective only fifteen (15) days after its publication in the Official Gazette, it will not mean that the
decree can have retroactive effect to the date of effectivity mentioned in the decree itself. There should be no retroactivity
if the retroactivity will run counter to constitutional rights or shall destroy vested rights.

PLANA, J., concurring (with qualification):

The Philippine Constitution does not require the publication of laws as a prerequisite for their effectivity, unlike some
Constitutions elsewhere. * It may be said though that the guarantee of due process requires notice of laws to affected
parties before they can be bound thereby; but such notice is not necessarily by publication in the Official Gazette. The due
process clause is not that precise. Neither is the publication of laws in the Official Gazette required by any statute as a
prerequisite for their effectivity, if said laws already provide for their effectivity date.

Article 2 of the Civil Code provides that "laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided " Two things may be said of this provision: Firstly, it
obviously does not apply to a law with a built-in provision as to when it will take effect. Secondly, it clearly recognizes that

11
each law may provide not only a different period for reckoning its effectivity date but also a different mode of notice. Thus,
a law may prescribe that it shall be published elsewhere than in the Official Gazette.

Commonwealth Act No. 638, in my opinion, does not support the proposition that for their effectivity, laws must be
published in the Official Gazette. The said law is simply "An Act to Provide for the Uniform Publication and Distribution of
the Official Gazette." Conformably therewith, it authorizes the publication of the Official Gazette, determines its frequency,
provides for its sale and distribution, and defines the authority of the Director of Printing in relation thereto. It also
enumerates what shall be published in the Official Gazette, among them, "important legislative acts and resolutions of a
public nature of the Congress of the Philippines" and "all executive and administrative orders and proclamations, except
such as have no general applicability." It is noteworthy that not all legislative acts are required to be published in the
Official Gazette but only "important" ones "of a public nature." Moreover, the said law does not provide that publication in
the Official Gazette is essential for the effectivity of laws. This is as it should be, for all statutes are equal and stand on the
same footing. A law, especially an earlier one of general application such as Commonwealth Act No. 638, cannot nullify or
restrict the operation of a subsequent statute that has a provision of its own as to when and how it will take effect. Only a
higher law, which is the Constitution, can assume that role.

In fine, I concur in the majority decision to the extent that it requires notice before laws become effective, for no person
should be bound by a law without notice. This is elementary fairness. However, I beg to disagree insofar as it holds that
such notice shall be by publication in the Official Gazette.

Cuevas and Alampay, JJ., concur.

GUTIERREZ, Jr., J., concurring:

I concur insofar as publication is necessary but reserve my vote as to the necessity of such publication being in the
Official Gazette.

DE LA FUENTE, J., concurring:

I concur insofar as the opinion declares the unpublished decrees and issuances of a public nature or general applicability
ineffective, until due publication thereof.

Separate Opinions

FERNANDO, C.J., concurring (with qualification):

There is on the whole acceptance on my part of the views expressed in the ably written opinion of Justice Escolin. I am
unable, however, to concur insofar as it would unqualifiedly impose the requirement of publication in the Official Gazette
for unpublished "presidential issuances" to have binding force and effect.

I shall explain why.

1. It is of course true that without the requisite publication, a due process question would arise if made to apply adversely
to a party who is not even aware of the existence of any legislative or executive act having the force and effect of law. My
point is that such publication required need not be confined to the Official Gazette. From the pragmatic standpoint, there is
an advantage to be gained. It conduces to certainty. That is too be admitted. It does not follow, however, that failure to do
12
so would in all cases and under all circumstances result in a statute, presidential decree or any other executive act of the
same category being bereft of any binding force and effect. To so hold would, for me, raise a constitutional question. Such
a pronouncement would lend itself to the interpretation that such a legislative or presidential act is bereft of the attribute of
effectivity unless published in the Official Gazette. There is no such requirement in the Constitution as Justice Plana so
aptly pointed out. It is true that what is decided now applies only to past "presidential issuances". Nonetheless, this
clarification is, to my mind, needed to avoid any possible misconception as to what is required for any statute or
presidential act to be impressed with binding force or effectivity.

2. It is quite understandable then why I concur in the separate opinion of Justice Plana. Its first paragraph sets forth what
to me is the constitutional doctrine applicable to this case. Thus: "The Philippine Constitution does not require the
publication of laws as a prerequisite for their effectivity, unlike some Constitutions elsewhere. It may be said though that
the guarantee of due process requires notice of laws to affected Parties before they can be bound thereby; but such
notice is not necessarily by publication in the Official Gazette. The due process clause is not that precise. 1 I am likewise
in agreement with its closing paragraph: "In fine, I concur in the majority decision to the extent that it requires notice
before laws become effective, for no person should be bound by a law without notice. This is elementary fairness.
However, I beg to disagree insofar as it holds that such notice shall be by publication in the Official Gazette. 2

3. It suffices, as was stated by Judge Learned Hand, that law as the command of the government "must be ascertainable
in some form if it is to be enforced at all. 3 It would indeed be to reduce it to the level of mere futility, as pointed out by
Justice Cardozo, "if it is unknown and unknowable. 4 Publication, to repeat, is thus essential. What I am not prepared to
subscribe to is the doctrine that it must be in the Official Gazette. To be sure once published therein there is the
ascertainable mode of determining the exact date of its effectivity. Still for me that does not dispose of the question of
what is the jural effect of past presidential decrees or executive acts not so published. For prior thereto, it could be that
parties aware of their existence could have conducted themselves in accordance with their provisions. If no legal
consequences could attach due to lack of publication in the Official Gazette, then serious problems could arise. Previous
transactions based on such "Presidential Issuances" could be open to question. Matters deemed settled could still be
inquired into. I am not prepared to hold that such an effect is contemplated by our decision. Where such presidential
decree or executive act is made the basis of a criminal prosecution, then, of course, its ex post facto character becomes
evident. 5 In civil cases though, retroactivity as such is not conclusive on the due process aspect. There must still be a
showing of arbitrariness. Moreover, where the challenged presidential decree or executive act was issued under the
police power, the non-impairment clause of the Constitution may not always be successfully invoked. There must still be
that process of balancing to determine whether or not it could in such a case be tainted by infirmity. 6 In traditional
terminology, there could arise then a question of unconstitutional application. That is as far as it goes.

4. Let me make therefore that my qualified concurrence goes no further than to affirm that publication is essential to the
effectivity of a legislative or executive act of a general application. I am not in agreement with the view that such
publication must be in the Official Gazette. The Civil Code itself in its Article 2 expressly recognizes that the rule as to
laws taking effect after fifteen days following the completion of their publication in the Official Gazette is subject to this
exception, "unless it is otherwise provided." Moreover, the Civil Code is itself only a legislative enactment, Republic Act
No. 386. It does not and cannot have the juridical force of a constitutional command. A later legislative or executive act
which has the force and effect of law can legally provide for a different rule.

5. Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that presidential decrees and
executive acts not thus previously published in the Official Gazette would be devoid of any legal character. That would be,
in my opinion, to go too far. It may be fraught, as earlier noted, with undesirable consequences. I find myself therefore
unable to yield assent to such a pronouncement.

I am authorized to state that Justices Makasiar, Abad Santos, Cuevas, and Alampay concur in this separate opinion.

Makasiar, Abad Santos, Cuevas and Alampay, JJ., concur.

TEEHANKEE, J., concurring:

I concur with the main opinion of Mr. Justice Escolin and the concurring opinion of Mme. Justice Herrera. The Rule of Law
connotes a body of norms and laws published and ascertainable and of equal application to all similarly circumstances
and not subject to arbitrary change but only under certain set procedures. The Court has consistently stressed that "it is
13
an elementary rule of fair play and justice that a reasonable opportunity to be informed must be afforded to the people
who are commanded to obey before they can be punished for its violation, 1 citing the settled principle based on due
process enunciated in earlier cases that "before the public is bound by its contents, especially its penal provisions, a law,
regulation or circular must first be published and the people officially and specially informed of said contents and its
penalties.

Without official publication in the Official Gazette as required by Article 2 of the Civil Code and the Revised Administrative
Code, there would be no basis nor justification for the corollary rule of Article 3 of the Civil Code (based on constructive
notice that the provisions of the law are ascertainable from the public and official repository where they are duly
published) that "Ignorance of the law excuses no one from compliance therewith.

Respondents' contention based on a misreading of Article 2 of the Civil Code that "only laws which are silent as to their
effectivity [date] need be published in the Official Gazette for their effectivity" is manifestly untenable. The plain text and
meaning of the Civil Code is that "laws shall take effect after fifteen days following the completion of their publication in the
Official Gazette, unless it is otherwise provided, " i.e. a different effectivity date is provided by the law itself. This proviso
perforce refers to a law that has been duly published pursuant to the basic constitutional requirements of due process.
The best example of this is the Civil Code itself: the same Article 2 provides otherwise that it "shall take effect [only] one
year [not 15 days] after such publication. 2 To sustain respondents' misreading that "most laws or decrees specify the date
of their effectivity and for this reason, publication in the Official Gazette is not necessary for their effectivity 3 would be to
nullify and render nugatory the Civil Code's indispensable and essential requirement of prior publication in the Official
Gazette by the simple expedient of providing for immediate effectivity or an earlier effectivity date in the law
itself before the completion of 15 days following its publication which is the period generally fixed by the Civil Code for its
proper dissemination.

MELENCIO-HERRERA, J., concurring:

I agree. There cannot be any question but that even if a decree provides for a date of effectivity, it has to be published.
What I would like to state in connection with that proposition is that when a date of effectivity is mentioned in the decree
but the decree becomes effective only fifteen (15) days after its publication in the Official Gazette, it will not mean that the
decree can have retroactive effect to the date of effectivity mentioned in the decree itself. There should be no retroactivity
if the retroactivity will run counter to constitutional rights or shall destroy vested rights.

PLANA, J., concurring (with qualification):

The Philippine Constitution does not require the publication of laws as a prerequisite for their effectivity, unlike some
Constitutions elsewhere. * It may be said though that the guarantee of due process requires notice of laws to affected
parties before they can be bound thereby; but such notice is not necessarily by publication in the Official Gazette. The due
process clause is not that precise. Neither is the publication of laws in the Official Gazette required by any statute as a
prerequisite for their effectivity, if said laws already provide for their effectivity date.

Article 2 of the Civil Code provides that "laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided " Two things may be said of this provision: Firstly, it
obviously does not apply to a law with a built-in provision as to when it will take effect. Secondly, it clearly recognizes that
each law may provide not only a different period for reckoning its effectivity date but also a different mode of notice. Thus,
a law may prescribe that it shall be published elsewhere than in the Official Gazette.

Commonwealth Act No. 638, in my opinion, does not support the proposition that for their effectivity, laws must be
published in the Official Gazette. The said law is simply "An Act to Provide for the Uniform Publication and Distribution of
the Official Gazette." Conformably therewith, it authorizes the publication of the Official Gazette, determines its frequency,
provides for its sale and distribution, and defines the authority of the Director of Printing in relation thereto. It also
enumerates what shall be published in the Official Gazette, among them, "important legislative acts and resolutions of a
public nature of the Congress of the Philippines" and "all executive and administrative orders and proclamations, except
such as have no general applicability." It is noteworthy that not all legislative acts are required to be published in the
Official Gazette but only "important" ones "of a public nature." Moreover, the said law does not provide that publication in
14
the Official Gazette is essential for the effectivity of laws. This is as it should be, for all statutes are equal and stand on the
same footing. A law, especially an earlier one of general application such as Commonwealth Act No. 638, cannot nullify or
restrict the operation of a subsequent statute that has a provision of its own as to when and how it will take effect. Only a
higher law, which is the Constitution, can assume that role.

In fine, I concur in the majority decision to the extent that it requires notice before laws become effective, for no person
should be bound by a law without notice. This is elementary fairness. However, I beg to disagree insofar as it holds that
such notice shall be by publication in the Official Gazette.

Cuevas and Alampay, JJ., concur.

GUTIERREZ, Jr., J., concurring:

I concur insofar as publication is necessary but reserve my vote as to the necessity of such publication being in the
Official Gazette.

DE LA FUENTE, J., concurring:

I concur insofar as the opinion declares the unpublished decrees and issuances of a public nature or general applicability
ineffective, until due publication thereof.

15
3.)

G.R. No. L-46158 November 28, 1986

TAYUG RURAL BANK, plaintiff-appellee,

vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

Bengzon, Bengzon, Villaroman & De Vera Law Office for plaintiff-appellee.

Evangelista, Bautista & Valdehuesa Law Office for defendant-appellant.

PARAS, J.:p

Submitted on May 20, 1977 for decision by this Court is this appeal from the decision dated January 6, 1971
rendered by the Court of First Instance of Manila, Branch III in Civil Case No. 76920, the decretal portion of which
states as follows:

WHEREFORE, judgment is rendered for the plaintiff on the complaint and the defendant is ordered
to further credit the plaintiff the amounts collected as 10% penalty in the sum of P19,335.88 or up
to July 15, 1969 and to refrain from collecting the said 10% penalty on the remaining past due
loans of plaintiff with the defendant.

With respect to defendant's counterclaim, judgment is hereby rendered against the plaintiff and
the defendant is ordered to pay the Central Bank of the Philippines the outstanding balance of its
past overdue accounts in the sum of P444,809,45 plus accrued interest at the rate of 1/2 of 1 % per
annum with respect to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and 2-1/2%
per annum with respect to the promissory notes (Annexes 1-f to 1-i of the Answer). From this
amount shall be deducted the sum of P19,335.88 collected as 10% penalty.

The facts of the case based on the parties' stipulation of facts (Record on Appeal p. 67), are as follows:

Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan. During the period from
December 28, 1962 to July 30, 1963, it obtained thirteen (13) loans from Defendant-Appellant, Central Bank of the
Philippines, by way of rediscounting, at the rate of 1/2 of 1% per annum from 1962 to March 28, 1963 and
thereafter at the rate of 2-1/2% per anum. The loans, amounting to P813,000.00 as of July 30, 1963, were all
covered by corresponding promissory notes prescribing the terms and conditions of the aforesaid loans (Record
on Appea, pp. 15-53). As of July 15, 1969, the outstanding balance was P 444,809.45 (Record on Appeal, p. 56).

On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit, issued Memorandum
Circular No. DLC-8, informing all rural banks that an additional penalty interest rate of ten per cent (10%) per
annum would be assessed on all past due loans beginning January 4, 1965. Said Memorandum Circular was
actually enforced on all rural banks effective July 4, 1965.

On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of Manila, Branch III, to
recover the 10% penalty imposed by Appellant amounting to P16,874.97, as of September 27, 1968 and to restrain
Appellant from continuing the imposition of the penalty. Appellant filed a counterclaim for the outstanding
balance and overdue accounts of Appellee in the total amount of P444,809.45 plus accrued interest and penalty
at 10% per annum on the outstanding balance until full payment. (Record on Appeal, p. 13). Appellant justified
the imposition of the penalty by way of affirmative and special defenses, stating that it was legally imposed under
the provisions of Section 147 and 148 of the Rules and Regulations Governing Rural Banks promulgated by the
Monetary Board on September 5, 1958, under authority of Section 3 of Republic Act No. 720, as amended (Record
on Appeal, p. 8, Affirmative and Special Defenses Nos. 2 and 3).

16
In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim, denying Appellant's
allegations stating that if Appellee has any unpaid obligations with Appellant, it was due to the latter's fault on
account of its flexible and double standard policy in the granting of rediscounting privileges to Appellee and its
subsequent arbitrary and illegal imposition of the 10% penalty (Record on Appeal, p. 57). In its Memorandum filed
on November 11, 1970, Appellee also asserts that Appellant had no basis to impose the penalty interest
inasmuch as the promissory notes covering the loans executed by Appellee in favor of Appellants do not provide
for penalty interest rate of 10% per annum on just due loans beginning January 4, 1965 (Record on Appeal p. 96).

The lower court, in its Order dated March 3, 1970, stated that "only a legal question has been raised in the
pleadings" and upholding the stand of plaintiff Rural Bank, decided the case in its favor. (Rollo, p. 34).

Appellant appealed the decision of the trial court to the Court of Appeals, for determination of questions of facts
and of law. However, in its decision promulgated April 13, 1977, the Court of Appeals, finding no controverted
facts and taking note of the statement of the lower court in its pre-trial Order dated March 3, 1970 that only a legal
question has been raised in the pleadings, (Record on Appeal, p. 61), ruled that the resolution of the appeal will
solely depend on the legal issue of whether or not the Monetary Board had authority to authorize Appellant
Central Bank to impose a penalty rate of 10% per annum on past due loans of rural banks which had failed to pay
their accounts on time and ordered the certification of this case to this Court for proper determination (Rollo, pp.
34-35).

On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p. 36). In the resolution of May
20, 1977, the First Division of this Court, ordered the case docketed and as already stated declared the same
submitted for decision (Rollo, p. 38).

In its Brief, Appellant assigns the following errors:

I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND THE REACH OF

THE MONETARY BOARD TO METE OUT PENALTIES ON PAST DUE LOANS OF
RURAL BANKS ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED IN
THE PROMISSORY NOTES.

II. THE LOWER COURT ERRED IN HOLDING THAT THE IMPOSITION OF THE
PENALTY IS AN IMPAIRMENT OF THE OBLIGATION OF CONTRACT WITHOUT
DUE PROCESS.

III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT AGAINST PLAINTIFF
FOR 10% COST OF COLLECTION OF THE PROMISSORY NOTE AS PROVIDED
THEREIN.

It is undisputed that no penal clause has been included in the promissory notes. For this reason, the trial court is
of the view that Memorandum Circular DLC-8 issued on December 23, 1964 prescribing retroactive effect on all
past due loans, impairs the obligation of contract and deprives the plaintiff of its property without due process of
law. (Record on Appel, p. 40).

On the other hand appellant without opposing appellee's right against impairment of contracts, contends that
when the promissory notes were signed by appellee, it was chargeable with knowledge of Sections 147 and 148
of the rules and regulations authorizing the Central Bank to impose additional reasonable penalties, which
became part of the agreement. (ibid).

Accordingly, the issue is reduced to the sole question as to whether or not the Central Bank can validly impose
the 10% penalty on Appellee's past overdue loans beginning July 4, 1965, by virtue of Memorandum Circular No.
DLC-8 dated December 23, 1964.

The answer is in the negative.

Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of Loans and Credit on
December 23, 1964, reads as follows:

17
 Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964, and in consonance
with Section 147 and 148 of the Rules and Regulations Governing Rural Banks concerning the
responsibility of a rural bank to remit immediately to the Central Bank payments received on
papers rediscounted with the latter including the loan value of rediscounted papers as they
mature, and to liquidate fully its maturing loan obligations with the Central Bank, personal checks,
for purposes of repayment, shall considered only after such personal checks shall have been
honored at clearing.

In addition, rural banks which shall default in their loan obligations, thus incurring past due
accounts with the Central Bank, shall be assessed an additional penalty interest rate of ten per
cent (10%) per annum on such past due accounts with the Central Bank over and above the
customary interest rate(s) at which such loans were originally secured from the Central Bank.
(Record on Appeal, p. 135).

The above-quoted Memorandum Circular was issued on the basis of Sections 147 and 148 of the Rules and
Regulations Governing Rural Banks of the Philippines approved on September 5, 1958, which provide:

Section 147. Duty of Rural Bank to turn over payment received for papers discounted or used for
collateral. — A Rural Bank receiving any payment on account of papers discounted or used for
collateral must turn the same over to the creditor bank before the close of the banking day next
following the receipt of payment, as long as the aggregate discounting on loan amount is not fully
paid, unless the Rural Bank substitutes the same with another eligible paper with at least the
same or earlier maturity and the same or greater value.

