Republic of the Philippines
SUPREME COURT
G.R. No. L-46245 May 31, 1982
MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF
ASSESSMENT APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF
LAGUNA, respondents.
AQUINO, J.:
In this special civil action of certiorari, Meralco Securities Industrial
Corporation assails the decision of the Central Board of Assessment
Appeals (composed of the Secretary of Finance as chairman and the
Secretaries of Justice and Local Government and Community
Development as members) dated May 6, 1976, holding that Meralco
Securities' oil pipeline is subject to realty tax.
The record reveals that pursuant to a pipeline concession issued
under the Petroleum Act of 1949, Republic Act No. 387, Meralco
Securities installed from Batangas to Manila a pipeline system
consisting of cylindrical steel pipes joined together and buried not
less than one meter below the surface along the shoulder of the
public highway. The portion passing through Laguna is about thirty
kilometers long.
The pipes for white oil products measure fourteen inches in
diameter by thirty-six feet with a maximum capacity of 75,000
barrels daily. The pipes for fuel and black oil measure sixteen inches
by forty-eight feet with a maximum capacity of 100,000 barrels
daily.
The pipes are embedded in the soil and are firmly and solidly welded
together so as to preclude breakage or damage thereto and prevent
leakage or seepage of the oil. The valves are welded to the pipes so
as to make the pipeline system one single piece of property from
end to end.
In order to repair, replace, remove or transfer segments of the
pipeline, the pipes have to be cold-cut by means of a rotary hard-
metal pipe-cutter after digging or excavating them out of the ground
where they are buried. In points where the pipeline traversed rivers
or creeks, the pipes were laid beneath the bed thereof. Hence, the
pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can
be moved from one place to another as shown in the permit issued
by the Secretary of Public Works and Communications which permit
provides that the government reserves the right to require the
removal or transfer of the pipes by and at the concessionaire's
expense should they be affected by any road repair or improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the
provincial assessor of Laguna treated the pipeline as real property
and issued Tax Declarations Nos. 6535-6537, San Pedro; 7473-7478,
Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Bian and 15806-15810,
Calamba, containing the assessed values of portions of the pipeline.
Meralco Securities appealed the assessments to the Board of
Assessment Appeals of Laguna composed of the register of deeds as
chairman and the provincial auditor as member. That board in its
decision of June 18, 1975 upheld the assessments (pp. 47-49, Rollo).
Meralco Securities brought the case to the Central Board of
Assessment Appeals. As already stated, that Board, composed of
Acting Secretary of Finance Pedro M. Almanzor as chairman and
Secretary of Justice Vicente Abad Santos and Secretary of Local
Government and Community Development Jose Roo as members,
ruled that the pipeline is subject to realty tax (p. 40, Rollo).
A copy of that decision was served on Meralco Securities' counsel on
August 27, 1976. Section 36 of the Real Property Tax Code,
Presidential Decree No. 464, which took effect on June 1, 1974,
provides that the Board's decision becomes final and executory after
the lapse of fifteen days from the date of receipt of a copy of the
decision by the appellant.
Under Rule III of the amended rules of procedure of the Central
Board of Assessment Appeals (70 O.G. 10085), a party may ask for
the reconsideration of the Board's decision within fifteen days after
receipt. On September 7, 1976 (the eleventh day), Meralco
Securities filed its motion for reconsideration.
Secretary of Finance Cesar Virata and Secretary Roo (Secretary
Abad Santos abstained) denied the motion in a resolution dated
December 2, 1976, a copy of which was received by appellant's
counsel on May 24, 1977 (p. 4, Rollo). On June 6, 1977, Meralco
Securities filed the instant petition for certiorari.
The Solicitor General contends that certiorari is not proper in this
case because the Board acted within its jurisdiction and did not
gravely abuse its discretion and Meralco Securities was not denied
due process of law.
Meralco Securities explains that because the Court of Tax Appeals
has no jurisdiction to review the decision of the Central Board of
Assessment Appeals and because no judicial review of the Board's
decision is provided for in the Real Property Tax Code, Meralco
Securities' recourse is to file a petition for certiorari.
We hold that certiorari was properly availed of in this case. It is a
writ issued by a superior court to an inferior court, board or officer
exercising judicial or quasi-judicial functions whereby the record of a
particular case is ordered to be elevated for review and correction in
matters of law (14 C.J.S. 121-122; 14 Am Jur. 2nd 777).
The rule is that as to administrative agencies exercising quasi-judicial
power there is an underlying power in the courts to scrutinize the
acts of such agencies on questions of law and jurisdiction even
though no right of review is given by the statute (73 C.J.S. 506, note
56).
"The purpose of judicial review is to keep the administrative agency
within its jurisdiction and protect substantial rights of parties
affected by its decisions" (73 C.J.S. 507, See. 165). The review is a
part of the system of checks and balances which is a limitation on
the separation of powers and which forestalls arbitrary and unjust
adjudications.
Judicial review of the decision of an official or administrative agency
exercising quasi-judicial functions is proper in cases of lack of
jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative decision is corrupt, arbitrary
or capricious (Mafinco Trading Corporation vs. Ople, L-37790, March
25, 1976, 70 SCRA 139, 158; San Miguel Corporation vs. Secretary of
Labor, L-39195, May 16, 1975, 64 SCRA 56, 60, Mun. Council of
Lemery vs. Prov. Board of Batangas, 56 Phil. 260, 268).
The Central Board of Assessment Appeals, in confirming the ruling of
the provincial assessor and the provincial board of assessment
appeals that Meralco Securities' pipeline is subject to realty tax,
reasoned out that the pipes are machinery or improvements, as
contemplated in the Assessment Law and the Real Property Tax
Code; that they do not fall within the category of property exempt
from realty tax under those laws; that articles 415 and 416 of the
Civil Code, defining real and personal property, have no application
to this case; that even under article 415, the steel pipes can be
regarded as realty because they are constructions adhered to the
soil and things attached to the land in a fixed manner and that
Meralco Securities is not exempt from realty tax under the
Petroleum Law (pp. 36-40).
Meralco Securities insists that its pipeline is not subject to realty tax
because it is not real property within the meaning of article 415. This
contention is not sustainable under the provisions of the
Assessment Law, the Real Property Tax Code and the Civil Code.
Section 2 of the Assessment Law provides that the realty tax is due
"on real property, including land, buildings, machinery, and other
improvements" not specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the Real Property
Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied,
assessed and collected in all provinces, cities and municipalities an
annual ad valorem tax on real property, such as land, buildings,
machinery and other improvements affixed or attached to real
property not hereinafter specifically exempted. *
It is incontestable that the pipeline of Meralco Securities does not
fall within any of the classes of exempt real property enumerated in
section 3 of the Assessment Law and section 40 of the Real Property
Tax Code.
Pipeline means a line of pipe connected to pumps, valves and
control devices for conveying liquids, gases or finely divided solids. It
is a line of pipe running upon or in the earth, carrying with it the
right to the use of the soil in which it is placed (Note 21[10],54 C.J.S.
561).
Article 415[l] and [3] provides that real property may consist of
constructions of all kinds adhered to the soil and everything
attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or
deterioration of the object.
The pipeline system in question is indubitably a construction
adhering to the soil (Exh. B, p. 39, Rollo). It is attached to the land in
such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to
maintain the flow of oil, it is in a sense machinery within the
meaning of the Real Property Tax Code.
It should be borne in mind that what are being characterized as real
property are not the steel pipes but the pipeline system as a whole.
Meralco Securities has apparently two pipeline systems.
A pipeline for conveying petroleum has been regarded as real
property for tax purposes (Miller County Highway, etc., Dist. vs.
Standard Pipe Line Co., 19 Fed. 2nd 3; Board of Directors of Red
River Levee Dist. No. 1 of Lafayette County, Ark vs. R. F. C., 170 Fed.
2nd 430; 50 C. J. 750, note 86).
The other contention of Meralco Securities is that the Petroleum
Law exempts it from the payment of realty taxes. The alleged
exemption is predicated on the following provisions of that law
which exempt Meralco Securities from local taxes and make it liable
for taxes of general application:
ART. 102. Work obligations, taxes, royalties not to be changed.
Work obligations, special taxes and royalties which are fixed by the
provisions of this Act or by the concession for any of the kinds of
concessions to which this Act relates, are considered as inherent on
such concessions after they are granted, and shall not be increased
or decreased during the life of the concession to which they apply;
nor shall any other special taxes or levies be applied to such
concessions, nor shall 0concessionaires under this Act be subject to
any provincial, municipal or other local taxes or levies; nor shall any
sales tax be charged on any petroleum produced from the
concession or portion thereof, manufactured by the concessionaire
and used in the working of his concession. All such concessionaires,
however, shall be subject to such taxes as are of general application
in addition to taxes and other levies specifically provided in this Act.
Meralco Securities argues that the realty tax is a local tax or levy and
not a tax of general application. This argument is untenable because
the realty tax has always been imposed by the lawmaking body and
later by the President of the Philippines in the exercise of his
lawmaking powers, as shown in section 342 et seq. of the Revised
Administrative Code, Act No. 3995, Commonwealth Act No. 470 and
Presidential Decree No. 464.
The realty tax is enforced throughout the Philippines and not merely
in a particular municipality or city but the proceeds of the tax accrue
to the province, city, municipality and barrio where the realty taxed
is situated (Sec. 86, P.D. No. 464). In contrast, a local tax is imposed
by the municipal or city council by virtue of the Local Tax Code,
Presidential Decree No. 231, which took effect on July 1, 1973 (69
O.G. 6197).
We hold that the Central Board of Assessment Appeals did not act
with grave abuse of discretion, did not commit any error of law and
acted within its jurisdiction in sustaining the holding of the provincial
assessor and the local board of assessment appeals that Meralco
Securities' pipeline system in Laguna is subject to realty tax.
WHEREFORE, the questioned decision and resolution are affirmed.
The petition is dismissed. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. Nos. L-10817-18 February 28, 1958
ENRIQUE LOPEZ, petitioner,
vs.
VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents.
Nicolas Belmonte and Benjamin T. de Peralta for petitioner.
Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co.,
Inc. Jose B. Macatangay for respondent Plaza Theatre, Inc.
FELIX, J.:
Enrique Lopez is a resident of Balayan, Batangas, doing business
under the trade name of Lopez-Castelo Sawmill. Sometime in May,
1946, Vicente Orosa, Jr., also a resident of the same province,
dropped at Lopez' house and invited him to make an investment in
the theatre business. It was intimated that Orosa, his family and
close friends were organizing a corporation to be known as Plaza
Theatre, Inc., that would engage in such venture. Although Lopez
expressed his unwillingness to invest of the same, he agreed to
supply the lumber necessary for the construction of the proposed
theatre, and at Orosa's behest and assurance that the latter would
be personally liable for any account that the said construction might
incur, Lopez further agreed that payment therefor would be on
demand and not cash on delivery basis. Pursuant to said verbal
agreement, Lopez delivered the lumber which was used for the
construction of the Plaza Theatre on May 17, 1946, up to December
4 of the same year. But of the total cost of the materials amounting
to P62,255.85, Lopez was paid only P20,848.50, thus leaving a
balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on
a piece of land with an area of 679.17 square meters formerly
owned by Vicente Orosa, Jr., and was acquired by the corporation
on September 25, 1946, for P6,000. As Lopez was pressing Orosa for
payment of the remaining unpaid obligation, the latter and
Belarmino Rustia, the president of the corporation, promised to
obtain a bank loan by mortgaging the properties of the Plaza
Theatre., out of which said amount of P41,771.35 would be satisfied,
to which assurance Lopez had to accede. Unknown to him, however,
as early as November, 1946, the corporation already got a loan for
P30,000 from the Philippine National Bank with the Luzon Surety
Company as surety, and the corporation in turn executed a
mortgage on the land and building in favor of said company as
counter-security. As the land at that time was not yet brought under
the operation of the Torrens System, the mortgage on the same was
registered on November 16, 1946, under Act No. 3344.
Subsequently, when the corporation applied for the registration of
the land under Act 496, such mortgage was not revealed and thus
Original Certificate of Title No. O-391 was correspondingly issued on
October 25, 1947, without any encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due
him caused Vicente Orosa, Jr. to execute on March 17, 1947, an
alleged "deed of assignment" of his 420 shares of stock of the Plaza
Theater, Inc., at P100 per share or with a total value of P42,000 in
favor of the creditor, and as the obligation still remained unsettled,
Lopez filed on November 12, 1947, a complaint with the Court of
First Instance of Batangas (Civil Case No. 4501 which later became R-
57) against Vicente Orosa, Jr. and Plaza Theater, Inc., praying that
defendants be sentenced to pay him jointly and severally the sum of
P41,771.35, with legal interest from the firing of the action; that in
case defendants fail to pay the same, that the building and the land
covered by OCT No. O-391 owned by the corporation be sold at
public auction and the proceeds thereof be applied to said
indebtedness; or that the 420 shares of the capital stock of the Plaza
Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold
at public auction for the same purpose; and for such other remedies
as may be warranted by the circumstances. Plaintiff also caused the
annotation of a notice of lis pendens on said properties with the
Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate
answers, the first denying that the materials were delivered to him
as a promoter and later treasurer of the corporation, because he
had purchased and received the same on his personal account; that
the land on which the movie house was constructed was not
charged with a lien to secure the payment of the aforementioned
unpaid obligation; and that the 420 shares of stock of the Plaza
Theatre, Inc., was not assigned to plaintiff as collaterals but as direct
security for the payment of his indebtedness. As special defense,
this defendant contended that as the 420 shares of stock assigned
and conveyed by the assignor and accepted by Lopez as direct
security for the payment of the amount of P41,771.35 were personal
properties, plaintiff was barred from recovering any deficiency if the
proceeds of the sale thereof at public auction would not be
sufficient to cover and satisfy the obligation. It was thus prayed that
he be declared exempted from the payment of any deficiency in
case the proceeds from the sale of said personal properties would
not be enough to cover the amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up
the same line of defense by alleging that the building materials
delivered to Orosa were on the latter's personal account; and that
there was no understanding that said materials would be paid jointly
and severally by Orosa and the corporation, nor was a lien charged
on the properties of the latter to secure payment of the same
obligation. As special defense, defendant corporation averred that
while it was true that the materials purchased by Orosa were sold by
the latter to the corporation, such transactions were in good faith
and for valuable consideration thus when plaintiff failed to claim
said materials within 30 days from the time of removal thereof from
Orosa, lumber became a different and distinct specie and plaintiff
lost whatever rights he might have in the same and consequently
had no recourse against the Plaza Theatre, Inc., that the claim could
not have been refectionary credit, for such kind of obligation
referred to an indebtedness incurred in the repair or reconstruction
of something already existing and this concept did not include an
entirely new work; and that the Plaza Theatre, Inc., having been
incorporated on October 14, 1946, it could not have contracted any
obligation prior to said date. It was, therefore, prayed that the
complaint be dismissed; that said defendant be awarded the sum P
5,000 for damages, and such other relief as may be just and proper
in the premises.
The surety company, in the meantime, upon discovery that the land
was already registered under the Torrens System and that there was
a notice of lis pendens thereon, filed on August 17, 1948, or within
the 1-year period after the issuance of the certificate of title, a
petition for review of the decree of the land registration court dated
October 18, 1947, which was made the basis of OCT No. O-319, in
order to annotate the rights and interests of the surety company
over said properties (Land Registration Case No. 17 GLRO Rec. No.
296). Opposition thereto was offered by Enrique Lopez, asserting
that the amount demanded by him constituted a preferred lien over
the properties of the obligors; that the surety company was guilty of
negligence when it failed to present an opposition to the application
for registration of the property; and that if any violation of the rights
and interest of said surety would ever be made, same must be
subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October
30, 1952, the lower Court, after making an exhaustive and detailed
analysis of the respective stands of the parties and the evidence
adduced at the trial, held that defendants Vicente Orosa, Jr., and the
Plaza Theatre, Inc., were jointly liable for the unpaid balance of the
cost of lumber used in the construction of the building and the
plaintiff thus acquired the materialman's lien over the same. In
making the pronouncement that the lien was merely confined to the
building and did not extend to the land on which the construction
was made, the trial judge took into consideration the fact that when
plaintiff started the delivery of lumber in May, 1946, the land was
not yet owned by the corporation; that the mortgage in favor of
Luzon Surety Company was previously registered under Act No.
3344; that the codal provision (Art. 1923 of the old Spanish Civil
Code) specifying that refection credits are preferred could refer only
to buildings which are also classified as real properties, upon which
said refection was made. It was, however, declared that plaintiff's
lien on the building was superior to the right of the surety company.
And finding that the Plaza Theatre, Inc., had no objection to the
review of the decree issued in its favor by the land registration court
and the inclusion in the title of the encumbrance in favor of the
surety company, the court a quo granted the petition filed by the
latter company. Defendants Orosa and the Plaza Theatre, Inc., were
thus required to pay jointly the amount of P41,771.35 with legal
interest and costs within 90 days from notice of said decision; that in
case of default, the 420 shares of stock assigned by Orosa to plaintiff
be sold at public auction and the proceeds thereof be applied to the
payment of the amount due the plaintiff, plus interest and costs;
and that the encumbrance in favor of the surety company be
endorsed at the back of OCT No. O-391, with notation I that with
respect to the building, said mortgage was subject to the
materialman's lien in favor of Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as it
declared that the obligation of therein defendants was joint instead
of solidary, and that the lien did not extend to the land, but same
was denied by order the court of December 23, 1952. The matter
was thus appealed to the Court of appeals, which affirmed the lower
court's ruling, and then to this Tribunal. In this instance, plaintiff-
appellant raises 2 issues: (1) whether a materialman's lien for the
value of the materials used in the construction of a building attaches
to said structure alone and does not extend to the land on which the
building is adhered to; and (2) whether the lower court and the
Court of Appeals erred in not providing that the material mans liens
is superior to the mortgage executed in favor surety company not
only on the building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any
question against the part of the decision sentencing defendants
Orosa and Plaza Theatre, Inc., to pay jointly the sum of P41,771.35,
so We will not take up or consider anything on that point. Appellant,
however, contends that the lien created in favor of the furnisher of
the materials used for the construction, repair or refection of a
building, is also extended to the land which the construction was
made, and in support thereof he relies on Article 1923 of the
Spanish Civil Code, pertinent law on the matter, which reads as
follows:
ART. 1923. With respect to determinate real property and real rights
of the debtor, the following are preferred:
xxx xxx xxx
5. Credits for refection, not entered or recorded, with respect to the
estate upon which the refection was made, and only with respect to
other credits different from those mentioned in four preceding
paragraphs.
It is argued that in view of the employment of the phrase real estate,
or immovable property, and inasmuch as said provision does not
contain any specification delimiting the lien to the building, said
article must be construed as to embrace both the land and the
building or structure adhering thereto. We cannot subscribe to this
view, for while it is true that generally, real estate connotes the land
and the building constructed thereon, it is obvious that the inclusion
of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties1 could mean
only one thing that a building is by itself an immovable property,
a doctrine already pronounced by this Court in the case of Leung Yee
vs. Strong Machinery Co., 37 Phil., 644. Moreover, and in view of the
absence of any specific provision of law to the contrary, a building is
an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same
owner.
A close examination of the provision of the Civil Code invoked by
appellant reveals that the law gives preference to unregistered
refectionary credits only with respect to the real estate upon which
the refection or work was made. This being so, the inevitable
conclusion must be that the lien so created attaches merely to the
immovable property for the construction or repair of which the
obligation was incurred. Evidently, therefore, the lien in favor of
appellant for the unpaid value of the lumber used in the
construction of the building attaches only to said structure and to no
other property of the obligors.
Considering the conclusion thus arrived at, i.e., that the
materialman's lien could be charged only to the building for which
the credit was made or which received the benefit of refection, the
lower court was right in, holding at the interest of the mortgagee
over the land is superior and cannot be made subject to the said
materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the
decision appealed from is hereby affirmed, with costs against
appellant. It is so ordered.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. 106041 January 29, 1993
BENGUET CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF
ASSESSMENT APPEALS OF ZAMBALES, PROVINCIAL ASSESSOR OF
ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN
MARCELINO, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for
petitioner.
CRUZ, J.:
The realty tax assessment involved in this case amounts to
P11,319,304.00. It has been imposed on the petitioner's tailings dam
and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of
Zambales assessed the said properties as taxable improvements. The
assessment was appealed to the Board of Assessment Appeals of the
Province of Zambales. On August 24, 1988, the appeal was dismissed
mainly on the ground of the petitioner's "failure to pay the realty
taxes that fell due during the pendency of the appeal."
The petitioner seasonably elevated the matter to the Central Board
of Assessment Appeals, 1 one of the herein respondents. In its
decision dated March 22, 1990, the Board reversed the dismissal of
the appeal but, on the merits, agreed that "the tailings dam and the
lands submerged thereunder (were) subject to realty tax."
For purposes of taxation the dam is considered as real property as it
comes within the object mentioned in paragraphs (a) and (b) of
Article 415 of the New Civil Code. It is a construction adhered to the
soil which cannot be separated or detached without breaking the
material or causing destruction on the land upon which it is
attached. The immovable nature of the dam as an improvement
determines its character as real property, hence taxable under
Section 38 of the Real Property Tax Code. (P.D. 464).
Although the dam is partly used as an anti-pollution device, this
Board cannot accede to the request for tax exemption in the
absence of a law authorizing the same.
xxx xxx xxx
We find the appraisal on the land submerged as a result of the
construction of the tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of
Market Values for Zambales which was reviewed and allowed for
use by the Ministry (Department) of Finance in the 1981-1982
general revision. No serious attempt was made by Petitioner-
Appellant Benguet Corporation to impugn its reasonableness, i.e.,
that the P50.00 per square meter applied by Respondent-Appellee
Provincial Assessor is indeed excessive and unconscionable. Hence,
we find no cause to disturb the market value applied by Respondent
Appellee Provincial Assessor of Zambales on the properties of
Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266.
This petition for certiorari now seeks to reverse the above ruling.
The principal contention of the petitioner is that the tailings dam is
not subject to realty tax because it is not an "improvement" upon
the land within the meaning of the Real Property Tax Code. More
particularly, it is claimed
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from and
independent of the mine; hence, by itself it cannot be considered an
improvement separately assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the petitioner
corporation in the area, the tailings dam will benefit the local
community by serving as an irrigation facility;
(d) that the building of the dam has stripped the property of
any commercial value as the property is submerged under water
wastes from the mine;
(e) that the tailings dam is an environmental pollution control
device for which petitioner must be commended rather than
penalized with a realty tax assessment;
(f) that the installation and utilization of the tailings dam as a
pollution control device is a requirement imposed by law;
(2) as regards the valuation of the tailings dam and the
submerged lands:
(a) that the subject properties have no market value as they
cannot be sold independently of the mine;
(b) that the valuation of the tailings dam should be based on
its incidental use by petitioner as a water reservoir and not on the
alleged cost of construction of the dam and the annual build-up
expense;
(c) that the "residual value formula" used by the Provincial
Assessor and adopted by respondent CBAA is arbitrary and
erroneous; and
(3) as regards the petitioner's liability for penalties for
non-declaration of the tailings dam and the submerged lands for
realty tax purposes:
(a) that where a tax is not paid in an honest belief that it is
not due, no penalty shall be collected in addition to the basic tax;
(b) that no other mining companies in the Philippines
operating a tailings dam have been made to declare the dam for
realty tax purposes.
The petitioner does not dispute that the tailings dam may be
considered realty within the meaning of Article 415. It insists,
however, that the dam cannot be subjected to realty tax as a
separate and independent property because it does not constitute
an "assessable improvement" on the mine although a considerable
sum may have been spent in constructing and maintaining it.
To support its theory, the petitioner cites the following cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963), where
this Court considered the dikes and gates constructed by the
taxpayer in connection with a fishpond operation as integral parts of
the fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of Surigao
(100 Phil. 303), involving a road constructed by the timber
concessionaire in the area, where this Court did not impose a realty
tax on the road primarily for two reasons:
In the first place, it cannot be disputed that the ownership of the
road that was constructed by appellee belongs to the government
by right of accession not only because it is inherently incorporated
or attached to the timber land . . . but also because upon the
expiration of the concession said road would ultimately pass to the
national government. . . . In the second place, while the road was
constructed by appellee primarily for its use and benefit, the
privilege is not exclusive, for . . . appellee cannot prevent the use of
portions of the concession for homesteading purposes. It is also duty
bound to allow the free use of forest products within the concession
for the personal use of individuals residing in or within the vicinity of
the land. . . . In other words, the government has practically
reserved the rights to use the road to promote its varied activities.
