Cases 1

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 164789
August 27, 2009
CHRISTIAN GENERAL ASSEMBLY, INC., Petitioner,

vs.
SPS. AVELINO C. IGNACIO and PRISCILLA T. IGNACIO, Respondents.
DECISION
BRION, J.:
We resolve in this Rule 45 petition the legal issue of whether an action to rescind a contract to
sell a subdivision lot that the buyer found to be under litigation falls under the exclusive
jurisdiction of the Housing and Land Use Regulatory Board (HLURB).
In this petition,1 Christian General Assembly, Inc. (CGA) prays that we set aside the
decision2 issued by the Court of Appeals (CA) in CAG.R. SP No. 75717 that dismissed its
complaint for rescission filed with the Regional Trial Court (RTC) of Bulacan for lack of
jurisdiction, as well as the CA resolution3 that denied its motion for reconsideration.
FACTUAL ANTECEDENTS
The present controversy traces its roots to the case filed by CGA against the Spouses Avelino
and Priscilla Ignacio (respondents) for rescission of their Contract to Sell before the RTC, Branch
14, Malolos, Bulacan. The facts, drawn from the records and outlined below, are not in dispute.
On April 30, 1998, CGA entered into a Contract to Sell a subdivision lot 4 (subject property) with
the respondents the registered owners and developers of a housing subdivision known as Villa
Priscilla Subdivision located in Barangay Cutcut, Pulilan, Bulacan. Under the Contract to Sell,
CGA would pay P2,373,000.00 for the subject property on installment basis; they were to pay a
down payment of P1,186,500, with the balance payable within three years on equal monthly
amortization payments of P46,593.85, inclusive of interest at 24% per annum, starting June
1998.
On August 5, 2000, the parties mutually agreed to amend the Contract to Sell to extend the
payment period from three to five years, calculated from the date of purchase and based on the
increased total consideration ofP2,706,600, with equal monthly installments of P37,615.00,
inclusive of interest at 24% per annum, starting September 2000.
According to CGA, it religiously paid the monthly installments until its administrative pastor
discovered that the title covering the subject property suffered from fatal flaws and defects. CGA
learned that the subject property was actually part of two consolidated lots (Lots 2-F and 2-G
Bsd-04-000829 [OLT]) that the respondents had acquired from Nicanor Adriano (Adriano) and
Ceferino Sison (Sison), respectively. Adriano and Sison were former tenant-beneficiaries of
Purificacion S. Imperial (Imperial) whose property in Cutcut, Pulilan, Bulacan5 had been placed
under Presidential Decree (PD) No. 27s Operation Land Transfer.6 According to CGA, Imperial
applied for the retention of five hectares of her land under Republic Act No. 6657, 7 which the
Department of Agrarian Reform (DAR) granted in its October 2, 1997 order (DAR Order). The
DAR Order authorized Imperial to retain the farm lots previously awarded to the tenantbeneficiaries, including Lot 2-F previously awarded to Adriano, and Lot 2-G Bsd-04-000829
awarded to Sison. On appeal, the Office of the President8 and the CA9 upheld the DAR Order.
Through the Courts Resolution dated January 19, 2005 in G.R. No. 165650, we affirmed the
DAR Order by denying the petition for review of the appellate decision.
Understandably aggrieved after discovering these circumstances, CGA filed a complaint against
the respondents before the RTC on April 30, 2002.10 CGA claimed that the respondents
fraudulently concealed the fact that the subject property was part of a property under litigation;
thus, the Contract to Sell was a rescissible contract under Article 1381 of the Civil Code. CGA
asked the trial court to rescind the contract; order the respondents to return the amounts already
paid; and award actual, moral and exemplary damages, attorneys fees and litigation expenses.
Instead of filing an answer, the respondents filed a motion to dismiss asserting that the RTC had
no jurisdiction over the case.11 Citing PD No. 95712 and PD No. 1344, the respondents claimed
that the case falls within the exclusive jurisdiction of the HLURB since it involved the sale of a
subdivision lot. CGA opposed the motion to dismiss, claiming that the action is for rescission of
contract, not specific performance, and is not among the actions within the exclusive jurisdiction
of the HLURB, as specified by PD No. 957 and PD No. 1344.
On October 15, 2002, the RTC issued an order denying the respondents motion to dismiss. The
RTC held that the action for rescission of contract and damages due to the respondents
fraudulent misrepresentation that they are the rightful owners of the subject property, free from all
liens and encumbrances, is outside the HLURBs jurisdiction.
1avvphi1
The respondents countered by filing a petition for certiorari with the CA. In its October 20, 2003
decision, the CA found merit in the respondents position and set the RTC order aside; the CA
ruled that the HLURB had exclusive jurisdiction over the subject matter of the complaint since it
involved a contract to sell a subdivision lot based on the provisions of PD No. 957 and PD No.
1344.
Contending that the CA committed reversible error, the CGA now comes before the Court asking
us to overturn the CA decision and resolution.
THE PETITION
In its petition, CGA argues that the CA erred (1) in applying Article 1191 of the Civil Code for breach of reciprocal obligation, while the
petitioners action is for the rescission of a rescissible contract under Article 1381 of the
same Code, which is cognizable by the regular court; and
(2) in holding that the HLURB has exclusive jurisdiction over the petitioners action by
applying Antipolo Realty Corp v. National Housing Corporation13 and other cited cases.
In essence, the main issue we are asked to resolve is which of the two the regular court or the
HLURB has exclusive jurisdiction over CGAs action for rescission and damages.
According to CGA, the exclusive jurisdiction of the HLURB, as set forth in PD No. 1344 and PD
No. 957, is limited to cases involving specific performance and does not cover actions for
rescission.
Taking the opposing view, respondents insist that since CGAs case involves the sale of a
subdivision lot, it falls under the HLURBs exclusive jurisdiction.
THE COURTS RULING
We find no merit in the petition and consequently affirm the CA decision.
Development of the HLURBs jurisdiction
The nature of an action and the jurisdiction of a tribunal are determined by the material
allegations of the complaint and the law governing at the time the action was commenced. The
jurisdiction of the tribunal over the subject matter or nature of an action is conferred only by law,
not by the parties consent or by their waiver in favor of a court that would otherwise have no
jurisdiction over the subject matter or the nature of an action.14Thus, the determination of whether
the CGAs cause of action falls under the jurisdiction of the HLURB necessitates a closer
examination of the laws defining the HLURBs jurisdiction and authority.
PD No. 957, enacted on July 12, 1976, was intended to closely supervise and regulate the real
estate subdivision and condominium businesses in order to curb the growing number of
swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and
condominium sellers and operators. As one of its "whereas clauses" states:
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators,
such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to
pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent
purchasers for value;
Section 3 of PD No. 957 granted the National Housing Authority (NHA) the "exclusive jurisdiction
to regulate the real estate trade and business." Thereafter, PD No. 1344 was issued on April 2,
1978 to expand the jurisdiction of the NHA to include the following:
SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority
shall have exclusive jurisdiction to hear and decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or condominium
unit buyer against the project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lot or condominium unit against the owner, developer, dealer,
broker or salesman.
Executive Order No. 648 (EO 648), dated February 7, 1981, transferred the regulatory and quasijudicial functions of the NHA to the Human Settlements Regulatory Commission (HSRC). Section
8 of EO 648 provides:
SECTION 8. Transfer of Functions. -The regulatory functions of the National Housing Authority
pursuant to Presidential Decree Nos. 957, 1216, 1344 and other related laws are hereby
transferred to the Commission [Human Settlements Regulatory Commission]. x x x. Among these
regulatory functions are: 1) Regulation of the real estate trade and business; x x x 11) Hear and
decide cases of unsound real estate business practices; claims involving refund filed against
project owners, developers, dealers, brokers, or salesmen; and cases of specific performance.
Pursuant to Executive Order No. 90 dated December 17, 1986, the HSRC was renamed as the
HLURB.
Rationale for HLURBs extensive quasi-judicial powers
The surge in the real estate business in the country brought with it an increasing number of
cases between subdivision owners/developers and lot buyers on the issue of the extent of the
HLURBs exclusive jurisdiction. In the cases that reached us, we have consistently ruled that the
HLURB has exclusive jurisdiction over complaints arising from contracts between the subdivision
developer and the lot buyer or those aimed at compelling the subdivision developer to comply
with its contractual and statutory obligations to make the subdivision a better place to live in. 15
We explained the HLURBs exclusive jurisdiction at length in Sps. Osea v. Ambrosio, 16 where we
said:
Generally, the extent to which an administrative agency may exercise its powers depends largely,
if not wholly, on the provisions of the statute creating or empowering such agency. Presidential
Decree (P.D.) No. 1344, "Empowering The National Housing Authority To Issue Writ Of Execution
In The Enforcement Of Its Decision Under Presidential Decree No. 957," clarifies and spells out
the quasi-judicial dimensions of the grant of jurisdiction to the HLURB in the following specific
terms:
SEC. 1. In the exercise of its functions to regulate the real estate trade and business and in
A. Unsound real estate business practices;
C. Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lots or condominium units against the owner, developer, dealer,
broker or salesman.