A Rural Bank failing to comply with the provisions of the preceding paragraph shall ipso facto
lose its right to the rediscounting or loan period, without prejudice to the Central Bank imposing
additional reasonable penalties, including curtailment or withdrawal of financial assistance.

Sec. 148. Default and other violations of obligation by Rural Bank, effect. — A Rural Bank
becomes in default upon the expiration of the maturity period of its note, or that of the papers
discounted or used as collateral, without the necessity of demand.

A Rural Bank incurring default, or in any other manner, violating any of the stipulations in its note,
shall suffer the consequences provided in the second paragraph of the preceding section.
(Record on Appeal, p. 136.)

The "Rules and Regulations Governing Rural Banks" was published in the Official Gazette, 55 O.G., on June 13,
1959, pp. 5186-5289. It is by virtue of these same Rules that Rural Banks re-discount their loan papers with the
Central Bank at 2-1/2% interest per annum and in turn lend the money to the public at 12% interest per annum
(Defendant's Reply to Plaintiff's Memorandum, Record on Appeal, p. 130).

Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that the Monetary Board has
adopted the set of Rules and Regulations Governing Rural Banks. It reads:

SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines
shall formulate the necessary rules and regulations governing the establishment and operatives
of Rural Banks for the purpose of providing adequate credit facilities to small farmers and
merchants, or to cooperatives of such farmers or merchants and to supervise the operation of
such banks.

The specific provision under the law claimed as basis for Sections 147 and 148 of the Rules and Regulations
Governing Rural Banks, that is, on Appellant's authority to extend loans to Rural Banks by way of rediscounting
is Section 13 of R.A. 720, as amended, which provides:

SEC. 13. In an emergency or when a financial crisis is imminent the Central Bank may give a loan
to any Rural Bank against assets of the Rural Bank which may be considered acceptable by a
concurrent vote of at least, five members of the Monetary Board.

18
 In normal times, the Central Bank may re-discount against papers evidencing a loan granted by a
Rural Bank to any of its customers which can be liquefied within a period of two hundred and
seventy days: PROVIDED, HOWEVER, That for the purpose of implementing a nationwide program
of agricultural and industrial development, Rural Banks are hereby authorized under such terms
and conditions as the Central Bank shall prescribe to borrow on a medium or long term basis,
funds that the Central Bank or any other government financing institutions shall borrow from the
International Bank for Reconstruction and Development or other international or foreign lending
institutions for the specific purpose of financing the above stated agricultural and industrial
program. Repayment of loans obtained by the Central Bank of the Philippines or any other
government financing institution from said foreign lending institutions under this section shall be
guaranteed by the Republic of the Philippines.

As to the supervising authority of the Monetary Board of the Central Bank over Rural Banks, the same is spelled-
out under Section 10 of R.A. 720, as follows:

SEC. 10. The power to supervise the operation of any Rural Bank by the Monetary Board of the
Central Bank as herein indicated, shall consist in placing limits to the maximum credit allowed
any individual borrower; in prescribing the interest rate; in determining the loan period and loan
procedure; in indicating the manner in which technical assistance shall be extended to Rural
Banks; in imposing a uniform accounting system and manner of keeping the accounts and
records of the Rural Banks; in undertaking regular credit examination of the Rural Banks: in
instituting periodic surveys of loan and lending procedures, audits, test check of cash and other
transactions of the Rural Banks; in conducting training courses for personnel of Rural Banks;
and, in general in supervising the business operation of the Rural Banks.

Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other provision of R.A. 720 for
that matter, is the monetary Board authorized to mete out on rural banks an additional penalty rate on their past
due accounts with Appellant. As correctly stated by the trial court, while the Monetary Board possesses broad
supervisory powers, nonetheless, the retroactive imposition of administrative penalties cannot be taken as a
measure supervisory in character. (Record on Appeal, p. 141).

Administrative rules and regulations have the force and effect of law (Valerio v. Hon. Secretary of Agriculture and
Natural Resources, 7 SCRA 719; Commissioner of Civil Service v. Cruz, 15 SCRA 638; R.B. Industrial
Development Company, Ltd. v. Enage, 24 SCRA 365; Director of Forestry v. Munoz, 23 SCRA 1183; Gonzalo Sy v.
Central Bank of the Philippines, 70 SCRA 570).

There are, however, limitations to the rule-making power of administrative agencies. A rule shaped out by
jurisprudence is that when Congress authorizes promulgation of administrative rules and regulations to
implement given legislation, all that is required is that the regulation be not in contradiction with it, but conform
to the standards that the law prescribes (Director of Forestry v. Munoz, 23 SCRA 1183). The rule delineating the
extent of the binding force to be given to administrative rules and regulations was explained by the Court
in Teoxon v. Member of the Board of Administrators (33 SCRA 588), thus: "The recognition of the power of
administrative officials to promulgate rules in the implementation of the statute, as necessarily limited to what is
provided for in the legislative enactment, may be found as early as 1908 in the case of United States v.
Barrias (11 Phil. 327) in 1914 U.S. v. Tupasi Molina (29 Phil. 119), in 1936 People v. Santos (63 Phil. 300), in
1951 Chinese Flour Importers Ass. v. Price Stabilization Board (89 Phil. 439), and in 1962 Victorias Milling Co.,
Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that "A rule is binding on the
courts so long as the procedure fixed for its promulgation is followed and its scope is within the statute granted
by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom ...."
On the other hand, "administrative interpretation of the law is at best merely advisory, for it is the courts that
finally determine what the law means." Indeed, it cannot be otherwise as the Constitution limits the authority of
the President, in whom all executive power resides, to take care that the laws be faithfully executed. No lesser
administrative, executive office, or agency then can, contrary to the express language of the Constitution, assert
for itself a more extensive prerogative. Necessarily, it is bound to observe the constitutional mandate. There
must be strict compliance with the legislative enactment. The rule has prevailed over the years, the latest
restatement of which was made by the Court in the case of Bautista v. Junio (L-50908, January 31, 1984, 127
SCRA 342).

19
In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law
prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People v.
Lim, 108 Phil. 1091). Rules that subvert the statute cannot be sanctioned (University of St. Tomas v. Board of Tax
Appeals, 93 Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials
who can trace their competence to act to the fundamental law itself, a public official must locate in the statute
relied upon a grant of power before he can exercise it. Department zeal may not be permitted to outrun the
authority conferred by statute (Radio Communications of the Philippines, Inc. v. Santiago, L-29236, August 21,
1974, 58 SCRA 493).

When promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law,
the rules and regulations partake of the nature of a statute, and compliance therewith may be enforced by a penal
sanction provided in the law (Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555; People v.
Maceren, L-32166, October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276, September 28, 1984, 132 SCRA
267). Conversely, the rule is likewise clear. Hence an administrative agency cannot impose a penalty not so
provided in the law authorizing the promulgation of the rules and regulations, much less one that is applied
retroactively.

The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised December 23, 1964 to include the
penal clause, as follows:

In the event that this note becomes past due, the undersigned shall pay a penalty at the rate of
_____ per cent ( ) per annum on such past due account over and above the interest rate at which
such loan was originally secured from the Central Bank.

Such clause was not a part of the promissory notes executed by Appellee to secure its loans. Appellant inserted
the clause in the revised DLC Form No. 11 to make it a part of the contractual obligation of rural banks securing
loans from the Central Bank, after December 23, 1964. Thus, while there is now a basis for the imposition of the
10% penalty rate on overdue accounts of rural banks, there was none during the period that Appellee contracted
its loans from Appellant, the last of which loan was on July 30, 1963. Surely, the rule cannot be given retroactive
effect.

Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1, 1970, revoked its
Resolution No. 1813, dated December 18, 1964 imposing the questioned 10% per annum penalty rate on past due
loans of rural banks and amended sub-paragraph (a), Section 10 of the existing guidelines governing rural banks'
applications for a loan or rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As stated by the trial court,
this move on the part of the Monetary Board clearly shows an admission that it has no power to impose the 10%
penalty interest through its rules and regulations but only through the terms and conditions of the promissory
notes executed by the borrowing rural banks. Appellant evidently hoped that the defect could be adequately
accomplished by the revision of DLC Form No. 11.

The contention that Appellant is entitled to the 10% cost of collection in case of suit and should therefore, have
been awarded the same by the court below, is well taken. It is provided in all the promissory notes signed by
Appellee that in case of suit for the collection of the amount of the note or any unpaid balance thereof, the
Appellee Rural Bank shall pay the Central Bank of the Philippines a sum equivalent to ten (10%) per cent of the
amount unpaid not in any case less than five hundred (P500.00) pesos as attorney's fees and costs of suit and
collection. Thus, Appellee cannot be allowed to come to Court seeking redress for an wrong done against it and
then be allowed to renege on its corresponding obligations.

PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with modification that Appellee
Rural Bank is ordered to pay a sum equivalent to 10% of the outstanding balance of its past overdue accounts,
but not in any case less than P500.00 as attorney's fees and costs of suit and collection.

SO ORDERED.

20
4.)

G.R. No. L-32116 April 2l, 1981

RURAL BANK OF CALOOCAN, INC. and JOSE O. DESIDERIO, JR., petitioners,

vs.
THE COURT OF APPEALS and MAXIMA CASTRO, respondents.

DE CASTRO, * J.:

This is a petition for review by way of certiorari of the decision 1 of the Court of Appeals in CA-G.R. No. 39760-R entitled
"Maxima Castro, plaintiff-appellee, versus Severino Valencia, et al., defendants; Rural Bank of Caloocan, Inc., Jose
Desiderio, Jr. and Arsenio Reyes, defendants-appellants," which affirmed in toto the decision of the Court of First Instance
of Manila in favor of plaintiff- appellee, the herein private respondent Maxima Castro.

On December 7, 1959, respondent Maxima Castro, accompanied by Severino Valencia, went to the Rural Bank of
Caloocan to apply for an industrial loan. It was Severino Valencia who arranged everything about the loan with the bank
and who supplied to the latter the personal data required for Castro's loan application. On December 11, 1959, after the
bank approved the loan for the amount of P3,000.00, Castro, accompanied by the Valencia spouses, signed a promissory
note corresponding to her loan in favor of the bank.

On the same day, December 11, 1959, the Valencia spouses obtained from the bank an equal amount of loan for
P3,000.00. They signed a promissory note (Exhibit "2") corresponding to their loan in favor of the bank and had Castro
affixed thereon her signature as co-maker.

The two loans were secured by a real-estate mortgage (Exhibit "6") on Castro's house and lot of 150 square meters,
covered by Transfer Certificate of Title No. 7419 of the Office of the Register of Deeds of Manila.

On February 13, 1961, the sheriff of Manila, thru Acting Chief Deputy Sheriff Basilio Magsambol, sent a notice of sheriff's
sale addressed to Castro, announcing that her property covered by T.C.T. No. 7419 would be sold at public auction on
March 10, 1961 to satisfy the obligation covering the two promissory notes plus interest and attorney's fees.

Upon request by Castro and the Valencias and with conformity of the bank, the auction sale that was scheduled for March
10, 1961 was postponed for April 10, 1961. But when April 10, 1961 was subsequently declared a special holiday, the
sheriff of Manila sold the property covered by T.C.T. No. 7419 at a public auction sale that was held on April 11, 1961,
which was the next succeeding business day following the special holiday.

Castro alleged that it was only when she received the letter from the Acting Deputy Sheriff on February 13, 1961, when
she learned for the first time that the mortgage contract (Exhibit "6") which was an encumbrance on her property was for
P6.000.00 and not for P3,000.00 and that she was made to sign as co-maker of the promissory note (Exhibit "2") without
her being informed of this.

On April 4, 1961, Castro filed a suit denominated "Re: Sum of Money," against petitioners Bank and Desiderio, the
Spouses Valencia, Basilio Magsambol and Arsenio Reyes as defendants in Civil Case No. 46698 before the Court of First
Instance of Manila upon the charge, amongst others, that thru mistake on her part or fraud on the part of Valencias she
was induced to sign as co-maker of a promissory note (Exhibit "2") and to constitute a mortgage on her house and lot to
secure the questioned note. At the time of filing her complaint, respondent Castro deposited the amount of P3,383.00 with
the court a quo in full payment of her personal loan plus interest.

In her amended complaint, Castro prayed, amongst other, for the annulment as far as she is concerned of the promissory
note (Exhibit "2") and mortgage (Exhibit "6") insofar as it exceeds P3,000.00; for the discharge of her personal obligation
with the bank by reason of a deposit of P3,383.00 with the court a quo upon the filing of her complaint; for the annulment
of the foreclosure sale of her property covered by T.C.T. No. 7419 in favor of Arsenio Reyes; and for the award in her
favor of attorney's fees, damages and cost.

21
In their answers, petitioners interposed counterclaims and prayed for the dismissal of said complaint, with damages,
attorney's fees and costs. 2

The pertinent facts arrived from the stipulation of facts entered into by the parties as stated by respondent Court of
Appeals are as follows:

Spawning the present litigation are the facts contained in the following stipulation of facts submitted by
the parties themselves:

1. That the capacity and addresses of all the parties in this case are admitted .

2. That the plaintiff was the registered owner of a residential house and lot located at Nos. 1268-1270
Carola Street, Sampaloc, Manila, containing an area of one hundred fifty (150) square meters, more or
less, covered by T.C.T. No. 7419 of the Office of the Register of Deeds of Manila;

3. That the signatures of the plaintiff appearing on the following documents are genuine:

a) Application for Industrial Loan with the Rural Bank of Caloocan, dated December 7, 1959 in the
amount of P3,000.00 attached as Annex A of this partial stipulation of facts;

b) Promissory Note dated December 11, 1959 signed by the plaintiff in favor of the Rural Bank of
Caloocan for the amount of P3,000.00 as per Annex B of this partial stipulation of facts;

c) Application for Industrial Loan with the Rural Bank of Caloocan, dated December 11, 1959, signed only
by the defendants, Severino Valencia and Catalina Valencia, attached as Annex C, of this partial
stipulation of facts;

d) Promissory note in favor of the Rural Bank of Caloocan, dated December 11, 1959 for the amount of
P3000.00, signed by the spouses Severino Valencia and Catalina Valencia as borrowers, and plaintiff
Maxima Castro, as a co-maker, attached as Annex D of this partial stipulation of facts;

e) Real estate mortgage dated December 11, 1959 executed by plaintiff Maxima Castro, in favor of the
Rural Bank of Caloocan, to secure the obligation of P6,000.00 attached herein as Annex E of this partial
stipulation of facts;

All the parties herein expressly reserved their right to present any evidence they may desire on the
circumstances regarding the execution of the above-mentioned documents.

4. That the sheriff of Manila, thru Acting Chief Deputy Sheriff, Basilio Magsambol, sent a notice of sheriff's
sale, address to the plaintiff, dated February 13, 1961, announcing that plaintiff's property covered by
TCT No. 7419 of the Register of Deeds of the City of Manila, would be sold at public auction on March 10,
1961 to satisfy the total obligation of P5,728.50, plus interest, attorney's fees, etc., as evidenced by the
Notice of Sheriff's Sale and Notice of Extrajudicial Auction Sale of the Mortgaged property, attached
herewith as Annexes F and F-1, respectively, of this stipulation of facts;

5. That upon the request of the plaintiff and defendants-spouses Severino Valencia and Catalina
Valencia, and with the conformity of the Rural Bank of Caloocan, the Sheriff of Manila postponed the
auction sale scheduled for March 10, 1961 for thirty (30) days and the sheriff re-set the auction sale for
April 10, 1961;

6. That April 10, 1961 was declared a special public holiday; (Note: No. 7 is omitted upon agreement of
the parties.)

8. That on April 11, 1961, the Sheriff of Manila, sold at public auction plaintiff's property covered by T.C.T.
No. 7419 and defendant, Arsenio Reyes, was the highest bidder and the corresponding certificate of sale
was issued to him as per Annex G of this partial stipulation of facts;

22
 9. That on April 16, 1962, the defendant Arsenio Reyes, executed an Affidavit of Consolidation of
Ownership, a copy of which is hereto attached as Annex H of this partial stipulation of facts;

10. That on May 9, 1962, the Rural Bank of Caloocan Incorporated executed the final deed of sale in
favor of the defendant, Arsenio Reyes, in the amount of P7,000.00, a copy of which is attached as Annex
I of this partial stipulation of facts;

11. That the Register of Deeds of the City of Manila issued the Transfer Certificate of Title No. 67297 in
favor of the defendant, Arsenio Reyes, in lieu of Transfer Certificate of Title No. 7419 which was in the
name of plaintiff, Maxima Castro, which was cancelled;

12. That after defendant, Arsenio Reyes, had consolidated his title to the property as per T.C.T. No.
67299, plaintiff filed a notice of lis pendens with the Register of Deeds of Manila and the same was
annotated in the back of T.C.T. No. 67299 as per Annex J of this partial stipulation of facts; and

13. That the parties hereby reserved their rights to present additional evidence on matters not covered by
this partial stipulation of facts.

WHEREFORE, it is respectfully prayed that the foregoing partial stipulation of facts be approved and
admitted by this Honorable Court.

As for the evidence presented during the trial, We quote from the decision of the Court of Appeals the statement thereof,
as follows:

In addition to the foregoing stipulation of facts, plaintiff claims she is a 70-year old widow who cannot read
and write the English language; that she can speak the Pampango dialect only; that she has only finished
second grade (t.s.n., p. 4, December 11, 1964); that in December 1959, she needed money in the
amount of P3,000.00 to invest in the business of the defendant spouses Valencia, who accompanied her
to the defendant bank for the purpose of securing a loan of P3,000.00; that while at the defendant bank,
an employee handed to her several forms already prepared which she was asked to sign on the places
indicated, with no one explaining to her the nature and contents of the documents; that she did not even
receive a copy thereof; that she was given a check in the amount of P2,882.85 which she delivered to
defendant spouses; that sometime in February 1961, she received a letter from the Acting Deputy Sheriff
of Manila, regarding the extrajudicial foreclosure sale of her property; that it was then when she learned
for the first time that the mortgage indebtedness secured by the mortgage on her property was P6,000.00
and not P3,000.00; that upon investigation of her lawyer, it was found that the papers she was made to
sign were:

(a) Application for a loan of P3,000.00 dated December 7, 1959 (Exh. B-1 and Exh. 1);

(b) Promissory note dated December 11, 1959 for the said loan of P3,000.00 (Exh- B-2);

(c) Promissory note dated December 11, 1959 for P3,000.00 with the defendants Valencia spouses as
borrowers and appellee as co-maker (Exh. B-4 or Exh. 2).

The auction sale set for March 10, 1961 was postponed co April 10, 1961 upon the request of defendant
spouses Valencia who needed more time within which to pay their loan of P3,000.00 with the defendant
bank; plaintiff claims that when she filed the complaint she deposited with the Clerk of Court the sum of
P3,383.00 in full payment of her loan of P3,000.00 with the defendant bank, plus interest at the rate of
12% per annum up to April 3, 1961 (Exh. D).

As additional evidence for the defendant bank, its manager declared that sometime in December, 1959,
plaintiff was brought to the Office of the Bank by an employee- (t.s.n., p 4, January 27, 1966). She wept,
there to inquire if she could get a loan from the bank. The claims he asked the amount and the purpose of
the loan and the security to he given and plaintiff said she would need P3.000.00 to be invested in a
drugstore in which she was a partner (t.s.n., p. 811. She offered as security for the loan her lot and house
at Carola St., Sampaloc, Manila, which was promptly investigated by the defendant bank's inspector.