Since, as above shown, the road in question cannot be considered as
an improvement which belongs to appellee, although in part is for
its benefit, it is clear that the same cannot be the subject of
assessment within the meaning of Section 2 of C.A.
No. 470.
Apparently, the realty tax was not imposed not because the road
was an integral part of the lumber concession but because the
government had the right to use the road to promote its varied
activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an
American case, where it was declared that the reservoir dam went
with and formed part of the reservoir and that the dam would be
"worthless and useless except in connection with the outlet canal,
and the water rights in the reservoir represent and include whatever
utility or value there is in the dam and headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also
from the United States. This case involved drain tunnels constructed
by plaintiff when it expanded its mining operations downward,
resulting in a constantly increasing flow of water in the said mine. It
was held that:
Whatever value they have is connected with and in fact is an integral
part of the mine itself. Just as much so as any shaft which descends
into the earth or an underground incline, tunnel, or drift would be
which was used in connection with the mine.
On the other hand, the Solicitor General argues that the dam is an
assessable improvement because it enhances the value and utility of
the mine. The primary function of the dam is to receive, retain and
hold the water coming from the operations of the mine, and it also
enables the petitioner to impound water, which is then recycled for
use in the plant.
There is also ample jurisprudence to support this view, thus:
. . . The said equipment and machinery, as appurtenances to the gas
station building or shed owned by Caltex (as to which it is subject to
realty tax) and which fixtures are necessary to the operation of the
gas station, for without them the gas station would be useless and
which have been attached or affixed permanently to the gas station
site or embedded therein, are taxable improvements and machinery
within the meaning of the Assessment Law and the Real Property
Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA 296).
We hold that while the two storage tanks are not embedded in the
land, they may, nevertheless, be considered as improvements on the
land, enhancing its utility and rendering it useful to the oil industry.
It is undeniable that the two tanks have been installed with some
degree of permanence as receptacles for the considerable quantities
of oil needed by MERALCO for its operations. (Manila Electric Co. v.
CBAA, 114 SCRA 273).
The pipeline system in question is indubitably a construction
adhering to the soil. It is attached to the land in such a way that it
cannot be separated therefrom without dismantling the steel pipes
which were welded to form the pipeline. (MERALCO Securities
Industrial Corp. v. CBAA, 114 SCRA 261).
The tax upon the dam was properly assessed to the plaintiff as a tax
upon real estate. (Flax-Pond Water Co. v. City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they are
designed and used by the owner as permanent improvement of the
free hold, and that for such reasons they were properly assessed by
the respondent taxing district as improvements. (Standard Oil Co. of
New Jersey v. Atlantic City, 15 A 2d. 271)
The Real Property Tax Code does not carry a definition of "real
property" and simply says that the realty tax is imposed on "real
property, such as lands, buildings, machinery and other
improvements affixed or attached to real property." In the absence
of such a definition, we apply Article 415 of the Civil Code, the
pertinent portions of which state:
Art. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds adhered to
the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in
such a way that it cannot be separated therefrom without breaking
the material or deterioration of the object.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law,
provides that the realty tax is due "on the real property, including
land, buildings, machinery and other improvements" not specifically
exempted in Section 3 thereof. A reading of that section shows that
the tailings dam of the petitioner does not fall under any of the
classes of exempt real properties therein enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the
Real Property Tax Code defines improvement as follows:
(k) Improvements is a valuable addition made to property
or an amelioration in its condition, amounting to more than mere
repairs or replacement of waste, costing labor or capital and
intended to enhance its value, beauty or utility or to adopt it for new
or further purposes.
The term has also been interpreted as "artificial alterations of the
physical condition of the ground that are reasonably permanent in
character." 2
The Court notes that in the Ontario case the plaintiff admitted that
the mine involved therein could not be operated without the aid of
the drain tunnels, which were indispensable to the successful
development and extraction of the minerals therein. This is not true
in the present case.
Even without the tailings dam, the petitioner's mining operation can
still be carried out because the primary function of the dam is
merely to receive and retain the wastes and water coming from the
mine. There is no allegation that the water coming from the dam is
the sole source of water for the mining operation so as to make the
dam an integral part of the mine. In fact, as a result of the
construction of the dam, the petitioner can now impound and
recycle water without having to spend for the building of a water
reservoir. And as the petitioner itself points out, even if the
petitioner's mine is shut down or ceases operation, the dam may still
be used for irrigation of the surrounding areas, again unlike in the
Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not
applicable because it involved water reservoir dams used for
different purposes and for the benefit of the surrounding areas. By
contrast, the tailings dam in question is being used exclusively for
the benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that the tailings
dam has no separate existence, just as vigorously contends that at
the end of the mining operation the tailings dam will serve the local
community as an irrigation facility, thereby implying that it can exist
independently of the mine.
From the definitions and the cases cited above, it would appear that
whether a structure constitutes an improvement so as to partake of
the status of realty would depend upon the degree of permanence
intended in its construction and use. The expression "permanent" as
applied to an improvement does not imply that the improvement
must be used perpetually but only until the purpose to which the
principal realty is devoted has been accomplished. It is sufficient
that the improvement is intended to remain as long as the land to
which it is annexed is still used for the said purpose.
The Court is convinced that the subject dam falls within the
definition of an "improvement" because it is permanent in character
and it enhances both the value and utility of petitioner's mine.
Moreover, the immovable nature of the dam defines its character as
real property under Article 415 of the Civil Code and thus makes it
taxable under Section 38 of the Real Property Tax Code.
The Court will also reject the contention that the appraisal at P50.00
per square meter made by the Provincial Assessor is excessive and
that his use of the "residual value formula" is arbitrary and
erroneous.
Respondent Provincial Assessor explained the use of the "residual
value formula" as follows:
A 50% residual value is applied in the computation because, while it
is true that when slime fills the dike, it will then be covered by
another dike or stage, the stage covered is still there and still exists
and since only one face of the dike is filled, 50% or the other face is
unutilized.
In sustaining this formula, the CBAA gave the following justification:
We find the appraisal on the land submerged as a result of the
construction of the tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of
Market Values for San Marcelino, Zambales, which is fifty (50.00)
pesos per square meter for third class industrial land (TSN, page 17,
July 5, 1989) and Schedule of Market Values for Zambales which was
reviewed and allowed for use by the Ministry (Department) of
Finance in the 1981-1982 general revision. No serious attempt was
made by Petitioner-Appellant Benguet Corporation to impugn its
reasonableness, i.e, that the P50.00 per square meter applied by
Respondent-Appellee Provincial Assessor is indeed excessive and
unconscionable. Hence, we find no cause to disturb the market
value applied by Respondent-Appellee Provincial Assessor of
Zambales on the properties of Petitioner-Appellant Benguet
Corporation covered by Tax Declaration Nos. 002-0260 and 002-
0266.
It has been the long-standing policy of this Court to respect the
conclusions of quasi-judicial agencies like the CBAA, which, because
of the nature of its functions and its frequent exercise thereof, has
developed expertise in the resolution of assessment problems. The
only exception to this rule is where it is clearly shown that the
administrative body has committed grave abuse of discretion calling
for the intervention of this Court in the exercise of its own powers of
review. There is no such showing in the case at bar.
We disagree, however, with the ruling of respondent CBAA that it
cannot take cognizance of the issue of the propriety of the penalties
imposed upon it, which was raised by the petitioner for the first time
only on appeal. The CBAA held that this "is an entirely new matter
that petitioner can take up with the Provincial Assessor (and) can be
the subject of another protest before the Local Board or a
negotiation with the local sanggunian . . ., and in case of an adverse
decision by either the Local Board or the local sanggunian, (it can)
elevate the same to this Board for appropriate action."
There is no need for this time-wasting procedure. The Court may
resolve the issue in this petition instead of referring it back to the
local authorities. We have studied the facts and circumstances of
this case as above discussed and find that the petitioner has acted in
good faith in questioning the assessment on the tailings dam and the
land submerged thereunder. It is clear that it has not done so for the
purpose of evading or delaying the payment of the questioned tax.
Hence, we hold that the petitioner is not subject to penalty for its
non-declaration of the tailings dam and the submerged lands for
realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure to show that the
questioned decision of respondent Central Board of Assessment
Appeals is tainted with grave abuse of discretion except as to the
imposition of penalties upon the petitioner which is hereby SET
ASIDE. Costs against the petitioner. It is so ordered.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-30173 September 30, 1971
GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-
appellees,
vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-
appellants.
Castillo & Suck for plaintiffs-appellees.
Jose Q. Calingo for defendants-appellants.
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R. No.
27824-R) for the reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in the
municipal court of Manila in Civil Case No. 43073, for ejectment.
Having lost therein, defendants-appellants appealed to the court a
quo (Civil Case No. 30993) which also rendered a decision against
them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the
plaintiffs and against the defendants, ordering the latter to pay
jointly and severally the former a monthly rent of P200.00 on the
house, subject-matter of this action, from March 27, 1956, to
January 14, 1967, with interest at the legal rate from April 18, 1956,
the filing of the complaint, until fully paid, plus attorney's fees in the
sum of P300.00 and to pay the costs.
It appears on the records that on 1 September 1955 defendants-
appellants executed a chattel mortgage in favor of plaintiffs-
appellees over their house of strong materials located at No. 550 Int.
3, Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and 7-B,
Block No. 2554, which were being rented from Madrigal & Company,
Inc. The mortgage was registered in the Registry of Deeds of Manila
on 2 September 1955. The herein mortgage was executed to
guarantee a loan of P4,800.00 received from plaintiffs-appellees,
payable within one year at 12% per annum. The mode of payment
was P150.00 monthly, starting September, 1955, up to July 1956,
and the lump sum of P3,150 was payable on or before August, 1956.
It was also agreed that default in the payment of any of the
amortizations, would cause the remaining unpaid balance to
becomeimmediately due and Payable and
the Chattel Mortgage will be enforceable in accordance with the
provisions of Special Act No. 3135, and for this purpose, the Sheriff
of the City of Manila or any of his deputies is hereby empowered
and authorized to sell all the Mortgagor's property after the
necessary publication in order to settle the financial debts of
P4,800.00, plus 12% yearly interest, and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was
extrajudicially foreclosed, and on 27 March 1956, the house was
sold at public auction pursuant to the said contract. As highest
bidder, plaintiffs-appellees were issued the corresponding certificate
of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant
commenced Civil Case No. 43073 in the municipal court of Manila,
praying, among other things, that the house be vacated and its
possession surrendered to them, and for defendants-appellants to
pay rent of P200.00 monthly from 27 March 1956 up to the time the
possession is surrendered. 4 On 21 September 1956, the municipal
court rendered its decision
... ordering the defendants to vacate the premises described in the
complaint; ordering further to pay monthly the amount of P200.00
from March 27, 1956, until such (time that) the premises is (sic)
completely vacated; plus attorney's fees of P100.00 and the costs of
the suit. 5
Defendants-appellants, in their answers in both the municipal court
and court a quo impugned the legality of the chattel mortgage,
claiming that they are still the owners of the house; but they waived
the right to introduce evidence, oral or documentary. Instead, they
relied on their memoranda in support of their motion to dismiss,
predicated mainly on the grounds that: (a) the municipal court did
not have jurisdiction to try and decide the case because (1) the issue
involved, is ownership, and (2) there was no allegation of prior
possession; and (b) failure to prove prior demand pursuant to
Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance,
defendants-appellants failed to deposit the rent for November, 1956
within the first 10 days of December, 1956 as ordered in the
decision of the municipal court. As a result, the court granted
plaintiffs-appellees' motion for execution, and it was actually issued
on 24 January 1957. However, the judgment regarding the surrender
of possession to plaintiffs-appellees could not be executed because
the subject house had been already demolished on 14 January 1957
pursuant to the order of the court in a separate civil case (No.
25816) for ejectment against the present defendants for non-
payment of rentals on the land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the
supersedeas bond and withdrawal of deposited rentals was denied
for the reason that the liability therefor was disclaimed and was still
being litigated, and under Section 8, Rule 72, rentals deposited had
to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its
decision, the dispositive portion of which is quoted earlier. The said
decision was appealed by defendants to the Court of Appeals which,
in turn, certified the appeal to this Court. Plaintiffs-appellees failed
to file a brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error
which can be condensed into two questions, namely: .
(a) Whether the municipal court from which the case
originated had jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound
to pay rentals to the plaintiffs during the period of one (1) year
provided by law for the redemption of the extrajudicially foreclosed
house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of
the municipal court from which the case originated, and
consequently, the appellate jurisdiction of the Court of First Instance
a quo, on the theory that the chattel mortgage is void ab initio;
whence it would follow that the extrajudicial foreclosure, and
necessarily the consequent auction sale, are also void. Thus, the
ownership of the house still remained with defendants-appellants
who are entitled to possession and not plaintiffs-appellees.
Therefore, it is argued by defendants-appellants, the issue of
ownership will have to be adjudicated first in order to determine
possession. lt is contended further that ownership being in issue, it
is the Court of First Instance which has jurisdiction and not the
municipal court.
Defendants-appellants predicate their theory of nullity of the chattel
mortgage on two grounds, which are: (a) that, their signatures on
the chattel mortgage were obtained through fraud, deceit, or
trickery; and (b) that the subject matter of the mortgage is a house
of strong materials, and, being an immovable, it can only be the
subject of a real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance
found defendants-appellants' contentions as not supported by
evidence and accordingly dismissed the charge, 8 confirming the
earlier finding of the municipal court that "the defense of ownership
as well as the allegations of fraud and deceit ... are mere
allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that
"the answer is a mere statement of the facts which the party filing it
expects to prove, but it is not evidence; 11 and further, that when
the question to be determined is one of title, the Court is given the
authority to proceed with the hearing of the cause until this fact is
clearly established. In the case of Sy vs. Dalman, 12 wherein the
defendant was also a successful bidder in an auction sale, it was
likewise held by this Court that in detainer cases the aim of
ownership "is a matter of defense and raises an issue of fact which
should be determined from the evidence at the trial." What
determines jurisdiction are the allegations or averments in the
complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit
does not render a contract void ab initio, and can only be a ground
for rendering the contract voidable or annullable pursuant to Article
1390 of the New Civil Code, by a proper action in court. 14 There is
nothing on record to show that the mortgage has been annulled.
Neither is it disclosed that steps were taken to nullify the same.
Hence, defendants-appellants' claim of ownership on the basis of a
voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if
there was no fraud, deceit or trickery, the chattel mortgage was still
null and void ab initio because only personal properties can be
subject of a chattel mortgage. The rule about the status of buildings
as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza
Theatre Inc., 15 cited in Associated Insurance Surety Co., Inc. vs. Iya,
et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate and
distinct from the land, in the enumeration of what may constitute
real properties (art. 415, New Civil Code) could only mean one thing
that a building is by itself an immovable property irrespective of
whether or not said structure and the land on which it is adhered to
belong to the same owner.
Certain deviations, however, have been allowed for various reasons.
In the case of Manarang and Manarang vs. Ofilada, 17 this Court
stated that "it is undeniable that the parties to a contract may by
agreement treat as personal property that which by nature would be
real property", citing Standard Oil Company of New York vs.
Jaramillo. 18 In the latter case, the mortgagor conveyed and
transferred to the mortgagee by way of mortgage "the following
described personal property." 19 The "personal property" consisted
of leasehold rights and a building. Again, in the case of Luna vs.
Encarnacion, 20 the subject of the contract designated as Chattel
Mortgage was a house of mixed materials, and this Court hold
therein that it was a valid Chattel mortgage because it was so
expressly designated and specifically that the property given as
security "is a house of mixed materials, which by its very nature is
considered personal property." In the later case of Navarro vs.
Pineda, 21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to
consider a house as personal property for the purposes of said
contract, "is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel"
(Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a
mortgaged house built on a rented land was held to be a personal
property, not only because the deed of mortgage considered it as
such, but also because it did not form part of the land (Evangelists
vs. Abad, [CA]; 36 O.G. 2913), for it is now settled that an object
placed on land by one who had only a temporary right to the same,
such as the lessee or usufructuary, does not become immobilized by
attachment (Valdez vs. Central Altagracia, 222 U.S. 58, cited in
Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a
house belonging to a person stands on a rented land belonging to
another person, it may be mortgaged as a personal property as so
stipulated in the document of mortgage. (Evangelista vs. Abad,
Supra.) It should be noted, however that the principle is predicated
on statements by the owner declaring his house to be a chattel, a
conduct that may conceivably estop him from subsequently claiming
otherwise. (Ladera vs. C.N. Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only
expressly designated as Chattel Mortgage; it specifically provides
that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by
way of Chattel Mortgage 23 the property together with its leasehold
rights over the lot on which it is constructed and participation ..." 24
Although there is no specific statement referring to the subject
house as personal property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendants-appellants could
only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise.
Moreover, the subject house stood on a rented lot to which
defendats-appellants merely had a temporary right as lessee, and
although this can not in itself alone determine the status of the
property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended
to treat the house as personalty. Finally unlike in the Iya cases, Lopez
vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong
Machinery and Williamson, 26 wherein third persons assailed the
validity of the chattel mortgage, 27 it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking the validity of
the chattel mortgage in this case. The doctrine of estoppel therefore
applies to the herein defendants-appellants, having treated the
subject house as personalty.
(b) Turning to the question of possession and rentals of the
premises in question. The Court of First Instance noted in its
decision that nearly a year after the foreclosure sale the mortgaged
house had been demolished on 14 and 15 January 1957 by virtue of
a decision obtained by the lessor of the land on which the house
stood. For this reason, the said court limited itself to sentencing the
erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00
from 27 March 1956 (when the chattel mortgage was foreclosed and
the house sold) until 14 January 1957 (when it was torn down by the
Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were
entitled to remain in possession without any obligation to pay rent
during the one year redemption period after the foreclosure sale,
i.e., until 27 March 1957. On this issue, We must rule for the
appellants.
Chattel mortgages are covered and regulated by the Chattel
Mortgage Law, Act No. 1508. 28 Section 14 of this Act allows the
mortgagee to have the property mortgaged sold at public auction
through a public officer in almost the same manner as that allowed
by Act No. 3135, as amended by Act No. 4118, provided that the
requirements of the law relative to notice and registration are
complied with. 29 In the instant case, the parties specifically
stipulated that "the chattel mortgage will be enforceable in
accordance with the provisions of Special Act No. 3135 ... ." 30
(Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-
mortgagor (defendants-appellants herein) may, at any time within
one year from and after the date of the auction sale, redeem the
property sold at the extra judicial foreclosure sale. Section 7 of the
same Act 32 allows the purchaser of the property to obtain from the
court the possession during the period of redemption: but the same
provision expressly requires the filing of a petition with the proper
Court of First Instance and the furnishing of a bond. It is only upon
filing of the proper motion and the approval of the corresponding
bond that the order for a writ of possession issues as a matter of
course. No discretion is left to the court. 33 In the absence of such a
compliance, as in the instant case, the purchaser can not claim
possession during the period of redemption as a matter of right. In
such a case, the governing provision is Section 34, Rule 39, of the
Revised Rules of Court 34 which also applies to properties purchased
in extrajudicial foreclosure proceedings. 35 Construing the said
section, this Court stated in the aforestated case of Reyes vs.
Hamada.
In other words, before the expiration of the 1-year period within
which the judgment-debtor or mortgagor may redeem the property,
the purchaser thereof is not entitled, as a matter of right, to
possession of the same. Thus, while it is true that the Rules of Court
allow the purchaser to receive the rentals if the purchased property
is occupied by tenants, he is, nevertheless, accountable to the
judgment-debtor or mortgagor as the case may be, for the amount
so received and the same will be duly credited against the
redemption price when the said debtor or mortgagor effects the
redemption. Differently stated, the rentals receivable from tenants,
although they may be collected by the purchaser during the
redemption period, do not belong to the latter but still pertain to
the debtor of mortgagor. The rationale for the Rule, it seems, is to
secure for the benefit of the debtor or mortgagor, the payment of
the redemption amount and the consequent return to him of his
properties sold at public auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the
time of the auction sale, they are entitled to remain in possession
during the period of redemption or within one year from and after
27 March 1956, the date of the auction sale, and to collect the rents
or profits during the said period.
It will be noted further that in the case at bar the period of
redemption had not yet expired when action was instituted in the
court of origin, and that plaintiffs-appellees did not choose to take
possession under Section 7, Act No. 3135, as amended, which is the
law selected by the parties to govern the extrajudicial foreclosure of
the chattel mortgage. Neither was there an allegation to that effect.
Since plaintiffs-appellees' right to possess was not yet born at the
filing of the complaint, there could be no violation or breach thereof.
Wherefore, the original complaint stated no cause of action and was
prematurely filed. For this reason, the same should be ordered
dismissed, even if there was no assignment of error to that effect.
The Supreme Court is clothed with ample authority to review
palpable errors not assigned as such if it finds that their
consideration is necessary in arriving at a just decision of the cases.
37
It follows that the court below erred in requiring the mortgagors to
pay rents for the year following the foreclosure sale, as well as
attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is
reversed and another one entered, dismissing the complaint. With
costs against plaintiffs-appellees.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON,
defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of
rice-cleaning machinery company from the defendant machinery
company, and executed a chattel mortgage thereon to secure
payment of the purchase price. It included in the mortgage deed the
building of strong materials in which the machinery was installed,
without any reference to the land on which it stood. The
indebtedness secured by this instrument not having been paid when
it fell due, the mortgaged property was sold by the sheriff, in
pursuance of the terms of the mortgage instrument, and was bought
in by the machinery company. The mortgage was registered in the
chattel mortgage registry, and the sale of the property to the
machinery company in satisfaction of the mortgage was annotated
in the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the
"Compaia Agricola Filipina" executed a deed of sale of the land
upon which the building stood to the machinery company, but this
deed of sale, although executed in a public document, was not
registered. This deed makes no reference to the building erected on
the land and would appear to have been executed for the purpose
of curing any defects which might be found to exist in the machinery
company's title to the building under the sheriff's certificate of sale.
The machinery company went into possession of the building at or
about the time when this sale took place, that is to say, the month of
December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in
favor of the machinery company, the mortgagor, the "Compaia
Agricola Filipina" executed another mortgage to the plaintiff upon
the building, separate and apart from the land on which it stood, to
secure payment of the balance of its indebtedness to the plaintiff
under a contract for the construction of the building. Upon the
failure of the mortgagor to pay the amount of the indebtedness
secured by the mortgage, the plaintiff secured judgment for that
amount, levied execution upon the building, bought it in at the
sheriff's sale on or about the 18th of December, 1914, and had the
sheriff's certificate of the sale duly registered in the land registry of
the Province of Cavite.
At the time when the execution was levied upon the building, the
defendant machinery company, which was in possession, filed with
the sheriff a sworn statement setting up its claim of title and
demanding the release of the property from the levy. Thereafter,
upon demand of the sheriff, the plaintiff executed an indemnity
bond in favor of the sheriff in the sum of P12,000, in reliance upon
which the sheriff sold the property at public auction to the plaintiff,
who was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of
the building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil
Code, gave judgment in favor of the machinery company, on the
ground that the company had its title to the building registered prior
to the date of registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the
ownership shall be transfer to the person who may have the first
taken possession thereof in good faith, if it should be personal
property.
Should it be real property, it shall belong to the person acquiring it
who first recorded it in the registry.
Should there be no entry, the property shall belong to the person
who first took possession of it in good faith, and, in the absence
thereof, to the person who presents the oldest title, provided there
is good faith.
The registry her referred to is of course the registry of real property,
and it must be apparent that the annotation or inscription of a deed
of sale of real property in a chattel mortgage registry cannot be
given the legal effect of an inscription in the registry of real
property. By its express terms, the Chattel Mortgage Law
contemplates and makes provision for mortgages of personal
property; and the sole purpose and object of the chattel mortgage
registry is to provide for the registry of "Chattel mortgages," that is
to say, mortgages of personal property executed in the manner and
form prescribed in the statute. The building of strong materials in
which the rice-cleaning machinery was installed by the "Compaia
Agricola Filipina" was real property, and the mere fact that the
parties seem to have dealt with it separate and apart from the land
on which it stood in no wise changed its character as real property.