The extent to which the HLURB has been vested with quasi-judicial authority must also be
determined by referring to the terms of P.D. No. 957, "The Subdivision And Condominium Buyers'
Protective Decree." Section 3 of this statute provides:
x x x National Housing Authority [now HLURB]. - The National Housing Authority shall have
exclusive jurisdiction to regulate the real estate trade and business in accordance with the
provisions of this Decree.
The need for the scope of the regulatory authority thus lodged in the HLURB is indicated in the
second, third and fourth preambular paragraphs of PD 957 which provide:
WHEREAS, numerous reports reveal that many real estate subdivision owners, developers,
operators, and/or sellers have reneged on their representations and obligations to provide and
maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and
other similar basic requirements, thus endangering the health and safety of home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators,
such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to
pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent
purchasers for value;
xxxx
WHEREAS, this state of affairs has rendered it imperative that the real estate subdivision and
condominium businesses be closely supervised and regulated, and that penalties be imposed on
fraudulent practices and manipulations committed in connection therewith.
The provisions of PD 957 were intended to encompass all questions regarding subdivisions and
condominiums. The intention was aimed at providing for an appropriate government agency, the
HLURB, to which all parties aggrieved in the implementation of provisions and the enforcement
of contractual rights with respect to said category of real estate may take recourse. The business
of developing subdivisions and corporations being imbued with public interest and welfare, any
question arising from the exercise of that prerogative should be brought to the HLURB which has
the technical know-how on the matter. In the exercise of its powers, the HLURB must commonly
interpret and apply contracts and determine the rights of private parties under such contracts.
This ancillary power is no longer a uniquely judicial function, exercisable only by the regular
courts.
As observed in C.T. Torres Enterprises, Inc. v. Hibionada:
The argument that only courts of justice can adjudicate claims resoluble under the provisions of
the Civil Code is out of step with the fast-changing times. There are hundreds of administrative
bodies now performing this function by virtue of a valid authorization from the legislature. This
quasi-judicial function, as it is called, is exercised by them as an incident of the principal power
entrusted to them of regulating certain activities falling under their particular expertise.
In the Solid Homes case for example the Court affirmed the competence of the Housing and
Land Use Regulatory Board to award damages although this is an essentially judicial power
exercisable ordinarily only by the courts of justice. This departure from the traditional allocation of
governmental powers is justified by expediency, or the need of the government to respond swiftly
and competently to the pressing problems of the modern world. [Emphasis supplied.]
Another case Antipolo Realty Corporation v. NHA17 explained the grant of the HLURBs
expansive quasi-judicial powers. We said:
In this era of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and capability to hear and determine
promptly disputes on technical matters or essentially factual matters, subject to judicial review in
case of grave abuse of discretion, has become well nigh indispensable. Thus, in 1984, the Court
noted that between the power lodged in an administrative body and a court, the unmistakable
trend has been to refer it to the former.
xxx
In general, the quantum of judicial or quasi-judicial powers which an administrative agency may
exercise is defined in the enabling act of such agency. In other words, the extent to which an
administrative entity may exercise such powers depends largely, if not wholly on the provisions of
the statute creating or empowering such agency. In the exercise of such powers, the agency
concerned must commonly interpret and apply contracts and determine the rights of private
parties under such contracts, One thrust of the multiplication of administrative agencies is that
the interpretation of contracts and the determination of private rights thereunder is no longer a
uniquely judicial function, exercisable only by our regular courts. [Emphasis supplied.]
Subdivision cases under the RTCs jurisdiction
The expansive grant of jurisdiction to the HLURB does not mean, however, that all cases
involving subdivision lots automatically fall under its jurisdiction. As we said in Roxas v. Court of
Appeals: 18
In our view, the mere relationship between the parties, i.e., that of being subdivision
owner/developer and subdivision lot buyer, does not automatically vest jurisdiction in the HLURB.
For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the
nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have
consistently held that the concerned administrative agency, the National Housing Authority (NHA)
before and now the HLURB, has jurisdiction over complaints aimed at compelling the subdivision
developer to comply with its contractual and statutory obligations.
xxx
Note particularly pars. (b) and (c) as worded, where the HLURBs jurisdiction concerns cases
commenced by subdivision lot or condominium unit buyers. As to par. (a), concerning "unsound
real estate practices," it would appear that the logical complainant would be the buyers and
customers against the sellers (subdivision owners and developers or condominium builders and
realtors ), and not vice versa. [Emphasis supplied.]
Pursuant to Roxas, we held in Pilar Development Corporation v. Villar19 and Suntay v.
Gocolay20 that the HLURB has no jurisdiction over cases filed by subdivision or condominium
owners or developers against subdivision lot or condominium unit buyers or owners. The
rationale behind this can be found in the wordings of Sec. 1, PD No. 1344, which expressly
qualifies that the cases cognizable by the HLURB are those instituted by subdivision or
condomium buyers or owners against the project developer or owner. This is also in keeping with
the policy of the law, which is to curb unscrupulous practices in the real estate trade and
business.21
Thus, in the cases of Fajardo Jr. v. Freedom to Build, Inc.,[22] and Cadimas v. Carrion,23 we
upheld the RTCs jurisdiction even if the subject matter was a subdivision lot since it was the
subdivision developer who filed the action against the buyer for violation of the contract to sell.
The only instance that HLURB may take cognizance of a case filed by the developer is when
said case is instituted as a compulsory counterclaim to a pending case filed against it by the
buyer or owner of a subdivision lot or condominium unit. This was what happened in Francel
Realty Corporation v. Sycip,24 where the HLURB took cognizance of the developers claim
against the buyer in order to forestall splitting of causes of action.
Obviously, where it is not clear from the allegations in the complaint that the property involved is
a subdivision lot, as in Javellana v. Hon. Presiding Judge, RTC, Branch 30, Manila,25 the case
falls under the jurisdiction of the regular courts and not the HLURB. Similarly, in Spouses Dela
Cruz v. Court of Appeals,26 we held that the RTC had jurisdiction over a case where the conflict
involved a subdivision lot buyer and a party who owned a number of subdivision lots but was not
himself the subdivision developer.
The Present Case
In the present case, CGA is unquestionably the buyer of a subdivision lot from the respondents,
who sold the property in their capacities as owner and developer. As CGA stated in its complaint:
2.01. Defendants are the registered owners and developers of a housing subdivision
presently known as Villa Priscilla Subdivision located at Brgy. Cutcut, Pulilan, Bulacan;
2.02 On or about April 30, 1998, the plaintiff thru its Administrative Pastor bought from
defendants on installment basis a parcel of land designated at Lot 1, Block 4 of the said
Villa Priscilla Subdivision xxx
xxx
2.04 At the time of the execution of the second Contract to Sell (Annex "B"), Lot 1, Block
4 of the Villa Priscilla Subdivision was already covered by Transfer Certificate of Title No.
T-127776 of the Registry of Deeds of Quezon City in the name of Iluminada T. Soneja,
married to Asterio Soneja (defendant Priscilla T. Ignacios sister and brother-in-law) and
the defendants as co-owners, but the latter represented themselves to be the real and
absolute owners thereof, as in fact it was annotated in the title that they were empowered
to sell the same. Copy of TCT No. T-127776 is hereto attached and made part hereof as
Annex "C".
2.05 Plaintiff has been religiously paying the agreed monthly installments until its
Administrative Pastor discovered recently that while apparently clean on its face, the title
covering the subject lot actually suffers from fatal flaws and defects as it is part of the
property involved in litigation even before the original Contract to Sell (Annex "A"), which
defendants deliberately and fraudulently concealed from the plaintiff;
2.06 As shown in the technical description of TCT No. T-127776 (Annex "C"), it covers a
portion of consolidated Lots 2-F and 2-G Bsd-04-000829 (OLT), which were respectively
acquired by defendants from Nicanor Adriano and Ceferino Sison, former tenantsbeneficiaries of Purificacion S. Imperial, whose property at Cutcut, Pulilan, Bulacan
originally covered by TCT No. 240878 containing an area of 119,431 square meters was
placed under Operation Land Transfer under P.D. No. 27;
2.07 Said Purificacion S. Imperial applied for retention of five (5) hectares of her property
at Cutcut, Pulilan, Bulacan under Rep, Act No. 6657 and the same was granted by the
Department of Agrarian Reform (DAR) to cover in whole or in part farm lots previously
awarded to tenants-beneficiaries, including inter alia Nicanor Adrianos Lot 2-F and
Ceferino Sisons Lot 2-G Bsd-04-000829 (OLT).
xxx
2.08 Said order of October 2, 1997 was affirmed and declared final and executory, and
the case was considered closed, as in fact there was already an Implementing Order
dated November 10, 1997.
xxx
3.03 As may thus be seen, the defendants deliberately and fraudulently concealed from
the plaintiff that fact that the parcel of land sold to the latter under the Contract to Sell
(Annexes "A" and "B") is part of the property already under litigation and in fact part of
the five-hectare retention awarded to the original owner, Purificacion S. Imperial.
xxx
3.05 Plaintiff is by law entitled to the rescission of the Contracts to Sell (Annexes "A" and
"B") by restitution of what has already been paid to date for the subject property in the
total amount of P2,515,899.20, thus formal demand therefor was made on the
defendants thru a letter dated April 5, 2002, which they received but refused to
acknowledge receipt. Copy of said letter is hereto attached and made part hereof as
Annex "J". 27 [Emphasis supplied.]