23
 Then a few days later, plaintiff came back to the bank with the wife of defendant Valencia A date was
allegedly set for plaintiff and the defendant spouses for the processing of their application, but on the day
fixed, plaintiff came without the defendant spouses. She signed the application and the other papers
pertinent to the loan after she was interviewed by the manager of the defendant. After the application of
plaintiff was made, defendant spouses had their application for a loan also prepared and signed (see Exh.
13). In his interview of plaintiff and defendant spouses, the manager of the bank was able to gather that
plaintiff was in joint venture with the defendant spouses wherein she agreed to invest P3,000.00 as
additional capital in the laboratory owned by said spouses (t.s.n., pp. 16-17) 3

The Court of Appeals, upon evaluation of the evidence, affirmed in toto the decision of the Court of First Instance of
Manila, the dispositive portion of which reads:

FOR ALL THE FOREGOING CONSIDERATIONS, the Court renders judgment and:

(1) Declares that the promissory note, Exhibit '2', is invalid as against plaintiff herein;

(2) Declares that the contract of mortgage, Exhibit '6', is null and void, in so far as the amount thereof
exceeds the sum of P3,000.00 representing the principal obligation of plaintiff, plus the interest thereon at
12% per annum;

(3) Annuls the extrajudicial foreclosure sale at public auction of the mortgaged property held on April 11,
1961, as well as all the process and actuations made in pursuance of or in implementation thereto;

(4) Holds that the total unpaid obligation of plaintiff to defendant Rural Bank of Caloocan, Inc., is only the
amount of P3,000.00, plus the interest thereon at 12% per annum, as of April 3, 1961, and orders that
plaintiff's deposit of P3,383.00 in the Office of the Clerk of Court be applied to the payment thereof;

(5) Orders defendant Rural Bank of Caloocan, Inc. to return to defendant Arsenio Reyes the purchase
price the latter paid for the mortgaged property at the public auction, as well as reimburse him of all the
expenses he has incurred relative to the sale thereof;

(6) Orders defendants spouses Severino D. Valencia and Catalina Valencia to pay defendant Rural Bank
of Caloocan, Inc. the amount of P3,000.00 plus the corresponding 12% interest thereon per annum from
December 11, 1960 until fully paid; and

Orders defendants Rural Bank of Caloocan, Inc., Jose Desiderio, Jr. and spouses Severino D. Valencia
and Catalina Valencia to pay plaintiff, jointly and severally, the sum of P600.00 by way of attorney's fees,
as well as costs.

In view of the conclusion that the court has thus reached, the counterclaims of defendant Rural Bank of
Caloocan, Inc., Jose Desiderio, Jr. and Arsenio Reyes are hereby dismissed, as a corollary

The Court further denies the motion of defendant Arsenio Reyes for an Order requiring Maxima Castro to
deposit rentals filed on November 16, 1963, resolution of which was held in abeyance pending final
determination of the case on the merits, also as a consequence of the conclusion aforesaid. 4

Petitioners Bank and Jose Desiderio moved for the reconsideration 5 of respondent court's decision. The motion having
been denied, 6 they now come before this Court in the instant petition, with the following Assignment of Errors, to wit:

THE COURT OF APPEALS ERRED IN UPHOLDING THE PARTIAL ANNULMENT OF THE

PROMISSORY NOTE, EXHIBIT 2, AND THE MORTGAGE, EXHIBIT 6, INSOFAR AS THEY AFFECT
RESPONDENT MAXIMA CASTRO VIS-A-VIS PETITIONER BANK DESPITE THE TOTAL ABSENCE OF
EITHER ALLEGATION IN THE COMPLAINT OR COMPETENT PROOF IN THE EVIDENCE OF ANY
FRAUD OR OTHER UNLAWFUL CONDUCT COMMITTED OR PARTICIPATED IN BY PETITIONERS
IN PROCURING THE EXECUTION OF SAID CONTRACTS FROM RESPONDENT CASTRO.
24
 II

THE COURT OF APPEALS ERRED IN IMPUTING UPON AND CONSIDERING PREJUDICIALLY

AGAINST PETITIONERS, AS BASIS FOR THE PARTIAL ANNULMENT OF THE CONTRACTS
AFORESAID ITS FINDING OF FRAUD PERPETRATED BY THE VALENCIA SPOUSES UPON
RESPONDENT CASTRO IN UTTER VIOLATION OF THE RES INTER ALIOS ACTA RULE.

III

THE COURT OF APPEAL ERRED IN NOT HOLDING THAT, UNDER THE FACTS FOUND BY IT,
RESPONDENT CASTRO IS UNDER ESTOPPEL TO IMPUGN THE REGULARITY AND VALIDITY OF
HER QUESTIONED TRANSACTION WITH PETITIONER BANK.

IV

THE COURT OF APPEALS ERRED IN NOT FINDING THAT, BETWEEN PETITIONERS AND
RESPONDENT CASTRO, THE LATTER SHOULD SUFFER THE CONSEQUENCES OF THE FRAUD
PERPETRATED BY THE VALENCIA SPOUSES, IN AS MUCH AS IT WAS THRU RESPONDENT
CASTRO'S NEGLIGENCE OR ACQUIESCENSE IF NOT ACTUAL CONNIVANCE THAT THE
PERPETRATION OF SAID FRAUD WAS MADE POSSIBLE.

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF THE DEPOSIT BY

RESPONDENT CASTRO OF P3,383.00 WITH THE COURT BELOW AS A TENDER AND
CONSIGNATION OF PAYMENT SUFFICIENT TO DISCHARGE SAID RESPONDENT FROM HER
OBLIGATION WITH PETITIONER BANK.

VI

THE COURT OF APPEALS ERRED IN NOT DECLARING AS VALID AND BINDING UPON
RESPONDENT CASTRO THE HOLDING OF THE SALE ON FORECLOSURE ON THE BUSINESS DAY
NEXT FOLLOWING THE ORIGINALLY SCHEDULED DATE THEREFOR WHICH WAS DECLARED A
HOLIDAY WITHOUT NECESSITY OF FURTHER NOTICE THEREOF.

The issue raised in the first three (3) assignment of errors is whether or not respondent court correctly affirmed the lower
court in declaring the promissory note (Exhibit 2) invalid insofar as they affect respondent Castro vis-a-vis petitioner bank,
and the mortgage contract (Exhibit 6) valid up to the amount of P3,000.00 only.

Respondent court declared that the consent of Castro to the promissory note (Exhibit 2) where she signed as co-maker
with the Valencias as principal borrowers and her acquiescence to the mortgage contract (Exhibit 6) where she
encumbered her property to secure the amount of P6,000.00 was obtained by fraud perpetrated on her by the Valencias
who had abused her confidence, taking advantage of her old age and ignorance of her financial need. Respondent court
added that "the mandate of fair play decrees that she should be relieved of her obligation under the contract" pursuant to
Articles 24 7 and 1332 8 of the Civil Code.

The decision in effect relieved Castro of any liability to the promissory note (Exhibit 2) and the mortgage contract (Exhibit
6) was deemed valid up to the amount of P3,000.00 only which was equivalent to her personal loan to the bank.

Petitioners argued that since the Valencias were solely declared in the decision to be responsible for the fraud against
Castro, in the light of the res inter alios acta rule, a finding of fraud perpetrated by the spouses against Castro cannot be
taken to operate prejudicially against the bank. Petitioners concluded that respondent court erred in not giving effect to the
promissory note (Exhibit 2) insofar as they affect Castro and the bank and in declaring that the mortgage contract (Exhibit
6) was valid only to the extent of Castro's personal loan of P3,000.00.

The records of the case reveal that respondent court's findings of fraud against the Valencias is well supported by
evidence. Moreover, the findings of fact by respondent court in the matter is deemed final. 9 The decision declared the
25
Valencias solely responsible for the defraudation of Castro. Petitioners' contention that the decision was silent regarding
the participation of the bank in the fraud is, therefore, correct.

We cannot agree with the contention of petitioners that the bank was defrauded by the Valencias. For one, no claim was
made on this in the lower court. For another, petitioners did not submit proof to support its contention.

At any rate, We observe that while the Valencias defrauded Castro by making her sign the promissory note (Exhibit 2) and
the mortgage contract (Exhibit 6), they also misrepresented to the bank Castro's personal qualifications in order to secure
its consent to the loan. This must be the reason which prompted the bank to contend that it was defrauded by the
Valencias. But to reiterate, We cannot agree with the contention for reasons above-mentioned. However, if the contention
deserves any consideration at all, it is in indicating the admission of petitioners that the bank committed mistake in giving
its consent to the contracts.

Thus, as a result of the fraud upon Castro and the misrepresentation to the bank inflicted by the Valencias both Castro
and the bank committed mistake in giving their consents to the contracts. In other words, substantial mistake vitiated their
consents given. For if Castro had been aware of what she signed and the bank of the true qualifications of the loan
applicants, it is evident that they would not have given their consents to the contracts.

Pursuant to Article 1342 of the Civil Code which provides:

Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation
has created substantial mistake and the same is mutual.

We cannot declare the promissory note (Exhibit 2) valid between the bank and Castro and the mortgage contract (Exhibit
6) binding on Castro beyond the amount of P3,000.00, for while the contracts may not be invalidated insofar as they affect
the bank and Castro on the ground of fraud because the bank was not a participant thereto, such may however be
invalidated on the ground of substantial mistake mutually committed by them as a consequence of the fraud and
misrepresentation inflicted by the Valencias. Thus, in the case of Hill vs. Veloso, 10 this Court declared that a contract may
be annulled on the ground of vitiated consent if deceit by a third person, even without connivance or complicity with one of
the contracting parties, resulted in mutual error on the part of the parties to the contract.

Petitioners argued that the amended complaint fails to contain even a general averment of fraud or mistake, and its
mention in the prayer is definitely not a substantial compliance with the requirement of Section 5, Rule 8 of the Rules of
Court. The records of the case, however, will show that the amended complaint contained a particular averment of fraud
against the Valencias in full compliance with the provision of the Rules of Court. Although, the amended complaint made
no mention of mistake being incurred in by the bank and Castro, such mention is not essential in order that the promissory
note (Exhibit 2) may be declared of no binding effect between them and the mortgage (Exhibit 6) valid up to the amount of
P3,000.00 only. The reason is that the mistake they mutually suffered was a mere consequence of the fraud perpetrated
by the Valencias against them. Thus, the fraud particularly averred in the complaint, having been proven, is deemed
sufficient basis for the declaration of the promissory note (Exhibit 2) invalid insofar as it affects Castro vis-a-vis the bank,
and the mortgage contract (Exhibit 6) valid only up to the amount of P3,000.00.

The second issue raised in the fourth assignment of errors is who between Castro and the bank should suffer the
consequences of the fraud perpetrated by the Valencias.

In attributing to Castro an consequences of the loss, petitioners argue that it was her negligence or acquiescence if not
her actual connivance that made the fraud possible.

Petitioners' argument utterly disregards the findings of respondent Court of Appeals wherein petitioners' negligence in the
contracts has been aptly demonstrated, to wit:

A witness for the defendant bank, Rodolfo Desiderio claims he had subjected the plaintiff-appellee to
several interviews. If this were true why is it that her age was placed at 61 instead of 70; why was she
described in the application (Exh. B-1-9) as drug manufacturer when in fact she was not; why was it
placed in the application that she has income of P20,000.00 when according to plaintiff-appellee, she his
not even given such kind of information -the true fact being that she was being paid P1.20 per picul of the
sugarcane production in her hacienda and 500 cavans on the palay production. 11

26
From the foregoing, it is evident that the bank was as much , guilty as Castro was, of negligence in giving its consent to
the contracts. It apparently relied on representations made by the Valencia spouses when it should have directly obtained
the needed data from Castro who was the acknowledged owner of the property offered as collateral. Moreover,
considering Castro's personal circumstances – her lack of education, ignorance and old age – she cannot be considered
utterly neglectful for having been defrauded. On the contrary, it is demanded of petitioners to exercise the highest order of
care and prudence in its business dealings with the Valencias considering that it is engaged in a banking business –a
business affected with public interest. It should have ascertained Castro's awareness of what she was signing or made
her understand what obligations she was assuming, considering that she was giving accommodation to, without any
consideration from the Valencia spouses.

Petitioners further argue that Castro's act of holding the Valencias as her agent led the bank to believe that they were
authorized to speak and bind her. She cannot now be permitted to deny the authority of the Valencias to act as her agent
for one who clothes another with apparent authority as her agent is not permitted to deny such authority.

The authority of the Valencias was only to follow-up Castro's loan application with the bank. They were not authorized to
borrow for her. This is apparent from the fact that Castro went to the Bank to sign the promissory note for her loan of
P3,000.00. If her act had been understood by the Bank to be a grant of an authority to the Valencia to borrow in her
behalf, it should have required a special power of attorney executed by Castro in their favor. Since the bank did not, We
can rightly assume that it did not entertain the notion, that the Valencia spouses were in any manner acting as an agent of
Castro.

When the Valencias borrowed from the Bank a personal loan of P3,000.00 evidenced by a promissory note (Exhibit 2)
and mortgaged (Exhibit 6) Castro's property to secure said loan, the Valencias acted for their own behalf. Considering
however that for the loan in which the Valencias appeared as principal borrowers, it was the property of Castro that was
being mortgaged to secure said loan, the Bank should have exercised due care and prudence by making proper inquiry if
Castro's consent to the mortgage was without any taint or defect. The possibility of her not knowing that she signed the
promissory note (Exhibit 2) as co-maker with the Valencias and that her property was mortgaged to secure the two loans
instead of her own personal loan only, in view of her personal circumstances – ignorance, lack of education and old age –
should have placed the Bank on prudent inquiry to protect its interest and that of the public it serves. With the recent
occurrence of events that have supposedly affected adversely our banking system, attributable to laxity in the conduct of
bank business by its officials, the need of extreme caution and prudence by said officials and employees in the discharge
of their functions cannot be over-emphasized.

Question is, likewise, raised as to the propriety of respondent court's decision which declared that Castro's consignation in
court of the amount of P3,383.00 was validly made. It is contended that the consignation was made without prior offer or
tender of payment to the Bank, and it therefore, not valid. In holding that there is a substantial compliance with the
provision of Article 1256 of the Civil Code, respondent court considered the fact that the Bank was holding Castro liable
for the sum of P6,000.00 plus 12% interest per annum, while the amount consigned was only P3,000.00 plus 12%
interest; that at the time of consignation, the Bank had long foreclosed the mortgage extrajudicially and the sale of the
mortgage property had already been scheduled for April 10, 1961 for non-payment of the obligation, and that despite the
fact that the Bank already knew of the deposit made by Castro because the receipt of the deposit was attached to the
record of the case, said Bank had not made any claim of such deposit, and that therefore, Castro was right in thinking that
it was futile and useless for her to make previous offer and tender of payment directly to the Bank only in the aforesaid
amount of P3,000.00 plus 12% interest. Under the foregoing circumstances, the consignation made by Castro was valid. if
not under the strict provision of the law, under the more liberal considerations of equity.

The final issue raised is the validity or invalidity of the extrajudicial foreclosure sale at public auction of the mortgaged
property that was held on April 11, 1961.

Petitioners contended that the public auction sale that was held on April 11, 1961 which was the next business day after
the scheduled date of the sale on April 10, 1961, a special public holiday, was permissible and valid pursuant to the
provisions of Section 31 of the Revised Administrative Code which ordains:

Pretermission of holiday. – Where the day, or the last day, for doing any act required or permitted by law
falls on a holiday, the act may be done on the next succeeding business day.

Respondent court ruled that the aforesaid sale is null and void, it not having been carried out in accordance with Section 9
of Act No. 3135, which provides:
27
 Section 9. – Notice shall be given by posting notices of the sale for not less than twenty days in at least
three public places of the municipality or city where the property is situated, and if such property is worth
more than four hundred pesos, such notice shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality or city.

We agree with respondent court. The pretermission of a holiday applies only "where the day, or the last day for doing any
act required or permitted by law falls on a holiday," or when the last day of a given period for doing an act falls on a
holiday. It does not apply to a day fixed by an office or officer of the government for an act to be done, as distinguished
from a period of time within which an act should be done, which may be on any day within that specified period. For
example, if a party is required by law to file his answer to a complaint within fifteen (15) days from receipt of the summons
and the last day falls on a holiday, the last day is deemed moved to the next succeeding business day. But, if the court
fixes the trial of a case on a certain day but the said date is subsequently declared a public holiday, the trial thereof is not
automatically transferred to the next succeeding business day. Since April 10, 1961 was not the day or the last day set by
law for the extrajudicial foreclosure sale, nor the last day of a given period but a date fixed by the deputy sheriff, the
aforesaid sale cannot legally be made on the next succeeding business day without the notices of the sale on that day
being posted as prescribed in Section 9, Act No. 3135.

WHEREFORE, finding no reversible error in the judgment under review, We affirm the same in toto. No pronouncement
as to cost.

SO ORDERED.

28
5.)

In re the complaint against Attorney ANACLETO FILART.

Acting Attorney-General Feria for the Government.

The respondent in his own behalf.

MALCOLM, J.:

These proceedings were instituted at the instance of thirty-seven residents of Asingan, Pangasinan, who filed a complaint
against attorney Anacleto Filart for malpractice, alleging in substance:

1. That while Filart was deputy fiscal of Pangasinan he received of them the sum of P111 as fees for drafting a
memorandum in connection with Registration Case No. 3, Record No. 8540;

2. That Filart was guilty of fraud and negligence in prosecuting the appeal to the Supreme Court, he having practically
abandoned the case.

In connection with point No. 1, even admitting that Filart while deputy fiscal received such a sum of complainants, which
respondent denies, Filart seems to have had a legal right to receive compensation as an attorney, the office of deputy
provincial fiscal not being specifically included in section 36 of the Code of Civil Procedure as amended by Act No. 1702,
as an official who shall not engage in private practice. It is also to be noted that Filart did not take up the case of his own
volition but was ordered by the court to defend the rights of petitioners because the attorney they formerly retained was
almost always in a state of intoxication.

In connection with point No. 2, the following facts are important:

1. That having resigned as deputy fiscal, and having engaged in the practice of law, complainants asked Filart to
prosecute the appeal of their case;

2. That Filart received from complainants sums of money, P780 according to complainants, and P160 according to
respondent;

3. That the complainants were driven from their lands, and their houses were destroyed, by order of the court.

The facts which support the allegation of fraud and negligence on the part of respondent are:

1. The lapse of fifty-one days between the receipt of notice of denial of motion for a new trial (March 7, 1917) until the
filing of the bill of exceptions (April 27, 1917) when the statutory period is only thirty days (Act No. 2347), sec. 26);

2. Failure to perfect a satisfactory bill of exceptions after repeated amendments and re-amendments;

3. Failure to file a bond in order to prevent execution;

4. Assurances made by respondent that all was right.

1. This is explained by the fact that the record was not in the clerk's office. The date when the answers to Filart's
questions from the Land Registration Office reached Filart, which were to be made a part of the bill of exceptions, does
not appear in the record. Filart also alleges he made an oral motion to extend the period fixed by law for the filing of the
bill of exceptions, but that motion appears to have been overlooked by the judge;

2. The parties are agreed that the bills of exceptions are voluminous. Respondent further pleads pressure of work in his
law office;

3. Respondent says that he believed execution would not be valid until after certiorari proceedings were decided;

29
4. The exact nature of the assurances do not clearly appear in the record — possibly they are no more than what an
attorney fairly confident of success would make to a client.