It follows that neither the original registry in the chattel mortgage of
the building and the machinery installed therein, not the annotation
in that registry of the sale of the mortgaged property, had any effect
whatever so far as the building was concerned.
We conclude that the ruling in favor of the machinery company
cannot be sustained on the ground assigned by the trial judge. We
are of opinion, however, that the judgment must be sustained on
the ground that the agreed statement of facts in the court below
discloses that neither the purchase of the building by the plaintiff
nor his inscription of the sheriff's certificate of sale in his favor was
made in good faith, and that the machinery company must be held
to be the owner of the property under the third paragraph of the
above cited article of the code, it appearing that the company first
took possession of the property; and further, that the building and
the land were sold to the machinery company long prior to the date
of the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the
Civil Code require "good faith," in express terms, in relation to
"possession" and "title," but contain no express requirement as to
"good faith" in relation to the "inscription" of the property on the
registry, it must be presumed that good faith is not an essential
requisite of registration in order that it may have the effect
contemplated in this article. We cannot agree with this contention.
It could not have been the intention of the legislator to base the
preferential right secured under this article of the code upon an
inscription of title in bad faith. Such an interpretation placed upon
the language of this section would open wide the door to fraud and
collusion. The public records cannot be converted into instruments
of fraud and oppression by one who secures an inscription therein in
bad faith. The force and effect given by law to an inscription in a
public record presupposes the good faith of him who enters such
inscription; and rights created by statute, which are predicated upon
an inscription in a public registry, do not and cannot accrue under an
inscription "in bad faith," to the benefit of the person who thus
makes the inscription.
Construing the second paragraph of this article of the code, the
supreme court of Spain held in its sentencia of the 13th of May,
1908, that:
This rule is always to be understood on the basis of the good faith
mentioned in the first paragraph; therefore, it having been found
that the second purchasers who record their purchase had
knowledge of the previous sale, the question is to be decided in
accordance with the following paragraph. (Note 2, art. 1473, Civ.
Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title
of conveyance of ownership of the real property that is first
recorded in the registry shall have preference, this provision must
always be understood on the basis of the good faith mentioned in
the first paragraph; the legislator could not have wished to strike it
out and to sanction bad faith, just to comply with a mere formality
which, in given cases, does not obtain even in real disputes between
third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers
of the La Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff,
when he bought the building at the sheriff's sale and inscribed his
title in the land registry, was duly notified that the machinery
company had bought the building from plaintiff's judgment debtor;
that it had gone into possession long prior to the sheriff's sale; and
that it was in possession at the time when the sheriff executed his
levy. The execution of an indemnity bond by the plaintiff in favor of
the sheriff, after the machinery company had filed its sworn claim of
ownership, leaves no room for doubt in this regard. Having bought
in the building at the sheriff's sale with full knowledge that at the
time of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be
said to have been a purchaser in good faith; and of course, the
subsequent inscription of the sheriff's certificate of title must be
held to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription
of the sheriff's certificate of sale to the plaintiff was not made in
good faith, we should not be understood as questioning, in any way,
the good faith and genuineness of the plaintiff's claim against the
"Compaia Agricola Filipina." The truth is that both the plaintiff and
the defendant company appear to have had just and righteous
claims against their common debtor. No criticism can properly be
made of the exercise of the utmost diligence by the plaintiff in
asserting and exercising his right to recover the amount of his claim
from the estate of the common debtor. We are strongly inclined to
believe that in procuring the levy of execution upon the factory
building and in buying it at the sheriff's sale, he considered that he
was doing no more than he had a right to do under all the
circumstances, and it is highly possible and even probable that he
thought at that time that he would be able to maintain his position
in a contest with the machinery company. There was no collusion on
his part with the common debtor, and no thought of the
perpetration of a fraud upon the rights of another, in the ordinary
sense of the word. He may have hoped, and doubtless he did hope,
that the title of the machinery company would not stand the test of
an action in a court of law; and if later developments had confirmed
his unfounded hopes, no one could question the legality of the
propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery
company's claim of ownership when he executed the indemnity
bond and bought in the property at the sheriff's sale, and it
appearing further that the machinery company's claim of ownership
was well founded, he cannot be said to have been an innocent
purchaser for value. He took the risk and must stand by the
consequences; and it is in this sense that we find that he was not a
purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of
title in his vendor cannot claim that he has acquired title thereto in
good faith as against the true owner of the land or of an interest
therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry
and investigation as might be necessary to acquaint him with the
defects in the title of his vendor. A purchaser cannot close his eyes
to facts which should put a reasonable man upon his guard, and
then claim that he acted in good faith under the belief that there
was no defect in the title of the vendor. His mere refusal to believe
that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in his vendor's title, will not
make him an innocent purchaser for value, if afterwards develops
that the title was in fact defective, and it appears that he had such
notice of the defects as would have led to its discovery had he acted
with that measure of precaution which may reasonably be acquired
of a prudent man in a like situation. Good faith, or lack of it, is in its
analysis a question of intention; but in ascertaining the intention by
which one is actuated on a given occasion, we are necessarily
controlled by the evidence as to the conduct and outward acts by
which alone the inward motive may, with safety, be determined. So
it is that "the honesty of intention," "the honest lawful intent,"
which constitutes good faith implies a "freedom from knowledge
and circumstances which ought to put a person on inquiry," and so it
is that proof of such knowledge overcomes the presumption of good
faith in which the courts always indulge in the absence of proof to
the contrary. "Good faith, or the want of it, is not a visible, tangible
fact that can be seen or touched, but rather a state or condition of
mind which can only be judged of by actual or fancied tokens or
signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co.
vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley,
119 Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing
part of the decision and judgment entered in the court below should
be affirmed with costs of this instance against the appellant. So
ordered.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-20329 March 16, 1923
THE STANDARD OIL COMPANY OF NEW YORK, petitioner,
vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila,
respondent.
Ross, Lawrence and Selph for petitioner.
City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the
respondent, Joaquin Jaramillo, register of deeds of the City of
Manila, to an original petition of the Standard Oil Company of New
York, seeking a peremptory mandamus to compel the respondent to
record in the proper register a document purporting to be a chattel
mortgage executed in the City of Manila by Gervasia de la Rosa, Vda.
de Vera, in favor of the Standard Oil Company of New York.
It appears from the petition that on November 27, 1922, Gervasia de
la Rosa, Vda. de Vera, was the lessee of a parcel of land situated in
the City of Manila and owner of the house of strong materials built
thereon, upon which date she executed a document in the form of a
chattel mortgage, purporting to convey to the petitioner by way of
mortgage both the leasehold interest in said lot and the building
which stands thereon.
The clauses in said document describing the property intended to be
thus mortgage are expressed in the following words:
Now, therefore, the mortgagor hereby conveys and transfer to the
mortgage, by way of mortgage, the following described personal
property, situated in the City of Manila, and now in possession of
the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in and to the
contract of lease hereinabove referred to, and in and to the
premises the subject of the said lease;
(2) The building, property of the mortgagor, situated on the
aforesaid leased premises.
After said document had been duly acknowledge and delivered, the
petitioner caused the same to be presented to the respondent,
Joaquin Jaramillo, as register of deeds of the City of Manila, for the
purpose of having the same recorded in the book of record of
chattel mortgages. Upon examination of the instrument, the
respondent was of the opinion that it was not a chattel mortgage,
for the reason that the interest therein mortgaged did not appear to
be personal property, within the meaning of the Chattel Mortgage
Law, and registration was refused on this ground only.
We are of the opinion that the position taken by the respondent is
untenable; and it is his duty to accept the proper fee and place the
instrument on record. The duties of a register of deeds in respect to
the registration of chattel mortgage are of a purely ministerial
character; and no provision of law can be cited which confers upon
him any judicial or quasi-judicial power to determine the nature of
any document of which registration is sought as a chattel mortgage.
The original provisions touching this matter are contained in section
15 of the Chattel Mortgage Law (Act No. 1508), as amended by Act
No. 2496; but these have been transferred to section 198 of the
Administrative Code, where they are now found. There is nothing in
any of these provisions conferring upon the register of deeds any
authority whatever in respect to the "qualification," as the term is
used in Spanish law, of chattel mortgage. His duties in respect to
such instruments are ministerial only. The efficacy of the act of
recording a chattel mortgage consists in the fact that it operates as
constructive notice of the existence of the contract, and the legal
effects of the contract must be discovered in the instrument itself in
relation with the fact of notice. Registration adds nothing to the
instrument, considered as a source of title, and affects nobody's
rights except as a specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion
for discriminating between real property and personal property for
purpose of the application of the Chattel Mortgage Law. Those
articles state rules which, considered as a general doctrine, are law
in this jurisdiction; but it must not be forgotten that under given
conditions property may have character different from that imputed
to it in said articles. It is undeniable that the parties to a contract
may by agreement treat as personal property that which by nature
would be real property; and it is a familiar phenomenon to see
things classed as real property for purposes of taxation which on
general principle might be considered personal property. Other
situations are constantly arising, and from time to time are
presented to this court, in which the proper classification of one
thing or another as real or personal property may be said to be
doubtful.
The point submitted to us in this case was determined on
September 8, 1914, in an administrative ruling promulgated by the
Honorable James A. Ostrand, now a Justice of this Court, but acting
at that time in the capacity of Judge of the fourth branch of the
Court of First Instance of the Ninth Judicial District, in the City of
Manila; and little of value can be here added to the observations
contained in said ruling. We accordingly quote therefrom as follows:
It is unnecessary here to determine whether or not the property
described in the document in question is real or personal; the
discussion may be confined to the point as to whether a register of
deeds has authority to deny the registration of a document
purporting to be a chattel mortgage and executed in the manner
and form prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No.
1508), his Honor continued:
Based principally upon the provisions of section quoted the
Attorney-General of the Philippine Islands, in an opinion dated
August 11, 1909, held that a register of deeds has no authority to
pass upon the capacity of the parties to a chattel mortgage which is
presented to him for record. A fortiori a register of deeds can have
no authority to pass upon the character of the property sought to be
encumbered by a chattel mortgage. Of course, if the mortgaged
property is real instead of personal the chattel mortgage would no
doubt be held ineffective as against third parties, but this is a
question to be determined by the courts of justice and not by the
register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37
Phil., 644), this court held that where the interest conveyed is of the
nature of real, property, the placing of the document on record in
the chattel mortgage register is a futile act; but that decision is not
decisive of the question now before us, which has reference to the
function of the register of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to
pass upon the point whether the interests conveyed in the
instrument now in question are real or personal; and we declare it
to be the duty of the register of deeds to accept the estimate placed
upon the document by the petitioner and to register it, upon
payment of the proper fee.
The demurrer is overruled; and unless within the period of five days
from the date of the notification hereof, the respondent shall
interpose a sufficient answer to the petition, the writ of mandamus
will be issued, as prayed, but without costs.
So ordered.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-17870 September 29, 1962
MINDANAO BUS COMPANY, petitioner,
vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS
of Cagayan de Oro City, respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax
Appeals in C.T.A. Case No. 710 holding that the petitioner Mindanao
Bus Company is liable to the payment of the realty tax on its
maintenance and repair equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400
petitioner's above-mentioned equipment. Petitioner appealed the
assessment to the respondent Board of Tax Appeals on the ground
that the same are not realty. The Board of Tax Appeals of the City
sustained the city assessor, so petitioner herein filed with the Court
of Tax Appeals a petition for the review of the assessment.
In the Court of Tax Appeals the parties submitted the following
stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to
the following stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting
passengers and cargoes by motor trucks, over its authorized lines in
the Island of Mindanao, collecting rates approved by the Public
Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro
City. It maintains Branch Offices and/or stations at Iligan City, Lanao;
Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon
Province;
3. That the machineries sought to be assessed by the respondent as
real properties are the following:
(a) Hobart Electric Welder Machine, appearing in the attached
photograph, marked Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph,
marked Annex "B";
(c) Lathe machine with motor, appearing in the attached
photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph,
marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph,
marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the
attached photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached
photograph, marked Annex "G".
4. That these machineries are sitting on cement or wooden
platforms as may be seen in the attached photographs which form
part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and
operates a garage for its TPU motor trucks; a repair shop; blacksmith
and carpentry shops, and with these machineries which are placed
therein, its TPU trucks are made; body constructed; and same are
repaired in a condition to be serviceable in the TPU land
transportation business it operates;
6. That these machineries have never been or were never used as
industrial equipments to produce finished products for sale, nor to
repair machineries, parts and the like offered to the general public
indiscriminately for business or commercial purposes for which
petitioner has never engaged in, to date.1awphl.nt
The Court of Tax Appeals having sustained the respondent city
assessor's ruling, and having denied a motion for reconsideration,
petitioner brought the case to this Court assigning the following
errors:
1. The Honorable Court of Tax Appeals erred in upholding
respondents' contention that the questioned assessments are valid;
and that said tools, equipments or machineries are immovable
taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article
415 of the New Civil Code, and holding that pursuant thereto the
movable equipments are taxable realties, by reason of their being
intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention
that the respondent City Assessor's power to assess and levy real
estate taxes on machineries is further restricted by section 31,
paragraph (c) of Republic Act No. 521; and
4. The Tax Court erred in denying petitioner's motion for
reconsideration.
Respondents contend that said equipments, tho movable, are
immobilized by destination, in accordance with paragraph 5 of
Article 415 of the New Civil Code which provides:
Art. 415. The following are immovable properties:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are
placed on wooden or cement platforms. They can be moved around
and about in petitioner's repair shop. In the case of B. H.
Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the
character of real property to "machinery, liquid containers,
instruments or implements intended by the owner of any building or
land for use in connection with any industry or trade being carried
on therein and which are expressly adapted to meet the
requirements of such trade or industry."
If the installation of the machinery and equipment in question in the
central of the Mabalacat Sugar Co., Inc., in lieu of the other of less
capacity existing therein, for its sugar and industry, converted them
into real property by reason of their purpose, it cannot be said that
their incorporation therewith was not permanent in character
because, as essential and principle elements of a sugar central,
without them the sugar central would be unable to function or carry
on the industrial purpose for which it was established. Inasmuch as
the central is permanent in character, the necessary machinery and
equipment installed for carrying on the sugar industry for which it
has been established must necessarily be permanent. (Emphasis
ours.)
So that movable equipments to be immobilized in contemplation of
the law must first be "essential and principal elements" of an
industry or works without which such industry or works would be
"unable to function or carry on the industrial purpose for which it
was established." We may here distinguish, therefore, those
movable which become immobilized by destination because they
are essential and principal elements in the industry for those which
may not be so considered immobilized because they are merely
incidental, not essential and principal. Thus, cash registers,
typewriters, etc., usually found and used in hotels, restaurants,
theaters, etc. are merely incidentals and are not and should not be
considered immobilized by destination, for these businesses can
continue or carry on their functions without these equity comments.
Airline companies use forklifts, jeep-wagons, pressure pumps, IBM
machines, etc. which are incidentals, not essentials, and thus retain
their movable nature. On the other hand, machineries of breweries
used in the manufacture of liquor and soft drinks, though movable in
nature, are immobilized because they are essential to said
industries; but the delivery trucks and adding machines which they
usually own and use and are found within their industrial
compounds are merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case
are, by their nature, not essential and principle municipal elements
of petitioner's business of transporting passengers and cargoes by
motor trucks. They are merely incidentals acquired as movables
and used only for expediency to facilitate and/or improve its service.
Even without such tools and equipments, its business may be carried
on, as petitioner has carried on, without such equipments, before
the war. The transportation business could be carried on without
the repair or service shop if its rolling equipment is repaired or
serviced in another shop belonging to another.
The law that governs the determination of the question at issue is as
follows:
Art. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works; (Civil Code of the
Phil.)
Aside from the element of essentiality the above-quoted provision
also requires that the industry or works be carried on in a building or
on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng,
supra, the "machinery, liquid containers, and instruments or
implements" are found in a building constructed on the land. A
sawmill would also be installed in a building on land more or less
permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only
to repair or service the transportation business, which is not carried
on in a building or permanently on a piece of land, as demanded by
the law. Said equipments may not, therefore, be deemed real
property.
Resuming what we have set forth above, we hold that the
equipments in question are not absolutely essential to the
petitioner's transportation business, and petitioner's business is not
carried on in a building, tenement or on a specified land, so said
equipment may not be considered real estate within the meaning of
Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is
hereby set aside and the equipment in question declared not subject
to assessment as real estate for the purposes of the real estate tax.
Without costs.
So ordered.
Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. L-50466 May 31, 1982
CALTEX (PHILIPPINES) INC., petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF
PASAY, respondents.
AQUINO, J.:
This case is about the realty tax on machinery and equipment
installed by Caltex (Philippines) Inc. in its gas stations located on
leased land.
The machines and equipment consists of underground tanks,
elevated tank, elevated water tanks, water tanks, gasoline pumps,
computing pumps, water pumps, car washer, car hoists, truck hoists,
air compressors and tireflators. The city assessor described the said
equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is
erected, a water tank if there is any is placed in one corner of the
lot, car hoists are placed in an adjacent shed, an air compressor is
attached in the wall of the shed or at the concrete wall fence.
The controversial underground tank, depository of gasoline or crude
oil, is dug deep about six feet more or less, a few meters away from
the shed. This is done to prevent conflagration because gasoline and
other combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline
pump and the gasoline pump is commonly placed or constructed
under the shed. The footing of the pump is a cement pad and this
cement pad is imbedded in the pavement under the shed, and
evidence that the gasoline underground tank is attached and
connected to the shed or building through the pipe to the pump and
the pump is attached and affixed to the cement pad and pavement
covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist under a
separate shed, the air compressor, the underground gasoline tank,
neon lights signboard, concrete fence and pavement and the lot
where they are all placed or erected, all of them used in the
pursuance of the gasoline service station business formed the entire
gasoline service-station.
As to whether the subject properties are attached and affixed to the
tenement, it is clear they are, for the tenement we consider in this
particular case are (is) the pavement covering the entire lot which
was constructed by the owner of the gasoline station and the
improvement which holds all the properties under question, they
are attached and affixed to the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station,
as well as all the improvements, machines, equipments and
apparatus are allowed by Caltex (Philippines) Inc. ...
The underground gasoline tank is attached to the shed by the steel
pipe to the pump, so with the water tank it is connected also by a
steel pipe to the pavement, then to the electric motor which electric
motor is placed under the shed. So to say that the gasoline pumps,
water pumps and underground tanks are outside of the service
station, and to consider only the building as the service station is
grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas
station operators under an appropriate lease agreement or receipt.
It is stipulated in the lease contract that the operators, upon
demand, shall return to Caltex the machines and equipment in good
condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not
become the owner of the machines and equipment installed therein.
Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas
station equipment and machinery as taxable realty. The realty tax on
said equipment amounts to P4,541.10 annually (p. 52, Rollo). The
city board of tax appeals ruled that they are personalty. The assessor
appealed to the Central Board of Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata
as chairman, Acting Secretary of Justice Catalino Macaraig, Jr. and
Secretary of Local Government and Community Development Jose
Roo, held in its decision of June 3, 1977 that the said machines and
equipment are real property within the meaning of sections 3(k) &
(m) and 38 of the Real Property Tax Code, Presidential Decree No.
464, which took effect on June 1, 1974, and that the definitions of
real property and personal property in articles 415 and 416 of the
Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad
Santos took Macaraig's place) in its resolution of January 12, 1978,
denying Caltex's motion for reconsideration, a copy of which was
received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed
for the setting aside of the Board's decision and for a declaration
that t he said machines and equipment are personal property not
subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has
exclusive appellate jurisdiction over this case is not correct. When
Republic act No. 1125 created the Tax Court in 1954, there was as
yet no Central Board of Assessment Appeals. Section 7(3) of that law
in providing that the Tax Court had jurisdiction to review by appeal
decisions of provincial or city boards of assessment appeals had in
mind the local boards of assessment appeals but not the Central
Board of Assessment Appeals which under the Real Property Tax
Code has appellate jurisdiction over decisions of the said local
boards of assessment appeals and is, therefore, in the same
category as the Tax Court.
Section 36 of the Real Property Tax Code provides that the decision
of the Central Board of Assessment Appeals shall become final and
executory after the lapse of fifteen days from the receipt of its
decision by the appellant. Within that fifteen-day period, a petition
for reconsideration may be filed. The Code does not provide for the
review of the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this
Court of the decision of the Central Board of Assessment Appeals is
the special civil action of certiorari, the recourse resorted to herein
by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and
machinery already enumerated are subject to realty tax. This issue
has to be resolved primarily under the provisions of the Assessment
Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due
"on real property, including land, buildings, machinery, and other
improvements" not specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the Real Property
Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied,
assessed and collected in all provinces, cities and municipalities an
annual ad valorem tax on real property, such as land, buildings,
machinery and other improvements affixed or attached to real
property not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements is a valuable addition made to property
or an amelioration in its condition, amounting to more than mere
repairs or replacement of waste, costing labor or capital and
intended to enhance its value, beauty or utility or to adapt it for new
or further purposes.
m) Machinery shall embrace machines, mechanical
contrivances, instruments, appliances and apparatus attached to the
real estate. It includes the physical facilities available for production,
as well as the installations and appurtenant service facilities,
together with all other equipment designed for or essential to its
manufacturing, industrial or agricultural purposes (See sec. 3[f],
Assessment Law).
We hold that the said equipment and machinery, as appurtenances
to the gas station building or shed owned by Caltex (as to which it is
subject to realty tax) and which fixtures are necessary to the
operation of the gas station, for without them the gas station would
be useless, and which have been attached or affixed permanently to
the gas station site or embedded therein, are taxable improvements
and machinery within the meaning of the Assessment Law and the
Real Property Tax Code.
Caltex invokes the rule that machinery which is movable in its nature
only becomes immobilized when placed in a plant by the owner of
the property or plant but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless
such person acted as the agent of the owner (Davao Saw Mill Co. vs.
Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the
Civil Code regarding machinery that becomes real property by
destination. In the Davao Saw Mills case the question was whether
the machinery mounted on foundations of cement and installed by
the lessee on leased land should be regarded as real property for
purposes of execution of a judgment against the lessee. The sheriff
treated the machinery as personal property. This Court sustained
the sheriff's action. (Compare with Machinery & Engineering
Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin
case machinery was treated as realty).
Here, the question is whether the gas station equipment and
machinery permanently affixed by Caltex to its gas station and
pavement (which are indubitably taxable realty) should be subject to
the realty tax. This question is different from the issue raised in the
Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though
for some purposes they might be considered personalty (84 C.J.S.
181-2, Notes 40 and 41). "It is a familiar phenomenon to see things
classed as real property for purposes of taxation which on general
principle might be considered personal property" (Standard Oil Co.
of New York vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of Assessment
Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel
towers were considered poles within the meaning of paragraph 9 of
its franchise which exempts its poles from taxation. The steel towers
were considered personalty because they were attached to square
metal frames by means of bolts and could be moved from place to
place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as
tools and equipment in the repair shop of a bus company which
were held to be personal property not subject to realty tax
(Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave
abuse of discretion in upholding the city assessor's is imposition of
the realty tax on Caltex's gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central
Board of Assessment Appeals are affirmed. The petition for
certiorari is dismissed for lack of merit. No costs.
SO ORDERED.
THIRD DIVISION
[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,
vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable
property be considered as personal or movable, a party is estopped
from subsequently claiming otherwise. Hence, such property is a
proper subject of a writ of replevin obtained by the other
contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January
6, 1999 Decision[1] of the Court of Appeals (CA)[2] in CA-GR SP No.