From these allegations, the main thrust of the CGA complaint is clear to compel the
respondents to refund the payments already made for the subject property because the
respondents were selling a property that they apparently did not own. In other words, CGA claims
that since the respondents cannot comply with their obligations under the contract, i.e., to deliver
the property free from all liens and encumbrances, CGA is entitled to rescind the contract and get
a refund of the payments already made. This cause of action clearly falls under the actions
contemplated by Paragraph (b), Section 1 of PD No. 1344, which reads:
SEC. 1. In the exercise of its functions to regulate the real estate trade and business and in
xxx
We view CGAs contention that the CA erred in applying Article 1191 of the Civil Code as basis
for the contracts rescission to be a negligible point. Regardless of whether the rescission of
contract is based on Article 1191 or 1381 of the Civil Code, the fact remains that what CGA
principally wants is a refund of all payments it already made to the respondents. This intent,
amply articulated in its complaint, places its action within the ambit of the HLURBs exclusive
jurisdiction and outside the reach of the regular courts. Accordingly, CGA has to file its complaint
before the HLURB, the body with the proper jurisdiction.
WHEREFORE, premises considered, we DENY the petition and AFFIRM the October 20, 2003
Decision of the Court of Appeals in CA G.R. SP No. 75717 dismissing for lack of jurisdiction the
CGA complaint filed with the RTC, Branch 14 of Malolos, Bulacan.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. L-50444 August 31, 1987
ANTIPOLO REALTY CORPORATION, petitioner,
vs.
THE NATIONAL HOUSING AUTHORITY, HON. G.V. TOBIAS, in his capacity as General
Manager of the National Housing Authority, THE HON. JACOBO C. CLAVE, in his capacity
as Presidential Executive Assistant and VIRGILIO A. YUSON, respondents.
FELICIANO, J.:
By virtue of a Contract to Sell dated 18 August 1970, Jose Hernando acquired prospective and
beneficial ownership over Lot. No. 15, Block IV of the Ponderosa Heights Subdivision in Antipolo,
Rizal, from the petitioner Antipolo Realty Corporation.
On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private respondent
Virgilio Yuson. The transfer was embodied in a Deed of Assignment and Substitution of Obligor
(Delegacion), executed with the consent of Antipolo Realty, in which Mr. Yuson assumed the
performance of the vendee's obligations under the original contract, including payment of his
predecessor's installments in arrears. However, for failure of Antipolo Realty to develop the
subdivision project in accordance with its undertaking under Clause 17 of the Contract to Sell,
Mr. Yuson paid only the arrearages pertaining to the period up to, and including, the month of
August 1972 and stopped all monthly installment payments falling due thereafter Clause 17
reads:
Clause 17. SUBDIVISION BEAUTIFICATION. To insure the beauty of the

subdivision in line with the modern trend of urban development, the SELLER
hereby obligates itself to provide the subdivision with:
a) Concrete curbs and gutters
b) Underground drainage system
c) Asphalt paved roads
d) Independent water system
e) Electrical installation with concrete posts.
f) Landscaping and concrete sidewall
g) Developed park or amphi-theatre
h) 24-hour security guard service.
These improvements shall be complete within a period of two (2) years from date
of this contract.Failure by the SELLER shall permit the BUYER to suspend his
monthly installments without any penalties or interest charges until such time that
such improvements shall have been completed. 1
On 14 October 1976, the president of Antipolo Realty sent a notice to private respondent Yuson
advising that the required improvements in the subdivision had already been completed, and
requesting resumption of payment of the monthly installments on Lot No. 15. For his part, Mr.
Yuson replied that he would conform with the request as soon as he was able to verify the truth
of the representation in the notice.
In a second letter dated 27 November 1976, Antipolo Realty reiterated its request that Mr. Yuson
resume payment of his monthly installments, citing the decision rendered by the National
Housing Authority (NHA) on 25 October 1976 in Case No. 252 (entitled "Jose B. Viado Jr.,
complainant vs. Conrado S. Reyes, respondent") declaring Antipolo Realty to have "substantially
complied with its commitment to the lot buyers pursuant to the Contract to Sell executed by and
between the lot buyers and the respondent." In addition, a formal demand was made for full and
immediate payment of the amount of P16,994.73, representing installments which, Antipolo
Realty alleged, had accrued during the period while the improvements were being completed
i.e., between September 1972 and October 1976.
Mr. Yuson refused to pay the September 1972-October 1976 monthly installments but agreed to
pay the post October 1976 installments. Antipolo Realty responded by rescinding the Contract to
Sell, and claiming the forfeiture of all installment payments previously made by Mr. Yuson.
Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute with Antipolo
Realty before public respondent NHA through a letter-complaint dated 10 May 1977 which
complaint was docketed in NHA as Case No. 2123.
Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977. Antipolo Realty,
without presenting any evidence, moved for the consolidation of Case No. 2123 with several
other cases filed against it by other subdivision lot buyers, then pending before the NHA. In an
Order issued on 7 February 1978, the NHA denied the motion to dismiss and scheduled Case
No. 2123 for hearing.
After hearing, the NHA rendered a decision on 9 March 1978 ordering the reinstatement of the
Contract to Sell under the following conditions:
l) Antipolo Realty Corporation shall sent [sic] to Virgilio Yuzon a statement of
account for the monthly amortizations from November 1976 to the present;
m) No penalty interest shall be charged for the period from November 1976 to the
date of the statement of account; and
n) Virgilio Yuzon shall be given sixty (60) days to pay the arrears shown in the
statement of account.2
Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been denied due
process of law since it had not been served with notice of the scheduled hearing; and (b) that the
jurisdiction to hear and decide Mr. Yuson's complaint was lodged in the regular courts, not in the
NHA, since that complaint involved the interpretation and application of the Contract to Sell.
The motion for reconsideration was denied on 28 June 1978 by respondent NHA General
Manager G.V. Tobias, who sustained the jurisdiction of the NHA to hear and decide the Yuson
complaint. He also found that Antipolo Realty had in fact been served with notice of the date of
the hearing, but that its counsel had failed to attend the hearing. 3 The case was submitted for
decision, and eventually decided, solely on the evidence presented by the complainant.
On 2 October 1978, Antipolo Realty came to this Court with a Petition for certiorari and
Prohibition with Writ of Preliminary Injunction, which was docketed as G.R. No. L-49051. Once
more, the jurisdiction of the NHA was assailed. Petitioner further asserted that, under Clause 7 of
the Contract to Sell, it could validly terminate its agreement with Mr. Yuson and, as a
consequence thereof, retain all the prior installment payments made by the latter. 4
This Court denied certiorari in a minute resolution issued on 11 December 1978, "without
prejudice to petitioner's pursuing the administrative remedy." 5 A motion for reconsideration was
denied on 29 January 1979.
Thereafter, petitioner interposed an appeal from the NHA decision with the Office of the President
which, on 9 March 1979, dismissed the same through public respondent Presidential Executive
Assistant Jacobo C. Clave. 6
In the present petition, Antipolo Realty again asserts that, in hearing the complaint of private
respondent Yuson and in ordering the reinstatement of the Contract to Sell between the parties,
the NHA had not only acted on a matter beyond its competence, but had also, in effect, assumed
the performance of judicial or quasi-judicial functions which the NHA was not authorized to
perform.
We find the petitioner's arguments lacking in merit.
It is by now commonplace learning that many administrative agencies exercise and perform
adjudicatory powers and functions, though to a limited extent only. Limited delegation of judicial
or quasi-judicial authority to administrative agencies (e.g., the Securities and Exchange
Commission and the National Labor Relations Commission) is well recognized in our
jurisdiction, 7 basically because the need for special competence and experience has been
recognized as essential in the resolution of questions of complex or specialized character and
because of a companion recognition that the dockets of our regular courts have remained crowded
and clogged. In Spouses Jose Abejo and Aurora Abejo, et al. vs. Hon. Rafael dela Cruz, etc., et
al., 8 the Court, through Mr. Chief Justice Teehankee, said:
In the fifties, the Court taking cognizance of the move to vest jurisdiction in
administrative commissions and boards the power to resolve specialized disputes
in the field of labor (as in corporations, public transportation and public utilities)
ruled that Congress in requiring the Industrial Court's intervention in the
resolution of labor management controversies likely to cause strikes or lockouts
meant such jurisdiction to be exclusive, although it did not so expressly state in
the law. The Court held that under the "sense-making and expeditious doctrine of
primary jurisdiction . . . the courts cannot or will not determine a controversy
involving a question which is within the jurisdiction of an administrative tribunal
where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience, and services of the administrative
tribunal to determine technical and intricate matters of fact, and a uniformity of
ruling is essential to comply with the purposes of the regulatory statute
administered" (Pambujan Sur United Mine Workers v. Samar Mining Co., Inc., 94
Phil, 932, 941 [1954]).