The Acting Attorney-General believes that the facts are not sufficient to support the complaint, and recommends dismissal
of the case. We agree to the extent that such gross misconduct or negligence has not been shown as warrants
disbarment or suspension pursuant to sections 21 and 22 of the Code of Civil Procedure. "That part of the profession,"
said Lord Mansfield in Pitt vs. Yalden, ([1767], 4 Burr., 2060), "which is carried on by attorneys is liberal and reputable, as
well as useful to the public, when they conduct themselves with honor and integrity; and they ought to be protected when
they act to the best of their skill and knowledge. But every man is liable to error; and I should be very sorry that it should
be taken for granted that an attorney is answerable for every error or mistake. . . . A counsel may mistake as well as an
attorney. . . . Yet no one will say that a counsel who has been mistaken shall be charged. . . . Not only counsel but judges
may differ, or doubt, or take time to consider. Therefore, an attorney ought not to be liable in case of reasonable doubt."
"No attorney," said Chief Justice Abbott, "is bound to know all the law; God forbid that it should be imagined that an
attorney or a counsel, or even a judge, is bound to know all the law." (Montorious vs. Jeffreys, 2 Car. & P., 113.)

The court, having in mind the many appeals which have been dismissed because of the lack of diligence of counsel,
cannot let the occurrence pass without expressing a strong disapproval of such criminal carelessness. While we would not
wish to assume a harsh and uncompromising attitude towards attorneys-at-law, we would wish for them to know that by
indulging in such unprofessional tactics they become unworthy of the trust which the law reposes in them. The lack of due
care is a breach of the attorney's undertaking with his client, and is indicative of a disregard of the attorney's duties to the
court. We bring to the notice of clients whose rights have been prejudiced by the failure or by the delay of an attorney in
preparing or filing pleadings necessary in the proper conduct of a cause, and in taking such steps as may be required in
the progress of the case, that the client who has suffered damages as the result of his attorney's negligence or
misconduct may recover therefor. In Drais vs. Hoggan ([1875], 50 Cal., 121), although many other cases might be cited, it
was held that "if a judgment is obtained against a party upon a complaint which is radically defective, and he desires to
appeal, and procures bondsmen, but his attorney neglects to do so until the time for appeal expires, the attorney is guilty
of gross negligence, and is liable for the loss sustained by the client."

Without, therefore, desiring especially to overemphasize the dereliction of Attorney Anacleto Filart for, sad to relate, he is
only one of a class, it does become our solemn duty to reprimand him for carelessness and misconduct in attending to the
cause of poor clients. Let a copy of this order be furnished to the respondent for his information with a warning that a more
severe punishment will be meted out to him in case of a repetition of similar acts and omissions; and let a copy hereof be
filed with his personal papers in this court. So ordered.

Arellano, C.J., Torres, Johnson, Araullo, Street and Avanceña, JJ., concur.

30
6.)

G.R. No. L-52306 October 12, 1981

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

MELENCIO-HERRERA, J.:

This is a Petition for Review on certiorari of the Decision of the Court of Tax Appeals in C.T.A. Case No. 2809, dated
November 29, 1979, which affirmed the assessment by the Commissioner of Internal Revenue, dated April 16, 1971, of a
deficiency withholding income tax against petitioner, ABS-CBN Broadcasting Corporation, for the years 1965, 1966, 1967
and 1968 in the respective amounts of P75,895.24, P99,239.18, P128,502.00 and P222, 260.64, or a total of
P525,897.06.

During the period pertinent to this case, petitioner corporation was engaged in the business of telecasting local as well as
foreign films acquired from foreign corporations not engaged in trade or business within the Philippines. for which
petitioner paid rentals after withholding income tax of 30%of one-half of the film rentals.

In so far as the income tax on non-resident corporations is concerned, section 24 (b) of the National Internal Revenue
Code, as amended by Republic Act No. 2343 dated June 20, 1959, used to provide:

(b) Tax on foreign corporations.—(1) Non-resident corporations.— There shall be levied, collected, and
paid for each taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount
received by every foreign corporation not engaged in trade or business within the Philippines, from an
sources within the Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities,
compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains,
profits, and income, a tax equal to thirty per centum of such amount. (Emphasis supplied)

On April 12, 1961, in implementation of the aforequoted provision, the Commissioner of Internal Revenue issued General
Circular No. V-334 reading thus:

In connection with Section 24 (b) of Tax Code, the amendment introduced by Republic Act No. 2343,
under which an income tax equal to 30% is levied upon the amount received by every foreign corporation
not engaged in trade or business within the Philippines from all sources within this country as interest,
dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or
other fixed or determinable annual or periodical gains, profits, and income, it has been determined that
the tax is still imposed on income derived from capital, or labor, or both combined, in accordance with the
basic principle of income taxation (Sec. 39, Income Tax Regulations), and that a mere return of capital or
investment is not income (Par. 5,06, 1 Mertens Law of Federal 'Taxation). Since according to the findings
of the Special Team who inquired into business of the non-resident foreign film distributors, the
distribution or exhibition right on a film is invariably acquired for a consideration, either for a lump sum or
a percentage of the film rentals, whether from a parent company or an independent outside
producer, apart of the receipts of a non-resident foreign film distributor derived from said film represents,
therefore, a return of investment.

xxx xxx xxx

4. The local distributor should withhold 30% of one-half of the film rentals paid to the non-resident foreign
film distributor and pay the same to this office in accordance with law unless the non- resident foreign film
distributor makes a prior settlement of its income tax liability. (Emphasis ours).

31
Pursuant to the foregoing, petitioner dutifully withheld and turned over to the Bureau of Internal Revenue the amount of
30% of one-half of the film rentals paid by it to foreign corporations not engaged in trade or business within the
Philippines. The last year that petitioner withheld taxes pursuant to the foregoing Circular was in 1968.

On June 27, 1968, Republic Act No. 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30 % to
35 % and revising the tax basis from "such amount" referring to rents, etc. to "gross income," as follows:

(b) Tax on foreign corporations.—(1) Non-resident corporations.—A foreign corporation not engaged in
trade or business in the Philippines including a foreign life insurance company not engaged in the life
insurance business in the Philippines shall pay a tax equal to thirty-five per cent of the gross income
received during each taxable year from all sources within the Philippines, as interests, dividends, rents,
royalties, salaries, wages, premiums, annuities, compensations, remunerations for technical services or
otherwise, emoluments or other fixed or determinable annual, periodical or casual gains, profits, and
income, and capital gains, Provided however, That premiums shah not include reinsurance premiums.
(Emphasis supplied)

On February 8, 1971, the Commissioner of Internal Revenue issued Revenue Memorandum Circular No. 4-71, revoking
General Circular No. V-334, and holding that the latter was "erroneous for lack of legal basis," because "the tax therein
prescribed should be based on gross income without deduction whatever," thus:

After a restudy and analysis of Section 24 (b) of the National Internal Revenue Code, as amended by
Republic Act No. 5431, and guided by the interpretation given by tax authorities to a similar provision in
the Internal Revenue Code of the United States, on which the aforementioned provision of our Tax Code
was patterned, this Office has come to the conclusion that the tax therein prescribed should be based on
gross income without t deduction whatever. Consequently, the ruling in General Circular No. V-334, dated
April 12, 1961, allowing the deduction of the proportionate cost of production or exhibition of motion
picture films from the rental income of non- resident foreign corporations, is erroneous for lack of legal
basis.

In view thereof, General Circular No. V-334, dated April 12, 1961, is hereby revoked and henceforth, local
films distributors and exhibitors shall deduct and withhold 35% of the entire amount payable by them to
non-resident foreign corporations, as film rental or royalty, or whatever such payment may be
denominated, without any deduction whatever, pursuant to Section 24 (b), and pay the withheld taxes in
accordance with Section 54 of the Tax Code, as amended.

All rulings inconsistent with this Circular is likewise revoked. (Emphasis ours)

On the basis of this new Circular, respondent Commissioner of Internal Revenue issued against petitioner a letter of
assessment and demand dated April 15, 1971, but allegedly released by it and received by petitioner on April 12, 1971,
requiring them to pay deficiency withholding income tax on the remitted film rentals for the years 1965 through 1968 and
film royalty as of the end of 1968 in the total amount of P525,897.06 computed as follows:

1965

Total amount remitted P 511,059.48

Withholding tax due 153,318.00

thereon

Less: Amount already 89,000.00

assessed

Balance P64,318.00

Add: 1/2% mo. int. fr. 4-16- 11,577.24

66 to 4-16-69

32
 Total amount due & P 75,895.24
collectible

1966

Total amount remitted P373,492.24

Withholding tax due 112,048.00

thereon

Less: Amount already 27,947.00

assessed

Balance 84,101.00

Add: 11/2%mo. int. fr. 4- 15,138.18

16-67 to 4-116-70

Total amount due & P99,239.18

collectible

1967

Total amount P601,160.65

remitted

Withholding tax due 180,348.00

thereon

Less: Amount 71,448.00

already assessed

Balance 108,900.00

Add: 1/2% mo. int. fr. 19,602.00

4-16-68 to 4-16-71

Total amount due & P128,502.00

collectible

1968

Total amount remitted P881,816.92

Withholding tax due 291,283.00

thereon

Less: Amount already 92,886.00

assessed

Balance P198,447.00

Add: 1/2% mo. int. fr. 4- 23,813.64

16-69 to 4-29-71

Total amount due & P222,260.44 1

33
 collectible

On May 5, 1971, petitioner requested for a reconsideration and withdrawal of the assessment. However, without acting
thereon, respondent, on April 6, 1976, issued a warrant of distraint and levy over petitioner's personal as well as real
properties. The petitioner then filed its Petition for Review with the Court of Tax Appeals whose Decision, dated November
29, 1979, is, in turn, the subject of this review. The Tax Court held:

For the reasons given, the Court finds the assessment issued by respondent on April 16, 1971 against
petitioner in the amounts of P75,895.24, P 99,239.18, P128,502.00 and P222,260.64 or a total of
P525,897.06 as deficiency withholding income tax for the years 1965, 1966, 1967 and 1968, respectively,
in accordance with law. As prayed for, the petition for review filed in this case is dismissed, and petitioner
ABS-CBN Broadcasting Corporation is hereby ordered to pay the sum of P525,897.06 to respondent
Commissioner of Internal Revenue as deficiency withholding income tax for the taxable years 1965 thru
1968, plus the surcharge and interest which have accrued thereon incident to delinquency pursuant to
Section 51 (e) of the National Internal Revenue Code, as amended.

WHEREFORE, the decision appealed from is hereby affirmed at petitioner's cost.

SO ORDERED. 2

The issues raised are two-fold:

I. Whether or not respondent can apply General Circular No. 4-71 retroactively and issue a deficiency
assessment against petitioner in the amount of P 525,897.06 as deficiency withholding income tax for the
years 1965, 1966, 1967 and 1968.

II. Whether or not the right of the Commissioner of Internal Revenue to assess the deficiency withholding
income tax for the year 196,5 has prescribed. 3

Upon the facts and circumstances of the case, review is warranted.

In point is Sec. 338-A (now Sec. 327) of the Tax Code. As inserted by Republic Act No. 6110 on August 9, 1969, it
provides:

Sec. 338-A. Non-retroactivity of rulings. — Any revocation, modification, or reversal of and of the rules
and regulations promulgated in accordance with the preceding section or any of the rulings or circulars
promulgated by the Commissioner of Internal Revenue shall not be given retroactive application if the
relocation, modification, or reversal will be prejudicial to the taxpayers, except in the following cases: (a)
where the taxpayer deliberately mis-states or omits material facts from his return or any document
required of him by the Bureau of Internal Revenue: (b) where the facts subsequently gathered by the
Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c)
where the taxpayer acted in bad faith. (italics for emphasis)

It is clear from the foregoing that rulings or circulars promulgated by the Commissioner of Internal Revenue have no
retroactive application where to so apply them would be prejudicial to taxpayers. The prejudice to petitioner of the
retroactive application of Memorandum Circular No. 4-71 is beyond question. It was issued only in 1971, or three years
after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The assessment and
demand on petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time
commencing in 1965. Petitioner was no longer in a position to withhold taxes due from foreign corporations because it had
already remitted all film rentals and no longer had any control over them when the new Circular was issued. And in so far
as the enumerated exceptions are concerned, admittedly, petitioner does not fall under any of them.

Respondent claims, however, that the provision on non-retroactivity is inapplicable in the present case in that General
Circular No. V-334 is a nullity because in effect, it changed the law on the matter. The Court of Tax Appeals sustained this
position holding that: "Deductions are wholly and exclusively within the power of Congress or the law-making body to
grant, condition or deny; and where the statute imposes a tax equal to a specified rate or percentage of the gross or entire

34
amount received by the taxpayer, the authority of some administrative officials to modify or change, much less reduce, the
basis or measure of the tax should not be read into law." 4 Therefore, the Tax Court concluded, petitioner did not acquire
any vested right thereunder as the same was a nullity.

The rationale behind General Circular No. V-334 was clearly stated therein, however: "It ha(d) been determined that the
tax is still imposed on income derived from capital, or labor, or both combined, in accordance with the basic principle of
income taxation ...and that a mere return of capital or investment is not income ... ." "A part of the receipts of a non-
resident foreign film distributor derived from said film represents, therefore, a return of investment." The Circular thus fixed
the return of capital at 50% to simplify the administrative chore of determining the portion of the rentals covering the return
of capital." 5

Were the "gross income" base clear from Sec. 24 (b), perhaps, the ratiocination of the Tax Court could be upheld. It
should be noted, however, that said Section was not too plain and simple to understand. The fact that the issuance of the
General Circular in question was rendered necessary leads to no other conclusion than that it was not easy of
comprehension and could be subjected to different interpretations.

In fact, Republic Act No. 2343, dated June 20, 1959, supra, which was the basis of General Circular No. V-334, was just
one in a series of enactments regarding Sec. 24 (b) of the Tax Code. Republic Act No. 3825 came next on June 22, 1963
without changing the basis but merely adding a proviso (in bold letters).

(b) Tax on foreign corporation.—(1) Non-resident corporations. — There shall be levied, collected and
paid for each taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount
received by every foreign corporation not engaged in trade or business within the Philippines, from all
sources within the Philippines, as interest, dividends, rents, salaries, wages, premiums annuities,
compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains,
profits, and income, a tax equal to thirty per centum of such amount: PROVIDED, HOWEVER, THAT
PREMIUMS SHALL NOT INCLUDE REINSURANCE PREMIUMS. (double emphasis ours).

Republic Act No. 3841, dated likewise on June 22, 1963, followed after, omitting the proviso and inserting some words
(also in bold letters).

(b) Tax on foreign corporations.—(1) Non-resident corporations.—There shall be levied, collected and
paid for each taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount
received by every foreign corporation not engaged in trade or business within the Philippines, from all
sources within the Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities,
compensations, remunerations, emoluments, or other fixed or determinable annual or periodical OR
CASUAL gains, profits and income, AND CAPITAL GAINS, a tax equal to thirty per centum of such
amount. 6 (double emphasis supplied)

The principle of legislative approval of administrative interpretation by re-enactment clearly obtains in this case. It provides
that "the re-enactment of a statute substantially unchanged is persuasive indication of the adoption by Congress of a prior
executive construction. 7 Note should be taken of the fact that this case involves not a mere opinion of the Commissioner
or ruling rendered on a mere query, but a Circular formally issued to "all internal revenue officials" by the then
Commissioner of Internal Revenue.

It was only on June 27, 1968 under Republic Act No. 5431, supra, which became the basis of Revenue Memorandum
Circular No. 4-71, that Sec. 24 (b) was amended to refer specifically to 35% of the "gross income."

This Court is not unaware of the well-entrenched principle that the Government is never estopped from collecting taxes
because of mistakes or errors on the part of its
agents. 8 In fact, utmost caution should be taken in this regard. 9 But, like other principles of law, this also admits of
exceptions in the interest of justice and fairplay. The insertion of Sec. 338-A into the National Internal Revenue Code, as
held in the case of Tuason, Jr. vs. Lingad, 10 is indicative of legislative intention to support the principle of good faith. In
fact, in the United States, from where Sec. 24 (b) was patterned, it has been held that the Commissioner of Collector is
precluded from adopting a position inconsistent with one previously taken where injustice would result therefrom, 11 or
where there has been a misrepresentation to the taxpayer. 12

35
We have also noted that in its Decision, the Court of Tax Appeals further required the petitioner to pay interest and
surcharge as provided for in Sec. 51 (e) of the Tax Code in addition to the deficiency withholding tax of P 525,897.06. This
additional requirement is much less called for because the petitioner relied in good faith and religiously complied with no
less than a Circular issued "to all internal revenue officials" by the highest official of the Bureau of Internal Revenue and
approved by the then Secretary of Finance. 13

With the foregoing conclusions arrived at, resolution of the issue of prescription becomes unnecessary.

WHEREFORE, the judgment of the Court of Tax Appeals is hereby reversed, and the questioned assessment set aside.
No costs.

SO ORDERED.

36
7.)

EN BANC

G.R. No. L-10712 August 10, 1916

ANSELMO FERRAZZINI, plaintiff-appellee,

vs.
CARLOS GSELL, defendant-appellant.

William A. Kincaid and Thomas L. Hartigan for appellant.

Ramon Sotelo for appellee.

TRENT, J.:

This action was brought to recover damages for an alleged wrongful discharge of the plaintiff, who had been employed by
the defendant for an indefinite time to work in the latter's industrial enterprises in the city of Manila. The defendant
admitted that he discharged the plaintiff without giving him the "written advice of six months in advance" as provided in the
contract, but alleged that the discharge was lawful on account of absence, unfaithfulness, and disobedience of orders.
The defendant sought affirmative relief for a further alleged breach of the contract by the plaintiff after his discharge. From
a judgment in favor of the plaintiff the defendant appealed and now urges that the trial court erred (1) in finding that the
plaintiff's discharge was not justified and (2) in declining to consider the counterclaim and enter judgment in accordance
therewith.

1. The plaintiff engaged his "skilled service" to the defendant for the entire existence "of this agreement" at a fixed monthly
salary and agreed "to devote his entire time and efforts to the best of his knowledge and skill exclusively in carrying out in
the most satisfactory manner possible all of the work which may be entrusted to him during the existence of this contract
and undertaking, furthermore, to exercise a strict discretion in all matters pertaining to the work so entrusted to him and
the whole thereof, . . . ."

The relation of master and servant, which was created by the contract, cast certain duties and obligations upon the
parties, which they were bound to discharge and fulfill; the foremost, on the part of the master, were those of furnishing
the servant with a reasonably safe place to work, to pay him for his services, and not to discharge him until the expiration
of six months after notice; and the foremost, on the part of the servant, were those of loyalty, faithfulness, and obedience
to all reasonable orders not inconsistent with the contract. Consequently, if the plaintiff's discharge were without just
cause, it was in violation of the contract of service and he is entitled to recover. Otherwise, he is not, because the breach
on his part must necessarily have occurred before his discharge. Hence, the defendant must prove justification for his act
for the reason that it was in contravention of the six-months clause in the contract. In order to justify the dismissal of the
plaintiff, the defendant must show that the plaintiff was guilty of conduct which can be construed to be a breach of some
express or implied provision in the contract of service. If it has been shown that the plaintiff's conduct was inconsistent
with the relation of master and servant or incompatible with the due and faithful performance of his duties, his discharge
was justified. In view of the fact that the determination of these questions necessarily requires a careful review of the
evidence and in view of the further fact that we cannot accept the trial court's findings upon these important points, we
think it advisable to set forth briefly the substance of all of the material testimony submitted by both parties.