47332 and its February 26, 1999 Resolution[3] denying
reconsideration. The decretal portion of the CA Decision reads as
follows:
WHEREFORE, premises considered, the assailed Order dated
February 18, 1998 and Resolution dated March 31, 1998 in Civil Case
No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary
injunction issued on June 15, 1998 is hereby LIFTED.[4]
In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of
Quezon City (Branch 218)[6] issued a Writ of Seizure.[7] The March
18, 1998 Resolution[8] denied petitioners Motion for Special
Protective Order, praying that the deputy sheriff be enjoined from
seizing immobilized or other real properties in (petitioners) factory
in Cainta, Rizal and to return to their original place whatever
immobilized machineries or equipments he may have removed.[9]
The Facts
The undisputed facts are summarized by the Court of Appeals as
follows:[10]
On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI
Leasing for short) filed with the RTC-QC a complaint for [a] sum of
money (Annex E), with an application for a writ of replevin docketed
as Civil Case No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing,
respondent judge issued a writ of replevin (Annex B) directing its
sheriff to seize and deliver the machineries and equipment to PCI
Leasing after 5 days and upon the payment of the necessary
expenses.
On March 24, 1998, in implementation of said writ, the sheriff
proceeded to petitioners factory, seized one machinery with [the]
word that he [would] return for the other machineries.
On March 25, 1998, petitioners filed a motion for special protective
order (Annex C), invoking the power of the court to control the
conduct of its officers and amend and control its processes, praying
for a directive for the sheriff to defer enforcement of the writ of
replevin.
This motion was opposed by PCI Leasing (Annex F), on the ground
that the properties [were] still personal and therefore still subject to
seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties sought to be
seized [were] immovable as defined in Article 415 of the Civil Code,
the parties agreement to the contrary notwithstanding. They argued
that to give effect to the agreement would be prejudicial to innocent
third parties. They further stated that PCI Leasing [was] estopped
from treating these machineries as personal because the contracts
in which the alleged agreement [were] embodied [were] totally
sham and farcical.
On April 6, 1998, the sheriff again sought to enforce the writ of
seizure and take possession of the remaining properties. He was
able to take two more, but was prevented by the workers from
taking the rest.
On April 7, 1998, they went to [the CA] via an original action for
certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that
the subject machines were personal property, and that they had
only been leased, not owned, by petitioners. It also ruled that the
words of the contract are clear and leave no doubt upon the true
intention of the contracting parties. Observing that Petitioner
Goquiolay was an experienced businessman who was not unfamiliar
with the ways of the trade, it ruled that he should have realized the
import of the document he signed. The CA further held:
Furthermore, to accord merit to this petition would be to preempt
the trial court in ruling upon the case below, since the merits of the
whole matter are laid down before us via a petition whose sole
purpose is to inquire upon the existence of a grave abuse of
discretion on the part of the [RTC] in issuing the assailed Order and
Resolution. The issues raised herein are proper subjects of a full-
blown trial, necessitating presentation of evidence by both parties.
The contract is being enforced by one, and [its] validity is attacked
by the other a matter x x x which respondent court is in the best
position to determine.
Hence, this Petition.[11]
The Issues
In their Memorandum, petitioners submit the following issues for
our consideration:
A. Whether or not the machineries purchased and imported by
SERGS became real property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a
lease.[12]
In the main, the Court will resolve whether the said machines are
personal, not immovable, property which may be a proper subject of
a writ of replevin. As a preliminary matter, the Court will also
address briefly the procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly
whether it was being filed under Rule 45 or Rule 65 of the Rules of
Court. It further alleges that the Petition erroneously impleaded
Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This
conclusion finds support in the very title of the Petition, which is
Petition for Review on Certiorari.[13]
While Judge Laqui should not have been impleaded as a
respondent,[14] substantial justice requires that such lapse by itself
should not warrant the dismissal of the present Petition. In this light,
the Court deems it proper to remove, motu proprio, the name of
Judge Laqui from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory
were not proper subjects of the Writ issued by the RTC, because
they were in fact real property. Serious policy considerations, they
argue, militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are
issued for the recovery of personal property only.[15] Section 3
thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and approval of the
bond, the court shall issue an order and the corresponding writ of
replevin describing the personal property alleged to be wrongfully
detained and requiring the sheriff forthwith to take such property
into his custody.
On the other hand, Article 415 of the Civil Code enumerates
immovable or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ
of Seizure were placed by petitioners in the factory built on their
own land. Indisputably, they were essential and principal elements
of their chocolate-making industry. Hence, although each of them
was movable or personal property on its own, all of them have
become immobilized by destination because they are essential and
principal elements in the industry.[16] In that sense, petitioners are
correct in arguing that the said machines are real, not personal,
property pursuant to Article 415 (5) of the Civil Code.[17]
Be that as it may, we disagree with the submission of the petitioners
that the said machines are not proper subjects of the Writ of
Seizure.
The Court has held that contracting parties may validly stipulate that
a real property be considered as personal.[18] After agreeing to such
stipulation, they are consequently estopped from claiming
otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact
found therein.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of
the parties to treat a house as a personal property because it had
been made the subject of a chattel mortgage. The Court ruled:
x x x. Although there is no specific statement referring to the subject
house as personal property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendants-appellants could
only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.
Wearever Textile Mills[20] also held that the machinery used in a
factory and essential to the industry, as in the present case, was a
proper subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of the Courts
ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the
above Tumalad case, may be considered as personal property for
purposes of executing a chattel mortgage thereon as long as the
parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery,
which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is
really because one who has so agreed is estopped from denying the
existence of the chattel mortgage.
In the present case, the Lease Agreement clearly provides that the
machines in question are to be considered as personal property.
Specifically, Section 12.1 of the Agreement reads as follows:[21]
12.1 The PROPERTY is, and shall at all times be and remain, personal
property notwithstanding that the PROPERTY or any part thereof
may now be, or hereafter become, in any manner affixed or
attached to or embedded in, or permanently resting upon, real
property or any building thereon, or attached in any manner to what
is permanent.
Clearly then, petitioners are estopped from denying the
characterization of the subject machines as personal property.
Under the circumstances, they are proper subjects of the Writ of
Seizure.
It should be stressed, however, that our holding -- that the machines
should be deemed personal property pursuant to the Lease
Agreement is good only insofar as the contracting parties are
concerned.[22] Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not affected by its
stipulation characterizing the subject machinery as personal.[23] In
any event, there is no showing that any specific third party would be
adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a
loan and not a lease.[24] Submitting documents supposedly showing
that they own the subject machines, petitioners also argue in their
Petition that the Agreement suffers from intrinsic ambiguity which
places in serious doubt the intention of the parties and the validity
of the lease agreement itself.[25] In their Reply to respondents
Comment, they further allege that the Agreement is invalid.[26]
These arguments are unconvincing. The validity and the nature of
the contract are the lis mota of the civil action pending before the
RTC. A resolution of these questions, therefore, is effectively a
resolution of the merits of the case. Hence, they should be threshed
out in the trial, not in the proceedings involving the issuance of the
Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,[27] the Court explained that
the policy under Rule 60 was that questions involving title to the
subject property questions which petitioners are now raising --
should be determined in the trial. In that case, the Court noted that
the remedy of defendants under Rule 60 was either to post a
counter-bond or to question the sufficiency of the plaintiffs bond.
They were not allowed, however, to invoke the title to the subject
property. The Court ruled:
In other words, the law does not allow the defendant to file a
motion to dissolve or discharge the writ of seizure (or delivery) on
ground of insufficiency of the complaint or of the grounds relied
upon therefor, as in proceedings on preliminary attachment or
injunction, and thereby put at issue the matter of the title or right of
possession over the specific chattel being replevied, the policy
apparently being that said matter should be ventilated and
determined only at the trial on the merits.[28]
Besides, these questions require a determination of facts and a
presentation of evidence, both of which have no place in a petition
for certiorari in the CA under Rule 65 or in a petition for review in
this Court under Rule 45.[29]
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the
Lease Agreement, for nothing on record shows that it has been
nullified or annulled. In fact, petitioners assailed it first only in the
RTC proceedings, which had ironically been instituted by
respondent. Accordingly, it must be presumed valid and binding as
the law between the parties.
Makati Leasing and Finance Corporation[30] is also instructive on
this point. In that case, the Deed of Chattel Mortgage, which
characterized the subject machinery as personal property, was also
assailed because respondent had allegedly been required to sign a
printed form of chattel mortgage which was in a blank form at the
time of signing. The Court rejected the argument and relied on the
Deed, ruling as follows:
x x x. Moreover, even granting that the charge is true, such fact
alone does not render a contract void ab initio, but can only be a
ground for rendering said contract voidable, or annullable pursuant
to Article 1390 of the new Civil Code, by a proper action in court.
There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify the
same. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be
seized, then its workers would be out of work and thrown into the
streets.[31] They also allege that the seizure would nullify all efforts
to rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the
Writ. As earlier discussed, law and jurisprudence support its
propriety. Verily, the above-mentioned consequences, if they come
true, should not be blamed on this Court, but on the petitioners for
failing to avail themselves of the remedy under Section 5 of Rule 60,
which allows the filing of a counter-bond. The provision states:
SEC. 5. Return of property. -- If the adverse party objects to the
sufficiency of the applicants bond, or of the surety or sureties
thereon, he cannot immediately require the return of the property,
but if he does not so object, he may, at any time before the delivery
of the property to the applicant, require the return thereof, by filing
with the court where the action is pending a bond executed to the
applicant, in double the value of the property as stated in the
applicants affidavit for the delivery thereof to the applicant, if such
delivery be adjudged, and for the payment of such sum to him as
may be recovered against the adverse party, and by serving a copy
bond on the applicant.
WHEREFORE, the Petition is DENIED and the assailed Decision of the
Court of Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-17898 October 31, 1962
PASTOR D. AGO, petitioner,
vs.
THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of
the Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF
SURIGAO and GRACE PARK ENGINEERING, INC., respondents.
Jose M. Luison for petitioner.
Norberto J. Quisumbing for respondent Grace Park Engineering, Inc.
The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.
LABRABOR, J.:
Appeal by certiorari to review the decision of respondent Court of
Appeals in CA-G.R. No. 26723-R entitled "Pastor D. Ago vs. The
Provincial Sheriff of Surigao, et al." which in part reads:
In this case for certiorari and prohibition with preliminary injunction,
it appears from the records that the respondent Judge of the Court
of First Instance of Agusan rendered judgment (Annex "A") in open
court on January 28, 1959, basing said judgment on a compromise
agreement between the parties.
On August 15, 1959, upon petition, the Court of First Instance issued
a writ of execution.
Petitioner's motion for reconsideration dated October 12, 1959
alleges that he, or his counsel, did not receive a formal and valid
notice of said decision, which motion for reconsideration was denied
by the court below in the order of November 14, 1959.
Petitioner now contends that the respondent Judge exceeded in his
jurisdiction in rendering the execution without valid and formal
notice of the decision.
A compromise agreement is binding between the parties and
becomes the law between them. (Gonzales vs. Gonzales G.R. No. L-
1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L-12439,
May 22, 1959) .
It is a general rule in this jurisdiction that a judgment based on a
compromise agreement is not appealable and is immediately
executory, unless a motion is filed on the ground fraud, mistake or
duress. (De los Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R.
No. L-10089, July 31, 1957)
Petitioner's claim that he was not notified or served notice of the
decision is untenable. The judgment on the compromise agreement
rendered by the court below dated January 28, 1959, was given in
open court. This alone is a substantial compliance as to notice. (De
los Reyes vs. Ugarte, supra)
IN VIEW THEREOF, we believe that the lower court did not exceed
nor abuse its jurisdiction in ordering the execution of the judgment.
The petition for certiorari is hereby dismissed and the writ of
preliminary injunction heretofore dissolved, with costs against the
petitioner.
IT IS SO ORDERED.
The facts of the case may be briefly stated as follows: In 1957,
petitioner Pastor D. Ago bought sawmill machineries and
equipments from respondent Grace Park Engineer domineering,
Inc., executing a chattel mortgage over said machineries and
equipments to secure the payment of balance of the price remaining
unpaid of P32,000.00, which petitioner agreed to pay on installment
basis.
Petitioner Ago defaulted in his payment and so, in 1958 respondent
Grace Park Engineering, Inc. instituted extra-judicial foreclosure
proceedings of the mortgage. To enjoin said foreclosure, petitioner
herein instituted Special Civil Case No. 53 in the Court of First
Instance of Agusan. The parties to the case arrived at a compromise
agreement and submitted the same in court in writing, signed by
Pastor D. Ago and the Grace Park Engineering, Inc. The Hon.
Montano A. Ortiz, Judge of the Court of First Instance of Agusan,
then presiding, dictated a decision in open court on January 28,
1959.
Petitioner continued to default in his payments as provided in the
judgment by compromise, so Grace Park Engineering, Inc. filed with
the lower court a motion for execution, which was granted by the
court on August 15, 1959. A writ of execution, dated September 23,
1959, later followed.
The herein respondent, Provincial Sheriff of Surigao, acting upon the
writ of execution issued by the lower court, levied upon and ordered
the sale of the sawmill machineries and equipments in question.
These machineries and equipments had been taken to and installed
in a sawmill building located in Lianga, Surigao del Sur, and owned
by the Golden Pacific Sawmill, Inc., to whom, petitioner alleges, he
had sold them on February 16, 1959 (a date after the decision of the
lower court but before levy by the Sheriff).
Having been advised by the sheriff that the public auction sale was
set for December 4, 1959, petitioner, on December 1, 1959, filed the
petition for certiorari and prohibition with preliminary injunction
with respondent Court of Appeals, alleging that a copy of the
aforementioned judgment given in open court on January 28, 1959
was served upon counsel for petitioner only on September 25, 1959
(writ of execution is dated September 23, 1959); that the order and
writ of execution having been issued by the lower court before
counsel for petitioner received a copy of the judgment, its resultant
last order that the "sheriff may now proceed with the sale of the
properties levied constituted a grave abuse of discretion and was in
excess of its jurisdiction; and that the respondent Provincial Sheriff
of Surigao was acting illegally upon the allegedly void writ of
execution by levying the same upon the sawmill machineries and
equipments which have become real properties of the Golden
Pacific sawmill, Inc., and is about to proceed in selling the same
without prior publication of the notice of sale thereof in some
newspaper of general circulation as required by the Rules of Court.
The Court of Appeals, on December 8, 1959, issued a writ of
preliminary injunction against the sheriff but it turned out that the
latter had already sold at public auction the machineries in question,
on December 4, 1959, as scheduled. The respondent Grace Park
Engineering, Inc. was the only bidder for P15,000.00, although the
certificate sale was not yet executed. The Court of Appeals
constructed the sheriff to suspend the issuance of a certificate of
sale of the said sawmill machineries and equipment sold by him on
December 4, 1959 until the final decision of the case. On November
9, 1960 the Court of Appeals rendered the aforequoted decision.
Before this Court, petitioner alleges that the Court of Appeals erred
(1) in holding that the rendition of judgment on compromise in open
court on January 1959 was a sufficient notice; and (2) in not
resolving the other issues raised before it, namely, (a) the legality of
the public auction sale made by the sheriff, and (b) the nature of the
machineries in question, whether they are movables or immovables.
The Court of Appeals held that as a judgment was entered by the
court below in open court upon the submission of the compromise
agreement, the parties may be considered as having been notified of
said judgment and this fact constitutes due notice of said judgment.
This raises the following legal question: Is the order dictated in open
court of the judgment of the court, and is the fact the petitioner
herein was present in open court was the judgment was dictated,
sufficient notice thereof? The provisions of the Rules of Court decree
otherwise. Section 1 of Rule 35 describes the manner in which
judgment shall be rendered, thus:
SECTION 1. How judgment rendered. All judgments
determining the merits of cases shall be in writing personally and
directly prepared by the judge, and signed by him, stating clearly
and distinctly the facts and the law on which it is based, filed with
the clerk of the court.
The court of first instance being a court of record, in order that a
judgment may be considered as rendered, must not only be in
writing, signed by the judge, but it must also be filed with the clerk
of court. The mere pronouncement of the judgment in open court
with the stenographer taking note thereof does not, therefore,
constitute a rendition of the judgment. It is the filing of the signed
decision with the clerk of court that constitutes rendition. While it is
to be presumed that the judgment that was dictated in open court
will be the judgment of the court, the court may still modify said
order as the same is being put into writing. And even if the order or
judgment has already been put into writing and signed, while it has
not yet been delivered to the clerk for filing it is still subject to
amendment or change by the judge. It is only when the judgment
signed by the judge is actually filed with the clerk of court that it
becomes a valid and binding judgment. Prior thereto, it could still be
subject to amendment and change and may not, therefore,
constitute the real judgment of the court.
Regarding the notice of judgment, the mere fact that a party heard
the judge dictating the judgment in open court, is not a valid notice
of said judgment. If rendition thereof is constituted by the filing with
the clerk of court of a signed copy (of the judgment), it is evident
that the fact that a party or an attorney heard the order or judgment
being dictated in court cannot be considered as notice of the real
judgment. No judgment can be notified to the parties unless it has
previously been rendered. The notice, therefore, that a party has of
a judgment that was being dictated is of no effect because at the
time no judgment has as yet been signed by the judge and filed with
the clerk.
Besides, the Rules expressly require that final orders or judgments
be served personally or by registered mail. Section 7 of Rule 27
provides as follows:
SEC. 7. Service of final orders or judgments. Final orders or
judgments shall be served either personally or by registered mail.
In accordance with this provision, a party is not considered as having
been served with the judgment merely because he heard the
judgment dictating the said judgment in open court; it is necessary
that he be served with a copy of the signed judgment that has been
filed with the clerk in order that he may legally be considered as
having been served with the judgment.
For all the foregoing, the fact that the petitioner herein heard the
trial judge dictating the judgment in open court, is not sufficient to
constitute the service of judgement as required by the above-
quoted section 7 of Rule 2 the signed judgment not having been
served upon the petitioner, said judgment could not be effective
upon him (petitioner) who had not received it. It follows as a
consequence that the issuance of the writ of execution null and
void, having been issued before petitioner her was served,
personally or by registered mail, a copy of the decision.
The second question raised in this appeal, which has been passed
upon by the Court of Appeals, concerns the validity of the
proceedings of the sheriff in selling the sawmill machineries and
equipments at public auction with a notice of the sale having been
previously published.
The record shows that after petitioner herein Pastor D. Ago had
purchased the sawmill machineries and equipments he assigned the
same to the Golden Pacific Sawmill, Inc. in payment of his
subscription to the shares of stock of said corporation. Thereafter
the sawmill machinery and equipments were installed in a building
and permanently attached to the ground. By reason of such
installment in a building, the said sawmill machineries and
equipment became real estate properties in accordance with the
provision of Art. 415 (5) of the Civil Code, thus:
ART. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements
tended by the owner of the tenement for an industry or works
which may be carried on in a building or on a piece of land, and
which tend directly to meet the needs of the said industry or works;
This Court in interpreting a similar question raised before it in the
case of Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil. 683, held that
the installation of the machine and equipment in the central of the
Mabalacat Sugar Co., Inc. for use in connection with the industry
carried by the company, converted the said machinery and
equipment into real estate by reason of their purpose. Paraphrasing
language of said decision we hold that by the installment of the
sawmill machineries in the building of the Gold Pacific Sawmill, Inc.,
for use in the sawing of logs carried on in said building, the same
became a necessary and permanent part of the building or real
estate on which the same was constructed, converting the said
machineries and equipments into real estate within the meaning of
Article 415(5) above-quoted of the Civil Code of the Philippines.
Considering that the machineries and equipments in question valued
at more than P15,000.00 appear to have been sold without the
necessary advertisement of sale by publication in a newspaper, as
required in Sec. 16 of Rule 39 of the Rules of Court, which is as
follows:
SEC. 16. Notice of sale of property on execution. Before the sale
of property on execution, notice thereof must be given as follows:
xxx xxx xxx
(c) In case of real property, by posting a similar notice
particularly describing the property for twenty days in three public
places in the municipality or city where the property is situated, and
also where the property is to be sold, and, if the assessed value of
the property exceeds four hundred pesos, by publishing a copy of
the notice once a week, for the same period, in some newspaper
published or having general circulation in the province, if there be
one. If there are newspapers published in the province in both the
English and Spanish languages, then a like publication for a like
period shall be made in one newspaper published in the English
language, and in one published in the Spanish language.
the sale made by the sheriff must be declared null and void.
WHEREFORE, the decision of the Court of Appeals sought to be
reviewed is hereby set aside and We declare that the issuance of the
writ of execution in this case against the sawmill machineries and
equipments purchased by petitioner Pastor D. Ago from the Grace
Park Engineering, Inc., as well as the sale of the same by the Sheriff
of Surigao, are null and void. Costs shall be against the respondent
Grace Park Engineering, Inc.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-41643 July 31, 1935
B.H. BERKENKOTTER, plaintiff-appellant,
vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE
COMPANY, MABALACAT SUGAR COMPANY and THE PROVINCE
SHERIFF OF PAMPANGA, defendants-appellees.
Briones and Martinez for appellant.
Araneta, Zaragoza and Araneta for appellees Cu Unjieng e Hijos.
No appearance for the other appellees.
VILLA-REAL, J.:
This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the
judgment of the Court of First Instance of Manila, dismissing said
plaintiff's complaint against Cu Unjiengs e Hijos et al., with costs.
In support of his appeal, the appellant assigns six alleged errors as
committed by the trial court in its decision in question which will be
discussed in the course of this decision.
The first question to be decided in this appeal, which is raised in the
first assignment of alleged error, is whether or not the lower court
erred in declaring that the additional machinery and equipment, as
improvement incorporated with the central are subject to the
mortgage deed executed in favor of the defendants Cu Unjieng e
Hijos.
It is admitted by the parties that on April 26, 1926, the Mabalacat
Sugar Co., Inc., owner of the sugar central situated in Mabalacat,
Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan
secured by a first mortgage constituted on two parcels and land
"with all its buildings, improvements, sugar-cane mill, steel railway,
telephone line, apparatus, utensils and whatever forms part or is
necessary complement of said sugar-cane mill, steel railway,
telephone line, now existing or that may in the future exist is said
lots."
On October 5, 1926, shortly after said mortgage had been
constituted, the Mabalacat Sugar Co., Inc., decided to increase the
capacity of its sugar central by buying additional machinery and
equipment, so that instead of milling 150 tons daily, it could produce
250. The estimated cost of said additional machinery and equipment
was approximately P100,000. In order to carry out this plan, B.A.
Green, president of said corporation, proposed to the plaintiff, B.H.
Berkenkotter, to advance the necessary amount for the purchase of
said machinery and equipment, promising to reimburse him as soon
as he could obtain an additional loan from the mortgagees, the
herein defendants Cu Unjieng e Hijos. Having agreed to said
proposition made in a letter dated October 5, 1926 (Exhibit E), B.H.
Berkenkotter, on October 9th of the same year, delivered the sum of
P1,710 to B.A. Green, president of the Mabalacat Sugar Co., Inc., the
total amount supplied by him to said B.A. Green having been
P25,750. Furthermore, B.H. Berkenkotter had a credit of P22,000
against said corporation for unpaid salary. With the loan of P25,750
and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased
the additional machinery and equipment now in litigation.
On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co.,
Inc., applied to Cu Unjieng e Hijos for an additional loan of P75,000
offering as security the additional machinery and equipment
acquired by said B.A. Green and installed in the sugar central after
the execution of the original mortgage deed, on April 27, 1927,
together with whatever additional equipment acquired with said
loan. B.A. Green failed to obtain said loan.
Article 1877 of the Civil Code provides as follows.
ART. 1877. A mortgage includes all natural accessions,
improvements, growing fruits, and rents not collected when the
obligation falls due, and the amount of any indemnities paid or due
the owner by the insurers of the mortgaged property or by virtue of
the exercise of the power of eminent domain, with the declarations,
amplifications, and limitations established by law, whether the
estate continues in the possession of the person who mortgaged it
or whether it passes into the hands of a third person.
In the case of Bischoff vs. Pomar and Compaia General de Tabacos
(12 Phil., 690), cited with approval in the case of Cea vs. Villanueva
(18 Phil., 538), this court laid shown the following doctrine:
1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS
AND FIXTURES. It is a rule, established by the Civil Code and also
by the Mortgage Law, with which the decisions of the courts of the
United States are in accord, that in a mortgage of real estate, the
improvements on the same are included; therefore, all objects
permanently attached to a mortgaged building or land, although
they may have been placed there after the mortgage was
constituted, are also included. (Arts. 110 and 111 of the Mortgage
Law, and 1877 of the Civil Code; decision of U.S. Supreme Court in
the matter of Royal Insurance Co. vs. R. Miller, liquidator, and
Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)
2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. In
order that it may be understood that the machinery and other
objects placed upon and used in connection with a mortgaged
estate are excluded from the mortgage, when it was stated in the
mortgage that the improvements, buildings, and machinery that
existed thereon were also comprehended, it is indispensable that
the exclusion thereof be stipulated between the contracting parties.