In this era of clogged court dockets, the need for specialized administrative
boards or commissions with the special knowledge, experience and capability to
hear and determine promptly disputes on technical matters or essentially factual
matters, subject to judicial review in case of grave abuse of discretion has
become well nigh indispensable. Thus, in 1984, the Court noted that 'between the
power lodged in an administrative body and a court, the unmistakeable trend has
been to refer it to the former, "Increasingly, this Court has been committed to the
view that unless the law speaks clearly and unequivocably, the choice should fall
on fan administrative agency]" ' (NFL v. Eisma, 127 SCRA 419, 428, citing
precedents). The Court in the earlier case of Ebon vs. De Guzman (113 SCRA
52, 56 [1982]), noted that the lawmaking authority, in restoring to the labor
arbiters and the NLRC their jurisdiction to award all kinds of damages in labor
cases, as against the previous P.D. amendment splitting their jurisdiction with the
regular courts, "evidently, . . . had second thoughts about depriving the Labor
Arbiters and the NLRC of the jurisdiction to award damages in labor cases
because that setup would mean duplicity of suits, splitting the cause of action and
possible conflicting findings and conclusions by two tribunals on one and the
same claim."
In an even more recent case, Tropical Homes, Inc. vs. National Housing Authority, et al., 9 Mr.
Justice Gutierrez, speaking for the Court, observed that:
There is no question that a statute may vest exclusive original jurisdiction in an
administrative agency over certain disputes and controversies falling within the
agency's special expertise. The very definition of an administrative agency

includes its being vested with quasi-judicial powers. The ever increasing variety
of powers and functions given to administrative agencies recognizes the need for
the active intervention of administrative agencies in matters calling for technical
knowledge and speed in countless controversies which cannot possibly be
handled by regular courts.
In general the quantum of judicial or quasi-judicial powers which an administrative agency may
exercise is defined in the enabling act of such agency. In other words, the extent to which an
administrative entity may exercise such powers depends largely, if not wholly, on the provisions
of the statute creating or empowering such agency. 10 In the exercise of such powers, the agency concerned must
commonly interpret and apply contracts and determine the rights of private parties under such contracts. One thrust of the multiplication
of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer a
uniquely judicial function, exercisable only by our regular courts.
Thus, the extent to which the NHA has been vested with quasi-judicial authority must be
determined by referring to the terms of Presidential Decree No. 957, known as "The Subdivision
and Condominium Buyers' Decree." 11Section 3 of this statute provides as follows:
National Housing Authority. The National Housing Authority shall have
exclusive jurisdiction to regulate the real estate trade and business in accordance
with the provisions of this decree (emphasis supplied)
The need for and therefore the scope of the regulatory authority thus lodged in the NHA are
indicated in the second and third preambular paragraphs of the statute which provide:
WHEREAS, numerous reports reveal that many real estate subdivision owners,
developers, operators, and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision roads, drainage,
sewerage, water systems lighting systems and other similar basic
requirements, thus endangering the health and safety of home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and
fraudulent manipulations perpetrated by unscrupulous subdivision and
condominium sellers and operators, such as failure to deliver titles to the buyers
or titles free from liens and encumbrances, and to pay real estate taxes, and
fraudulent sales of the same subdivision lots to different innocent purchasers for
value . (emphasis supplied)
Presidential Decree No. 1344 12 clarified and spelled out the quasi-judicial dimensions of the grant of regulatory authority to
the NHA in the following quite specific terms:
SECTION 1. In the exercise of its functions to regulate the real estate trade and
business and in addition to its powers provided for in Presidential Decree No.
957, the National Housing Authority shall have exclusive jurisdiction to hear and
decide cases of the following nature:
A. Unsound real estate business practices:
B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and
C. Cases involving specific performance of contractual and statutory obligations
filed by buyers of subdivision lots or condominium units against the owner,
developer, dealer, broker or salesman.(emphasis supplied.)
The substantive provisions being applied and enforced by the NHA in the instant case are found
in Section 23 of Presidential Decree No. 957 which reads:
Sec. 23. Non-Forfeiture of Payments. No installment payment made by a
buyer in a subdivision or condominium project for the lot or unit he contracted to
buy shall be forfeited in favor of the owner or developer when the buyer, after due
notice to the owner or developer, desists from further payment due to the failure
of the owner or developer to develop the subdivision or condominium project
according to the approved plans and within the time limit for complying with the
same. Such buyer may, at his option, be reimbursed the total amount paid
including amortization and interests but excluding delinquency interests, with
interest thereon at the legal rate. (emphasis supplied.)
Having failed to comply with its contractual obligation to complete certain specified improvements
in the subdivision within the specified period of two years from the date of the execution of the
Contract to Sell, petitioner was not entitled to exercise its options under Clause 7 of the Contract.
Hence, petitioner could neither rescind the Contract to Sell nor treat the installment payments
made by the private respondent as forfeited in its favor. Indeed, under the general Civil Law, 13 in
view of petitioner's breach of its contract with private respondent, it is the latter who is vested with the option either to rescind the
contract and receive reimbursement of an installment payments (with legal interest) made for the purchase of the subdivision lot in
question, or to suspend payment of further purchase installments until such time as the petitioner had fulfilled its obligations to the
buyer. The NHA was therefore correct in holding that private respondent's prior installment payments could not be forfeited in favor of
petitioner.
Neither did the NHA commit any abuse, let alone a grave abuse of discretion or act in excess of
its jurisdiction when it ordered the reinstatement of the Contract to Sell between the parties. Such
reinstatement is no more than a logical consequence of the NHA's correct ruling, just noted, that
the petitioner was not entitled to rescind the Contract to Sell. There is, in any case, no question
that under Presidential Decree No. 957, the NHA was legally empowered to determine and
protect the rights of contracting parties under the law administered by it and under the respective
agreements, as well as to ensure that their obligations thereunder are faithfully performed.
We turn to petitioner's assertion that it had been denied the right to due process. This assertion
lacks substance. The record shows that a copy of the order denying the Motion to Dismiss and
scheduling the hearing of the complaint for the morning of 6 March 1978, was duly served on
counsel for petitioner, as evidenced by the annotation appearing at the bottom of said copy
indicating that such service had been effected. 14 But even if it be assumed, arguendo, that such notice had not
been served on the petitioner, nevertheless the latter was not deprived of due process, for what the fundamental law abhors is not the
absence of previous notice but rather the absolute lack of opportunity to be heard. 15 In the instant case, petitioner was given ample
opportunity to present its side and to be heard on a motion for reconsideration as well, and not just on a motion to dismiss; the claim of
denial of due process must hence sound even more hollow. 16
We turn finally to the question of the amount of P16,994.73 which petitioner insists had accrued
during the period from September 1972 to October 1976, when private respondent had
suspended payment of his monthly installments on his chosen subdivision lot. The NHA in its 9
March 1978 resolution ruled that the regular monthly installments under the Contract to Sell did
not accrue during the September 1972 October 1976 period:
[R]espondent allowed the complainant to suspend payment of his monthly
installments until the improvements in the subdivision shall have been completed.
Respondent informed complainant on November 1976 that the improvements
have been completed. Monthly installments during the period of suspension of
payment did not become due and demandable Neither did they accrue Such
must be the case, otherwise, there is no sense in suspending payments. If the
suspension is lifted the debtor shall resume payments but never did he incur any
arrears.
Such being the case, the demand of respondent for complainant to pay the
arrears due during the period of suspension of payment is null and
void. Consequently, the notice of cancellation based on the refusal to pay the s
that were not due and demandable is also null and void. 17
The NHA resolution is probably too terse and in need of certification and amplification. The NHA
correctly held that no installment payments should be considered as having accrued during the
period of suspension of payments. Clearly, the critical issue is what happens to the installment
payments which would have accrued and fallen due during the period of suspension had no
default on the part of the petitioner intervened. To our mind, the NHA resolution is most
appropriately read as directing that the original period of payment in the Contract to Sell must be
deemed extended by a period of time equal to the period of suspension (i.e., by four (4) years
and two (2) months) during which extended time (tacked on to the original contract period)
private respondent buyer must continue to pay the monthly installment payments until the entire
original contract price shall have been paid. We think that such is the intent of the NHA resolution
which directed that "[i]f the suspension is lifted, the debtor shall resume payments" and that such
is the most equitable and just reading that may be given to the NHA resolution. To permit Antipolo
Realty to collect the disputed amount in a lump sum after it had defaulted on its obligations to its
lot buyers, would tend to defeat the purpose of the authorization (under Sec. 23 of Presidential
Decree No. 957, supra) to lot buyers to suspend installment payments. As the NHA resolution
pointed out, [s]uch must be the case, otherwise, there is no sense in suspending payments."
Upon the other hand, to condone the entire amount that would have become due would be an
expressively harsh penalty upon the petitioner and would result in the unjust enrichment of the
private respondent at the expense of the petitioner. It should be recalled that the latter had
already fulfilled, albeit tardily, its obligations to its lot buyers under their Contracts to Sell. At the
same time, the lot buyer should not be regarded as delinquent and as such charged penalty
interest. The suspension of installment payments was attributable to the petitioner, not the private
respondent. The tacking on of the period of suspension to the end of the original period precisely
prevents default on the part of the lot buyer. In the words of the NHA resolution, "never would
[the buyer] incur any arrears."