ANSELMO FERRAZZINI: On Friday evening at supper there was some talk about Mr. Gsell measuring the goods
for the umbrellas. Then I said that if Mr. Gsell does this, it is my idea that he has no confidence in his employees. I
was talking to everybody in general. There were present Mr. Specht, Mr. Alberto Ferrazzini and Mr. Inhelder. Mr.
Specht was an employee of the defendant at the time. I do not remember telling Specht that he was not receiving
sufficient salary. The only thing I remember distinctly is that i said `that Mr. Gsell does not seem to have any
confidence in us.'

Q. Is it not a fact that shortly, or sometime before your discharge, you have been in the habit of leaving the
factory for considerable periods in the morning to go outside for the purpose of taking a drink? —

A. As long as I have been with the firm of Carlos Gsell I was allowed in the morning ten or fifteen minutes
during the hot season to absent myself to have a drink of beer or whisky and soda; and the same in the afternoon.

37
Q. Is it not a fact that Mr. Bender, the manager of the factory, had repeated spoken to you, or had several
times spoken to you about your habit of leaving the factory for the purpose of taking a drink, and had prohibited
you from doing it, forbade you to do it? —

A. He merely told me not to do it in such an ostentatious manner. Mr. Bender told me that Mr. Gsell did not
like to see me go out in the forenoon and afternoon; I told him that Mr. Gsell himself had told me on one occasion
that if I had to have a drink I could go out for it and it would be all right; this was in the presence of Mr. Landvatter.

Q. Then, am I to understand that when you went out to take a drink it was because you must have one? —

A. Yes, of course.

Q. Is it not a fact that Mr. Bender had conversations with you, at least once in the month of March, regarding
this matter? —

A. I don't remember it.

Q. Were not you frequently spoken to about it? —

A. No, sir.

CARLOS GSELL: The first reason that led to his dismissal was because several months, through April and May,
he had the habit of going out in the morning and afternoon for having a drink; not one but many drinks, because
he was out sometimes an hour and an hour and a half; and as I have a factory with 400 working people I have to
see that certain discipline is maintained in the factory. I gave instructions to the manager. Mr. Bender, to see that
this habit would be dropped, but he (the plaintiff) would not do so. Now what made me pleased to dismiss him
was because on a certain night at the mess where he ate with other employees of my house, he provoked one of
my employees, a new arrival, and said that all the control I had in the factory was one of mistrust; he said I was
suspicious; that I measured the cloth in my office for the umbrellas and that he would not support such treatment
from my side; at the same time he said to this newly arrived employee that the salary that he, the new man, got
under the contract was not sufficient to live on and that he should not continue to work for me. I asked the plaintiff
about the conversation which he had at the mess and he did not deny it. He said that he did not mean it to be so
bad. The factory was prejudiced on account of the plaintiff absenting himself, because sometimes I wanted to
speak to him, tell him something, and he was not there. I had to wait for him, and then when he came back it was
noon perhaps, and it could not be done. I gave instructions to Mr. Bender, the manager, to stop the plaintiff's
going out without permission. I did not exactly authorized the plaintiff to go out to drink. I always wanted to stop
this. The plaintiff was the older of those who have gone out to drink. The plaintiff held a responsible position. In
the first place it was his duty to make repairs to the machinery in all the departments; later he was entrusted with
the various departments — not at the same time; once he had the bleaching department; once he had to help out
in the umbrella factory; and then he was in charge of the hat factory. The plaintiff had other employees under him.

CARL BENDER: I came to the Philippine Islands in the middle of March as the defendant's manager. I saw that
the plaintiff was frequently out of the factory. I told him that we was not allowed to leave the factory without my
permission. HE kept up the habit of going out in the morning and afternoon for an hour or more and I told him the
second time. He told me that he had permission from the former manager to go out and take a drink. I again told
him he must not go out without my permission. Notwithstanding these orders, he was out one whole Saturday
afternoon and I reported him to the defendant. The plaintiff went out without permission some thirty-five times
after I ordered him not to do so. I had the other employees search for him, but they could not find him. He would
go out four or five times a week.

HERMAN INHELDER: I was present at the mess in June when that conversation took place. We were discussing
several things, including the business and the way the umbrella factory was run. The plaintiff spoke in a manner
that indicated that Mr. Gsell did not trust Mr. Specht. I did not want to have this kind of a conversation going on
there and I told the plaintiff he had better leave the house.

Q. Did the plaintiff say anything with respect to the amount of salary, which Mr. Specht was receiving? — If
so, what? —

38
 A. I won't pretend that Mr. Ferrazzini said it that night, about the salary, but he said it on several occasions
before, and — well — what he did say was that Mr. Specht ought not to work so much for such a small salary.

ALBERTO FERRAZZINI: I was present when the conversation took place in the mess one evening of June last. A
discussion arose about Mr. Gsell exercising control over the merchandise or goods. Then the plaintiff said that
this seemed to show that Gsell had no confidence in Mr. Specht. Mr. Specht was in charge of the umbrella
department. The conversation was then carried on in German and I could not understand what they said.

HANS SPECHT: I am foreman of the umbrella factor of the defendant. During the conversation at the mass the
plaintiff told me that the defendant had no confidence in me. I protested and then the plaintiff tried to prove it by
stating that the defendant was investigating things in the umbrella factory, verifying the goods for the umbrellas.
The plaintiff said nothing about my salary at that time, but on a previous occasion he told me that I was foolish at
my age to work for such a small salary. I reported the matter to the defendant.

The plaintiff admits that he stated to those present at the mess that if the defendant measured the cloth for the umbrellas,
"It is my idea that he has no confidence in his employees." Mr. Specht, the foreman f the umbrella factory, says that
"During the conversation at the mess, the plaintiff told me that the defendant had no confidence in me." The plaintiff
testified that he did not remember telling Specht that he (Specht) was not receiving sufficient salary, while Inhelder
testified positively that the plaintiff stated on several occasions that Specht ought not to work so much for such a small
salary, and Specht also testified positively that "he (the plaintiff) told me that I was foolish at my age to work for such a
small salary." As to the plaintiff's absenting himself during working hours for the purpose of drinking, we have, on the one
hand, the plaintiff's testimony to the effect that as long as he had been with the firm of Gsell he had been "allowed in the
morning ten or fifteen minutes during the hot season to absent himself to have a drink of beer or whiskey, and the same in
the afternoon," and that "the manager merely told me not to do it in such an ostentatious manner." While, on the other
hand, we have the testimony of the defendant wherein he states that he instructed his manager, Mr. Bender, to direct the
plaintiff to discontinue his habit of drinking during working hours, and the testimony of the manager (Bender) to the effect
that he expressly directed the plaintiff not to go out without permission. But the plaintiff violated his express order some
thirty-five times, keeping up the habit of going out (for the purpose of drinking) in the morning and afternoon for an hour or
more at a time. All of the foregoing show a course of conduct on the part of the plaintiff inconsistent with the due and
faithful performance of his duties as an employee of the defendant. He sought to create a feeling of unrest among the
employees by inducing them to believe that the defendant had no confidence in them and that at least one employee was
not receiving sufficiently salary. If it were true that the defendant was measuring the cloth for the umbrellas, he had a right
to do so and this fact would not justify the plaintiff in saying that the defendant had no confidence in the employees.
Likewise, if it be true that the defendant or his manager did at first authorize the plaintiff to absent himself during working
hours for the purpose of drinking, the defendant had a perfect right to withdraw this permission at anytime he saw fit to do
so. In fact, the defendant, through his manager, expressly directed the plaintiff to cease leaving the factory for that
purpose, but the plaintiff violated this order numerous times. The plaintiff, being at times foreman and at other times in
charge of important departments of the factory wherein some four hundred employees were at work, it cannot be
questioned but that the defendant not only had a right to prohibit drinking during working hours, but it was his duty to do
so for his own interests and the safety of his other employees. But it is intimated in the record that the defendant
discharged the plaintiff on account of the conversation at the mess. If it be true that the defendant gave this as his sole
reason for so acting at the time he discharged the plaintiff, yet he would not be prevented from setting up at the trial the
fact that the plaintiff continued to disobey his orders with reference to absenting himself for the purpose of drinking. The
defendant was, at the time he discharged the plaintiff, authorized to take into consideration the latter's whole course of
conduct in determining whether the contract of employment should be terminated. We are, therefore, convinced that real
errors was committed by the trial court in its findings of fact and that the record fully justifies a reversal of such findings,
and a declaration to the effect that the defendant was justified in terminating the contract of employment.

2. At the opening of the trial in the court below and before any testimony had been taken, counsel for the defendant
stated:

I desire to amend my answer at this time by the addition of the following paragraph:

The defendant further alleges for a second and further defense to the complaint herein, and for a counterclaim
thereto, that the plaintiff has engaged in business in the Philippine Islands since leaving the service of the
defendant and without the defendant's request or consent, in violation of his contract with the defendant;
wherefore, the defendant demands judgment against the plaintiff for the sum of ten thousand pesos.

39
 By the COURT: If the plaintiff does not claim any time to answer the new pleadings, the court will grant
the amendment as asked for.

By Mr. SOTELO: I note my exception to the admission of a counterclaim at this time; I have no time to
prepare myself to meet it.

By the COURT: The court has stated that if counsel for the plaintiff requires time to answer or meet this
counterclaim he will be granted time to do so.

By Mr. SOTELO: The attorney for the plaintiff answers to the court that much time has been lost already
since the filing of the complaint and the trial, and he wants to go to trial in order that the plaintiff may get
what he is justly entitled to.

Testimony in support of the counterclaim was duly introduced before the close of the trial. In the final decision the court
said:

The court is of the opinion that the defendant's so-called amendment to his answer, dictated by counsel to the
official stenographer, and not `upon motion filed in court, and after notice to the adverse party and an opportunity
to be heard,' must be disregarded in the consideration of this case.

This is manifest error. The verbal petition was expressly granted and the proferred amendment accepted by the court.
Plaintiff's counsel noted his exception to this ruling and signified his willingness to proceed with the trial. All thereafter
considered the answer as thus amended. We must, therefore, dispose of the defendant's counterclaim upon the merits.

That portion of the contract upon which the defendant's counterclaimed is based reads as follows:

That during the term of this contract, and for the period of five years after the termination of the employment of the
said party of the second part, whether this contract continue in force for the period of one, two, three or more
years, or be sooner terminated, the said party of the second party shall not engage or interest himself in any
business enterprises similar to or in competition with those conducted, maintained or operated by the said party of
the first day in the Philippines, and shall not assist, aid or encourage any such enterprise by the furnishing of
information, advice or suggestions of any kind, and shall not enter into the employ of any enterprises in the
Philippine Islands, whatever, save and except after obtaining special written permission therefor from the said
party of the first part. It is further stipulated and agreed that the said party of the second part is hereby obligated
and bound to pay unto the party of the first part the sum of ten thousand pesos, Philippine currency (P10,000) as
liquidated damages for each and every breach of the present clause of this contract, whether such breach
occurred during the employment of the said party of the second part or at any time during the period of five years
from and after the termination of said employment, and without regard to the cause of the termination of said
employment.

The plaintiff admits that he entered the employment of Mr. Whalen in the Philippine Islands as a foreman on some
construction work for a cement factory within a few days after his discharge and without the consent, either written or
verbal, of the defendant. This work was entirely different and disassociated from that engaged in by the defendant Gsell,
yet this act of the plaintiff was a technical violation of the above-quoted provisions of the contract wherein he expressly
agreed and obligated himself "not to enter into the employment of any enterprise in the Philippine Islands, whatever, save
and except after obtaining special written permission therefor" from the defendant. The question now arises whether these
provisions of the contract are valid and binding upon the plaintiff.

Counsel for the defendant in their printed brief say:

There is no doubt as to the validity of the contract, Gsell vs. Koch (16 Phil. Rep., 1) has settled that question in a
similar contract and that decision has never been criticised, but is cited as recently as 1914 with approved.
(Lambert vs. Fox, 26 Phil. Rep., 588).

An examination of these cases, as well as others in point, is necessary in order to determine whether or not the question
has been settled, and if we find that it is still an open one in this jurisdiction, we must proceed with the case. In pursuing
this inquiry it is well to bear in mind (1) that the case under consideration has been tried in both courts exclusively upon

40
the theory that the local law alone is applicable to the contract and (2) that the business in which the plaintiff became
engaged was entirely different and distinct from that conducted, maintained or operated by the defendant.

In Gsell vs. Koch, supra, a demurrer was sustained upon the ground that the allegations in the complaint did not constitute
a cause of action, and after defendant declined to amend, judgment was entered dismissing the action. On appeal this
order was reversed and the record returned with instructions to direct the defendant to answer. The paragraph in the
written contract, upon which the judgment of this court rests, reads:

Third. The said Pedro Koch binds himself to pay in cash to Mr. Gsell the sum of ten thousand pesos if, after
leaving the firm of C. Gsell, and against the latter's will, he shall engage directly or indirectly in carrying on any
business in which the said Carlos Gsell is at present engaged, or within the two and one-half years fixed for the
duration of the present contract in these Islands, either as an employee or member of a firm or company, or on his
own account; and he furthermore binds himself to pay in cash to Mr. Gsell an equal sum of ten thousand pesos
for each violation of any secret of the business entrusted him.

The plaintiff in that case was engaged solely and exclusively in the manufacture of umbrellas, matches, and hats. The
secret process for making straw hats had cost the plaintiff some P20,000 and the defendant Koch, after having entered
the hat factory under a contract of employment and after having learned the secret process employed by the plaintiff, left
the plaintiff's service and engaged in the manufacture of straw hats in violation of the above-quoted provisions of the
contract, using the trade secrets which he had thus learned. The provisions in the contract against the engaging in the
manufacturing of straw hats in the Philippine Islands were held to be reasonably necessary for the protection of the
plaintiff and not oppressive in so far as the defendant was concerned. In the case under consideration the contract goes
far beyond that which formed the basis of the action in the case just cited. Here the plaintiff Ferrazzini was prohibited from
engaging in any business or occupation whatever in the Philippine Islands for a period of five years after the termination of
this contract of employment without special written permission from the defendant. This plaintiff became engaged, as we
have said, as a foreman in a cement factory, while the defendant in the other case became engaged in identically the
same business which his employer was carrying on, that is, the manufacture of straw hats. Consequently, the reasons
which support the validity of the contract in the one case are not applicable to the other. The same is true of the case
of Fornow vs. Hoffmeister (6 Phil. Rep., 33), wherein the decision rests solely upon the question whether the contract was
in violation of the contract labor laws. No other question was submitted or decided in that case. Therefore, whether the
clause under consideration is valid and enforcible is still an open question.

Articles 1091 and 1255 of the Civil Code read:

ART. 1091. Obligations arising from contracts have legal force between the contracting parties, and must be
fulfilled in accordance with their stipulations."

ART. 1255. The contracting parties may make the agreement and establish the clauses and conditions which they
may deem advisable, provided they are not in contravention of law, morals, or public order.

Hence, the policy of the law requires that the freedom of persons to enter into contracts shall not be lightly interfered with,
but if a contract be not founded upon a legal consideration (causa) or if it conflicts with the morals of the times or
contravenes some established interest of society, the courts will not aid in its enforcement.

Passing over the question whether "consideration" of the American law and the "causa" of the civil law are equivalent and
whether there was adequate or legal consideration or "causa" on which the contract was founded, we will limit our further
inquiry to the determination of the question whether that part of the contract under consideration is against public policy
(orden publico).

Manresa, Vol. 8 p. 606, says:

Public policy (orden publico) — which does not here signify the material keeping of public order — represents in
the law of persons the public, social and legal interest, that which is permanent and essential of the institutions,
that which, even if favoring an individual in whom the right lies, cannot be left to his own will. It is an idea which, in
cases of the waiver of any right, is manifested with clearness and force. Thus the jurisprudence on the subject of
mortgages contains an interesting declarations on this point in a resolution of January 24, 1898, wherein it was
held that: `The power of the husband to give marital permission cannot be validly conferred upon any attorney-in-
fact, as the legislator has willed that, for reasons of the interest of society and of family government and discipline
41
 it should be vested only in the husband, being personal to him in the highest sense and therefore not capable of
being transmitted.'

Mucius Scaevola's (vol. 20, p., 505) conclusion is that:

Agreements in violation of orden publico must be considered as those which conflict with law, whether properly,
strictly and wholly a public law (derecho) or whether a law of the person, but law which in certain respects affects
the interest of society.

Articles 1893 and 1895 of Merrick's Revised Civil Code of Louisiana, a civil law state, read:

ART. 1893. An obligation without a cause, or with a false or unlawful cause, can have no effect.

ART. 1895. Illegal or immoral cause. — The cause is unlawful, when it is forbidden by law, when it is contra
bonos mores or to public order.

In Fabacher vs. Bryant & Mather (46 La. Ann., 820), the plaintiff and one Thomas Egan were engaged in the business of
hauling cotton for the presses in the city of New Orleans. Both of these men were members of the Draymen's Association
which had adopted a tariff of charges and undertook to distribute among the members the hauling of the various presses.
The owners of the press were not consulted either as to the prices to be paid or as to those who should do the hauling.
They could not obtain draymen outside of the union. They had to engage those designated by the union. The defendants
employed Egan on the latter's representation that he had been so designated. Later the defendants employed the plaintiff
upon the same representations. Finally, after investigation, the defendants declined to permit the plaintiff to do the work
and carried out their contract with Egan. The plaintiff thereupon instituted this action for damages based upon the breach
of his contract by the defendants. On the setting aside of a verdict in favor of the plaintiff by the trial court and an appeal
having been duly entered, the Supreme Court affirmed the judgment, directing the dismissal of the case, holding that the
plaintiff's contract was plainly repugnant to public policy, citing articles 1893 and 1895 supra. (India Bagging Association
vs. Kock, 14 La. ann., 168; Gravier vs. Carraby, 17 La., 118, 142, and cases collected in 20 Hennen's Digest, p. 1007, No.
1.)

In India Bagging Association vs. Kock, supra, an association of eight commercial firms in New Orleans, holders of 7,410
bales of India cotton bagging, was formed, the members binding themselves for the term of three months not to sell any
bagging, nor offer to sell any, except with the consent of the majority of them expressed at a meeting; under the penalty of
ten dollars for every bale sold or offered for sale. This action was brought against one of the members by the manager of
the association for the recovery of a penalty of $7,400 for having sold 740 bales of bagging in contravention of the articles
of the association. From a judgment in favor of the association the defendant member appealed and the Supreme Court
reversed the judgment saying:

The agreement between the parties was palpably and unequivocably a combination in restraint of trade, and to
enhance the price in the market of an article of primary necessity to cotton planters. Such combination are
contrary to public order, and cannot be enforced in a court of justice.

By "public policy," as defined by the courts in the United States and England, is intended that principle of the law which
holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public
good, which may be termed the "policy of the law," or "public policy in relation to the administration of the law." (Words &
Phrases Judicially Defined, vol. 6, p. 5813, and cases cited.) Public policy is the principle under which freedom of contract
or private dealing is restricted by law for the good of the public. (Id., Id.) In determining whether a contract is contrary to
public policy the nature of the subject matter determines the source from which such question is to be solved. (Hartford
Fire Ins. Co. vs. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)

The foregoing is sufficient to show that there is no difference in principle between the public policy (orden publico) in the
two jurisdictions (the United States and the Philippine Islands) as determined by the Constitution, laws, and judicial
decisions.