The appellant contends that the installation of the machinery and
equipment claimed by him in the sugar central of the Mabalacat
Sugar Company, Inc., was not permanent in character inasmuch as
B.A. Green, in proposing to him to advance the money for the
purchase thereof, made it appear in the letter, Exhibit E, that in case
B.A. Green should fail to obtain an additional loan from the
defendants Cu Unjieng e Hijos, said machinery and equipment
would become security therefor, said B.A. Green binding himself not
to mortgage nor encumber them to anybody until said plaintiff be
fully reimbursed for the corporation's indebtedness to him.
Upon acquiring the machinery and equipment in question with
money obtained as loan from the plaintiff-appellant by B.A. Green,
as president of the Mabalacat Sugar Co., Inc., the latter became
owner of said machinery and equipment, otherwise B.A. Green, as
such president, could not have offered them to the plaintiff as
security for the payment of his credit.
Article 334, paragraph 5, of the Civil Code gives the character of real
property to "machinery, liquid containers, instruments or
implements intended by the owner of any building or land for use in
connection with any industry or trade being carried on therein and
which are expressly adapted to meet the requirements of such trade
or industry.
If the installation of the machinery and equipment in question in the
central of the Mabalacat Sugar Co., Inc., in lieu of the other of less
capacity existing therein, for its sugar industry, converted them into
real property by reason of their purpose, it cannot be said that their
incorporation therewith was not permanent in character because, as
essential and principal elements of a sugar central, without them the
sugar central would be unable to function or carry on the industrial
purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment
installed for carrying on the sugar industry for which it has been
established must necessarily be permanent.
Furthermore, the fact that B.A. Green bound himself to the plaintiff
B.H. Berkenkotter to hold said machinery and equipment as security
for the payment of the latter's credit and to refrain from mortgaging
or otherwise encumbering them until Berkenkotter has been fully
reimbursed therefor, is not incompatible with the permanent
character of the incorporation of said machinery and equipment
with the sugar central of the Mabalacat Sugar Co., Inc., as nothing
could prevent B.A. Green from giving them as security at least under
a second mortgage.
As to the alleged sale of said machinery and equipment to the
plaintiff and appellant after they had been permanently
incorporated with sugar central of the Mabalacat Sugar Co., Inc., and
while the mortgage constituted on said sugar central to Cu Unjieng e
Hijos remained in force, only the right of redemption of the vendor
Mabalacat Sugar Co., Inc., in the sugar central with which said
machinery and equipment had been incorporated, was transferred
thereby, subject to the right of the defendants Cu Unjieng e Hijos
under the first mortgage.
For the foregoing considerations, we are of the opinion and so hold:
(1) That the installation of a machinery and equipment in a
mortgaged sugar central, in lieu of another of less capacity, for the
purpose of carrying out the industrial functions of the latter and
increasing production, constitutes a permanent improvement on
said sugar central and subjects said machinery and equipment to the
mortgage constituted thereon (article 1877, Civil Code); (2) that the
fact that the purchaser of the new machinery and equipment has
bound himself to the person supplying him the purchase money to
hold them as security for the payment of the latter's credit, and to
refrain from mortgaging or otherwise encumbering them does not
alter the permanent character of the incorporation of said
machinery and equipment with the central; and (3) that the sale of
the machinery and equipment in question by the purchaser who was
supplied the purchase money, as a loan, to the person who supplied
the money, after the incorporation thereof with the mortgaged
sugar central, does not vest the creditor with ownership of said
machinery and equipment but simply with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed
in all its parts, with costs to the appellant. So ordered.
THIRD DIVISION
[G.R. NO. 171346 : October 19, 2007]
JAIME SANCHEZ, JR., Petitioner,
vs.
ZENAIDA F. MARIN, JESUS NICASIO F. MARIN, JOSE DAVID F.
MARIN, MARIA BERNADETTE F. MARIN, PAUL PETER F. MARIN and
PHILIP LUIS F. MARIN, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure seeking to reverse and set aside (1)
the Decision1 of the Court of Appeals in CA-G.R. SP No. 61955, dated
23 May 2005, which granted in part the petition filed before it by
herein respondents and thereby annulled and set aside the
Decision2 rendered by the Department of Agrarian Reform
Adjudication Board (DARAB) dated 25 September 2000 in DARAB
Cases No. 3799 (Reg. Case No. IV-QI-0175-91) and No. 3800 (Reg.
Case No. IV-QI-0167-91); and (2) the Resolution3 of the appellate
court, dated 25 January 2006, which denied herein petitioner's
Motion for Reconsideration.
Herein petitioner Jaime Sanchez, Jr. is an agricultural tenant of a 10-
hectare fishpond sited at Barangay Talao-Talao, Lucena City, which
was previously owned by David Felix, the ascendant of herein
respondents. Herein respondent Zenaida F. Marin is the civil law
lessee of the subject fishpond and the mother of respondents Jesus
Nicasio, Jose David, Maria Bernadette, Paul Peter and Philip Luis, all
surnamed Marin, who are now the registered owners4 of the said
fishpond.
The controversy in this case arose from the following facts:
In 1977, the petitioner was instituted as a tenant of the subject
fishpond by its previous registered owner David Felix. The sharing
agreement was on a 50/50 basis after deducting the expenses from
the gross harvest. A few years thereafter, David Felix sold and
transferred ownership of the subject fishpond to respondents Jesus
Nicasio, Jose David, Maria Bernadette, Paul Peter and Philip Luis, all
surnamed Marin, to whom a Transfer Certificate of Title (TCT) No. T-
43289,5 covering the subject fishpond, was issued. The aforesaid
respondents, as the new owners of the fishpond, entered into a civil
law lease agreement dated 24 June 1985 with their mother and co-
respondent Zenaida F. Marin, which was renewable yearly.
Subsequently, Zenaida F. Marin, as a lessee of the subject fishpond,
made an arrangement with the petitioner wherein the latter would
receive a regular salary and a 20% share in the net profit of the
fishpond from January 1985 to June 1986. The reason why the
agreement was with a period was to be consistent with the lease
agreement entered into between respondent Zenaida F. Marin and
her children, herein respondents Jesus Nicasio, Jose David, Maria
Bernadette, Paul Peter and Philip Luis, all surnamed Marin.6
However, after the expiration of the first lease agreement between
respondent Zenaida F. Marin and her children, and before a new
lease agreement could be made, the petitioner was ordered by
Zenaida F. Marin to vacate the premises but he refused to do so. He
asserted that he was a tenant of the fishpond and not a mere
contractual worker; hence, he had the right to its peaceful
possession and security of tenure.
On 21 July 1986, the petitioner filed a Complaint before the Regional
Trial Court (RTC) of Lucena City, Branch 53, which was docketed as
Agrarian Case No. 86-8, in which he asked the court to declare him
as a tenant of the subject fishpond. On 20 July 1987, the RTC of
Lucena City rendered a Decision7 in favor of the petitioner, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring the [herein
petitioner] as the agricultural tenant, not a hired contractual worker
on the [subject fishpond], and therefore, entitled to the security of
tenure under Section 78 of Republic Act No. 11999 and to continue
possession of the premises and shall enjoy the rights and privileges
accorded by law.10 (Emphasis supplied.)
Dissatisfied, the aforesaid Decision was appealed by respondent
Zenaida F. Marin to the appellate court, in which it was docketed as
CA-G.R. SP (CAR) No. 14421. In a Decision11 dated 11 September
1989, the appellate court affirmed in toto the Decision of the RTC of
Lucena City. No other recourse being taken therefrom, the said
Decision of the Court of Appeals later became final and executory.

Having been declared as an agricultural tenant on the subject
fishpond, the petitioner, on 15 March 1991, filed before the
Provincial Agrarian Reform Adjudicator (PARAD) Region IV a Petition
for the fixing of the leasehold rentals for his use of the subject
fishpond at P30,000.00 per annum, docketed as DARAB Case No. IV-
QI-0175-91. It was alleged therein by the petitioner that under
Section 12 of Republic Act No. 665712 and Department of Agrarian
Reform (DAR) Administrative Order No. 4, Series of 1989, he had the
option to convert his status as share-crop tenant into an agricultural
lessee by paying a fixed lease rental on the fishpond. He further
claimed that the respondents posited no objection to the amount of
P30,000.00 as a yearly lease rental. Yet, in an Answer filed by the
respondents, they insisted that fishponds, like the subject matter of
this case, were not yet within the purview of the law on leasehold.
They likewise refuted the fact that they agreed to fix the lease rental
at P30,000.00 per annum. Although they admitted that the
petitioner was indeed declared as an agricultural tenant of the
fishpond, they, however, argued that the petitioner should already
be ejected therefrom for his failure to pay the rent.
Thus, on 17 April 1991, respondent Zenaida F. Marin filed a
Complaint before the PARAD Region IV, docketed as DARAB Case
No. IV-QI-0167-91, primarily to eject the petitioner from the
fishpond because of the latter's failure to pay the rent and to make
an accounting, in violation of Sections 17 and 50 of Republic Act No.
1199. She also sought to compel the petitioner to pay the total
amount of P650,000.00 representing the lease rentals from 1 July
1985 to 30 June 1991 and to make an accounting of the total
production or income of the subject fishpond from 1 August 1987 to
25 October 1991.
The petitioner denied having any liability to respondent Zenaida F.
Marin in the amount of P650,000.00 as rental arrears. He stressed
that he failed to pay the lease rentals from July 1987 to July 1989
because he failed to harvest anything from the fishpond during the
said period due to respondent Zenaida F. Marin's refusal to defray
the expenses of production. Accordingly, he cannot be evicted on
the basis of non-payment of rent because his obligation to pay the
same merely depends on the actual harvest made. Similarly, the
petitioner emphasized that from March 1989 to September 1990, he
deposited the rent due respondent Zenaida F. Marin in Philippine
National Bank (PNB) Account No. 6637513 under the name of the
Deputy Sheriff of the RTC of Lucena City, Branch 53, and respondent
Zenaida F. Marin withdrew the said amount.
Considering that the two cases involved the same parties and the
same subject matter, the Provincial Adjudicator consolidated the
same. On 2 March 1993, he rendered a Decision14 in favor of the
petitioner. Its dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered:
xxx
3. Ordering that [petitioner] be maintained in the peaceful
possession of subject farm-holding.15
Respondents moved for the reconsideration of the aforementioned
Decision but the same was denied in a Joint Order,16 dated 15 May
1995, rendered by the Regional Agrarian Reform Adjudicator
(RARAD).
Aggrieved, respondents appealed the PARAD Decision dated 2
March 1993 to the DARAB, reiterating their position that the
fishpond was excluded from the coverage of the Comprehensive
Agrarian Reform Program (CARP) of the government. The cases
before the DARAB were docketed as DARAB Cases No. 3799 (Reg.
Case No. IV-QI-0175-91) and No. 3800 (Reg. Case No. IV-QI-0167-
91).
On 25 September 2000, the DARAB rendered a Decision affirming in
toto the Decision of the Provincial Adjudicator dated 2 March 1993.
Still refusing to admit defeat, respondents filed with the Court of
Appeals a Petition for Review of the aforesaid DARAB Decision
maintaining that the DARAB grossly erred in not finding that
substantial evidence exists to warrant the dispossession of the
petitioner from the subject fishpond.
On 23 May 2005, the appellate court rendered its assailed Decision
wherein it granted in part the Petition of the respondents by
annulling and setting aside the DARAB Decision dated 25 September
2000 on the ground of lack of jurisdiction. The appellate court ruled
that Section 2 of Republic Act No. 7881,17 amending Section 10 of
Republic Act No. 6657, excluded private lands actually, directly and
exclusively used for prawn farms and fishponds from the coverage of
the Comprehensive Agrarian Reform Law (CARL); clearly then, the
operation of a fishpond is no longer considered an agricultural
activity, and a parcel of land devoted to fishpond operation is not
anymore an agricultural land. Additionally, the appellate court
declared that under Section 1, Rule II of the 2003 DARAB Rules of
Procedure, governing proceedings before the DARAB and its
different regional and provincial adjudicators, the DARAB et al.'s
jurisdictions were limited only to agrarian disputes or controversies
and matters or incidents involving the implementation of Republic
Act No. 6657, Republic Act No. 3844 and other agrarian laws.
Consequently, the disputes involved in DARAB Cases No. 3799 and
No. 3800 were not agrarian disputes, and since the DARAB, et al.
then acted without jurisdiction when they heard and adjudicated
the aforesaid cases, their decisions and orders therein were null and
void. There is, however, no obstacle for the opposing parties to
institute the proper action before the regular courts. Lastly, the
appellate court held that the petitioner cannot avail himself of the
protection under Section 2(b) of Republic Act No. 7881, which
protects vested rights of those who have already been issued a
CLOA, for the reason that the petitioner had not shown that he had
been issued a CLOA to the subject fishpond as an agrarian reform
beneficiary.
Petitioner moved for the reconsideration of the aforesaid Decision,
but it was denied in a Resolution dated 25 January 2006.
Hence, this Petition.
Petitioner presents the following issues for this Court's resolution:
I. Whether the burden of proof to show that a fishpond is not an
agricultural land rests on the agricultural lessor.
II. Whether this burden was sufficiently discharged by the
respondents.
III. Whether the Office of the Secretary of the Department of
Agrarian Reform should first determine the exclusion of a fishpond
from the coverage of CARP before it could be finally said that it is
indeed excluded therefrom.
IV. Whether the subject fishpond is covered by the [CARL].
V. Assuming that the fishpond is not covered by the CARL, whether
the [DARAB] has jurisdiction over the case.
Petitioner maintains his contention that Section 10 of Republic Act
No. 6657, as amended by Republic Act No. 7881, which was the
basis of the appellate court in declaring that the subject fishpond
was not an agricultural land, does not mention any presumption as
regards the exemption of prawn farms and fishponds from the
coverage of the CARL. According to him, before a fishpond can be
considered exempted from the coverage of Republic Act No. 6657,
two things must concur, to wit: (1) the fishpond has not been
distributed; and (2) a CLOA has been issued to the agrarian reform
beneficiaries under the CARP. And the burden of proof to establish
the existence of the aforesaid elements falls upon the agricultural
lessor. Absent any of these two elements, the fishpond will remain
within the coverage of Republic Act No. 6657. He also argues that
Section 10 of Republic Act No. 6657, as amended by Republic Act
No. 7881, cannot be given retroactive effect. Neither can it prevail
over a right which has already been vested in him by virtue of the
final and executory Decision dated 11 September 1989 of the Court
of Appeals, affirming the Decision dated 20 July 1987 of the Lucena
City RTC, which declared him as an agricultural tenant of the subject
fishpond and therefore entitled to security of tenure. Similarly,
petitioner contends that respondents' unsubstantiated claim that no
CLOA had been issued to him was not enough to discharge their
burden of proving that the subject fishpond was already exempted
from the coverage of the CARL.
Petitioner further avers that although Section 10 of Republic Act No.
6657 already provides that prawn farms and fishponds are
exempted from the coverage of the CARL, the said provision of law
still has to be construed in relation to Section 3, Rule II of the 2003
DARAB Rules of Procedure, which requires an application for
exemption to be filed before the Office of the Secretary of the DAR
to determine if prawn farms and fishponds are indeed excluded
from the coverage of the CARL. And considering that the
respondents failed to file the said application for exemption,
petitioner then alleges that the subject fishpond cannot be
considered excluded from the coverage of the CARL.
Finally, petitioner argues that granting arguendo that the subject
fishpond was excluded from the coverage of the CARL, still, the
DARAB had jurisdiction over his case. Petitioner asserts that his
status as an agricultural tenant of the subject fishpond has long
been settled. And being a tenant, he has various rights which are
recognized and protected under the law, among which is his right to
security of tenure. Thus, when the respondents filed a Complaint
before DARAB Region IV to eject him from the fishpond, in violation
of his rights, it cannot be denied that an agrarian dispute arose
between him and the respondents and the same properly fell within
the jurisdiction of the DARAB. And so, even though the fishpond was
excluded from the coverage of the CARL, the petitioner asserts that
it does not necessarily follow that no tenancy relation existed
between him and the respondents and it cannot be used as basis to
deprive the DARAB of its jurisdiction over the present case.
In sum, the issues in this case may be summarized as follows:
I. Whether the subject fishpond is exempted/excluded from the
coverage of the Comprehensive Agrarian Reform Program of the
government by virtue of the amendments introduced by R.A. No.
7881 to R.A. No. 6657.
II. Granting that the subject fishpond is exempted/excluded from the
coverage of the CARL, whether the DARAB has jurisdiction over the
case.
The Petition is meritorious. The Court of Appeals grounded its
Decision on this Court's pronouncements in Romero v. Tan.18 In the
said case, this Court traced the classification of fishponds for
agrarian reform purposes. Section 166(1) of Republic Act No. 384419
defined an agricultural land as land devoted to any growth, including
but not limited to crop lands, salt beds, fish ponds, idle land and
abandoned land. Thus, it is beyond cavil that under this law,
fishponds were considered agricultural lands. Even when Republic
Act No. 6657 entitled, "Comprehensive Agrarian Reform Law of
1988," took effect on 15 June 1988, fishponds were still considered
as agricultural land. However, when Republic Act No. 7881 was
passed by Congress on 20 February 1995, it amended several
provisions of Republic Act No. 6657. Section 2 of Republic Act No.
7881 amended Section 10 of Republic Act No. 6657 by expressly
exempting/excluding private lands actually, directly and exclusively
used for prawn farms and fishponds from the coverage of the CARL.
Section 3(c) of Republic Act No. 6657, as amended, now defines
agricultural land as land devoted to agricultural activity and not
otherwise classified as mineral, forest, residential, commercial or
industrial land. As to what constitutes an agricultural activity is
defined by Section 3(b) of Republic Act No. 6657, as amended, as the
cultivation of the soil, planting of crops, growing of fruit trees,
including the harvesting of such farm products, and other farm
activities and practices performed by a farmer in conjunction with
such farming operations done by persons whether natural or
juridical. By virtue of the foregoing amendments, the operation of
fishponds is no longer considered an agricultural activity, and a
parcel of land devoted to fishpond operation is no longer an
agricultural land.20
Section 10 of Republic Act No. 6657, as amended by Republic Act
No. 7881, explicitly provides:
SEC. 10. Exemptions and Exclusions.'
x x x x.
b) Private lands actually, directly and exclusively used for prawn
farms and fishponds shall be exempt from the coverage of this Act:
Provided, That said prawn farms and fishponds have not been
distributed and Certificate of Land Ownership Award (CLOA) issued
to agrarian reform beneficiaries under the Comprehensive Agrarian
Reform Program.
In cases where the fishponds or prawn farms have been subjected to
the Comprehensive Agrarian Reform Law, by voluntary offer to sell,
or commercial farms deferment or notices of compulsory
acquisition, a simple and absolute majority of the actual regular
workers or tenants must consent to the exemption within one (1)
year from the effectivity of this Act. When the workers or tenants do
not agree to this exemption, the fishponds or prawn farms shall be
distributed collectively to the workers-beneficiaries or tenants who
shall form a cooperative or association to manage the same
In cases where the fishponds or prawn farms have not been
subjected to the Comprehensive Agrarian Reform Law, the consent
of the farm workers shall no longer be necessary; however, the
provision of Section 32-A hereof on incentives shall apply. (Emphasis
supplied.)
From the afore-quoted provision, it is crystal clear that fishponds are
excluded/exempted from the coverage of the CARL. This Court
affirmed such exemption/exclusion in Atlas Fertilizer Corp. v.
Secretary, Department of Agrarian Reform.21 In view of the
foregoing, it is beyond doubt that the subject fishpond is indeed
now exempted/excluded from the coverage of the CARL. Thus, the
contention of the petitioner that the subject fishpond cannot be
exempted/excluded from CARL coverage because respondents failed
to prove that the fishpond has not yet been distributed and a CLOA
has been issued to the beneficiary of the agrarian reform, as
required by Section 10 of Republic Act No. 6657, as amended by
Republic Act No. 7881, is now unavailing. Moreover, this Court notes
that the DARAB already made a finding in its Decision that no CLOA
had been issued to the petitioner as a beneficiary of the fishpond.
Neither was the fishpond voluntarily offered for sale to the
petitioner. Section 54 of Republic Act No. 6657, as amended,
expressly states that the findings of fact of the DARAB shall be final
and conclusive if based on substantial evidence. Since the issue as to
whether a CLOA has been issued to the petitioner is a question of
fact, and being convinced that the findings of the DARAB on such
issue was not based on mere surmises or conjectures, this Court
upholds the same. Similarly, in this case, the character of the land
was never put in issue as it has long been settled that the 10-hectare
lot was indeed used actually, directly and exclusively as fishponds.
Hence, it is not necessary for the respondents to file an application
for the exemption of the subject fishpond from the coverage of the
CARL, contrary to the claim of the petitioner.
Even as we recognize that the fishpond is not covered by the CARL,
pursuant to Section 10 of Republic Act No. 6657, as amended by
Republic Act No. 7881, this Court, nonetheless, does not agree in the
conclusion arrived at by the Court of Appeals that since the subject
fishpond is no longer an agricultural land, it follows then that there
can be no tenurial arrangement affecting the parties in this case.
And in view of the fact that there is no agrarian dispute cognizable
by the DARAB, then the DARAB had no jurisdiction to resolve
petitioner's case.
It bears emphasis that the status of the petitioner as a tenant in the
subject fishpond and his right to security of tenure were already
previously settled in the Decision dated 20 July 1987 of the RTC of
Lucena City in Agrarian Case No. 86-8, which was affirmed by the
Court of Appeals in its Decision dated 11 September 1989. Having
been declared as a tenant with the right to security of tenure as
provided in Section 3522 of Republic Act No. 3844 in relation to
Section 7 of Republic Act No. 1199, the law enforced at the time of
the filing of the Complaint before the RTC of Lucena City, the
petitioner has acquired a vested right over the subject fishpond,
which right or interest has become fixed and established and is no
longer open to doubt or controversy.23 Therefore, even if fishponds,
like the subject matter of this case, were later excluded/exempted
from the coverage of the CARL as expressly provided in Section 10 of
Republic Act No. 6657, as amended by Republic Act No. 7881, and
despite the fact that no CLOA has been issued to the petitioner, the
same cannot defeat the aforesaid vested right already granted and
acquired by the petitioner long before the passage of Republic Act
No. 7881. And being in the nature of a substantive law, the
amendments introduced by Republic Act No. 7881 to Republic Act
No. 6657 in the year 1995 cannot be given a retroactive application
as to deprive the petitioner of his rights under the previous agrarian
legislation.24
Verily, DAR Administrative Order No. 3, Series of 1995, expressly
respects and acknowledges the tenancy relationship that existed
between the parties prior to the amendments made to Republic Act
No. 6657 by Republic Act No. 7881, that is, before fishponds and
prawn farms were exempted/excluded from the coverage of the
CARL. The aforesaid DAR Administrative Order provides:
II. POLICY STATEMENT
D. Acts of harassment by landowners intended to eject or remove
the workers or tenants or the loss of their rights, benefits and
privileges to which they are entitled shall be sanctioned and dealt
with under existing laws, rules and regulations.
E. Fishpond or prawn farmworkers affected by exemption/exclusion
have the option to remain as workers or become beneficiaries in
other agricultural lands.
A worker who chooses to remain in the exempted area shall remain
therin and shall be entitled to such rights, benefits and privileges
granted to farmworkers under existing laws, decrees, and executive
orders. (Emphasis supplied.)
Indubitably, despite the amendments to Section 10 of Republic Act
No. 6657, the petitioner's right to tenancy and security of tenure
over the subject fishpond must still be honored.
This Court likewise affirms that the DARAB correctly assumed
jurisdiction over the case, contrary to the declaration made by the
appellate court in its Decision. Notably, the present case was
instituted as early as 1991 when the petitioner filed a Petition
before the PARAD for the fixing of his lease rental on the subject
fishpond. Respondents subsequently filed a countercharge against
the petitioner for the accounting, collection of sums of money, and
dispossession. At such point, the law applicable was Republic Act No.