WHEREFORE, the Petition for certiorari is DISMISSED. The NHA decision appealed from is
hereby AFFIRMED and clarified as providing for the lengthening of the original contract period for
payment of installments under the Contract to Sell by four (4) years and two (2) months, during
which extended time private respondent shall continue to pay the regular monthly installment
payments until the entire original contract price shall have been paid. No pronouncement as to
costs.
SO ORDERED.
SUPREME COURT
Manila
EN BANC
G.R. No. 1049
May 16, 1903
THE UNITED STATES, complainant-appellee,

vs.
FRED L. DORR, ET AL., defendants-appellants.
F.G. Waite for appellants.
Solicitor-General Araneta for appellee.
COOPER, J.:
On May 23, 1902, a complaint was filed in the Court of First Instance of the city of Manila against
Fred L. Dorr and Edward F. O'Brien, charging them with the publication of a false and malicious
libel against Seor Benito Legarda, one of the United States Philippine Commissioners, by
placing certain headlines or caption above an article published in the "Manila Freedom," a
newspaper in the city of Manila, of which the defendant Fred L. Dorr was the proprietor and the
defendant Edward F. O'Brien was the editor.
The following are the headlines or caption upon which the prosecution is based:
Traitor, seducer and perjurer. Sensational allegations against Commissioner Legarda.
Made of record and read in English. Spanish reading waived. Wife would have killed him.
Legarda pale and nervous.
The article over and above which the headlines were placed was a report of certain judicial
proceedings had in the Court of First Instance of the city of Manila, in the criminal case of the
United States vs. Valdez for the offense of libel,1 and the report was a copy taken from a
document prepared by the attorney for Valdez, in which the offer was made, as a defense, to
prove the truth of the material allegations contained in and which were the basis of the complaint
against Valdez. The facts offered to be proven were published in the "Miau," a newspaper of
which Valdez was editor, and related to Seor Legarda, the prosecuting witness in the Valdez
case as well as in this case.
At that time, under the libel law, the truth of the libelous matter was inadmissible as evidence.
The judge of the Court of First Instance excluded the proof tendered in the document, but
permitted it to be filed in the case, and the copy was taken from it by one Vogel, the city reporter
of the "Manila Freedom." The report was handed by the reporter to the defendant O'Brien, the
editor of the paper, and the headlines were written by O'Brien, and the report with the headlines
thus prepared was published in the "Manila Freedom" of date April 16, 1902.
The report seems to have been regarded by the prosecuting attorney as privileged matter under
section 7 of the Libel Act, and, as before stated, the prosecution is based upon the matter
contained in the headlines.
On August 25, 1902, the defendants were tried and found guilty of the offense charged in the
complaint, and each was sentenced to six months' imprisonment at hard labor and a fine of
$1,000, United States currency. From this judgment the defendants have appealed to this court.
A demurrer was filed to the complaint, based upon the ground that the facts charged in the
complaint did not constitute a public offense. This demurrer was overruled by the trial court, and
an exception to the ruling taken by the defendants.
During the course of the proceedings a motion was made by the defendants asking that they be
granted a trial by jury, as provided for in Article III, section 2, of the Constitution of the United
States, and under the sixth amendment to the Constitution, which motion was denied by the
court, and an exception was also taken to this ruling.
Before entering into a discussion of the case upon its merits, it will be necessary to consider the
questions of a preliminary nature which have been raised in the assignment of errors and brief of
counsel for the appellants.
The questions submitted may be embraced within the following propositions:
(1) That by the treaty of peace between the United States and Spain, ratified on the 11th day of
April, 1899, the Philippine Islands became a part of the United States;
(2) And being a part thereof, they are subject to the provisions of section 2, Article III, of the
Constitution, and to the provisions contained in the sixth amendment to the Constitution, by
which in all criminal cases a trial by jury is guaranteed;
(3) That Congress can exercise no power over the person or property of a citizen beyond what
the Constitution confers, nor deny any right guaranteed to them by the Constitution.
Stated in its simple form, the proposition made is that the provisions of the Constitution of the
United States relating to jury trials are in force in the Philippine Islands.
The determination of this question involves the consideration of the political status of these
Islands, the power of Congress under the Constitution, and the nature of the constitutional
provisions relating to jury trials.
The political status of the Philippine Islands has been defined to a large extent by the decision of
the Supreme Court of the United States in the case of Downes vs. Bidwell (182 U. S., 244), in
which case the status of Puerto Rico was directly involved.
The question in that case was whether merchandise brought into the port of New York from
Puerto Rico, after the ratification of the treaty of peace with Spain and since the passage of the
Foraker Act, is exempt from duty, and involved the question whether the revenue clauses of the
Constitution extend of their own force to the newly acquired territories from Spain, and whether
the act is in contravention of the uniformity clause of the Constitution.
The conclusion was reached that the act in question was not unconstitutional. In the
consideration of the case an exhaustive review was made of the powers of Congress to govern
the territories belonging to the United States, under the power to acquire territory by treaty and
the incidental right to govern such territory, and under the clause of section 3, Article IV, of the
Constitution, which vests Congress with the power to dispose of and make all needful rules and
regulations respecting the territory or other property of the United States. This review was made
in the light of the opinion of contemporaries, the practical construction placed upon the
Constitution by Congress, and the decisions of the Supreme Court of the United States upon
questions arising thereunder. Distinctions were found to exist in the application of the
Constitution depending upon the relation which was borne to the National Government whether
by a State or by the territories which belonged to certain States at the time of the adoption of the
Constitution, and which were situated within the acknowledged limits of the United States, and
such territory as might be acquired by the establishment of a disputed line; or by those which
were acquired by cession from foreign powers and to which the Constitution was extended by the
treaty under which they were ceded, sanctioned by Congress, or to which the Constitution was
expressly extended by Congressional act; or by those territories acquired from a foreign power
by treaty, which have not been incorporated as a part of the United States nor to which has been
extended the Constitution by act of Congress.
The following conclusions are deducible from the decision in that case:
1. That Puerto Rico (to which the Philippines is equally situated) did not by the act of cession
from Spain to the United States become incorporated in the United States as a part of it, but
became territory pertaining to and belonging to the United States.
2. That as to such territory Congress may establish a temporary government, and in so doing it is
not subject to all the restrictions of the Constitution.
3. That the determination of what these restrictions are and what particular provisions of the
Constitution are applicable to such territories involves an inquiry into the situation of the territory
and its relation to the United States.
4. That the uniformity provided for in the revenue clause of the Constitution is not one of those
restrictions upon Congress in its government of the territory of Puerto Rico.
What is the character of these restrictions and how are they to be ascertained and determined?
And to what extent is the Constitution in force and effect in these Islands?
Both Mr. Justice Brown, in delivering the majority opinion, and Mr. Justice White, in delivering the
concurring opinion, refer to these constitutional restrictions.
In formulating certain propositions as his conclusions, Justice White uses the following language:
Whilst, therefore, there is no express or implied limitation on Congress, in exercising its
power to create local governments for any and all of the territories, by which that body is
restrained from the widest latitude of discretion, it does not follow that there may not be
inherent, although unexpressed, principles which are the basis of all free government
which can not be with impunity transcended. But this does not suggest that every
express limitation of the Constitution which is applicable has not force, but only signifies
that even in cases where there is no direct command of the Constitution which applies,
there may nevertheless be restrictions of so fundamental a nature that they can not be
transgressed, although not expressed in so many words in the Constitution. 2
He also says:
Undoubtedly, there are general prohibitions in the Constitution in favor of the liberty and
property of the citizen which are not mere regulations as to the form and manner in which
a conceded power may be exercised, but which are an absolute denial of all authority
under any circumstances or conditions to do particular acts. In the nature of things,
limitations of this character can not be under any circumstances transcended, because of
the complete absence of power.
The distinction which exists between the two characters of restrictions, those which
regulate a granted power and those which withdraw all authority on a particular subject,
has in effect been always conceded, even by those who most strenuously insisted on the
erroneous principle that the Constitution did not apply to Congress in legislating for the
territories, and was not operative in such districts of country.
Mr. Justice Brown in this connection quotes the following language used by Mr. Justice Bradley in
the case of the Mormon Church vs. United States (136 U. S., 1):
Doubtless Congress, in legislating for the Territories, would be subject to those
fundamental limitations in favor of personal rights which are formulated in the
Constitution and its amendments; but those limitations would exist rather by inference
and the general spirit of the Constitution from which Congress derives all its powers than
by and express and direct application of its provisions.3
Again he says:
There are certain principles of natural justice inherent in the Anglo-Saxon character which
need no expression in constitutions or statutes to give them effect, or to secure
dependencies against legislation manifestly hostile to their real interest. 4
The case of the American Insurance Company vs. Canter (1 Pet., 511) is a very interesting and
instructive case which well illustrates the difference in the application of constitutional provisions
to territories which are a part and within the United States, and to those acquired from a foreign
power by cession which have not been incorporated into the United States, nor have had by act
of Congress the Constitution extended to them.
Florida was ceded by Spain to the United States, as was also the Philippines.