In the United States it is well settled that contracts in undue or unreasonable restraint of trade are unenforcible because
they are repugnant to the established public policy in that country. Such contracts are illegal in the sense that the law will

42
not enforce them. The Supreme Court of the United States, in Oregon Steam Navigation Co. vs. Winsor (20 Wall., 64),
quoted with approval in Gibbs vs. Consolidated Gas Co. of Baltimore (130 U. S., 396), said:

Cases must be judged according to their circumstances, and can only be rightly judged when the reason and
grounds of the rule as carefully considered. There are two principal grounds on which the doctrine is founded that
a contract in restraint of trade is void as against public policy. One is, the injury to the public by being deprived of
the restricted party's industry; and the other is, the injury to the party himself by being precluded from pursuing his
occupation, and thus being prevented from supporting himself and his family.

And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:

Pubic welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than
protection to the other party requires, that contract may be sustained. The question is, whether, under the
particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is
not, unreasonable.

Chapter 5, title 13, book 2, of our Penal Code makes it a crime for a person to solicit any gift or promise as a
consideration for agreeing to refrain from taking part in any public, auction, or attempting to cause bidders to stay away
from such auction by means of threats, gifts, promises or any other artifice, with intent to affect the price of the thing
auctioned (Art. 542), or to combine for the purpose of lowering or raising wages to an abusive extent, or to regulate the
conditions of labor (Art. 543), or by spreading false rumors, or by making use of any other artifice, succeeds in altering the
prices which would naturally be obtained in free competition for merchandise, stocks, public and private securities, or any
other thing which may be the object of trade and commerce (Art. 544). And Act No. 98, as amended, of the Philippine
Commission likewise makes it a crime for any person or corporation, engaged as a common carrier, to subject any
particular person, firm, company, corporation, or locality, or any particular kind of traffic to any undue or unreasonable
prejudice or discrimination. To this extent the Legislature has expressly covered the subject and left to the courts to
determine in each case whether any other particular agreement or contract is contrary to public policy.

It needs no argument to show that an agreement or contract entered into for the purpose of accomplishing any of the
prohibited acts mentioned in the above cited provisions of the Penal Code or in Act No. 98 would be unenforcible as being
in violation of positive law. Those falling within the provisions of articles 542 and 544 of the Penal Code and Act No. 98
would clearly be agreements or contracts in undue or unreasonable restraint of trade. The meaning given to the word
"trade" would determine the question whether those coming within the provisions of article 543 would or would not be the
same. If the commercial meaning of the word should govern, and in this sense t has reference to the business of selling or
exchanging some tangible substance or commodity for money, or the business of dealing by way of sale in commodities,
it would appear that such would not be contract in restraint of trade. This may be the most common significance of the
word "trade." but it is not the only one, nor the most comprehensive meaning in which the word is properly used. In the
broader sense, it is any occupation or business carried on for subsistence or profit. Anderson's Dictionary of Law gives the
following definition: "Generally equivalent to occupation, employment, or business, whether manual or mercantile; any
occupation, employment or business carried on for profit, gain, or livelihood, not in the liberal arts or in the learned
professions." In Abbott's Law Dictionary the word is defined as "an occupation, employment or business carried on for
gain or profit." Among the definitions given in the Encyclopaedic Dictionary is the following: "The business which a person
has learnt, and which he carries on for subsistence or profit; occupation; particularly employment, whether manual or
mercantile, as distinguished from the liberal arts or the learned professions and agriculture." Bouvier limits the meaning to
commerce and traffic and the handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply
the broader meaning given by the lexicographers.

The contract under consideration, tested by the law, rules and principles above set forth, is clearly one in undue or
unreasonable restraint of trade and therefore against public policy. It is limited as to time and space but not as to trade. It
is not necessary for the protection of the defendant, as this is provided for in another part of the clause. It would force the
plaintiff to leave the Philippine Islands in order to obtain a livelihood in case the defendant declined to give him the written
permission to work elsewhere in this country.

The foregoing are our reasons upon which the short decision and order for judgment, heretofore filed,1 were based.

Torres, Johnson, and Araullo, JJ., concur.

43
44
8.)

G.R. No. L-19628 December 4, 1922

LICHAUCO & COMPANY, INC., petitioner,

vs.
SILVERIO APOSTOL, as Director of Agriculture, and RAFAEL CORPUS, as Secretary of Agriculture and Natural
Resources, respondents.

Gibbs, McDonough and Johnson for petitioner.

Attorney-General Villa-Real for respondents.

STREET, J.:

This is an original petition for the writs of mandamus and injunction, filed in this court by Lichauco & Company against the
respondents, Silverio Apostol, as Director of Agriculture, and Rafael Corpus, as Secretary of Agriculture and Natural
Resources. An order having been issued by this court requiring the respondents to appear and show cause why the relief
prayed for should not be granted, the Attorney-General presented a return, in the nature of a demurrer, in their behalf; and
the cause is now before us for the determination of the questions thus presented.

It is alleged in the complaint that the petitioner is a corporation duly organized under the laws of the Philippine Islands and
that it has been engaged for several years in the business of importing carabao and other draft animals into the Philippine
Islands and that it is now desirous of importing from Pnom-Pehn, in French Indo-China, a shipment of draft cattle and
bovine cattle for the manufacture of serum but that the respondent Director of Agriculture refuses to admit said cattle,
except upon the condition, stated in Administrative Order No. 21 of the Bureau of Agriculture, that said cattle shall have
been immunized from rinderpest before embarcation at Pnom-Pehn. The petitioner therefore asks for an order requiring
the respondents to admit the contemplated importation of cattle into the Islands and enjoining them from the enforcement
of said administrative order in the future.

The petitioner asserts that under the first proviso to section 1762 of the Administrative Code, as amended by Act No. 3052
of the Philippine Legislature, it has "an absolute and unrestricted right to import carabao and other draft animals and
bovine cattle for the manufacture of serum from Pnom-Pehn, Indo-China, into the Philippine Islands" and that the
respondents have no authority to impose upon the petitioner the restriction referred to above, requiring the immunization
of the cattle before shipment.

The respondents, on the other hand, rely upon section 1770 of the Administrative Code and upon Administrative Order
No. 21 of the Bureau of Agriculture, promulgated on July 29, 1922, by the Director of Agriculture, in relation with
Department Order No. 6, promulgated on July 28, 1922, by the Secretary of Agriculture and Natural Resources, as
supplying authority for the action taken.

Such portions of the laws above-mentioned as are material to the present controversy will be set out in full, preceded by
section 1762 of the Administrative Code, as originally enacted, to which will be appended the pertinent parts of the orders
referred to and the communication of the Director of Agriculture of August 31, 1922.

1. First paragraph of section 1762 of Administrative Code in original form:

SEC. 1762. Bringing of diseased animal into Islands forbidden. — Except upon permission of the Director
of Agriculture, with the approval of the head of Department first had, it shall be unlawful for any person
knowingly to ship or otherwise bring into the Philippine Islands any animal suffering from, infected with, or
dead of any dangerous communicable disease, or any effects pertaining to such animal which are liable
to introduce such disease into the Philippine Islands.

2. First paragraph of section 1762 of Administrative Code, as amended by Act No. 3052 of the Philippine
Legislature:

45
 SEC. 1762. Bringing of animals imported from foreign countries into the Philippine Islands. — It shall be
unlawful for any person or corporation to import, bring or introduce live cattle into the Philippine Islands
from any foreign country. The Director of Agriculture may, with the approval of the head of the department
first had, authorize the importation, bringing or introduction of various classes of thoroughbred cattle from
foreign countries for breeding the same to the native cattle of these Islands, and such as may be
necessary for the improvement of the breed, not to exceed five hundred head per annum: Provided,
however, That the Director of Agriculture shall in all cases permit the importation, bringing or introduction
of draft cattle and bovine cattle for the manufacture of serum: Provided, further, That all live cattle from
foreign countries the importation, bringing or introduction of which into the Islands is authorized by this
Act, shall be submitted to regulations issued by the Director of Agriculture, with the approval of the head
of the department, prior to authorizing its transfer to other provinces.

3. Section 1770 of Administrative Code:

SEC. 1770. Prohibition against bringing of animals from infected foreign countries. — When the
Department Head shall by general order declare that a dangerous communicable animal disease prevails
in any foreign country, port, or place and that there is danger of spreading such disease by the
importation of domestic animals therefrom, it shall be unlawful for any person knowingly to ship or bring
into the Philippine Islands any such animal, animal effects, parts, or products from such place, unless the
importation thereof shall be authorized under the regulation of the Bureau of Agriculture.

4. Department Order No. 6, promulgated on July 28, 1922, by Secretary of Agriculture and Natural Resources:

DEPARTMENT ORDER }
}Series of 1922.
NO. 6. }

Owing to the fact that a dangerous communicable disease known as rinderpest exist in Hongkong,
French Indo-China and British India, it is hereby declared, in accordance with the provisions of section
1770 of Act No. 2711 (Administrative Code of the Philippine Islands of 1917), that rinderpest prevails in
said countries, and as there is danger of spreading such disease by the importation of cattle, carabaos,
and pigs therefrom, it shall be unlawful for any person knowingly to ship or bring into the Philippine
Islands any such animal, animal effects, parts, or products from Hongkong, French Indo-China and British
India, unless the importation thereof shall be authorized under the regulations of the Bureau of
Agriculture.

The provisions of this order shall take effect on and after August 1, 1922.

5. Administrative Order No. 21, of the Bureau of Agriculture, promulgated July 29, 1922, by the Director of
Agriculture:

ADMINISTRATIVE ORDER }
}
NO. 21 }

Re importation of cattle, carabaos, and pigs from French Indo-China, Hongkong and India.

1. Pursuant to the provisions of Department Order No. 6, series of 1922, of the Department of Agriculture
and Natural Resources, the present regulations of the Bureau of Agriculture governing the importation of
livestock from French Indo-China and Hongkong are hereby amended to the effect that the importation of
livestock of the species named in the aforementioned Department Order is hereby prohibited from French
Indo-China, Hongkong and India. However, animals immunized against rinderpest, for which the importer
before placing his order shall have obtained from the Director of Agriculture a written permit to import
them from the above named countries, may be allowed entrance into the Philippine Islands.

2. This order shall take effect on and after August 1, 1922.

46
 6. Communication of August 31, 1922, from the Acting Director of Agriculture to Faustino Lichauco (in part):

SIR: In reply to your application for permission to import from 300 to 400 carabaos immunized against
rinderpest from Pnom-Pehn, French Indo-China, I have the honor to inform you that the permission is
hereby granted, under the following conditions:

1. Animals must be immunized by the simultaneous method before shipment. At least 10 c.c. of good
virulent blood must be injected at the first injection simultaneously with the serum. Ten days after the
simultaneous inoculation all non-reactors must receive another injection of not less than 10 c.c. of virulent
blood (alone).

2. The immunization must be done by a veterinarian designated by the French Government for the
purpose, who must issue a certificate stating the fact that the animal has been immunized according to
the requirements in number 1 and it must not be embarked until ten days after the second injection of
virulent blood.

xxx xxx xxx

Very respectfully,

SILVERIO APOSTOL,
Acting Director of Agriculture.

Upon glancing over the matter above collated, it will be seen at once that section 1770 of the Administrative Code on its
face authorizes the action taken by the Secretary of Agriculture and Natural Resources in closing our ports (in the manner
and to the extent indicated in Department Order No. 6) to the importation of cattle and carabao from French Indo-China,
supposing of course, as everybody knows and as the petitioner does not deny, that the disease of rinderpest exists in that
country.

It is claimed, however, that section 1762 of the Administrative Code, so far as it authorizes restriction upon the importation
of draft cattle and bovine cattle for the manufacture of serum, has been impliedly repealed by the amendatory Act No.
3052, which is of later enactment that the Administrative Code; and in this connection reliance is chiefly placed on the first
proviso to section 1762, as amended by said Act No. 3052, which is in these words: "Provided, however, That the Director
of Agriculture shall in all cases permit the importation, bringing or introduction of draft cattle and bovine cattle for the
manufacture of serum." This then is the first and principal question in the case, namely, whether section 1770 has been
repealed by implication, in so far as it relates to draft animals and bovine cattle for the manufacture of serum. We say
repealed by implication, for it will be noted that that Act No. 3052 has no repealing clause, and it contains only one
section, i. e., that amending section 1762 of the Administrative Code.

We are of the opinion that the contention of the petitioner is untenable, for the reason that section 1762, as amended, is
obviously of a general nature, while section 1770 deals with a particular contingency not made the subject of legislation in
section 1762. Section 1770 is therefore not to be considered as inconsistent with section 1762, as amended; on the other
hand, it must be treated as a special qualification of section 1762. Of course the two provisions are different, in the sense
that if section 1762, as amended, is considered alone, the cattle which the petitioner wishes to bring in can be imported
without restriction, while if section 1770 is still in force the cattle, under the conditions stated in the petition, can be brought
in only upon compliance with the requirements of Administrative Order No. 21. But this difference between the practical
effect of the two provisions does not make then inconsistent in the sense that the earlier provision (sec. 1770) should be
deemed repealed by the amendatory Act (3052).

That section 1770 is special, in the sense of dealing with a special contingency not dealt with in section 1762, is readily
apparent upon comparing the two provisions. Thus, we find that while section 1762 relates generally to the subject of the
bringing of animals into the Island at any time and from any place, section 1770 confers on the Department Head a
special power to deal with the situation which arises when a dangerous communicable disease prevails in some defined
foreign country, and the provision is intended to operate only so long as that situation continues. Section 1770 is the
backbone of the power to enforce animal quarantine in these Islands in the special emergency therein contemplated; and
if that section should be obliterated, the administrative authorities here would be powerless to protect the agricultural
industry of the Islands from the spread of animal infection originating abroad.

47
We note that the argument for unrestricted importation extends only to the importation of cattle for draft purposes and
bovine cattle for the manufacture of serum, leaving section 1770 theoretically in full effect as regards the importation of
cattle for other purposes, as where they are imported for slaughter; but the importation of cattle for draft purposes is the
principal thing, and unless that can be regulated under the conditions and to the extent attempted by the respondents in
this case, the power given in section 1770 is obviously worthless.

In our opinion section 1762, as amended, and section 1770 must be construed in pari materia as harmonious parts of the
law dealing with animal quarantine; and section 1762, as amended, can be given effect only in so far as it is not restricted
by section 1770. Here, as always, the general must yield to the particular.

If the Congress of the United States should this day repeal the Chinese Exclusion Law so far as it affects these Islands,
and should declare that all persons of Chinese nationality shall be at liberty to enter the Philippine Islands without
restriction, would anybody suppose that such enactment would have the effect of abolishing the power to maintain
quarantine against any Chinese port where cholera or bubonic plaque might hereafter be raging in epidemic form? Yet the
question now before us is not fundamentally different from the one thus supposed.

The judicial precedents are conclusive to the effect that no implied repeal of a special provisions of the character of the
one now under consideration will result from the enactment of broader provision of a general nature. In other words, a
general statute without negative words does not repeal a previous statute which is particular, even though the provisions
of one be different from the other. (Rymer vs. Luzerne County, 12 L. R. A., 192; Petri vs. F. E. Creelman Lumber Co., 199
U. S., 487; 50 L. ed., 281.)

Wherever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most
comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment
must be taken to affect only the other parts of the statute to which it may properly apply. (Sir John Romilly, Master of the
Rolls, in Pretty vs. Solly, 26 Beav., 606, 610.)

The additional words of qualification needed to harmonize a general and a prior special provision in the same statute
should be added to the general provision, rather than to the special one. (Rodgers vs. United States, 185 U. S., 82; 46 L.
ed., 816.)

Specific legislation upon a particular subject is not affected by a general law upon the same subject unless it clearly
appears that the provision of the two laws are so repugnant that the legislature must have intended by the later to modify
or repeal the earlier legislation. The special act and the general law must stand together, the one as the law of the
particular subject and the other as the general law of the land. (Ex Parte United States, 226 U. S., 420; 57 L. ed., 281; Ex
Parte Crow Dog, 109 U. S., 556; 27 L. ed., 1030; Partee vs. St. Louis & S. F. R. Co., 204 Fed. Rep., 970.)

Where there are two acts or provisions, one of which is special and particular, and certainly includes the matter in
question, and the other general, which, if standing alone, would include the same matter and thus conflict with the special
act or provision, the special must be taken as intended to constitute an exception to the general act or provision,
especially when such general and special acts or provisions are contemporaneous, as the Legislature is not to be
presumed to have intended a conflict. (Crane vs. Reeder and Reeder, 22 Mich., 322, 334; University of Utah vs. Richards,
77 Am. St. Rep., 928.)

It is well settled that repeals by implication are not to be favored. And where two statutes cover, in whole or in part, the
same matter, and are not absolutely irreconcilable, the duty of the court — no purpose to repeal being clearly expressed
or indicated — is, if possible, to give effect to both. In other words, it must not be supposed that the Legislature intended
by a latter statute to repeal a prior one on the same subject, unless the last statute is so broad in its terms and so clear
and explicit in its words as to show that it was intended to cover the whole subject, and therefore to displace the prior
statute. (Frost vs. Wenie, 157 U. S., 46; 39 L. ed., 614, 619.)

As stated in the pages of the two most authoritative legal encyclopedias, the rule is that a prior legislative act will not be
impliedly repealed by a later act unless there is a plain, unavoidable and irreconcilable repugnancy between the two. If
both acts can by any reasonable construction stand together, both will be sustained. (36 Cyc., 1074- 1076; 26 Am. & Eng.
Encyc. Law, 2d ed., 725-726.)

A masterly analysis of the decisions of the United States Courts pertinent to the matter now in hand will be found in the
monographic article on "Statutes and Statutory Construction," written by Chas. C. Moore and prefixed as a General
48
Introduction to Federal Statutes Annotated. The discussion there given is too lengthy to be here reproduced in full, but
some of the observations of the learned author are so appropriate to the case before us that we cannot forego the
temptation to include the same in this opinion. Says the writer: "The various provisions of an act should be read so that all
may, if possible, have their due and conjoint effect without repugnancy or inconsistency. The sections of a code relative to
any subject must be harmonized and to that end the letter of any section may sometimes be disregarded. But where
absolute harmony between parts of a statute is demonstrably non-existent, the court must reject that one which is least in
accord with the general plan of the whole, or if there be no such ground for choice between inharmonious section, the
later section being the last expression of the legislative mind must, in construction, vacate the former to the extent of the
repugnancy." (1 Fed. Stat. Ann., 2d ed., 49-50.)