6657, wherein fishponds and prawn farms were not yet
exempted/excluded from the CARL coverage. Evidently, there was
an agrarian dispute existing between the petitioner and the
respondents, cognizable by the PARAD at the time it rendered its
Decision on 2 March 1993 in favor of the petitioner. On 20 February
1995, however, Republic Act No. 7881 came into being which
expressly exempted/excluded fishponds and prawn farms from the
coverage of the CARL. In effect, cases involving fishponds and prawn
farms are no longer considered agrarian disputes as to make the
case fall within the jurisdiction of the DARAB or its Adjudicators.
Nevertheless, considering that prior to the enactment of Republic
Act No. 7881, this case was already pending appeal before the
DARAB, the aforesaid amendments then cannot be made to apply as
to divest the DARAB of its jurisdiction over the case. It is well-settled
that once jurisdiction is acquired by the court, it remains with it until
the full termination of the case.25
WHEREFORE, premises considered, the instant Petition is hereby
GRANTED. The Decision and the Resolution of the Court of Appeals
in CA-G.R. SP No. 61955, dated 23 May 2005 and 25 January 2006,
respectively, which annulled and set aside the Decision of the
DARAB, dated 25 September 2000, for lack of jurisdiction, are
hereby REVERSED AND SET ASIDE. Thus, the said Decision of the
DARAB dated 25 September 2000 is hereby REINSTATED and
AFFIRMED. No costs.
SO ORDERED.
THIRD DIVISION
[G.R. No. 79167. May 7, 1992.]
THE HEIRS OF PROCESO BAUTISTA represented by PEDRO
BAUTISTA, Petitioners, vs.
SPOUSES SEVERO BARZA and ESTER P. BARZA, and COURT OF
APPEALS, Respondent.
Miguel and Valenson Law Offices, for Petitioners.
Rogelio A. Barba and Aguinaldo, Barza & Associates for Private
Respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; PUBLIC LANDS; ONLY DISPOSABLE
OR ALIENABLE PORTION THEREOF SUBJECT TO LEASE, GRANT, SALE
OR OTHER DISPOSITION; CASE AT BAR. Until timber or forest
lands are released as disposable or alienable, neither the Bureau of
Lands nor the Bureau of Fisheries has authority to lease, grant, sell,
or otherwise dispose of these lands for homesteads, sales patents,
leases for grazing purposes, fishpond leases and other modes of
utilization. On October 25, 1946 when Bautista filed Fishpond
Application No. 1205, the area applied for could not yet be granted
to him as it was yet to be released for public utilization. The
situation, however, changed when Barza filed Fishpond Application
No. 2984 for the area had, by then, been opened for fishpond
purposes.
2. ID.; ID.; FISHERIES ADMINISTRATIVE ORDER NO. 14;
PRIORITY RULE ON APPLICATIONS APPLICABLE ONLY TO PUBLIC
LANDS DECLARED AVAILABLE FOR FISHPOND PURPOSES. The
priority rule under Fisheries Administrative Order No. 14 applies
only to public lands already released by the Bureau of Fisheries.
Until such lands had been properly declared available for fishpond
purposes, any application is ineffective because there is no
disposable land to speak of.
3. ID.; ADMINISTRATIVE DECISIONS ENTITLED TO GREAT
WEIGHT AND RESPECT; RULE THAT ADMINISTRATIVE DECISIONS SET
ASIDE ONLY ON PROOF OF GROSS ABUSE OF JURISDICTION, FRAUD
OR ERROR OF LAW WELL-SETTLED; CASE AT BAR. Although an
administrative decision does not necessarily bind us, it is entitled to
great weight and respect. It should be stressed that the function of
administering and disposing of lands of the public domain in the
manner prescribed by law is not entrusted to the courts but to
executive officials. Matters involved in the grant, cancellation,
reinstatement and revision of fishpond licenses and permits are
vested under the executive supervision of the appropriate
department head who in this case is the Secretary of Agriculture and
Natural Resources. As such, his discretion must be respected in the
absence of a clear showing of abuse. This is in consonance with our
well settled ruling that administrative decisions on matters within
the jurisdiction of the executive department can only be set aside on
proof of gross abuse of jurisdiction, fraud or error of law. As earlier
noted, and there being no motion for its reconsideration, the
decision of the Secretary of Agriculture and Natural Resources
became final on July 3, 1959, thirty (30) days from receipt by the
parties of copies of the decision
4. CIVIL LAW; POSSESSION; CESSATION OF GOOD FAITH;
CASE AT BAR. Although Bautista was in possession of the area for
quite a number of years, he ceased to become a bona fide possessor
upon receipt of the decision of the Director of Fisheries granting due
course to Barzas fishpond application. Under Art. 528 of the Civil
Code," (p)ossession acquired in good faith does not lose its
character except in the case and from the moment facts exist which
show that the possessor is not unaware that he possesses the thing
improperly or wrongfully."
DECISION
ROMERO, J.:
The facts of this case began as far back as 1946, when the
Philippines was still a new republic and frontier lands and bountiful
natural resources down south beckoned the adventurous-like
Proceso Bautista and Ester Barza.
It was on October 25, 1946, to be exact, when Proceso Bautista
applied for a fishpond permit over a thirty-hectare parcel of marshy
public land located in Sitio Central, Lupon, Davao (Fishpond
Application No. 1205). The application was acknowledged on
December 12, 1946, by the then Division of Fisheries. Said
application was, however, rejected by the same office on November
9, 1948 because the area applied for was needed for firewood
production as certified to by the Bureau of Forestry. The rejection
covered an area of 49 hectares as against the 30 hectares applied for
by Proceso Bautista. 1 Between October 25, 1946 and November 9,
1948, Bautista occupied an area which extended beyond the
boundary of the one he had applied for and introduced
improvements thereon. 2
On September 23, 1948, Ester Barza filed a fishpond application
covering an area of approximately 14.85 hectares at Sitio Bundas,
Lupon, Davao (Fishpond Application. No. 2984). Subsequent
investigation revealed that the portion applied for by Barza
overlapped the area originally applied for by Proceso Bautista. 3
Despite the rejection of his application, Proceso Bautista filed
another fishpond application on February 8, 1949 with the Bureau of
Fisheries (Fishpond Application No. 3346). The 49 hectares applied
for was in Sitio Bundas instead of Sitio Central. 4
The records of the Bureau of Fisheries further show that While 14.85
hectares applied for by Barza in Fishpond Application No. 2984 had
been released by the Bureau of Forestry as available for fishpond
purposes, the 49 hectares applied for by Bautista in Fishpond
Application No. 3346 had not yet been similarly released by the said
bureau. It must be emphasized that the area, including the portion
applied for by Barza had been greatly improved by Proceso Bautista.
5 As expected, an administrative case involving the two applicants
arose.chanrobles law library : red
On September 19, 1953, the Director of Fisheries ruled in favor of
Ester Barza. The dispositive portion 6 of his order
reads:jgc:chanrobles.com.ph
"IN VIEW OF THE FOREGOING, Fp. A. No. 2984 of Ester F. Barza
should be, as hereby it is, GIVEN DUE COURSE, subject however to
the reimbursement of the amounts of improvements in the area to
Proceso Bautista within a period of sixty days from the date hereof,
the said amounts to be appraised and determined by the District
Fishery Officer at Davao City; and Fp. A. No. 3346 of Proceso
Bautista should be, as hereby it is, REJECTED.
SO ORDERED."cralaw virtua1aw library
Bautista appealed the said order to the Secretary of Agriculture and
Natural Resources (DANR Case No. 836). In a decision dated April 28,
1954, the Secretary, through Undersecretary Jaime M. Ferrer,
dismissed the appeal and affirmed in toto the order of the Director
of Fisheries giving due course to the fishpond application of Barza. 7
Bautista moved for reconsideration but the same was denied on
October 8, 1954. 8
It was not until February 2, 1955, that the Director of Fisheries, in
pursuance of the order of September 19, 1953, required Ester Barza
to remit the amount of P3,391.34 which represented the value of
the improvements introduced by Bautista. 9 This figure was
protested by Mrs. Barza in her letter dated March 6, 1955 where she
expressed her willingness to pay the amount of P1,763.31 only. On
April 18, 1955, the Director of Fisheries advised her to remit a
reappraised amount of P2,263.33. Subsequent reappraisals on the
value of the improvements became necessary in view of Bautistas
claim that the improvements were worth P14,000. 10
Meanwhile, since the parties could not agree on the amount of
reimbursement, on October 13, 1956, Bautista moved for the
rejection of the fishpond application of Barza in view of her non-
compliance with the order of the Director of Fisheries dated
September 19, 1953 mandating Barzas deposit of the value of the
improvements. 11 Bautista appealed to the then Secretary of
Agriculture and Natural Resources, who, in his decision dated May 5,
1959 denied Bautistas appeal thereby enforcing the Director of
Fisheries order of September 19, 1953. 12
On October 19, 1960, Jose Montilla, Assistant Director of Fisheries,
ordered Ester Barza by letter to reimburse Bautista P1,789.18, the
total value of the improvements pursuant to the appraisal report of
District Fishery Officer Crispin Mondragon dated October 31, 1958.
13 On December 22, 1960, Barza, agreeing to said appraisal,
consigned the sum of P1,789.18 with the then Justice of the Peace of
Lupon, Davao. 14 Bautista, however, refused to accept the same. On
July 11, 1961, another reappraisal of the improvements was made
establishing the value of the dikes, dams, trees and houses in the
area involved to be P14,569.08. 15 On December 12, 1962, this
amount was reduced to P9,514.33 in view of the finding that certain
improvements were suitable for agricultural and not for fishpond
purposes. 16 In the meantime, the decision of the Secretary of
Agriculture and Natural Resources dated May 5, 1955 became final.
17
More than seven years after the last reappraisal of the
improvements or on December 12, 1968, Ester Barza and her
husband, Engr. Severo H. Barza, filed in the then Court of First
Instance of Davao Oriental, an action against Bautista praying for
recovery of possession over the 14.85-hectare fishpond area she had
applied for, a declaration of the validity of the consignation made
before the Justice of the Peace of Lupon, and damages and
attorneys fees. On January 30, 1971, while the case was pending
resolution, Proceso Bautista died. 18 Consequently, his heirs were
substituted as party defendants.chanrobles.com : virtual law library
The lower court at first dismissed the case for lack of jurisdiction but
later, it reconsidered the dismissal. 19 After a protracted trial, on
November 15, 1983, the Regional Trial Court of Davao Oriental, 20
rendered a decision 21 in favor of defendant Bautista. While
disagreeing with the Bautistas that the priority rule in applications
for permits was inapplicable because Proceso Bautistas application
was made before the area was declared available for fishpond
purposes, the lower court ruled that the Barzas had not acquired a
vested right to possess the areas concerned as they had not
complied with the "condition precedent" to such possession the
reimbursement of the value of the improvements made by Bautista.
Hence, the court ruled, it was premature for the Barzas to demand
possession of the area.
On whether the action for recovery of possession had prescribed, 22
the lower court said:jgc:chanrobles.com.ph
". . . Besides, a review of the established facts and circumstances
would show that Proceso Bautista started to possess the property
adversely as early as 1946. It was only on September 23, 1948 when
Ester Barza filed her application and protested Bautistas entry.
Under Article 2253 of the New Civil Code, the Civil Code of 1899 and
other previous laws shall govern rights originating, under said laws,
from acts done or events which took place under their regime, even
though this Code may regulate them in a different manner or may
not recognize them. Prescription therefore which started prior to
the effectivity of the New Civil Code on August 30, 1950 should be
governed by the law prior to the effectivity of the New Civil Code,
which was the Code of Civil Procedure, under which the action of
recovery of (possession) prescribed within ten (10) years. In this
case, the adverse possession of Proceso Bautista which could be a
basis for prescription was interrupted with the filing of the
application of Ester Barza and her protest against the acts of the
former which she lodged with the Bureau of Fisheries in 1948. When
the decision of the Department of Agriculture and Natural Resources
dated May 5, 1959 became final on July 4, 1959 as per Exhibit D
and as in fact admitted by the parties, the said prescription by
adverse possession continued (sic). This is clear from the provision
of Art. 1123 of the New Civil Code which provides that civil
interruption of possession for the purpose of prescription is
produced by the judicial summons to the possessor which, in the
conflict between the parties, took the form of the fishpond
application and the protest filed by Ester Barza with the Bureau of
Fisheries in 1948. From July 4, 1959 to December 12, 1968, a period
of more than nine (9) years elapsed, and as the same should be
tacked with the period of almost two (2) years which elapsed from
1946 to 1948, when Proceso Bautista started to adversely possess
the area and when, on September 23, 1948, Ester Barza filed her
application, more than ten (10) years had expired and therefore by
reason of prescription, the recovery of possession is also
barred."cralaw virtua1aw library
Emphasizing that Barzas failure to reimburse Bautista for the
improvements introduced on the area was inconsistent with good
faith, the lower court held that the order of the Director of Fisheries
giving due course to her fishpond application and the decision of the
Secretary of Agriculture and Natural Resources "had all become
stale." Moreover, the consignation of the amount of P1,789.18 was
illegal as it was not in accordance with Art. 1258 of the New Civil
Code and, the court added, Barzas failure to pay the sum required
of her and to file the necessary action within ten years was
tantamount to a non-user of her rights under the September 19,
1953 order of the Director of Fisheries. Citing by analogy Art. 506 of
the Civil Code providing that the right to make use of public waters
is extinguished by the lapse of the concession and by non-user for
five (5) years, the lower court held that the cancellation of Barzas
application, as recommended by Fishery Product Examiner Abdul
Bakir, was proper.chanrobles virtual lawlibrary
On the other hand, the lower court ruled that Bautistas right to
retain possession over his improvements was implied by the order
of September 19, 1953 while Barzas failure to pay the value of the
improvements was "unfair and unsporting" and violative of Art. 19
of the New Civil Code. The lower court believed that P9,514.33 was
the "right amount" that Barza should have properly consigned. The
dispositive portion of the decision 23 reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the
defendants and against the plaintiffs, dismissing the complaint and
the plaintiffs are hereby directed to pay defendants the sum of
P10,000 by way of litigation expenses and P10,000 by way of
attorneys fees and to pay the costs.
SO ORDERED."cralaw virtua1aw library
The Barzas appealed to the Court of Appeals. On June 30, 1986 said
court reversed the decision of the lower court. 24 It interpreted the
decision of the Secretary of Agriculture and Natural Resources as an
"official imprimatur" on the application of Barza and as an
implication that Bautista had no right to continue possession over
the 49 hectares covered by Fishpond Application No. 3346.
While stating that consignation in an action for recovery of
possession of realty is not required by law and that the
reimbursement of the of the improvements is not an obligation, the
appellate court nonetheless held that the consignation of P1,789.18
was "proper and effective." 25 It found that Bautista was not a
possessor in good faith nor a planter in good faith because he filed
Fishpond Application No. 3346 after Barza had filed Fishpond
Application No. 2984. It concluded that Bautistas claim to
prescriptive rights, acquired or vested, did not arise "because it
infringe(d) on the rights of other(s) like Barza whose Fishpond
Application No. 2984 was given due course by the proper officials of
the government." 26 It disposed of the case as
follows:jgc:chanrobles.com.ph
"Wherefore, the decision a quo is hereby set aside and reversed and
another one is rendered ordering the heirs of Proceso Bautista to
accept or withdraw the sum of P1,789.18 from the Municipal Trial
Court Lupon, Davao, Oriental (formerly Municipal Court of Lupon,
Davao Oriental) representing the value of the improvements
introduced on the controverted area and to surrender possession of
the contested area to the heirs of Ester Barza both within 10 days
from receipt of the entry of judgment. No damages and cost.
SO ORDERED." (Rollo, p. 55)
On July 29, 1986, petitioners filed a motion for reconsideration of
the decision of the Court of Appeals but the same was denied on
June 18, 1987. 27
Hence, this recourse. Petitioners contend that the private
respondents cannot be given the right to possess the fishpond in
question as they themselves did not comply with the Director of
Fisheries order to reimburse Bautista for the improvements
thereon. They assert that whatever rights the Barzas had under their
fishpond application had become stale by non-user.
At the outset, it should be remembered that until timber or forest
lands are released as disposable or alienable, neither the Bureau of
Lands nor the Bureau of Fisheries has authority to lease, grant, sell,
or otherwise dispose of these lands for homesteads, sales patents,
leases for grazing purposes, fishpond leases and other modes of
utilization. 28 On October 25, 1946 when Bautista filed Fishpond
Application No. 1205, the area applied for could not yet be granted
to him as it was yet to be released for public utilization. The
situation, however, changed when Barza filed Fishpond Application
No. 2984 for the area had, by then, been opened for fishpond
purposes.chanrobles.com : virtual law library
Thus, even if Bautista were ahead of Barza by two years in terms of
occupation, possession and introduction of substantial
improvements, he was not placed in a better position than Barza.
The priority rule under Fisheries Administrative Order No. 14 applies
only to public lands already released by the Bureau of Fisheries.
Until such lands had been properly declared available for fishpond
purposes, any application is ineffective because there is no
disposable land to speak of. 29 Accordingly, Bautistas application
was premature and the ruling of the Director of Fisheries on this
matter was, therefore, correct.
Although an administrative decision does not necessarily bind us, it
is entitled to great weight and respect. It should be stressed that the
function of administering and disposing of lands of the public
domain in the manner prescribed by law is not entrusted to the
courts but to executive officials. 30 Matters involved in the grant,
cancellation, reinstatement and revision of fishpond licenses and
permits are vested under the executive supervision of the
appropriate department head who in this case is the Secretary of
Agriculture and Natural Resources. As such, his discretion must be
respected in the absence of a clear showing of abuse. 31 This is in
consonance with our well settled ruling that administrative decisions
on matters within the jurisdiction of the executive department can
only be set aside on proof of gross abuse of jurisdiction, fraud or
error of law. 32 As earlier noted, and there being no motion for its
reconsideration, the decision of the Secretary of Agriculture and
Natural Resources became final on July 3, 1959, thirty (30) days from
receipt by the parties of copies of the decision. 33
Petitioners contention that the action for recovery of possession
had prescribed when the Barzas filed it on December 12, 1968 is
erroneous for it was filed within the ten-year period for enforcing a
judgment, which in this case is the May 5, 1959 decision of the
Secretary of Agriculture and Natural Resources, as provided for in
Art. 1144 of the Civil Code. Hence, the ultimate issue in this case is
whether or not the Barzas may rightfully seek enforcement of the
decision of the Director of Fisheries and that of the Secretary of
Agriculture and Natural Resources, notwithstanding their refusal to
reimburse the Bautistas for the improvements in the area. We find
that the peculiar circumstances of this case compel as to rule in the
affirmative.
Although Bautista was in possession of the area for quite a number
of years, he ceased to become a bona fide possessor upon receipt of
the decision of the Director of Fisheries granting due course to
Barzas fishpond application. Under Art. 528 of the Civil Code,"
(p)ossession acquired in good faith does not lose its character except
in the case and from the moment facts exist which show that the
possessor is not unaware that he possesses the thing improperly or
wrongfully." Thus, Bautista should have desisted from introducing
improvements on the property when he learned that Barzas
application had been approved.chanrobles lawlibrary : rednad
However, Bautista may not be solely faulted for holding on to the
area notwithstanding that he had no right over it. The Barzas, after
receiving the administrative decision in the favor, should have
complied with its directive to reimburse the Bautistas for the
improvements introduced thereon. This is not to say, however, that
such failure to abide by the decision of the Director of Fisheries
rendered "stale" the said decision. There is also the established fact
that Bautista refused the payments tendered by the Barzas.
However, the Barzas failure to question the last reappraisal of the
improvements constituted inaction on their part, for which they
should bear its consequences.
WHEREFORE, the decision of the Court of Appeals is hereby
AFFIRMED subject to the modification that the petitioners shall be
REIMBURSED the amount of P9,514.33 (inclusive of the consigned
amount of P1,789.18) with legal interest from December 12, 1962
until fully paid. Upon payment of said reimbursement, the Bautistas
shall SURRENDER possession of the 14.85 hectares, including the
improvements thereon, for which the Barzas had been granted the
right to operate as fishpond. This decision is immediately executory.
No costs.
SO ORDERED.
SPECIAL FIRST DIVISION
[G.R. No. 124293. January 31, 2005]
J.G. SUMMIT HOLDINGS, INC., petitioner,
vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman
and Members; ASSET PRIVATIZATION TRUST; and PHILYARDS
HOLDINGS, INC., respondents.
RESOLUTION
PUNO, J.:
For resolution before this Court are two motions filed by the
petitioner, J.G. Summit Holdings, Inc. for reconsideration of our
Resolution dated September 24, 2003 and to elevate this case to the
Court En Banc. The petitioner questions the Resolution which
reversed our Decision of November 20, 2000, which in turn reversed
and set aside a Decision of the Court of Appeals promulgated on July
18, 1995.
I. Facts
The undisputed facts of the case, as set forth in our Resolution of
September 24, 2003, are as follows:
On January 27, 1997, the National Investment and Development
Corporation (NIDC), a government corporation, entered into a Joint
Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of
Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which
subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI
will contribute P330 million for the capitalization of PHILSECO in the
proportion of 60%-40% respectively. One of its salient features is the
grant to the parties of the right of first refusal should either of them
decide to sell, assign or transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its
interest in SNS [PHILSECO] to any third party without giving the
other under the same terms the right of first refusal. This provision
shall not apply if the transferee is a corporation owned or controlled
by the GOVERNMENT or by a KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and
interest in PHILSECO to the Philippine National Bank (PNB). Such
interests were subsequently transferred to the National
Government pursuant to Administrative Order No. 14. On December
8, 1986, President Corazon C. Aquino issued Proclamation No. 50
establishing the Committee on Privatization (COP) and the Asset
Privatization Trust (APT) to take title to, and possession of, conserve,
manage and dispose of non-performing assets of the National
Government. Thereafter, on February 27, 1987, a trust agreement
was entered into between the National Government and the APT
wherein the latter was named the trustee of the National
Government's share in PHILSECO. In 1989, as a result of a quasi-
reorganization of PHILSECO to settle its huge obligations to PNB, the
National Government's shareholdings in PHILSECO increased to
97.41% thereby reducing KAWASAKI's shareholdings to 2.59%.
In the interest of the national economy and the government, the
COP and the APT deemed it best to sell the National Government's
share in PHILSECO to private entities. After a series of negotiations
between the APT and KAWASAKI, they agreed that the latter's right
of first refusal under the JVA be "exchanged" for the right to top by
five percent (5%) the highest bid for the said shares. They further
agreed that KAWASAKI would be entitled to name a company in
which it was a stockholder, which could exercise the right to top. On
September 7, 1990, KAWASAKI informed APT that Philyards
Holdings, Inc. (PHI)[1] would exercise its right to top.
At the pre-bidding conference held on September 18, 1993,
interested bidders were given copies of the JVA between NIDC and
KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted
for the National Government's 87.6% equity share in PHILSECO. The
provisions of the ASBR were explained to the interested bidders who
were notified that the bidding would be held on December 2, 1993.
A portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through
public bidding is the National Government's equity in PHILSECO
consisting of 896,869,942 shares of stock (representing 87.67% of
PHILSECO's outstanding capital stock), which will be sold as a whole
block in accordance with the rules herein enumerated.
xxx xxx xxx
2.0 The highest bid, as well as the buyer, shall be subject to the final
approval of both the APT Board of Trustees and the Committee on
Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all
bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis.
The Indicative price set for the National Government's 87.67%
equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED
MILLION (P1,300,000,000.00).
xxx xxx xxx
6.0 The highest qualified bid will be submitted to the APT Board of
Trustees at its regular meeting following the bidding, for the
purpose of determining whether or not it should be endorsed by the
APT Board of Trustees to the COP, and the latter approves the same.