The status of the Philippines at the present time is very similar to that of Florida at the date of the
act passed by the legislative council of Florida, the constitutionality of which was considered in
the case of the American Insurance Company vs. Canter. The statement of the case and the
decision is taken from the opinion of Justice Brown in the case of Downes vs. Bidwell, and is as
follows:
This case originated in the district court of South Carolina for the possession of 356 bales
of cotton, which had been wrecked on the coast of Florida, abandoned to the insurance
companies, and subsequently brought to Charleston. Canter claimed the cotton as bona
fide purchaser at a marshal's sale at Key West by virtue of a decree of a territorial court
consisting of a notary and five jurors, proceeding under an act of the governor and
legislative council of Florida. The case turned upon the question whether the sale by that
court was effectual to divest the interest of the underwriters. The district judge
pronounced the proceedings a nullity, and rendered a decree from which both parties
appealed to the circuit court. The circuit court reversed the decree of the district court
upon the ground that the proceedings of the court at Key West were legal, and
transferred the property to Canter, the alleged purchaser.
The opinion of the circuit court was delivered by Mr. Justice Johnson of the Supreme
Court, and is published in full in a note in Peter's Reports. It was argued that the
Constitution vested the admiralty jurisdiction exclusively in the General Government; that
the legislature of Florida had exercise an illegal power in organizing this court, and that
its decrees were void. On the other hand, it was insisted that this was a court of separate
and distinct jurisdiction from the courts of the United States, and as such its acts were not
to be reviewed in a foreign tribunal, such as was the court of South California; "that the
district of Florida was not part of the United States, but only an acquisition or
dependency, and as such the Constitution per se had not binding effect in or over it." "It
becomes," said the court, "indispensable to the solution of these difficulties, that we
should conceive a just idea of the relation in which Florida stands to the United
States. . . . And, first, it is obvious that there is a material distinction between the territory
now under consideration and that which is acquired from the aborigines (whether by
purchase or conquest) within the acknowledged limits of the United States, as also that
which is acquired by the establishment of a disputed line. As to both these, there can be
no question that the sovereignty of the State or territory within which it lies, and of the
United States, immediately attach, producing a complete subjection to all the laws and
institutions of the two governments, local and general, unless modified by treaty. The
question now to be considered relates to territories previously subject to the
acknowledged jurisdiction of another sovereign, such as was Florida to the crown of
Spain. And on this subject we have the most explicit proof that the understanding of our
public functionaries is that the government and laws of the United States do not extend to
such territory by the mere act of cession. For, in the act of Congress of March 30, 1822,
section 9, we have an enumeration of the acts of Congress which are to be held in force
in the territory; and in the tenth section an enumeration, in the nature of a bill of rights, of
privileges and immunities, which could not be denied to the inhabitants of the territory if
they came under the Constitution by the mere act of cession. . . . These States, this
territory, and future States to be admitted into the Union are the sole objects of the
Constitution; there is no express provision whatever made in the Constitution for the
acquisition or government of territories beyond those limits." He further held that the right
of acquiring territory was altogether incidental to the treaty-making power; that their
government was left to Congress; that the territory of Florida did "not stand in the relation
of a State to the United States;" that the acts establishing a territorial government were
the constitution of Florida; that while under these acts the territorial legislature could
enact nothing inconsistent with what Congress had made inherent and permanent in the
territorial government, it had not done so in organizing the court at Key West. 5
Justice Brown further cites from the opinion of Chief Justice Marshall in this case, in which the
latter held "that the judicial clause of the Constitution, above quoted, did not apply to Florida; that
the judges of the superior courts of Florida held their office for four years; that 'these courts are
not constitutional courts in which the judicial power conferred by the Constitution on the General
Government can be deposited;' that they are legislative courts, created in virtue of the general
right of sovereignty which exists in the government,' or in virtue of the territorial clause of the
Constitution; that the jurisdiction with which they are invested is not a part of judicial power of the
Constitution, but is conferred by Congress, in the exercise of those general powers which that
body possesses over the territories of the United States; and that in legislating for them
Congress exercises the combined powers of the general and of State governments. The act of
the territorial legislature, creating the court in question, was held not to be 'inconsistent with the
laws and Constitution of the United States,' and the decree of the circuit was affirmed." 6
Remarking upon this case, Justice Brown says:
As the only judicial power vested in Congress is to create courts whose judges shall hold
their offices during good behavior, it necessarily follows that, if Congress authorizes the
creation of courts and the appointment of judges for limited time, it must act
independently of the Constitution, and upon territory which is not part of the United States
within the meaning of the Constitution.7
The act of Congress of July 1, 1902, entitled "An Act temporarily to provide for the administration
of the affairs of civil government in the Philippine Islands, and for other purposes," in section 5
extends to the Philippine Islands nearly all the provisions of the Constitution known as the Bill of
Rights. But there was excepted from it the provisions of the Constitution relating to jury trials
contained in section 2, Article III, and in the sixth amendment.
It becomes necessary for us to determine whether these provisions of the Constitution of the
United States relating to trials by jury are in force in the Philippine Islands. It is difficult to
determine from the general statements contained in these decisions what are "these
fundamental limitations in favor of personal rights which are formulated in the Constitution and its
amendments and which exist by inference.
It seems fairly deducible from all that has been said upon this subject that such provisions are
negative in character rather than of a direct positive or affirmative nature, denying to Congress
the power to pass laws in contravention with such principles of the Constitution.
If this is their nature and this be the true distinction, it can not be said that either Congress or the
Philippine Commission have passed any laws which would come within the inhibition of the
Constitution, or which tend to impair the right to trial by jury in these Islands.
All that can be said is that, in extending the various provisions of the Bill of Rights here,
Congress has failed to extend those provisions guaranteeing the right to trial by jury.
We will now turn to the consideration of the question as to whether a violation of the right to a
jury trial falls within the inhibition arising from the existence of those fundamental limitations in
favor of personal rights mentioned in the decisions.
There are a number of cases cited in Downes vs. Bidwell establishing the right to trial by jury in
territories of the United States, but these decisions have all arisen in cases relating to territories
which were a part of the United States and had been incorporated as a part thereof and to which
Congress had expressly extended the Constitution.
In Webster vs. Reid (11 How., 437) it was held that the law of the Territory of Iowa which
prohibited the trial by jury of certain at law, founded on contract to recover payment for services,
was void; but, as it is said, this case is of little value as bearing upon the question of the
extension of the Constitution to that Territory, inasmuch as the organic law of the Territory of Iowa
enacted by Congress by its express provision extended to Iowa the laws of the United States,
including the ordinance of 1787 (which provided expressly for jury trials), so far as they were
applicable; and the case was put upon this ground.
In Callem vs. Wilson (127 U. S., 540) the defendant had been convicted without jury trial, in the
District of Columbia, but the district of Columbia was not only within and a part of the United
States but had formed a part of the original States of Virgina and Maryland.
In the case of Springville vs. Thomas (166 U. S., 707) it was held that a verdict returned by less
that the whole number of jurors was invalid, because in contravention of the seventh amendment
to the Constitution and the act of Congress of April 7, 1874, which provide that no party shall be
deprived of the right of trial by jury in cases cognizable at common law. This is, as stated by Mr.
Justice Brown, "obviously true with respect to Utah, since the organic act of that Territory had
expressly extended to it in the Constitution and laws of the United States." 8
The other decisions cited by counsel for the appellants can all be traced to the same principle;
that is, that where Congress has extended the laws and the Constitution to the territories, then
Congress would be inhibited by the Constitution from enacting a law depriving persons living in
such territories from the right to trial by jury.
The only case which we have been able to discover arising under an act of Congress, and which
deprived a party of the right to a trial by jury at a place where the Constitution had not been
extended by express provision, in the case of In re Ross (140 U. S., 453). This was a case in
which the American consular tribunal in Japan, created by act of Congress under treaty with the
Government of Japan and vested with jurisdiction, to be exercised and enforced in accordance
with the laws of the United States, to try Americans, had, in the exercise of this jurisdiction,
convicted the defendant of the crime of murder, and he was sentenced by that court to the
penalty of death.
It was held that "the guaranties it (the Constitution) affords against accusation of capital or
infamous crimes, except by indictment or presentment by a grand jury, and for an impartial trial
by a jury when thus accused, apply only to citizens and others within the United States, or who
are brought there for trial for alleged offenses committed elsewhere, and not to residents and
temporary sojourners abroad."9
It seems from this decision that the powers of Congress to enact a law which would deprive a
person of the right to a trial by jury is expressly recognized, and that such legislation does not
come within the fundamental limitations in favor of personal rights, for this act of Congress which
operated upon citizens of the United States abroad is recognized as a valid act of Congress.
The act is save from the constitutional inhibition by reason that in such country the Constitution of
the United States does not extend, and is not in force there, but the decision in this case
nevertheless establishes the doctrine that there is not upon Congress an absolute and total
inhibition under any and all circumstances to enact a law in which a person is deprived of the
right to a trial by jury.
It may be further observed that if it should be held that the constitutional provision guaranteeing
the right to trial by jury has been introduced here by the simple act of cession, there is no law in
existence to give such provision effect.