And speaking with reference to the rule by which special provisions are held to dominate over general provisions in the
same or later laws, the author proceeds: " 'it is an old and familiar rule,' said Mr. Justice Lamar, 'that where there is in the
same statute a particular enactment, and also a general one, which in its most comprehensive sense would include what
is embraced in the former, the particular enactment must be operative, and the general enactment must be taken to affect
only such cases within its general language as are not within the provisions of the particular enactment.' And the Justice
proceeded to apply that rule in the construction of a statute upon which there had been much ingenious argument and a
decided conflict of authority in the inferior federal courts. The stature was an act of Congress of 1876, declaring
nonmailable 'every obscene . . . book, pamphlet, paper, writing, print, or other publication of an indecent character,' and
other enumerated articles, and making it a misdemeanor to deposit any of them for mailing. In a prosecution under the
act, the Circuit Court certified to the Supreme Court the following question: 'Is the knowingly depositing in the mails of an
obscene letter, inclosed in an envelope or wrapper upon which there is nothing but the name and address of the person to
whom the letter is written, an offense within the act?' On behalf of the government it was contended that the word 'writing'
comprehended such a letter, but the Supreme Court held otherwise. In the course of his argument in support of the view
of the court, Justice Lamar pointed out that the statute, after enumeration what articles shall be nonmailable, adds a
separate and distinct clause declaring that 'every letter upon the envelope of which . . . indecent, lewd, obscene, or
lascivious delineations, epithets, terms, or language may be written or printed . . . shall not be conveyed in the mails,' and
the person knowingly or willfully depositing the same in the mails 'shall be deemed guilty of a misdemeanor,' etc. 'This
distinctly additional clause,' continued the Justice, 'specifically designating and describing the particular class of letters
which shall be nonmailable, clearly limits the inhibitions of the statute to that class of letters alone whose indecent matter
is exposed on the envelope.' " (1 Fed. Stat. Ann., 2d ed., 50-51; also at pp. 164-166.)

The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of latter date clearly
reveals an intention on the part of the lawmaking power to abrogate the prior law, this intention must be given effect; but
there must always be a sufficient revelation of this intention, and it has become an unbending rule of statutory
construction that the intention to repeal a former law will not be imputed to the Legislature when it appears that the two
statute, or provisions, with reference to which the question arises bear to each other the relation of general to special. It is
therefore idle to speculate whether in the case before us the Philippine Legislature may or may not have intended to
modify or abrogate section 1770 of the Administrative Code at the time the amendment to section 1762 was enacted, for if
any such intention was entertained, it was not revealed in a way that would justify a court in giving this intention effect. We
may add, however, that, in the opinion of the majority of the Justices participating in this decision, the Legislature in
amending section 1762 could not possibly have entertained a design to modify section 1770; for, as we have already
shown, the abrogation of that provision, even as regards draft animals alone, would leave the animal industry of the
Islands exposed to the danger incident to the unrestricted importation of infected animals from districts where rinderpest
prevails. The unreasonableness of this interpretation of the amendatory law alone supplies sufficient warrant for rejecting
it. The Legislature could not possibly have intended to destroy the effectiveness of quarantine as regards imported
animals.

Our conclusion then is that section 1770 of the Administrative Code remains in full force; and the determination of this
question is we think necessarily fatal to the petitioner's case.

It is insisted, however, that even supposing section 1770 of the Administrative Code to be in force, nevertheless, the
requirement of immunization at the port of embarcation is unreasonable, inasmuch as the immunization of the cattle at
that port, under the supervision of the Government veterinarians of French Indo-China, is not unconditionally accepted as
efficacious by the Philippine authorities, as shown by the fact that the latter further require tests to be made upon the
arrival of the cattle here, consisting of inoculation with virulent blood of animals suffering from rinderpest — which involves
additional expenses and exposes the importer to the loss of his entire herd.

Considerations of this nature are we think more proper to be addressed to the authorities responsible for the regulations
than to this court. About the principal fact that rinderpest exists in the regions referred to in Department Order No. 6, there
49
is, and can be no dispute; and when the Department Head declared that the disease prevails in those regions and that
there is danger of spreading it by the importation of cattle and carabao into this country, he was acting upon a matter
within his province, and we are not disposed to review the conclusion.

It has been suggested that the regulative power vested in the Director of Agriculture under section 1770 of the
Administrative Code with respect to the admission of cattle into the Philippine Islands attaches only when the importation
has been effected; and that the said Director has no authority to dictate the measures to be taken by the importer before
the cattle are embarked for transportation to these Islands. This contention, in our opinion, reflects a mistaken point of
view with reference to the effect of the regulations; and the answer is to be found in the consideration that the regulation in
question has prospective reference to the condition of the cattle upon their arrival here. In other words, the prior
immunization of the cattle is made a condition precedent to the right to bring them in; as much as to say, that only animals
conforming to the required type will be admitted. The importer is thus left at entire liberty in respect to the taking of the
necessary measures to gain admittance for his cattle in our ports; and if he fails to do so, the penalty merely is that the
cattle are not admitted.

Upon the whole we are of the opinion that the petition does not show sufficient ground for granting the writs
of mandamus and injunction. The demurrer interposed thereto by the respondents in their return to the order to show
cause, dated October 7, 1922, is therefore sustained, and the temporary restraining order heretofore promulgated in this
cause, dated September 21, 1922, is dissolved; and unless within five days after notification hereof the petitioner shall so
amend his petition as to show a sufficient cause of action, an order absolute will be entered, dismissing the same, with
costs. So ordered.

Separate Opinions

JOHNS, J., dissenting:

The question involved is the meaning and construction of Act No. 3052 of the Legislature at its special session approved
March 14, 1922, as it amends section 1762 of Act No. 2711, and to what extent, if any, it repeals or modifies section 1770
of Act No. 2711.

It will be noted that section 1 of Act No. 3052 reads as follows:

Section seventeen hundred and sixty-two of Act Numbered Twenty-seven hundred and eleven, known as the
Administrative Code, is hereby amended to read as follows:

Hence, Act No. 3052 becomes, and is, a complete substitute for section 1762 of Act No. 2711, which reads as follows:

SEC. 1762. Bringing of diseased animal into Islands forbidden. — Except upon permission of the Director of
Agriculture, with the approval of the head of Department first had, it shall be unlawful for any person knowingly to
ship or otherwise bring into the Philippine Islands any animal suffering from, infected with, or dead of any
dangerous communicable disease, or any effects pertaining to such animal which are liable to introduce such
disease into the Philippine Islands.

Any such animal or its effects may be permitted by the Director of Agriculture, with the approval of the head of
Department first had, to enter the Islands under such conditions as to quarantine, cremation, or other disposal as
he may direct, or which shall be deemed by him sufficient to prevent the spread of any such disease.

As amended by Act No. 3052, section 1762 reads as follows:

SEC. 1762. Bringing of animals imported from foreign countries into the Philippine Islands. — It shall be unlawful
for any person or corporation to import, bring or introduce live cattle into the Philippine Islands from any foreign
country. The Director of Agriculture may, with the approval of the head of the department first had, authorize the
importation, bringing or introduction of various classes of thoroughbred cattle from foreign countries for breeding
the same to the native cattle of these Islands, and such as may be necessary for the improvement of the breed,
not to exceed five hundred head per annum: Provided, however, That the Director of Agriculture shall in all cases
50
 permit the importation, bringing or introduction of draft cattle and bovine cattle for the manufacture of
serum: Provided, further, That all live cattle from foreign countries the importation, bringing or introduction of
which into the Islands is authorized by this Act, shall be submitted to regulations issued by the Director of
Agriculture, with the approval of the head of the department, prior to authorizing its transfer to other provinces.

At the time of the approval of this Act, the Governor-General shall issue regulations and others to provide against
a raising of the price of both fresh and refrigerated meat. The Governor-General also may, by executive order,
suspend this prohibition for a fixed period in case local conditions require it.

It was approved March 14, 1922.

It will be noted that the original Act was entitled:

Bringing of diseased animal into Islands forbidden.

And that , as amended by Act No. 3052, it is now entitled:

Bringing of animals imported from foreign countries into the Philippine Islands.

Of course, it must follow that any animal imported into the Philippine Islands must be brought here from a foreign country
within the meaning of either Act. It will be noted that the word "diseased," as found in the title of the original Act, is not
found in the title of the Act as amended. To my mind this is important, especially in view of the language used in the
amended Act, which reads:

It shall be unlawful for any person or corporation to import, bring or introduce live cattle into the Philippine Islands
from any foreign country.

Standing alone that language would be construed as an express prohibition against bringing cattle of any kind into the
Philippine Islands "from any foreign country." The Act then says:

The Director of Agriculture may, with the approval of the head of the department first had, authorized the
importation, bringing or introduction of various classes of thoroughbred cattle from foreign countries for breeding
the same to the native cattle of these Islands, and such as may be necessary for the improvement of the breed,
not to exceed five hundred head per annum.

By those provisions the Director of Agriculture, with the approval of the head of the department first had and obtained,
may authorize the importation of thoroughbred cattle for breeding purposes not to exceed five hundred head per annum.
To import such cattle, the shipper must obtain the consent of the Director of Agriculture, together with the approval "of the
head of the department," and it must appear that the cattle "are thoroughbred cattle from foreign countries for breeding
the same to the native cattle of these Islands," and that they are of the kind which will improve the breed of the native
cattle, and the number must not exceed five hundred head per annum. That is to say, by the express terms of the Act,
thoroughbred cattle cannot be imported without the express consent and approval of the Director of Agriculture and the
head of his department, and then only for specific purposes, and then in a limited quantity. Such provision will not admit of
any other construction. Bearing those provisions and such construction in mind, the Act further says:

Provided, however, That the Director of Agriculture shall in all cases permit the importation, bringing or
introduction of draft cattle and bovine cattle for the manufacture of serum.

Under the former provision of the Act thoroughbred cattle cannot be imported without the consent of the Director of
Agriculture, "without the approval of the head of the department first had." But as to draft cattle and bovine cattle, the Act
expressly provides:

That the Director of Agriculture shall in all cases permit the importation.

That is to say, as to thoroughbred cattle, he may or may not grant the permit, and then only in a limited number. But as to
draft cattle and bovine cattle for the manufacture of serum, he "shall in all cases permit the importation." As to such cattle

51
it is not a matter of his choice or discretion. But the majority opinion holds that he is given that power and discretion under
section 1770 of Act No. 2711, which reads as follows:

SEC. 1770. Prohibition against bringing of animals from infected foreign countries. — When the Department Head
shall be general order that a dangerous communicable animal disease prevails in any foreign country, port, or
place and that there is danger of spreading such disease by the importation of domestic animals therefrom, it
shall be unlawful for any person knowingly to ship or bring into the Philippine Islands any such animal, animal
effects, parts, or products from such place, unless the importation thereof shall be authorized under the
regulations of the Bureau of Agriculture.

It will be noted that section 1770 was enacted in 1917, and that Act No. 3052 was enacted March 14, 1922, five years
after section 1770 became a law. It will also be noted that the rules and regulation here sought to be enforced were
promulgated in July, 1922, under section 1770, and four months after Act No. 3052 became a law. That is to say, that
here you have rules and regulations of a subordinate department promulgated in July, 1922, that are in dire0ct conflict
with an Act of the Legislature approved March, 1922. But it is contended that one is a special and the other a general law,
and that the two Acts should be construed in pari materia. The construction overlooks the fact that the force and effect of
section 1770 of Act No 2711 is founded upon section 1762, and that both are sections of the same general Act, and that
when section 1762 is repealed, as it is, by Act No. 3052, in so far as it applies to draft and bovine cattle, there is nothing
left upon which section 1770 can operate or to which it would apply. That is to say, that section 1762 and section 1770 are
both sections of a general Act, and part of one and the same Act, and Act No. 3052 expressly repeals section 1762, and
by doing so it repeals section 1770, in so far as it applies to draft and bovine cattle for the manufacture of serum.

For illustration: Suppose that section 1762 had never been amended by Act No. 3052, and that the Legislature enacted a
law expressly repealing the whole section, how then would section 1770 operate, and to what would it apply, and how and
where would it be in force and effect? There would be nothing to which it could apply. Section 1770 is absolutely
dependent upon section 1762, without which it cannot be of any force or effect. Both of them are sections of the same
general law, and one is dependent upon the other, hence, when you amend or repeal section 1762, you modify or repeal
section 1770, in so far as it relates to, or is a part of, section 1762.lawphil.net

Section 1770 is entitled:

Prohibition against bringing of animals from infected foreign countries.

Section 1762, as amended by Act No. 3052, is entitled:

Bringing of animals imported from foreign countries into the Philippine Islands.

Section 1762, as amended, recites:

That the Director of Agriculture shall in all cases permit the importation, etc.

The word "importation" has a well-defined meaning, and must have been used with reference to its legal meaning.

Words and Phrases, volume IV, page 3438, says:

"The literal meaning of "importation" is to bring in with intent to land. It means a bringing into some port, harbor, or
haven, with an intent to land the goods there. It takes place when the vessel arrives at a port of entry, intending
there to discharge her cargo." (Kidd vs. Flagler [U.S.], 54 Fed., 367, 369; The Mary [U.S.], 16 Fed. Cas., 932,
933.)

Importation is not the making entry of goods at the customhouse, but merely the bringing them into port; and the
importation is complete before entry at the customhouse. (United States vs. Lyman [U.S.], 26 Fed. Cas., 1024,
1028; Perots vs. United States, 19 Fed. Cas., 258.)

Act Cong. July 1, 1812, c. 112, providing a double duty on all goods, wares, and merchandise imported into the
United States from and after the passage of the acts, means not only that there shall be an arrival within the limits

52
 of the United States and of a collection district, but also within the limits of some port of entry. (Arnold vs. United
States, 13 U. S. [9 Cranch], 104, 120; 3 L. ed., 671.)

An article is not imported from a foreign country, within the meaning of the tariff laws, until it actually arrives at a
port of entry of the United States, and the importation is governed by the law in force at the time of such arrival;
and hence under the Treaty of Paris, by which Spain ceded the Philippine Islands to the United States, and which
took effect by the exchange of ratification and the president's proclamation on April 1, 1899, which repealed the
existing tariff duties on goods brought from those islands, the goods, arriving at a port of entry of the United
States from Philippine ports after its taking effect, were not subject to duty, although they were shipped before
April 11th. (American Sugar Refining Co. vs. Bidwell [U.S.], 124 Fed., 677, 681.)lawphil.net

Applying this definition, the legislative Act says:

That the Director of Agriculture shall in all cases permit the importation, etc.

Giving to the word "importation," as used in the Act, its legal meaning, it is the express duty of the Director of Agriculture
to permit the bringing or introduction of draft cattle and bovine cattle with the ports and harbors of the Philippine Islands
when they are brought here with intent to land. That is the definition given to the word "importation" by both the Federal
and the Supreme Courts of the United State. That is to say, that in all cases it is the express duty of the Director of
Agriculture to permit the bringing or introduction of draft cattle and bovine cattle for the manufacture of serum within the
jurisdiction, ports and harbors of the Philippine Islands. If that part of Act No. 3052 does not mean what it says, it does not
mean anything. Again, it must be conceded that the Legislature of the Philippine Islands has no authority to make or
enforce any law beyond its jurisdiction, and that it never intended to do so.

As the majority opinion states, the case is submitted to the court on the demurrer of the defendants to the complaint.
Hence, all of the material allegations of the complaint are admitted.

The defendants rely upon Department Order No. 6, as follows:

DEPARTMENT ORDER }
}Series of 1922.
NO. 6. }

Owing to the fact that a dangerous communicable disease known as rinderpest exist in Hongkong, French Indo-
China and British India, it is hereby declared, in accordance with the provisions of section 1770 of Act No. 2711
(Administrative Code of the Philippine Islands of 1917), that rinderpest prevails in said countries, and as there is
danger of spreading such disease by the importation of cattle, carabaos, and pigs therefrom, it shall be unlawful
for any person knowingly to ship or bring into the Philippine Islands any such animal, animal effects, parts, or
products from Hongkong, French Indo-China and British India, unless the importation thereof shall be authorized
under the regulations of the Bureau of Agriculture.

The provisions of this order shall take effect on and after August 1, 1922.

And Administrative Order No. 21, as follows:

ADMINISTRATIVE ORDER }
}
NO. 21. }

Re importation of cattle, carabaos, and pigs from French Indo-China, Hongkong and India.

1. Pursuant to the provisions of Department Order No. 6, series of 1922, of the Department of Agriculture and
Natural Resources, the present regulations of the Bureau of Agriculture governing the importation of livestock
from French Indo-China and Hongkong are hereby amended to the effect that the importation of livestock of the
species named in the aforementioned Department Order is hereby prohibited from French Indo-China, Hongkong
and India. However, animals immunized against rinderpest, for which the importer before placing his order shall

53
 have obtained from the Director of Agriculture a written permit to import them from the above named countries,
may be allowed entrance into the Philippine Islands.

2. This order shall take effect on and after August 1, 1922.

Hence, you have this situation. You have an Act of the Legislature which says:

"That the Director of Agriculture shall in all cases permit the importation, bringing or introduction of draft cattle and bovine
cattle for the manufacture of serum," passed by the Legislature in March, 1922, and you have rules and regulations of a
subordinate department of the Government which absolutely prohibits the importation of draft cattle and bovine cattle for
the manufacture of serum, "unless the importation thereof shall be authorized under the regulations of the Bureau of
Agriculture," and "that the importation of livestock of the species named in the aforementioned Department Order is
hereby prohibited from French Indo-China, Hongkong and India," and where the important, before placing his order in a
foreign country, shall obtain a written permit from the Director of Agriculture, and then he may be allowed to import cattle
into the Philippine Islands.

The question is thus squarely presented whether the rules and regulations of a subordinate department can overthrow
and destroy the express provisions of a legislative Act. It will be noted that Act No. 3052 expressly provides that with
certain limitations and reservations, and with the consent and approval of the Director of Agriculture and the head of the
department, thoroughbred cattle may be brought into the Islands in limited number for certain purposes. There are no
such restriction or limitations for the bringing in or introduction of draft and bovine cattle. Under that provision, the
Legislature has said in express terms that the Director of Agriculture shall grant the permit in all cases. If it had been the
purpose and intent of the Legislature to place any restrictions or limitations upon "the importation, bringing or introduction
of draft cattle and bovine cattle for the manufacture of serum," it would have said so, as it did in the previous provision of
the Act for the importation of thoroughbred cattle. But it is contended that, notwithstanding Act No. 3052, section 1770 is
not repealed and remains in full force and effect.

Upon the question of where and how a statute is repealed, Lewis' Sutherland Statutory Construction is a recognized as
standard authority in all the courts. In section 247 (vol. I), the author says:

. . . therefore, the former law is constructively repealed, since it cannot be supposed that the law-making power
intends to enact or continue in force laws which are contradictions. The repugnancy being ascertained, the later
act or provision in date or position has full force, and displace by repeal whatever in the precedent law is
inconsistent with it.

Subsequent legislation repeals previous inconsistent legislation whether it expressly declares such repeal or not.
In the nature of things it would be so, not only on the theory of intention, but because contradictions cannot stand
together.

"Where the later or revising statute clearly covers the whole subject-matter of antecedent acts, and it plainly
appears to have been the purpose of the legislature to give expression in it to the whole law on the subject, the
latter is held to be replaced by necessary implication."

An affirmative enactment of a new rule implies a negative of whatever is not included, or is different; and if by the
language used a thing is limited to be done is a particular form or manner, it includes a negative that it shall not be
done otherwise. An intention will not be ascribed to the law-making power to establish conflict and hostile systems
upon the same subject, or to leave in force provisions of law by which the later will of the legislature may be
thwarted and overthrown. Such a result would render legislation a useless and idle ceremony, and subject the law
to the reproach of uncertainly and unintelligibility. (Sec. 249.)

Where a later act grants to an officer or tribunal a part of a larger power already possessed, and in terms which
interpreted by themselves import a grant of all the power the grantee is intended to exercise, it repeals the prior
act from which the larger power had been derived. (Sec. 250.)