The APT shall advise Kawasaki Heavy Industries, Inc. and/or its
nominee, [PHILYARDS] Holdings, Inc., that the highest bid is
acceptable to the National Government. Kawasaki Heavy Industries,
Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of
thirty (30) calendar days from the date of receipt of such advice
from APT within which to exercise their "Option to Top the Highest
Bid" by offering a bid equivalent to the highest bid plus five (5%)
percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. exercise their "Option to Top the Highest Bid," they
shall so notify the APT about such exercise of their option and
deposit with APT the amount equivalent to ten percent (10%) of the
highest bid plus five percent (5%) thereof within the thirty (30)-day
period mentioned in paragraph 6.0 above. APT will then serve notice
upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings,
Inc. declaring them as the preferred bidder and they shall have a
period of ninety (90) days from the receipt of the APT's notice within
which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. fail to exercise their "Option to Top the Highest Bid"
within the thirty (30)-day period, APT will declare the highest bidder
as the winning bidder.
xxx xxx xxx
12.0 The bidder shall be solely responsible for examining with
appropriate care these rules, the official bid forms, including any
addenda or amendments thereto issued during the bidding period.
The bidder shall likewise be responsible for informing itself with
respect to any and all conditions concerning the PHILSECO Shares
which may, in any manner, affect the bidder's proposal. Failure on
the part of the bidder to so examine and inform itself shall be its
sole risk and no relief for error or omission will be given by APT or
COP. . . .
At the public bidding on the said date, petitioner J.G. Summit
Holdings, Inc.[2] submitted a bid of Two Billion and Thirty Million
Pesos (P2,030,000,000.00) with an acknowledgment of
KAWASAKI/[PHILYARDS'] right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has
up to thirty (30) days to act on APT's recommendation based on the
result of this bidding. Should the COP approve the highest bid, APT
shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the
National Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT
within which to exercise their "Option to Top the Highest Bid" by
offering a bid equivalent to the highest bid plus five (5%) percent
thereof.
As petitioner was declared the highest bidder, the COP approved the
sale on December 3, 1993 "subject to the right of Kawasaki Heavy
Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5%
as specified in the bidding rules."
On December 29, 1993, petitioner informed APT that it was
protesting the offer of PHI to top its bid on the grounds that: (a) the
KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS],
Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the ASBR
because the last four (4) companies were the losing bidders thereby
circumventing the law and prejudicing the weak winning bidder; (b)
only KAWASAKI could exercise the right to top; (c) giving the same
option to top to PHI constituted unwarranted benefit to a third
party; (d) no right of first refusal can be exercised in a public bidding
or auction sale; and (e) the JG Summit consortium was not estopped
from questioning the proceedings.
On February 2, 1994, petitioner was notified that PHI had fully paid
the balance of the purchase price of the subject bidding. On
February 7, 1994, the APT notified petitioner that PHI had exercised
its option to top the highest bid and that the COP had approved the
same on January 6, 1994. On February 24, 1994, the APT and PHI
executed a Stock Purchase Agreement. Consequently, petitioner
filed with this Court a Petition for Mandamus under G.R. No.
114057. On May 11, 1994, said petition was referred to the Court of
Appeals. On July 18, 1995, the Court of Appeals denied the same for
lack of merit. It ruled that the petition for mandamus was not the
proper remedy to question the constitutionality or legality of the
right of first refusal and the right to top that was exercised by
KAWASAKI/PHI, and that the matter must be brought "by the proper
party in the proper forum at the proper time and threshed out in a
full blown trial." The Court of Appeals further ruled that the right of
first refusal and the right to top are prima facie legal and that the
petitioner, "by participating in the public bidding, with full
knowledge of the right to top granted to KAWASAKI/[PHILYARDS]
isestopped from questioning the validity of the award given to
[PHILYARDS] after the latter exercised the right to top and had paid
in full the purchase price of the subject shares, pursuant to the
ASBR." Petitioner filed a Motion for Reconsideration of said Decision
which was denied on March 15, 1996. Petitioner thus filed a Petition
for Certiorari with this Court alleging grave abuse of discretion on
the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling
among others that the Court of Appeals erred when it dismissed the
petition on the sole ground of the impropriety of the special civil
action of mandamus because the petition was also one of certiorari.
It further ruled that a shipyard like PHILSECO is a public utility whose
capitalization must be sixty percent (60%) Filipino-owned.
Consequently, the right to top granted to KAWASAKI under the Asset
Specific Bidding Rules (ASBR) drafted for the sale of the 87.67%
equity of the National Government in PHILSECO is illegal not only
because it violates the rules on competitive bidding but more so,
because it allows foreign corporations to own more than 40% equity
in the shipyard. It also held that "although the petitioner had the
opportunity to examine the ASBR before it participated in the
bidding, it cannot be estopped from questioning the
unconstitutional, illegal and inequitable provisions thereof." Thus,
this Court voided the transfer of the national government's 87.67%
share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the right
of JG Summit, as the highest bidder, to take title to the said shares,
viz:
WHEREFORE, the instant petition for review on certiorari is
GRANTED. The assailed Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay to
APT its bid price of Two Billion Thirty Million Pesos
(P2,030,000,000.00), less its bid deposit plus interests upon the
finality of this Decision. In turn, APT is ordered to:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and
interests from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the certificates of
stocks representing 87.6% of PHILSECO's total capitalization;
(d) return to private respondent PHGI the amount of Two Billion One
Hundred Thirty-One Million Five Hundred Thousand Pesos
(P2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued to PHI.
SO ORDERED.
In separate Motions for Reconsideration, respondents submit[ted]
three basic issues for x x x resolution: (1) Whether PHILSECO is a
public utility; (2) Whether under the 1977 JVA, KAWASAKI can
exercise its right of first refusal only up to 40% of the total
capitalization of PHILSECO; and (3) Whether the right to top granted
to KAWASAKI violates the principles of competitive bidding.[3]
(citations omitted)
In a Resolution dated September 24, 2003, this Court ruled in favor
of the respondents. On the first issue, we held that Philippine
Shipyard and Engineering Corporation (PHILSECO) is not a public
utility, as by nature, a shipyard is not a public utility[4] and that no
law declares a shipyard to be a public utility.[5] On the second issue,
we found nothing in the 1977 Joint Venture Agreement (JVA) which
prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI)
from acquiring more than 40% of PHILSECOs total capitalization.[6]
On the final issue, we held that the right to top granted to
KAWASAKI in exchange for its right of first refusal did not violate the
principles of competitive bidding.[7]
On October 20, 2003, the petitioner filed a Motion for
Reconsideration[8] and a Motion to Elevate This Case to the Court
En Banc.[9] Public respondents Committee on Privatization (COP)
and Asset Privatization Trust (APT), and private respondent Philyards
Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit
Holdings, Inc.s (JG Summits) Motion for Reconsideration and Motion
to Elevate This Case to the Court En Banc on January 29, 2004 and
February 3, 2004, respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end this
litigation are the following:
1. Whether there are sufficient bases to elevate the case at bar to
the Court en banc.
2. Whether the motion for reconsideration raises any new matter or
cogent reason to warrant a reconsideration of this Courts Resolution
of September 24, 2003.
Motion to Elevate this Case to the
Court En Banc

The petitioner prays for the elevation of the case to the Court en
banc on the following grounds:
1. The main issue of the propriety of the bidding process involved in
the present case has been confused with the policy issue of the
supposed fate of the shipping industry which has never been an
issue that is determinative of this case.[10]
2. The present case may be considered under the Supreme Court
Resolution dated February 23, 1984 which included among en banc
cases those involving a novel question of law and those where a
doctrine or principle laid down by the Court en banc or in division
may be modified or reversed.[11]
3. There was clear executive interference in the judicial functions of
the Court when the Honorable Jose Isidro Camacho, Secretary of
Finance, forwarded to Chief Justice Davide, a memorandum dated
November 5, 2001, attaching a copy of the Foreign Chambers Report
dated October 17, 2001, which matter was placed in the agenda of
the Court and noted by it in a formal resolution dated November 28,
2001.[12]
Opposing J.G. Summits motion to elevate the case en banc,
PHILYARDS points out the petitioners inconsistency in previously
opposing PHILYARDS Motion to Refer the Case to the Court En Banc.
PHILYARDS contends that J.G. Summit should now be estopped from
asking that the case be referred to the Court en banc. PHILYARDS
further contends that the Supreme Court en banc is not an appellate
court to which decisions or resolutions of its divisions may be
appealed citing Supreme Court Circular No. 2-89 dated February 7,
1989.[13] PHILYARDS also alleges that there is no novel question of
law involved in the present case as the assailed Resolution was
based on well-settled jurisprudence. Likewise, PHILYARDS stresses
that the Resolution was merely an outcome of the motions for
reconsideration filed by it and the COP and APT and is consistent
with the inherent power of courts to amend and control its process
and orders so as to make them conformable to law and justice. (Rule
135, sec. 5)[14] Private respondent belittles the petitioners
allegations regarding the change in ponente and the alleged
executive interference as shown by former Secretary of Finance Jose
Isidro Camachos memorandum dated November 5, 2001 arguing
that these do not justify a referral of the present case to the Court
en banc.
In insisting that its Motion to Elevate This Case to the Court En Banc
should be granted, J.G. Summit further argued that: its Opposition
to the Office of the Solicitor Generals Motion to Refer is different
from its own Motion to Elevate; different grounds are invoked by
the two motions; there was unwarranted executive interference;
and the change in ponente is merely noted in asserting that this case
should be decided by the Court en banc.[15]
We find no merit in petitioners contention that the propriety of the
bidding process involved in the present case has been confused with
the policy issue of the fate of the shipping industry which, petitioner
maintains, has never been an issue that is determinative of this case.
The Courts Resolution of September 24, 2003 reveals a clear and
definitive ruling on the propriety of the bidding process. In
discussing whether the right to top granted to KAWASAKI in
exchange for its right of first refusal violates the principles of
competitive bidding, we made an exhaustive discourse on the rules
and principles of public bidding and whether they were complied
with in the case at bar.[16] This Court categorically ruled on the
petitioners argument that PHILSECO, as a shipyard, is a public utility
which should maintain a 60%-40% Filipino-foreign equity ratio, as it
was a pivotal issue. In doing so, we recognized the impact of our
ruling on the shipbuilding industry which was beyond avoidance.[17]
We reject petitioners argument that the present case may be
considered under the Supreme Court Resolution dated February 23,
1984 which included among en banc cases those involving a novel
question of law and those where a doctrine or principle laid down by
the court en banc or in division may be modified or reversed. The
case was resolved based on basic principles of the right of first
refusal in commercial law and estoppel in civil law. Contractual
obligations arising from rights of first refusal are not new in this
jurisdiction and have been recognized in numerous cases.[18]
Estoppel is too known a civil law concept to require an elongated
discussion. Fundamental principles on public bidding were likewise
used to resolve the issues raised by the petitioner. To be sure,
petitioner leans on the right to top in a public bidding in arguing that
the case at bar involves a novel issue. We are not swayed. The right
to top was merely a condition or a reservation made in the bidding
rules which was fully disclosed to all bidding parties. In Bureau
Veritas, represented by Theodor H. Hunermann v. Office of the
President, et al., [19]we dealt with this conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons
v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that in an
"invitation to bid, there is a condition imposed upon the bidders to
the effect that the bidding shall be subject to the right of the
government to reject any and all bids subject to its discretion. In the
case at bar, the government has made its choice and unless an
unfairness or injustice is shown, the losing bidders have no cause to
complain nor right to dispute that choice. This is a well-settled
doctrine in this jurisdiction and elsewhere."
The discretion to accept or reject a bid and award contracts is vested
in the Government agencies entrusted with that function. The
discretion given to the authorities on this matter is of such wide
latitude that the Courts will not interfere therewith, unless it is
apparent that it is used as a shield to a fraudulent award (Jalandoni
v. NARRA, 108 Phil. 486 [1960]). x x x The exercise of this discretion
is a policy decision that necessitates prior inquiry, investigation,
comparison, evaluation, and deliberation. This task can best be
discharged by the Government agencies concerned, not by the
Courts. The role of the Courts is to ascertain whether a branch or
instrumentality of the Government has transgressed its
constitutional boundaries. But the Courts will not interfere with
executive or legislative discretion exercised within those boundaries.
Otherwise, it strays into the realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that the
Courts will set aside the award of a contract made by a government
entity. Grave abuse of discretion implies a capricious, arbitrary and
whimsical exercise of power (Filinvest Credit Corp. v. Intermediate
Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The
abuse of discretion must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform a duty
enjoined by law, as to act at all in contemplation of law, where the
power is exercised in an arbitrary and despotic manner by reason of
passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.],
L-40867, 26 July 1988, 163 SCRA 489).
The facts in this case do not indicate any such grave abuse of
discretion on the part of public respondents when they awarded the
CISS contract to Respondent SGS. In the "Invitation to Prequalify and
Bid" (Annex "C," supra), the CISS Committee made an express
reservation of the right of the Government to "reject any or all bids
or any part thereof or waive any defects contained thereon and
accept an offer most advantageous to the Government." It is a well-
settled rule that where such reservation is made in an Invitation to
Bid, the highest or lowest bidder, as the case may be, is not entitled
to an award as a matter of right (C & C Commercial Corp. v. Menor,
L-28360, 27 January 1983, 120 SCRA 112). Even the lowest Bid or
any Bid may be rejected or, in the exercise of sound discretion, the
award may be made to another than the lowest bidder (A.C.
Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur., 788).
(emphases supplied)
Like the condition in the Bureau Veritas case, the right to top was a
condition imposed by the government in the bidding rules which
was made known to all parties. It was a condition imposed on all
bidders equally, based on the APTs exercise of its discretion in
deciding on how best to privatize the governments shares in
PHILSECO. It was not a whimsical or arbitrary condition plucked from
the ether and inserted in the bidding rules but a condition which the
APT approved as the best way the government could comply with its
contractual obligations to KAWASAKI under the JVA and its mandate
of getting the most advantageous deal for the government. The right
to top had its history in the mutual right of first refusal in the JVA
and was reached by agreement of the government and KAWASAKI.
Further, there is no executive interference in the functions of this
Court by the mere filing of a memorandum by Secretary of Finance
Jose Isidro Camacho. The memorandum was merely noted to
acknowledge its filing. It had no further legal significance. Notably
too, the assailed Resolution dated September 24, 2003 was decided
unanimously by the Special First Division in favor of the
respondents.
Again, we emphasize that a decision or resolution of a Division is
that of the Supreme Court[20] and the Court en banc is not an
appellate court to which decisions or resolutions of a Division may
be appealed.[21]
For all the foregoing reasons, we find no basis to elevate this case to
the Court en banc.
Motion for Reconsideration
Three principal arguments were raised in the petitioners Motion for
Reconsideration. First, that a fair resolution of the case should be
based on contract law, not on policy considerations; the contracts
do not authorize the right to top to be derived from the right of first
refusal.[22] Second, that neither the right of first refusal nor the
right to top can be legally exercised by the consortium which is not
the proper party granted such right under either the JVA or the
Asset Specific Bidding Rules (ASBR).[23] Third, that the maintenance
of the 60%-40% relationship between the National Investment and
Development Corporation (NIDC) and KAWASAKI arises from
contract and from the Constitution because PHILSECO is a
landholding corporation and need not be a public utility to be bound
by the 60%-40% constitutional limitation.[24]
On the other hand, private respondent PHILYARDS asserts that J.G.
Summit has not been able to show compelling reasons to warrant a
reconsideration of the Decision of the Court.[25] PHILYARDS denies
that the Decision is based mainly on policy considerations and points
out that it is premised on principles governing obligations and
contracts and corporate law such as the rule requiring respect for
contractual stipulations, upholding rights of first refusal, and
recognizing the assignable nature of contracts rights.[26] Also, the
ruling that shipyards are not public utilities relies on established case
law and fundamental rules of statutory construction. PHILYARDS
stresses that KAWASAKIs right of first refusal or even the right to top
is not limited to the 40% equity of the latter.[27] On the landholding
issue raised by J.G. Summit, PHILYARDS emphasizes that this is a
non-issue and even involves a question of fact. Even assuming that
this Court can take cognizance of such question of fact even without
the benefit of a trial, PHILYARDS opines that landholding by
PHILSECO at the time of the bidding is irrelevant because what is
essential is that ultimately a qualified entity would eventually hold
PHILSECOs real estate properties.[28] Further, given the assignable
nature of the right of first refusal, any applicable nationality
restrictions, including landholding limitations, would not affect the
right of first refusal itself, but only the manner of its exercise.[29]
Also, PHILYARDS argues that if this Court takes cognizance of J.G.
Summits allegations of fact regarding PHILSECOs landholding, it
must also recognize PHILYARDS assertions that PHILSECOs
landholdings were sold to another corporation.[30] As regards the
right of first refusal, private respondent explains that KAWASAKIs
reduced shareholdings (from 40% to 2.59%) did not translate to a
deprivation or loss of its contractually granted right of first
refusal.[31] Also, the bidding was valid because PHILYARDS
exercised the right to top and it was of no moment that losing
bidders later joined PHILYARDS in raising the purchase price.[32]
In cadence with the private respondent PHILYARDS, public
respondents COP and APT contend:
1. The conversion of the right of first refusal into a right to top by 5%
does not violate any provision in the JVA between NIDC and
KAWASAKI.
2. PHILSECO is not a public utility and therefore not governed by the
constitutional restriction on foreign ownership.
3. The petitioner is legally estopped from assailing the validity of the
proceedings of the public bidding as it voluntarily submitted itself to
the terms of the ASBR which included the provision on the right to
top.
4. The right to top was exercised by PHILYARDS as the nominee of
KAWASAKI and the fact that PHILYARDS formed a consortium to
raise the required amount to exercise the right to top the highest
bid by 5% does not violate the JVA or the ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement for the
acquisition of lands does not apply to PHILSECO because as admitted
by petitioner itself, PHILSECO no longer owns real property.
6. Petitioners motion to elevate the case to the Court en banc is
baseless and would only delay the termination of this case.[33]
In a Consolidated Comment dated March 8, 2004, J.G. Summit
countered the arguments of the public and private respondents in
this wise:
1. The award by the APT of 87.67% shares of PHILSECO to
PHILYARDS with losing bidders through the exercise of a right to top,
which is contrary to law and the constitution is null and void for
being violative of substantive due process and the abuse of right
provision in the Civil Code.
a. The bidders[] right to top was actually exercised by losing bidders.
b. The right to top or the right of first refusal cannot co-exist with a
genuine competitive bidding.
c. The benefits derived from the right to top were unwarranted.
2. The landholding issue has been a legitimate issue since the start
of this case but is shamelessly ignored by the respondents.
a. The landholding issue is not a non-issue.

b. The landholding issue does not pose questions of fact.
c. That PHILSECO owned land at the time that the right of first
refusal was agreed upon and at the time of the bidding are most
relevant.
d. Whether a shipyard is a public utility is not the core issue in this
case.
3. Fraud and bad faith attend the alleged conversion of an inexistent
right of first refusal to the right to top.
a. The history behind the birth of the right to top shows fraud and
bad faith.
b. The right of first refusal was, indeed, effectively useless.
4. Petitioner is not legally estopped to challenge the right to top in
this case.
a. Estoppel is unavailing as it would stamp validity to an act that is
prohibited by law or against public policy.
b. Deception was patent; the right to top was an attractive nuisance.
c. The 10% bid deposit was placed in escrow.
J.G. Summits insistence that the right to top cannot be sourced from
the right of first refusal is not new and we have already ruled on the
issue in our Resolution of September 24, 2003. We upheld the
mutual right of first refusal in the JVA.[34] We also ruled that
nothing in the JVA prevents KAWASAKI from acquiring more than
40% of PHILSECOs total capitalization.[35] Likewise, nothing in the
JVA or ASBR bars the conversion of the right of first refusal to the
right to top. In sum, nothing new and of significance in the
petitioners pleading warrants a reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the right
of first refusal nor the right to top can legally be exercised by the
consortium which is not the proper party granted such right under
either the JVA or the ASBR. Thus, we held:
The fact that the losing bidder, Keppel Consortium (composed of
Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has
joined PHILYARDS in the latter's effort to raise P2.131 billion
necessary in exercising the right to top is not contrary to law, public
policy or public morals. There is nothing in the ASBR that bars the
losing bidders from joining either the winning bidder (should the
right to top is not exercised) or KAWASAKI/PHI (should it exercise its
right to top as it did), to raise the purchase price. The petitioner did
not allege, nor was it shown by competent evidence, that the
participation of the losing bidders in the public bidding was done
with fraudulent intent. Absent any proof of fraud, the formation by
[PHILYARDS] of a consortium is legitimate in a free enterprise
system. The appellate court is thus correct in holding the petitioner
estopped from questioning the validity of the transfer of the
National Government's shares in PHILSECO to respondent.[36]
Further, we see no inherent illegality on PHILYARDS act in seeking
funding from parties who were losing bidders. This is a purely
commercial decision over which the State should not interfere
absent any legal infirmity. It is emphasized that the case at bar
involves the disposition of shares in a corporation which the
government sought to privatize. As such, the persons with whom
PHILYARDS desired to enter into business with in order to raise
funds to purchase the shares are basically its business. This is in
contrast to a case involving a contract for the operation of or
construction of a government infrastructure where the identity of
the buyer/bidder or financier constitutes an important
consideration. In such cases, the government would have to take
utmost precaution to protect public interest by ensuring that the
parties with which it is contracting have the ability to satisfactorily
construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is
a landholding company, KAWASAKI could exercise its right of first
refusal only up to 40% of the shares of PHILSECO due to the
constitutional prohibition on landholding by corporations with more
than 40% foreign-owned equity. It further argues that since
KAWASAKI already held at least 40% equity in PHILSECO, the right of
first refusal was inutile and as such, could not subsequently be
converted into the right to top. [37] Petitioner also asserts that, at
present, PHILSECO continues to violate the constitutional provision
on landholdings as its shares are more than 40% foreign-owned.[38]
PHILYARDS admits that it may have previously held land but had
already divested such landholdings.[39] It contends, however, that
even if PHILSECO owned land, this would not affect the right of first
refusal but only the exercise thereof. If the land is retained, the right
of first refusal, being a property right, could be assigned to a
qualified party. In the alternative, the land could be divested before
the exercise of the right of first refusal. In the case at bar,
respondents assert that since the right of first refusal was validly
converted into a right to top, which was exercised not by KAWASAKI,
but by PHILYARDS which is a Filipino corporation (i.e., 60% of its
shares are owned by Filipinos), then there is no violation of the
Constitution.[40] At first, it would seem that questions of fact
beyond cognizance by this Court were involved in the issue.
However, the records show that PHILYARDS admits it had owned
land up until the time of the bidding.[41] Hence, the only issue is
whether KAWASAKI had a valid right of first refusal over PHILSECO
shares under the JVA considering that PHILSECO owned land until
the time of the bidding and KAWASAKI already held 40% of
PHILSECOs equity.
We uphold the validity of the mutual rights of first refusal under the
JVA between KAWASAKI and NIDC. First of all, the right of first
refusal is a property right of PHILSECO shareholders, KAWASAKI and
NIDC, under the terms of their JVA. This right allows them to
purchase the shares of their co-shareholder before they are offered
to a third party. The agreement of co-shareholders to mutually grant
this right to each other, by itself, does not constitute a violation of
the provisions of the Constitution limiting land ownership to
Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if
PHILSECO still owns land, the right of first refusal can be validly
assigned to a qualified Filipino entity in order to maintain the 60%-
40% ratio. This transfer, by itself, does not amount to a violation of
the Anti-Dummy Laws, absent proof of any fraudulent intent. The
transfer could be made either to a nominee or such other party
which the holder of the right of first refusal feels it can comfortably
do business with. Alternatively, PHILSECO may divest of its
landholdings, in which case KAWASAKI, in exercising its right of first
refusal, can exceed 40% of PHILSECOs equity. In fact, it can even be
said that if the foreign shareholdings of a landholding corporation
exceeds 40%, it is not the foreign stockholders ownership of the
shares which is adversely affected but the capacity of the
corporation to own land that is, the corporation becomes
disqualified to own land. This finds support under the basic
corporate law principle that the corporation and its stockholders are
separate juridical entities. In this vein, the right of first refusal over
shares pertains to the shareholders whereas the capacity to own
land pertains to the corporation. Hence, the fact that PHILSECO
owns land cannot deprive stockholders of their right of first refusal.