Trial by jury was unknown to the law in force in these Islands prior to the date of cession, nor has
the Philippine Commission passed any law which would give it effect. Such provisions of a
constitution as those relating to trial by jury can hardly be regarded as self-executing. It is
necessary that there should be some legislation carrying them into effect, such as laws
prescribing the qualifications of persons for jury duty, for the organization of juries and provisions
of a like character.
Suppose the Constitution has been extended here by force of the cession of territory and that it
should be held that there could be no legal conviction for crime in the Philippines on account of
the absence of the law prescribing the qualifications of jurors or for the organization of juries, and
Congress, in the exercise of its sound judgment, after a careful examination of the conditions
prevailing in such territory and in the exercise of its undoubted right to govern the territory, should
reach the conclusion that an efficient territorial government could not be conducted in which
convictions for crime are dependent upon the verdict of juries, by reason of the hostility of the
inhabitants of such country to the constituted authorities, or the lack of the qualification of the
people of the country or an extensive portion of it to perform jury service, and should refuse to
enact any law for jury trials, the criminal laws in such event must remain unenforced and a state
of anarchy would be the result. In such the case question assumes very much the nature of a
political question, and the judicial department might well hesitate to interfere indirectly with
Congress in the exercise of its judgment, and in the exercise of its broad discretion in the
government of a territory so situated.
It is contended, also, by counsel for the defendants, that Congress could not lawfully authorize
the Philippine Commission to enact the libel law passed by it on October 24, 1901, under which
the defendants have been convicted. The objection to the law is based upon the three branches,
executive, legislative, and judicial, and that the powers of legislation vested in Congress to make
laws can not be delegated by that department to the judgment, wisdom, or patriotism of any
other body or authority.
While the authorities cited in support of the general proposition maintain the doctrine, there are
well-known exceptions to the general rule not referred to in these decisions, for the reason that
the decision of the case did not require their consideration. A well-known exception is that of
municipal corporations, upon which the powers of legislation are commonly bestowed.
The case in question forms an exception to this general rule equally well established. Congress,
in the exercise of its power to make rules and regulations for the government of the territories,
has often delegated the power of legislation to the territorial government. The case of American
Insurance Company, vs. Canter (1 Pet., 511), before cited, originated under an act of the
governor and legislative council of Florida, organizing a court and vesting in it admiralty
jurisdiction, and in which the jurisdiction of the court was sustained by the Supreme Court of the
United States.
Speaking of the power of Congress in creating territorial governments, it is said in the case of De
Lima vs. Bidwell (182 U. S., 1) that "the power to establish territorial government has been too
long exercised by Congress and acquiesced in by the Supreme Court to be deemed an unsettled
question."
We reach the conclusion in this case:
1. That while the Philippine Islands constitute territory which has been acquired by and belongs
to the United States, there is a difference between such territory and the territories which are a
part of the United States with reference to the Constitution of the United States.
2. That the Constitution was not extended here by the terms of the treaty of Paris, under which
the Philippine Islands were acquired from Spain. By the treaty the status of the ceded territory
was to be determined by Congress.
3. That the mere fact of cession of the Philippines to the United States did not extend the
Constitution here, except such parts as fall within the general principles of fundamental
limitations in favor of personal rights formulated in the Constitution and its amendments, and
which exist rather by inference and the general spirit of the Constitution, and except those
express provisions of the Constitution which prohibit Congress from passing laws in their
contravention under any circumstances; that the provisions contained in the Constitution relating
to jury trials do not fall within either of these exceptions, and, consequently, the right to trial by
jury has not been extended here by the mere act of the cession of the territory.
4. That Congress has passed no law extending here the provision of the Constitution relating to
jury trials, nor were any laws in existence in the Philippine Islands, at the date of their cession, for
trials by jury, and consequently there is no law in the Philippine Islands entitling the defendants in
this case to such trial; that the Court of First Instance committed no error in overruling their
application for a trial by jury.
We also reach the conclusion that the Philippine Commission is a body expressly recognized and
sanctioned by act of Congress, having the power to pass laws, and has the power to pass the
libel law under which the defendants were convicted.
We will now pass to the third assignment of error, which is that the headlines or caption of the
article charged to be libelous were legitimate deductions from a previous report of a public
judicial proceeding and were insufficient to constitute the offense of libel.
The testimony shows that the defendant Fred L. Dorr was the proprietor, and that the defendant
Edward F. O'Brien was the editor, of the "Manila Freedom;" that the article upon which the
complaint is founded was published in the issue of that paper on the 16th of April, 1902; that the
privileged statements or report of the judicial proceedings, the headlines of which are the basis of
the prosecution, arose on the trial of the case of the United States vs. Valdez, in the Court of First
Instance in the city of Manila, in which case Valdez was charged with the offense of libel, the
complaining witness in that case being Seor Legarda, who was also the complaining witness in
this case; that counsel for the defendant Valdez prepared a written statement of certain facts and
offered to prove the truth of these statements if permitted by the court.
A copy of this statement was made by the reporter of the "Manila Freedom" one Vogel
which, having been presented to the defendant O'Brien, the editor, the latter prepared the
headlines or caption set forth in the complaint.
The attorney for the defendants, under his assignments of errors, makes the proposition that the
headlines or caption was a legitimate deduction from the privileged report of the judicial
proceedings, and as such was itself a privileged publication. This proposition is succinctly made
and is easily understood; no material facts are in dispute; our law of libel is contained in the few
sections in which the law upon this subject is concisely and clearly stated, and renders it
unnecessary to refer to textbooks or decisions of the courts of other jurisdictions. Thus the labors
of the court have been simplified in the determination of the case.
Section 1 of Act No. 277, Philippine Commission, gives the following definition of libel:
A libel is a malicious defamation, expressed either in writing, printing, or by signs or
pictures, or the like, or public theatrical exhibitions, tending to blacken the memory of one
who is dead, or to impeach the honesty, virtue, or reputation, or publish the alleged or
natural defects of one who is alive and thereby expose him to public hatred, contempt, or
ridicule.
Did the matter contained in these headlines or caption have a tendency to impeach the honesty,
virtue, and reputation of the injured party? We need not to stop discuss this question.
What is a malicious defamation? These appears equally plain, for section 3 is as follows:
An Injurious publication is presumed to have been malicious if no justifiable motive for
making it is shown.
No attempt has been made by the defendants to show a justifiable motive, and the established
presumption of law that the publication was malicious must prevail. Nor has there been any
attempt made to show the truth of the matter contained in the headlines.
But it is attempted to bring the headlines or caption within the exception of privileged matter.
Section 7 of the act defines this character of privileged matter as follows:
No reporter, editor, or proprietor of any newspaper is liable to any prosecution for a fair
and true report of any judicial, legislative, or other public official proceedings, or of any
statement, speech, argument, or debate in the course of the same, except upon proof of
malice in making such report, which shall not be implied from the mere fact of publication.
Section 8 reads as follows:
Libelous remarks or comments connected with matter privileged by the last section
receive no privilege by reason of being so connected.
It follows, therefore, that the matter is libelous; that it was a malicious publication as defined by
law. The only question that remains to be considered is, Were those headlines or caption
"remarks" or "comments" on the privileged matter?
The word "comment" is defined by Webster as a "remark, observation, or criticism; gossip,
discourse, talk; a note or observation intended to explain, illustrate or criticize the meaning of a
writing, book, etc. Explanation, annotation, exposition."
The word "remark" is defined by him as "an expression in speech or writing of something
remarked or noticed.The mention of that which is worthy of attention of notice. A casual
observation, comment, or statement."
The headlines or caption comes within the definition of "remarks" as given by Webster, in that it
is "the mention of that which is worthy of attention or notice," and they also fall within the
definition of the word "comment" defined as "a note or observation intended to explain."
The defendants' counsel denominates the character of the headlines or caption as a "legitimate
deduction from the privileged report."
The word "deduction" is defined by Webster as "that which is deduced, or drawn from premises
by a process of reason; inference; acquisition."
It seems from these definitions that the word "deduction" conveys about the same meaning as
the words "comment" and "remark"; at least it would be as objectionable to make injurious
deductions as to make injurious comments or remarks.
To say that the headlines or caption is not a remark or comment but an "epitome" or "index" of
what is contained in the privileged article is simply a play upon words, and it is useless to follow
this line of argument further.
The intention of the statute, as shown in sections 7 and 8, is that the privileged matter should be
a fair and true report, and must stand alone as such. If headlines or captions are used, the matter
contained in them must not be remarks or comments of a libelous nature.
If by any process additional significance is added, either by display letters or by the arrangement
of catchwords, under whatever name they may be designated, it comes within the denunciation
of the statute.
That the headlines were not a part of the report prepared by Vogel, the reporter who was present
in the court and who made a copy of the report, is shown in the testimony.
The defendant O'Brien, who, so far as the testimony shows, knew nothing about the matter
contained in the report except that acquired by reading of it after it was delivered to him, made
the headlines or caption
It is said that it is the common practice in the United States to make such headlines in display
letters to render the necessary assistance to the reader in determining whether he cares to read
the article.
It is immaterial what the real intention of those who write such headlines may be; if such caption
and headlines are libelous, the writer must hear the consequences.