In the leading case of Gorham vs. Luckett (6 B. Mon., 146), Marshall, J., says:

54
 This is not a case of the re-enactment of a former law in the same words, or with additional provisions, nor of a
regrant of a pre-existing power to the same or a greater extent. It is not a case of cumulative or additional power
or right or remedy. Nor does it come within the rule that a subsequent affirmative statute does not repeal a
previous one, which can only apply where both statute can have effect. This is a formal and express grant of
limited power to a depository which already had unlimited power. And it can have no effect, nor be ascribed to any
other purpose, but that of limiting the extent of the pre-existing power. If certain provisions of two statutes are
identical, the last need not be construed as repealing, but merely as continuing or re-affirming, the first, for which
there might be various reasons. So, if a statute give a remedy, or provide that certain acts shall be sufficient for
the attainment or security of certain objects, and a subsequent statute declare that a part of the same remedy or
some of the same acts, or other acts entirely different, shall suffice for the accomplishment of the same object,
here the latter act does not necessarily repeal the former, except so far as it may be expressed or implied in the
former that the end shall be attained by no other mode but that which it prescribes. If there be no such restriction
in the first, there is no conflict between them. Both may stand together with full effect, and the provisions of either
may be pursued.

But if a subsequent statute requires the same, and also more than a former statute had made sufficient, this is in
effect a repeal of so much of the former statute as declares the sufficient of what it prescribes. And if the last act
professes, or manifestly intends to regulate the whole subject to which it relates, it necessary supersedes and
repeals all former acts, so far as it differs from them in its prescriptions. The great object, then is, to ascertain the
true interpretation of the last act. That being ascertained, the necessary consequence is, that the legislative
intention thus decided from, it must prevail over any prior inconsistent intention to be deduced from a previous
act.

. . . The difficulty, or rather the embarrassment in the case, arises from the fact that a previous law had given to
the same grantee unlimited power on the same subject, and that this twentieth section makes no reference to the
previous law, and contains no express words or restriction or change, but granting an express and limited power,
is framed as if it were the first and only act on the subject. But do not these circumstance indicate that it is to be
construed as if it were the only act on the subject? Or shall the first act, which is inferior in authority so far as they
conflict, so far affect the construction of the last, as to deprive it of all effect? We say the last act must have effect
according to its terms and its obvious intent. And as both cannot have full operation according to their terms and
intent, the first and not the last act must yield.

Section 1770 was enacted in 1917, and Act No. 3052 in 1922, five years later, and the rules and regulations sought to be
enforced are founded upon section 1770 and were promulgated about five months after Act No. 3052 became a law. The
two sections are not only inconsistent, but there is a direct conflict between them as to the importation of draft and bovine
cattle, especially as to the promulgated rules and regulations. The Legislature says that as to draft and bovine cattle, the
permit shall be granted in all cases, and defendants say that we will not grant the permit under any circumstances, unless
you comply with the rules and regulations that we have promulgated, which are impossible of performance, and are in
direct conflict with Act No. 3052 of the Legislature.

As Lewis' Sutherland says:

. . . therefore, the former law is constructively repealed, since it cannot be supposed that the law-making power
intends to enact or continue in force laws which are contradictions. The repugnancy being ascertained, the later
act or provision in date or position has full force, and displaces by repeal whatever in the precedent law is
inconsistent with it.

And

Subsequent legislation repeals previous inconsistent legislation whether it expressly declares such repeal or not.
In the nature of things it would be so, not only on the theory of intention, but because contradictions cannot stand
together.

It must be conceded that any authority of the defendants to promulgated rules and regulations must be found upon some
legislative act, and that in the absence of legislative authority, the defendants have no right or license to promulgate any
rules and regulations for any purpose. Hence, you have this situation; that the Legislature in positive and express
language has said that "the Director of Agriculture shall in all cases permit the importation, bringing and introduction of
draft cattle and bovine cattle for the manufacture of serum," and the defendants have said that we will not comply with the
55
legislative act, you shall not import cattle until you comply with rules and regulations which we have made and
promulgated, which rules and regulations, in legal effect, absolutely prohibit the importation of such cattle for any purpose.

It is not for this court to legislate or to say whether or not Act No. 3052 is a good law or a bad law. Suffice it to say that it
was enacted by the Legislative, which, to say the least, knows as much about the cattle business in the Philippine Islands
as do the members of this court.

In its petition, the plaintiff offers to comply with all the port, harbor and quarantine rules and regulations of the Philippine
Islands. But it is contended that they are not sufficient to prevent the spread of disease among the cattle. If not, they
should be amended, and other and more strict quarantine regulations within the Philippine Islands should be adopted, and
the Legislature has the power to absolutely prohibited the importation of cattle into the Islands for any and all purposes,
which it did in Act No. 3052, except as to certain limitations and provisions, among which are "that in all cases the Director
of Agriculture shall permit the importation, bringing and introduction of draft cattle and bovine cattle for the manufacture of
serum."

Under the facts alleged, the petitioner has brought itself squarely within those provisions and the Director of Agriculture
has denied him the permit which the Legislature says he must grant, and has imposed upon it the performance of
impossible rules and regulations as a condition precedent to the granting of the permit.

Under the majority opinion, as to the importation of draft and bovine cattle, we have a government of rules and regulations
promulgated by a subordinate of the government which are in direct conflict with the legislative Act.

By the majority opinion all that portion of Act No. 3052, which says "that the Director of Agriculture shall in all cases permit
the importation, etc.," becomes a nullity and is overruled by a subordinate branch of the Government. In legal effect, it
holds that, in so far as there is a conflict between them, the provisions of section 1770 must prevail over the provisions of
Act No. 3052. That is not good law. In so far as there is a conflict, Act No. 3052 should be construed as repealing section
1770, for the simple reason that Act No. 3052 became a law about five years after section 1770.

The majority opinion violates every canon of statutory construction. For such reasons, with all due respect to it, I
vigorously dissent.

Araullo, C. J., and Romualdez, J., concur.

56
9.)

G.R. No. L-11002 January 17, 1916

THE UNITED STATES, plaintiff-appellee,

vs.
MATEO P. PALACIO, defendant-appellant.

Antonio Belmonte for appellant.

Attorney-General Avanceña for appellee.

ARAULLO, J.:

These proceedings for violation of section 87 of Act No. 82, the Municipal Code, were brought against the defendant,
Mateo P. Palacio, in the Court of First Instance of Leyte by the following complaint filed therein by the fiscal on December
18, 1914.

The undersigned charges Mateo P. Palacio with having violated section 87 of Act No. 82, in the following manner,
to wit: Said accused, on or about the 26th day of September, 1914, in the municipality of Tacloban, Province of
Leyte, P.I., he being then and there a deputy to the provincial assessor of Leyte, charged with the duty of
assessing real property, did wilfully, unlawfully, and criminally upon revising the assessment and in reassessing
the property of Francisco Madlonito, situated in the barrio of Di-it, municipality of Tacloban, omit from the tax list
certain real properties and improvements belonging to said Francisco Madlonito, knowing that the properties
omitted were lawfully taxable; in violation of law.

A demurrer having been filed by defendant's counsel on the ground that the facts alleged in the complaint did not
constituted the crime provided for and punished by said section 87 of Act No. 82, the same was overruled, and, defendant
having pleaded not guilty, the case came to trial. Evidence was introduced by both the prosecution and the defense, and,
on January 15, 1915, said Court of First Instance rendered judgment in which, insisting upon the overruling of the
demurrer interposed to the complaint, and finding of the demurrer interposed to the complaint, and finding the defendant
guilty of the crime therein charged, he sentenced him to the penalty of forty days' imprisonment in the provincial jail, to pay
a fine of P100, or, in case of insolvency, to suffer the corresponding subsidiary imprisonment and to pay the costs.
Defendant has appealed from this judgment and has assigned thereto various errors which, as stated by the Attorney-
General in his brief, may be reduced to the following:

1. That the lower court erred in holding that the evidence adduced at trial proves defendant's guilt beyond all
reasonable doubt.

2. That the facts alleged in the complaint and proven at trial do not constitute the infraction provided for and
punished by section 87 of Act No. 82, known as the Municipal Code.

The evidence shows beyond all doubt that while defendant was serving as a deputy to the provincial assessor of Leyte,
duly appointed and such, and having proceeded under orders of said assessor, given in the month of September, 1914, to
verify the measurement, evaluation, and assessment of the properties of one Francisco Madlonito, situated in the barrio of
Di-it, municipality of Tacloban of said province, he presented in performance of his duty a report in which he recorded as
real property belonging to said Francisco Madlonito a rectangular parcel of unirrigated land which was adjoined on the
north by the land of Anacleto Condes; on the east, by that of Ventura Viñas; on the south, by that of Jose Guardino; and
on the west, by woods; it measured 3 hectares 51 ares and 23 centiares in area, the only improvements consisting of 500
hemp plants; that several days afterwards, in the following month of October, the provincial assessor, having been
advised that defendant's report was false, proceeded in company with another deputy to remeasure and to make a new
valuation and assessment of the same land, under guidance of and in accordance with date furnished by the same
Francisco Madlonito who had previously conducted and furnished information to defendant; as a result of this proceeding
on the part of said provincial assessor, it was ascertained that said land was unirrigated hemp or corn land; that it was
polygonal in form and was adjoined on the north by the property of Anacleto Condes and Basilio Espejo; on the east, by
that of Nicanor Dolina, Basilio Espejo and Ventura Viñas; on the south, by the land of Tomas Tabosa and a wood; and by
a wood on the west; it was found to measure 15 hectares 17 ares and 65 centiares in extent, the improvements thereon
consisting of a plantation of hemp, a dwelling house of mixed material, 80 clumps of banana trees, 9 cacao trees, 24
coconut trees 5 years of age, and one coconut tree in bearing. It was therefore apparent that in the tax list of real property
57
which, as deputy to the provincial assessor, defendant was charged to prepare — that is, the report presented by him —
he had omitted real property belonging to Francisco Madlonito, which property consisted of 12 hectares 66 ares and 42
centares of land and all the improvements mentioned, with the exception of the 500 hemp plants specified in this report.

Defendant endeavored in a way to explain this omission by attributing it to the fact that in making his report he relied upon
the information furnished by Francisco Madlonito himself, and, with respect to the area, on that given him at the time by
the two laborers who measured the land and who assured him that said measurement was correct, because it was the
same as that which has been pointed out to them by the owner of the land. Defendant further explained that he also
accepted the informations furnished by said laborers with respect to the improvements specified in said report as
consisting of a plantation of hemp; that these men had told him that there were no other improvements except the hemp
plantation and some banana trees of which he did not know how many there were; with respect to the house, Francisco
Madlonito told him that it belonged to Emiliano, Francisco's brother; that this latter was absent at the time and therefore
defendant did not measure the property, deciding to postpone doing so until the 15th of January of the following year,
when he intended to return.

These explanations of the defendant are not satisfactory, nor can they serve to exonerate him as he claims because, in
the first place, he should not have relied on what the interest party himself, Francisco Madlonito, told him, nor upon the
information which, at the time he inspected and measured the lands, was furnished him by the two laborers of whose
services he availed himself for the actual performance of that labor. He himself ought to have verified the correctness of
the information and have informed himself of the true area of the land and of all the improvements thereon, they being in
sight, in order to include them in the report which it was his duty to render to the provincial assessor in fulfillment of the
mission confined to him. In the second place, Francisco Madlonito himself testified at the trial that he had furnished
defendant with the same date and information which he subsequently gave to the provincial assessor and to the latter's
other deputy when they both went to verify and investigate the defendant's work, form which verification and investigation
it was disclosed that the land was larger by 12 hectares 66 ares and 42 centiares and that it contained many other
improvements such as clumps of coconut, cacao and banana trees, besides the 500 hemp plants mentioned in
defendant's report. We therefore fail to understand and it has not been explained how said improvements could have
been omitted from the report, nor how defendant could have failed to mentioned therein such a large tract of land as that
of the 12 hectares above referred to. This, together with the circumstances of defendant's having passed the previous
night in Francisco Madlonito's own house, and having had, therefore, sufficient opportunity and time to inform himself of
exactly what the latter's property, which was to be measure and recorded in said report, consisted of, constitute proof that
defendant (exception made in so far as the house is concerned, for it might be true that it did belong to Francisco
Madlonito's brother), willfully omitted from his report and extensive portion of Francisco Madlonito's real property that he
knew was lawfully taxable and which it was his duty to record in said document. The lower court did not, therefore, incur
the first error assigned by defendant's counsel in his brief.

Defendant's counsel alleges, however, that the act committed by his client and which, as aforesaid, was proven at trial,
does not constitute an infraction provided for and punished by section 87 of Act No. 82, known as the Municipal Code."

That section provides as follows:

Any officer charged with the duty of assessing real property, who shall willfully omit from the tax lists real property
which he knows to be lawfully taxable, shall be guilty of a misdemeanor and punishable by a fine not exceeding
one thousand pesos, or imprisonment not exceeding two years, or both, in the discretion of the court.

Section 49 of the same Act, No. 82, provides that the real estate of the municipality shall be valued and assessed for
taxation by a board, to consist of the president, the municipal treasurer, and a specially authorized deputy of the provincial
treasurer, which board shall be known as the municipal board of assessors.

Said section 49 was amended by section 1 of Act No. 1930, so that the aforementioned municipal board of assessors
should consist of the municipal president the municipal treasurer and, instead of the deputy to the provincial treasurer, of
a third member to be appointed by the provincial board.

Subsequently, on February 11, 1913, Act No. 2238 was passed, section 1 of which created the position of provincial
assessor for each province containing municipalities organized under the provisions of the Municipal Code. Section 2 of
this Act provides that provincial assessors shall be allowed such number of deputies and clerks as shall be fixed by the
provincial board with the approval of the Executive Secretary, and section 4, in reciting the duties of the provincial
assessor, and, consequently, those of his deputies, provides that, when directed by provincial board, he shall revise and
58
correct the assessments and valuations of real property for the purpose of taxation, and , in the manner set forth in the
Act, revise and correct, when so directed, any and all assessments and valuations for taxation, make a correct and just
assessments and state the true value of the real property. Other sections of this Act confer upon the provincial assessor
various powers in connection with the preparation of the lists of property subject to assessment, and, finally, establishes
the procedure that must be followed where any municipality or any property owner does not agree with the assessment
and valuation so made.

As may be seen, the purpose of Act No. 2238, in creating the office of provincial assessor and allowing him such number
of deputies and clerks as shall be fixed by the provincial board with the approval of the Executive Secretary, was the
same as that of Act No. 82, in creating, in section 49 thereof, the municipal board of assessors; and Act No. 1930, in
amending said section in the manner aforementioned, to wit, by providing that all the real property, taxable or subject to
the land tax, existing in the municipalities of these Islands, should be assessed, and, for this purpose and in order that the
provincial board should exercise the necessary and proper supervision over acts of the municipalities relative to said tax,
provided that someone representing the provincial board or better said, a provincial official, should be a member of the
municipal board of assessors — a purpose and object which are more accentuated in Act No. 2238 by expressly creating
the office of provincial assessor for the revision and correction of assessments and valuations of real property declared in
the municipalities — and to enable this official to take a direct and active part in preparing the lists of property subject to
said tax. Said Act 2238 is therefore intimately related to the two Acts Nos. 82 and 1930 aforecited, and is virtually a
complement of the same in so far as regards the declaration and assessment of taxable property.

Said Act No. 2238 provides in section 18 that all Acts or parts of Acts in conflict therewith are repealed. In the two
aforementioned Acts, Nos. 82 and 1930, in so far as relates to the assessment and valuation of taxable real property in
municipalities, there is, strictly speaking, nothing which may be said to be in conflict with said Act no. 2238, not only for
the reason above stated, but also because this Act has done nothing but change the method and procedure provided in
Act No. 82, the Municipal Code, for determining the taxable real property in the municipalities and the value thereof, by
means of the intervention which in said procedure is given to the provincial assessors. But that municipalities are not
excluded from taking part in the proceedings is shown by the fact that section 9 of this Act No. 2238 provides that, prior to
directing the provincial assessor in accordance with the provisions thereof, to proceed to revise and correct the
assessments and valuations of real property, the provincial board shall require each municipal council of the municipalities
organized under the provisions of the Municipal Code (Act No. 82) to prepare, in such form and detail as the Executive
Secretary may prescribe, a general schedule of the values of the different classes of land for the municipality which shall
be forwarded to the provincial board for approval, and such schedule, when approved by the provincial board, shall serve
the assessor as basis for the valuation and assessment. It also provides in section 13 that it shall be the duty of the
municipal president, secretary and treasurer and all municipal employees, to render every assistance in their power to the
provincial assessor.

Furthermore, one of the rules of interpretation, as very properly said by defendant's counsel in his brief, is that "when
there are two laws on the same subject enacted on different dates, and it appears evidently by the form and essence of
the later law that it was the intention of the legislator to cover therein the whole of the subject, and that it is a complete and
perfect system, or is in itself a provision, the latest law should be considered as a legal declaration that all that is
comprised therein shall continue in force and that all that is not shall rejected and repealed." A simple perusal of Act No.
2238 is sufficient to show that it was not the intention of the legislature to cover all matters relative to the assessment and
valuation of the taxable real property of the municipalities, and subject, because, as aforesaid, the Act in question is
closely related to Act No. 82, of which it is virtually a complement in so far as regards the organization of the service of
making the lists for the complete and adequate collection to the tax on the real property in municipalities organized under
said Act No. 82. It cannot, therefore, be maintained that section 87 of this latter Act should be considered as repealed, in
so far as it prescribes the penalty incurred by any official who, being charged with the duty of assessing real property,
wilfully omits form the tax lists any real property which he knows to be lawfully taxable.

Repeals by implications are not favored, and will not be decreed, unless it is manifest that the legislature so
intended. As laws are presumed to be passed with deliberation and with full knowledge of all existing ones on the
subject, it is but reasonable to conclude that in passing a statute it was not intended to interfere with or abrogate
any former law relating to same matter, unless the repugnancy between the two is not only irreconcilable, but also
clear and convincing, and flowing necessarily from the language used, unless the later act fully embraces the
subject matter of the earlier, or unless the reason for the earlier act is beyond peradventure removed. Hence,
every effort must be used to make all acts stand and if, by any reasonable construction, they can be reconciled,
the later act will not operate as a repeal of the earlier. (23 Am. and Eng. Ency. of Law, p. 489, and cases there
cited [vol. 26, pp. 721, 726].)

59
As said Act No. 2238 provides no penalty for the provincial assessor or his deputy who, in revising the assessment and
preparing the tax list of real property, wilfully makes any omission such as that aforestated; and as the provincial
assessor, or his deputy, is a public official or an official of the class referred to in section 87, it being immaterial whether
he be a provincial or a municipal official (for it is sufficient that it be the duty of such official to assess real property) it is
evident that the said penal provisions in force and is applicable to the provincial assessors and their deputies referred to in
Act No. 2238, and that the lower court did not err in sentencing defendant, under the provisions of said section 87, to the
penalty specified in the judgment appealed from.

The fact that the cadastral survey of the municipality of Tacloban was to terminated at the time of the discovery of the
omission made by the defendant in the report presented by him to the provincial assessor, and that such omission might
have been repaired by correcting the list or report by means of revision and new assessment made by the provincial
assessor himself on his proceeding with the investigation of the misdemeanor committed by defendant, does not exempt
the latter from liability, because what the law punished in said section 87 is the fact of the willful omission, by the official
charged with the duty of assessing the real property in the tax list, of any property which he knows to be lawfully taxable;
and it is immaterial whether said omission can or cannot subsequently be remedied, because it constitutes in itself a false
representation in that document and a fraud committed by the public official to prejudice of the Government or with intent
to cause such prejudice.

By reason of the foregoing, and the judgment appealed from being in accordance with the merits of the case and the law,
we hereby affirm the same, with the costs against appellant. So ordered.

60