The law declares the motive of the writer, in the absence of proof of justifiable motive and the
truth of the matter, to be malicious.
The decisions of some of the courts of the United States have held than index of words
contained in the privileged matter, when fairly and truly made, will partake of the nature of the
article indexed; but, as we have shown, our laws does not permit this. Nor it is possible to reach
the conclusion that the words contained in the headlines are a fair index. No idea can be
gathered from these headlines of the real nature of what is contained in the published article.
The privileged report was a written statement prepared by the attorney in the Valdez case, in
which an offer was made to prove the truth of certain statements regarded as material in the
defense of the case and which was by the court excluded. This was the general nature of the
matter contained in the report. Can anyone, by reading the headlines or caption, form any
conception as to the real nature of the document to which the headlines have been prefixed?
It is also said that the headlines in this case are not worse than the matter contained in the
report. This may be admitted as true, but in the eyes of the law there is a distinction. The
injurious matter contained in the report is regarded by the law as protected by a privilege which
should be extended to the report of judicial proceedings, but here the privilege ends.
It is unnecessary to inquire why this distinction should be made. It is sufficient that the law so
makes it.
It is stated that there is not a word contained in the headlines or caption which is not found in the
privileged report. We have attempted to show that this is immaterial. But this statement is in fact
incorrect. The sentences "sensational allegations against Commissioner Legarda, made of
record and read in English; Spanish reading waived; wife would have killed him; Legarda pale
and nervous," are not found in the report. Nor can the sentence "Legarda pale and nervous"
even be deduced from anything contained in the report, nor does it appear from the testimony to
have been in fact true. When the statement in writing was offered and read before the court,
according to the testimony in the case, Seor Legarda was not at that time present in court.
We will notice briefly the character of the caption and headlines, the effect of which can well be
imagined.
The copy of the "Manila Freedom" containing the article is attached to the record. An examination
of it shows that the words "traitor, seducer, and perjurer" were printed in large display letters, and
were of a size sufficient in the use of these words to cover a space equal to that of three columns
across the paper. They were placed at the top of the first page of the paper. The other words
were in smaller type, but much larger than the ordinary type. It is hard to conceive language
stronger than that contained in the three words, "traitor, seducer, and perjurer."
No more effectual means could be adopted to destroy the good name and fame of a person.
More significant words can not be found in the English language to impeach the honesty,
reputation, and virtue. By skillful selection the sting of the entire document has been placed in
the caption and headlines in such a manner that in a literal sense "he who runs may read."
We conclude that the publication of the caption and headlines in the "Manila Freedom," upon
which the information is based, constituted the offense of libel; that the judgment is sustained by
the evidence; that the defendants, Fred L. Dorr, and Edward F. O'Brien, are guilty of the offense
charged in the information; that no error was committed in the trial of the case prejudicial to the
rights of the defendants, and that the judgment of the Court of First Instance should be affirmed,
with costs against the defendants. It is so ordered.
Arellano, C.J., Torres and Mapa, JJ., concur.
Separate Opinions
WILLARD, J., dissenting:
The case presents two questions: (1) Were the headlines privileged, and (2) if they were, was
there express malice in publishing them?
1. The important part of the article in question, and the only part which contained any libelous
matter, was the offer to prove contained therein. This offer was actually made a part of the record
of the case on trial in the Court of First Instance. Under section 7 of the libel law, the defendants
had the right to publish it if they did so without malice. The Government recognized this right
when it limited the charge in the complaint to the headlines of the article, and it is not and can not
be claimed that the defendants are guilty of libel for publishing the article itself.
Nothing could be worse or more libelous that the statements contained in this offer. I do not wish
to give them currency by copying them here, but it is necessary to say that it was distinctly
charged in this offer, in so many words, that the complaining witness in the case "seduced" a girl
living in his house. It was also distinctly charged therein that he had added to his other crimes
those of treason and perjury. For the publication of these most grave and unfounded charges the
defendants are not prosecuted.
The are, however, prosecuted for placing over the article certain headlines.
That headlines to a privileged article may be used can not be doubted. The public must be able
to get some idea of what a newspaper article contains without reading it entirely through. And it is
not claimed that the defendants had not a right to put a proper headlining to this report. The
question is, Was the one actually used proper?
If the heading is a fair index, and nothing more, of the article, it is as much privileged as the
article itself. If it expresses the opinion of the editor on the statements in the article, it is not
privileged as to such expressions. Such expressions of opinion are called in our law comments
and remarks. The rule is well illustrated in this case. The words "Spanish reading waived "is a
mere statement of what the article contains. It expresses no opinion of the editor upon any part of
it. On the contrary, the word "sensational" in connection with the word "allegations" is a comment
or remark and is not privileged. It says that in the opinion of the editor the allegations made in the
offer are sensational. It is not an index of any statement of fact made in the article, but is an
expression of opinion upon such facts.
The headline "Legarda pale and nervous" can perhaps be considered as an expression of
opinion, although in this respect there is a statement of fact to this effect. But this unimportant, for
these words, even if not privileged, are not libelous. Neither is the word "sensational" libelous.
It is claimed that the words "Traitor, seducer, perjurer" are not an index of the article, but are an
expression of the opinion of the editor that the complaining witness was a traitor, seducer, and
perjurer.
In order to determine this question it is necessary to consider the whole of the headline and to
consider it with reference to the article itself. The mechanical necessities of newspaper
composition generally forbid the employment of complete grammatical sentences in headlines.
They must of necessity be elliptical. The reader does not expect to find the whole thought
contained in the first two or three isolated words. It is necessary to look at the whole of the
headlines to ascertain this.
The case at bar illustrates this proposition. The first line consisting of these three words of itself
means nothing. The words are not spoken of any person. In order to find out to whom they refer
it is necessary to go to the line below, in which, while it is learned that they refer to Seor
Legarda, it is also seen at the same time that they wereallegations made against him.
The necessity of reading the whole of the headlines in order to get the meaning of the isolated
words is illustrated by the other half of this same page. On the first line are the words "Situation
in Hongkong." On the next line are the words "Health authorities fighting the Asiatic cholera
epidemic." The first line does not show that feature of the situation in Hongkong is treated of in
the article. The second lines does not show where the health authorities are taking action. It is
only by reading them together that one learns what the article is about.
Fairly construed, the headlines in question say that sensational allegations of being a traitor,
seducer, and perjurer have been made against Commissioner Legarda. A person knowing
nothing about the case or the parties to it, reading the whole of the headlines, could get no other
idea from it. Omitting the word "sensational" which has already been considered, this statement
is a fair index of the offer to prove which, as has been said before, was the principal part of the
article and the only libelous part. That these crimes were plainly and distinctly, and in those very
words, alleged against him is shown by a reading of the offer to prove. It is difficult to see how
anyone could make a fair index of that offer without using those words. That was all there was of
it.
The result upon this branch of the case is that the headlines are nothing more than a fair index of
the article and are therefore privileged with exception of the words "sensational" and "Legarda
pale and nervous," which are not libelous.
2. What has been said already leaves out of consideration the question of malice.
By the express terms of section 7, if the defendants published this judicial record with express
malice, they are guilty.
The Government claims that there was express malice. It is not apparent why, with such a claim,
the Government did not prosecute the defendants for publishing the article itself, for, as we have
said, it is infinitely worse in its details than the headlines.
The article with the headlines being privileged, the burden of proving express malice was on the
Government.
It relied upon two kinds of evidence. It claimed that the size of type and the arrangement of the
headlines proved malice. They would be some force to this claim were it not for the fact that the
other headlines on the same page, to which we have referred, are in the same size of type and
the arrangement of the subheads is identical with the one in question. Each one takes up onehalf of the page. Any presumption of malice in the use of large type for the words, "Traitor, etc.,"
is to my mind conclusively rebutted by the use of the same size in printing the words "Situation in
Hongkong."
An examination of other numbers of this paper, offered in evidence during the trial, shows that
this size of type was in frequent use for headlines of the most indifferent character.
The only other evidence introduced consisted of articles in other numbers of the same paper
relating to the same matter. These stated the gravity of the charges made; the condition of the
law in regard to the presentation of the truth as a defense, and urged that an investigation be had
for the purpose of showing whether charges were true or not. There was no other proof of
express malice.
It was proved at the trial that neither of the defendants knew Commissioner Legarda even by
sight. There was no evidence that they had ever had dealings of any kind with him.
The newspaper articles do not show any express malice, and any inference of that kind which
could be drawn from them is, to my mind, overcome by the proof that the defendants did not
know the person whom they are charged with having maliciously libeled.
In conclusion it may be said that, while the defendants are not guilty, the person who made this
offer in court is, for the reasons stated in my concurring opinion in the case of the United States
vs. Lerma, 10 and if prosecuted for this libel could, as far as appears from the record in this case,
have been convicted.
The judgment should be reversed and the defendants acquitted

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Republic of the Philippines

August 27, 2009

CHRISTIAN GENERAL ASSEMBLY, INC., Petitioner,

Clause 17. SUBDIVISION BEAUTIFICATION. To insure the beauty of the

agency's special expertise. The very definition of an administrative agency

May 16, 1903

THE UNITED STATES, complainant-appellee,

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