No law disqualifies a person from purchasing shares in a landholding
corporation even if the latter will exceed the allowed foreign equity,
what the law disqualifies is the corporation from owning land. This is
the clear import of the following provisions in the Constitution:
Section 2. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated.
The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State
may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per
centum of whose capital is owned by such citizens. Such agreements
may be for a period not exceeding twenty-five years, renewable for
not more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure
and limit of the grant.
xxx xxx xxx
Section 7. Save in cases of hereditary succession, no private lands
shall be transferred or conveyed except to individuals, corporations,
or associations qualified to acquire or hold lands of the public
domain.[42] (emphases supplied)
The petitioner further argues that an option to buy land is void in
itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]).
The right of first refusal granted to KAWASAKI, a Japanese
corporation, is similarly void. Hence, the right to top, sourced from
the right of first refusal, is also void.[43] Contrary to the contention
of petitioner, the case of Lui She did not that say an option to buy
land is void in itself, for we ruled as follows:
x x x To be sure, a lease to an alien for a reasonable period is valid.
So is an option giving an alien the right to buy real property on
condition that he is granted Philippine citizenship. As this Court said
in Krivenko vs. Register of Deeds:
[A]liens are not completely excluded by the Constitution from the
use of lands for residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary rights such
as a lease contract which is not forbidden by the Constitution.
Should they desire to remain here forever and share our fortunes
and misfortunes, Filipino citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy,
a piece of land, by virtue of which the Filipino owner cannot sell or
otherwise dispose of his property, this to last for 50 years, then it
becomes clear that the arrangement is a virtual transfer of
ownership whereby the owner divests himself in stages not only of
the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and
jus abutendi) but also of the right to dispose of it (jus disponendi)
rights the sum total of which make up ownership. It is just as if today
the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which
ownership is made up are consolidated in an alien. And yet this is
just exactly what the parties in this case did within this pace of one
year, with the result that Justina Santos'[s] ownership of her
property was reduced to a hollow concept. If this can be done, then
the Constitutional ban against alien landholding in the Philippines, as
announced in Krivenko vs. Register of Deeds, is indeed in grave
peril.[44] (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to
a virtual transfer of ownership as the owner could not sell or dispose
of his properties. The contract in Lui She prohibited the owner of the
land from selling, donating, mortgaging, or encumbering the
property during the 50-year period of the option to buy. This is not
so in the case at bar where the mutual right of first refusal in favor
of NIDC and KAWASAKI does not amount to a virtual transfer of land
to a non-Filipino. In fact, the case at bar involves a right of first
refusal over shares of stock while the Lui She case involves an option
to buy the land itself. As discussed earlier, there is a distinction
between the shareholders ownership of shares and the corporations
ownership of land arising from the separate juridical personalities of
the corporation and its shareholders.
We note that in its Motion for Reconsideration, J.G. Summit alleges
that PHILSECO continues to violate the Constitution as its foreign
equity is above 40% and yet owns long-term leasehold rights which
are real rights.[45] It cites Article 415 of the Civil Code which
includes in the definition of immovable property, contracts for
public works, and servitudes and other real rights over immovable
property.[46] Any existing landholding, however, is denied by
PHILYARDS citing its recent financial statements.[47] First, these are
questions of fact, the veracity of which would require introduction
of evidence. The Court needs to validate these factual allegations
based on competent and reliable evidence. As such, the Court
cannot resolve the questions they pose. Second, J.G. Summit
misreads the provisions of the Constitution cited in its own
pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private
respondent is not a 60%-40% corporation, and this violates the
Constitution x x x The violation continues to this day because under
the law, it continues to own real property
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14,
Article XIV of the 1973 Constitution (the JVA was signed in 1977),
provided:
Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain.
32.1 This provision is the same as Section 7, Article XII of the 1987
Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or
hold lands of the public domain are corporations at least 60% of
which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141,
as amended). (emphases supplied)
As correctly observed by the public respondents, the prohibition in
the Constitution applies only to ownership of land.[48] It does not
extend to immovable or real property as defined under Article 415
of the Civil Code. Otherwise, we would have a strange situation
where the ownership of immovable property such as trees, plants
and growing fruit attached to the land[49] would be limited to
Filipinos and Filipino corporations only.
III.
WHEREFORE, in view of the foregoing, the petitioners Motion for
Reconsideration is DENIED WITH FINALITY and the decision appealed
from is AFFIRMED. The Motion to Elevate This Case to the Court En
Banc is likewise DENIED for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. L-15260 August 18, 1920
FAUSTO RUBISO, plaintiff-appellant,
vs.
FLORENTINO RIVERA, ET AL., defendants-appellees.
Canillas and Cardenas for appellant.
M. P. Leuterio for appellees.
VILLAMOR, J.:
About April, 1915, Fausto Rubiso and Florentino Rivera had a
litigation concerning the ownership of the pilot boat Valentina.
Rivera acquired it on January 4, 1915, from its original owner the
Chinaman Sy Qui, but did not inscribe his title in the mercantile
registry according to article 573 of the Code of Commerce in relation
to article 2 of Act No. 1900. Subsequently Rubiso bought said pilot
boat in a sale at public auction for the sum of P55.45 on January 23,
1915, and inscribed his title in the mercantile registry on March 4th
of the same year. The suit was decided by the Court of First Instance
of Manila in favor of the plaintiff Rubiso on September 6, 1915. On
the 11th day of said month the court issued a writ of execution,
upon the petition of the plaintiff, in order to proceed, as said
plaintiff alleged, to the salvage of the pilot boat which at that time
was stranded in the sitio of Tingloy, Batangas. The order of
execution was stayed upon the filing of a bond for P1,800 by the
defendant Rivera who alleged in support of his objection, that the
pilot boat was already salvaged and had been taken to Maricaban,
Batangas. The judgment having been brought to this court by appeal
it was affirmed in a judgment rendered on October 30, 1917 (R.G. N.
11407).1 The cause having been sent to the Court of First Instance
for the execution of judgment the sheriff of Batangas who
undertook to enforce the writ of execution was able to deliver to the
plaintiff Rubiso nothing but the pilot boat itself in a seriously
damaged condition and two useless sails.
Such are the facts which gave rise to the present action for the
recovery of the damages in the sum of P1,200 which the plaintiff
and appellant Fausto Rubiso alleges he has suffered by the
destruction and loss of the pilot boat Valentina and its equipment
which were caused, according to the complaint, by the fault and
negligence of the defendants Florentino Rivera and others.
The answer having been filed and the trial having taken place, the
court rendered judgment in favor of the defendants without any
special pronouncement as to costs. From this judgment the plaintiff
appealed. The motion for new trial having been overruled, the
appellant presented the corresponding bill of exceptions assigning in
his brief the following a errors: (a) The finding that there was not
sufficient evidence to establish the amount of the expenses sought
to be recovered; (b) the finding that the pilot boat Valentina had no
legal value in August, 1915; (c) in rendering judgment absolving the
defendants in this case; and (d) in overruling the motion for new
trial presented by the plaintiff on the ground that the judgment is
against the weight of the evidence.
In a series of uninterrupted decision before and after the
promulgation of the Civil Code, the doctrine has been established
that all judgment for damages whether arising from a breach of
contract or resulting from some provision of law, must be based
upon satisfactory evidence of the real existence of the damages
alleged to have been suffered. (Sanz vs. Lavin and Bros., 6 Phil., 299.)
Has the existence of the damages sought to be recovered in this
case been satisfactorily established? The court below decided this
question of fact adversely to the plaintiff and we are of the opinion
that this findings is sustained by the evidence. Plaintiff declares that
in February, 1915, he visited and examined the pilot boat Valentina
in the barrio of Tingloy and that on said day he found it in good
condition, and that he saw all of its tackle and rigging; but on cross-
examination by the attorney for the defendants he admitted that on
said date he was unable to take possession of the vessel because the
person in charge of it would not permit him even to approach.
Estanislao Jili who accompanied Fausto Rubiso in order to see the
pilot boat Valentina in February, 1915, affirms that they did not go
on board the vessel because the person in charge of it would not
permit them to do so. This same witness and Jose Soriano as a
witness of the plaintiff state that at that time the boat was not in a
seaworthy condition, because its bottom was damaged and it had
no equipments.
If what has been said is not yet sufficient to find that the pretense of
the appellant as to his first assignment of error is unsustainable, we
still have the uncontradicted testimony of Juan Velino, Irineo
Martinez and Mariano Villas, witnesses for the defendants, who
declared on the seriously damaged condition of the pilot boat long
before its acquisition by the appellant.
Juan Velino declared that in August, 1914, the boat was aground in
Dayhagan, Mindoro; it was somewhat repaired and about November
of the same year it sailed from that place and suffered on the way
such damages and troubles that it had to be taken to Tingloy for
new repair, some vessels' tools and equipments having been
borrowed from another boat because those of the Valentina had
been destroyed; and the storm destroyed the vessel so much that it
could not be taken to the Island of Maricaban except by means of
rafts. To the same effect is the testimony of Irineo Martinez.
Mariano Villas testified that in December, 1914, the Valentina
anchored in Tingloy alongside his vessel and as he was interested in
the purchase of this pilot boat, the sale of which was advertised in
Manila, he examined it and then saw that he would not buy it even
for P400, because it was completely destroyed. There can be no
doubt as to the competency of this witness to testify on the
question of the price of the pilot boat Valentina because according
to him he had ordered the construction of boats of the same size
and condition during that period. The lower court declares in its
judgment that this witness appears to it as sufficiently trustworthy,
and we find no basis whatever on the record to doubt the
correctness of the finding of the trial judge who saw and observed
him while he was testifying.
We, therefore, are of the opinion that the finding of the court that
there was not sufficient proof to establish the amount of the
defendants' claim is in accordance with the merits of the case.
As to the second error assigned by the appellant it should be noted
that, as appears in the record the pilot boat Valentina was stranded
in Tingloy since the month of November, 1914, that is, two months
before it had been acquired by the plaintiff at public auction and ten
months before the judgment declaring him to be the owner thereof,
was rendered. The appellant, in his first complaint of April 10, 1915,
for the recovery of the pilot boat Valentina, affirms that the boat
was then in the same worthless condition in which it was in 1914,
and the evidence we have examined in this case show that in fact in
August or September, 1915, it was in the worse of conditions and
was utterly worthless. Without attempting to determine the
durability of a boat made of wood stranded for a period of ten
months, as is the case with the boat in question, we are of the
opinion, and so declare, that according to the proofs adduced in this
case, the court did not err in declaring in its judgment that the pilot
boat Valentina did not have any legal value in August, 1915.
The defendant in his brief interposes the defense of res judicata
based upon the judgment of this court in the action between Fausto
Rubiso et al. and Florentino Rivera who are the parties in the
present case.
In that case it was held:
With respect to the indemnification for damages claimed by the
plaintiff, besides the fact [that according to the proceedings taken
subsequently to the date on which the judgment appealed from was
rendered, it appears that the pilot boat has already left in good
condition the place where it had been stranded and is at present
found anchored in the port of Maricaban,] the truth is that the
record does not offer positive proof of the amount of the damages
caused, and on the other hand it cannot be declared that the
defendant had acted in bad faith for he acquired the vessel previous
to its acquisition at public auction by the plaintiff Rubiso who, for
the reason already given, is the true and sole owner of said pilot
boat. (Decision of October 30, 1917, R. G. No. 11407 [Rubiso and
Gelito vs. Rivera, 37 Phil., 72].)
It having been declared in a previous action that the defendant
Rivera did not act in bad faith and that therefore he was not liable
for damages, it would be necessary to show in the present case that
the destruction of the boat and the loss of its equipments took place
after the final judgment was rendered in that case and by reason of
the fault and negligence of the defendants, which is not the case
here. What appears from the evidence presented by the defendant
and uncontradicted by that presented by the adverse parties, is that
from September, 1915, to March 7, 1918, which was the date of the
execution of the judgment of this court affirming that of the lower
court, the boat continued aground in the Island of Maricaban
awaiting the final judgment in the action with respect to ownership
and naturally exposed to the action of sea water and the
inclemencies of the weather, things which were beyond the control
of the defendant Rivera.
It thus now appears that the damages claimed by the plaintiff are
the same damages that he claimed in the first action. To speak more
accurately, the appellant first sued for the recovery of the vessel and
damages in the sum of P1,750. Judgment was rendered as to the
first in his favor but against him as to the second. And now he comes
back again claiming damages.
The case now under consideration is analogous to that of Palanca
Tanguinlay vs. Quiros (10 Phil., 360). In that case the question was
extensively discussed whether a previous judgment constitutes an
adjudication of the subject-matter of a new suit between the same
parties to such extent that it can not again be tried anew. It was held
that according to articles 306 and 307 of the Code of Civil Procedure,
a judgment rendered in an action for the recovery damages for
property lost is a bar to any other action between the same parties
for the recovery of the same property or its value. In the course of
the decision the court held:
The American books are full of similar cases, an instance being Hatch
vs. Coddington (32 Minn., 92), in which it was held that a former
action between the same parties to recover damages for a wrongful
conversion of personal property was a bar to a subsequent suit to
recover possession of the specific property itself, notwithstanding
the difference of form and that the relief sought and the subject-
matter of the cause of action were regarded as the same. Nor is it
altogether clear that the law of Spain was different. Seor Manresa,
in his commentary on article 1252 of the Civil Code, cites a decision
of the supreme court of 25th of April, 1900 (vol. 8, p. 555), holding
that in a real action a judgment in a former personal suit between
the same parties for indemnity for the use of the same property
operated as cosa juzgada.
From what has been said the judgment appealed from should be,
and is hereby, affirmed, with costs against the appellant. So ordered.
Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. 205728 January 21, 2015
THE DIOCESE OF BACOLOD, REPRESENTED BY THE MOST REV.
BISHOP VICENTE M. NAVARRA and THE BISHOP HIMSELF IN HIS
PERSONAL CAPACITY, Petitioners,
vs.
COMMISSION ON ELECTIONS AND THE ELECTION OFFICER OF
BACOLOD CITY, ATTY. MAVIL V. MAJARUCON, Respondents.
DECISION
LEONEN, J.:
"The Philippines is a democratic and republican State. Sovereignty
resides in the people and all government authority emanates from
them." Article II, Section 1, Constitution
All governmental authority emanates from our people. No
unreasonable restrictions of the fundamental and preferred right to
expression of the electorate during political contests no matter how
seemingly benign will be tolerated.
This case defines the extent that our people may shape the debates
during elections. It is significant and of first impression. We are
asked to decide whether the Commission on Elections (COMELEC)
has the competence to limit expressions made by the citizens
who are not candidates during elections.
Before us is a special civil action for certiorari and prohibition with
application for preliminary injunction and temporary restraining
order1 under Rule 65 of the Rules of Court seeking to nullify
COMELECs Notice to Remove Campaign Materials2 dated February
22, 2013 and letter3 issued on February 27, 2013.
The facts are not disputed.
On February 21, 2013, petitioners posted two (2) tarpaulins within a
private compound housing the San Sebastian Cathedral of Bacolod.
Each tarpaulin was approximately six feet (6') by ten feet (10') in
size. They were posted on the front walls of the cathedral within
public view. The first tarpaulin contains the message "IBASURA RH
Law" referring to the Reproductive Health Law of 2012 or Republic
Act No. 10354. The second tarpaulin is the subject of the present
case.4 This tarpaulin contains the heading "Conscience Vote" and
lists candidates as either "(Anti-RH) Team Buhay" with a check mark,
or "(Pro-RH) Team Patay" with an "X" mark.5 The electoral
candidates were classified according to their vote on the adoption of
Republic Act No. 10354, otherwise known as the RH Law.6 Those
who voted for the passing of the law were classified by petitioners
as comprising "Team Patay," while those who voted against it form
"Team Buhay":7
TEAM BUHAY TEAM PATAY
Estrada, JV Angara, Juan Edgardo
Honasan, Gregorio Casio, Teddy
Magsaysay, Mitos Cayetano, Alan Peter
Pimentel, Koko Enrile, Jackie
Trillanes, Antonio Escudero, Francis
Villar, Cynthia Hontiveros, Risa
Party List Buhay Legarda, Loren
Party List Ang Pamilya Party List Gabriela
Party List Akbayan
Party List Bayan Muna
Party List Anak Pawis
During oral arguments, respondents conceded that the tarpaulin
was neither sponsored nor paid for by any candidate. Petitioners
also conceded that the tarpaulin contains names ofcandidates for
the 2013 elections, but not of politicians who helped in the passage
of the RH Law but were not candidates for that election.
On February 22, 2013, respondent Atty. Mavil V. Majarucon, in her
capacity as Election Officer of Bacolod City, issued a Notice to
Remove Campaign Materials8 addressed to petitioner Most Rev.
Bishop Vicente M. Navarra. The election officer ordered the
tarpaulins removal within three (3) days from receipt for being
oversized. COMELEC Resolution No. 9615 provides for the size
requirement of two feet (2) by three feet (3).9
On February 25, 2013, petitioners replied10 requesting, among
others, that (1) petitioner Bishop be given a definite ruling by
COMELEC Law Department regarding the tarpaulin; and (2) pending
this opinion and the availment of legal remedies, the tarpaulin be
allowed to remain.11
On February 27, 2013, COMELEC Law Department issued a letter12
ordering the immediate removal of the tarpaulin; otherwise, it will
be constrained to file an election offense against petitioners. The
letter of COMELEC Law Department was silenton the remedies
available to petitioners. The letter provides as follows:
Dear Bishop Navarra:
It has reached this Office that our Election Officer for this City, Atty.
Mavil Majarucon, had already given you notice on February 22, 2013
as regards the election propaganda material posted on the church
vicinity promoting for or against the candidates and party-list groups
with the following names and messages, particularly described as
follows:
Material size : six feet (6) by ten feet (10)
Description : FULL COLOR TARPAULIN
Image of : SEE ATTACHED PICTURES
Message : CONSCIENCE VOTE (ANTI RH) TEAM
BUHAY; (PRO RH) TEAM PATAY
Location : POSTED ON THE CHURCH VICINITY
OF THE DIOCESE OF BACOLOD CITY
The three (3) day notice expired on February 25, 2013.
Considering that the above-mentioned material is found to be in
violation of Comelec Resolution No. 9615 promulgated on January
15, 2013 particularly on the size (even with the subsequent division
of the said tarpaulin into two), as the lawful size for election
propaganda material is only two feet (2) by three feet (3), please
order/cause the immediate removal of said election propaganda
material, otherwise, we shall be constrained to file an election
offense case against you.
We pray that the Catholic Church will be the first institution to help
the Commission on Elections inensuring the conduct of peaceful,
orderly, honest and credible elections.
Thank you and God Bless!
[signed]
ATTY. ESMERALDA AMORA-LADRA
Director IV13
Concerned about the imminent threatof prosecution for their
exercise of free speech, petitioners initiated this case through this
petition for certiorari and prohibition with application for
preliminary injunction and temporary restraining order.14 They
question respondents notice dated February 22, 2013 and letter
issued on February 27, 2013. They pray that: (1) the petition be
given due course; (2) a temporary restraining order (TRO) and/or a
writ of preliminary injunction be issued restraining respondents
from further proceeding in enforcing their orders for the removal of
the Team Patay tarpaulin; and (3) after notice and hearing, a
decision be rendered declaring the questioned orders of
respondents as unconstitutional and void, and permanently
restraining respondents from enforcing them or any other similar
order.15
After due deliberation, this court, on March 5, 2013, issued a
temporary restraining order enjoining respondents from enforcing
the assailed notice and letter, and set oral arguments on March 19,
2013.16
On March 13, 2013, respondents filed their comment17 arguing that
(1) a petition for certiorari and prohibition under Rule 65 of the
Rules of Court filed before this court is not the proper remedy to
question the notice and letter of respondents; and (2) the tarpaulin
is an election propaganda subject to regulation by COMELEC
pursuant to its mandate under Article IX-C, Section 4 of the
Constitution. Hence, respondents claim that the issuances ordering
its removal for being oversized are valid and constitutional.18
During the hearing held on March 19, 2013, the parties were
directed to file their respective memoranda within 10 days or by
April 1, 2013, taking into consideration the intervening holidays.19
The issues, which also served as guide for the oral arguments, are:20
I.
WHETHER THE 22 FEBRUARY 2013 NOTICE/ORDER BY ELECTION
OFFICER MAJARUCON AND THE 27 FEBRUARY 2013 ORDER BY THE
COMELEC LAW DEPARTMENT ARE CONSIDERED JUDGMENTS/FINAL
ORDERS/RESOLUTIONS OF THE COMELEC WHICH WOULD WARRANT
A REVIEW OF THIS COURT VIA RULE 65 PETITION[;]
A. WHETHER PETITIONERS VIOLATED THE HIERARCHY OF COURTS
DOCTRINE AND JURISPRUDENTIAL RULES GOVERNING APPEALS
FROM COMELEC DECISIONS;
B. ASSUMING ARGUENDO THAT THE AFOREMENTIONED ORDERS
ARE NOT CONSIDERED JUDGMENTS/FINAL ORDERS/RESOLUTIONS
OF THE COMELEC, WHETHER THERE ARE EXCEPTIONAL
CIRCUMSTANCES WHICH WOULD ALLOW THIS COURT TO TAKE
COGNIZANCE OF THE CASE[;]
II.
WHETHER IT IS RELEVANT TODETERMINE WHETHER THE
TARPAULINS ARE "POLITICAL ADVERTISEMENT" OR "ELECTION
PROPAGANDA" CONSIDERING THAT PETITIONER IS NOT A POLITICAL
CANDIDATE[;]
III.
WHETHER THE TARPAULINS ARE A FORM OR EXPRESSION
(PROTECTED SPEECH), OR ELECTION PROPAGANDA/POLITICAL
ADVERTISEMENT[;]
A. ASSUMING ARGUENDO THAT THE TARPAULINS ARE A FORM OF
EXPRESSION, WHETHER THE COMELEC POSSESSES THE AUTHORITY
TO REGULATE THE SAME[;]
B. WHETHER THIS FORM OF EXPRESSION MAY BE REGULATED[;]
IV.
WHETHER THE 22 FEBRUARY 2013 NOTICE/ ORDER BY ELECTION
OFFICER MAJARUCON AND THE 27 FEBRUARY 2013 ORDER BY THE
COMELEC LAW DEPARTMENT VIOLATES THE PRINCIPLE OF
SEPARATION OF CHURCH AND STATE[;] [AND]
V.
WHETHER THE ACTION OF THE PETITIONERS IN POSTING ITS
TARPAULIN VIOLATES THE CONSTITUTIONAL PRINCIPLE OF
SEPARATION OF CHURCH AND STATE.
I principle of social justice or the protection of labor, when the
PROCEDURAL ISSUES
I.A
This courts jurisdiction over COMELEC cases
Respondents ask that this petition be dismissed on the ground that
the notice and letter are not final orders, decisions, rulings, or
judgments of the COMELEC En Banc issued in the exercise of its
adjudicatory powers, reviewable via Rule 64 of the Rules of Court.21
Rule 64 is not the exclusive remedy for all acts of the COMELEC. Rule
65 is applicable especially to raise objections relating to a grave
abuse of discretion resulting in the ouster of jurisdiction.22 As a
special civil action, there must also be a showing that there be no
plain, speedy, and adequate remedy in the ordinary course of the
law.
Respondents contend that the assailed notice and letter are not
subject to review by this court, whose power to review is "limited
only to final decisions, rulings and orders of the COMELEC En Banc
rendered in the exercise of its adjudicatory or quasi-judicial
power."23 Instead, respondents claim that the assailed notice and
letter are reviewable only by COMELEC itself pursuant to Article IX-
C, Section 2(3) of the Constitution24 on COMELECs power to decide
all questions affecting elections.25 Respondents invoke the cases of
Ambil, Jr. v. COMELEC,26 Repol v. COMELEC,27 Soriano, Jr. v.
COMELEC,28 Blanco v. COMELEC,29 and Cayetano v. COMELEC,30 to
illustrate how judicialintervention is limited to final decisions,
orders, rulings and judgments of the COMELEC En Banc.31
These cases are not applicable.
In Ambil, Jr. v. COMELEC, the losing party in the gubernatorial race
of Eastern Samar filed the election protest.32 At issue was the
validity of the promulgation of a COMELEC Division resolution.33 No
motion for reconsideration was filed to raise this issue before the
COMELEC En Banc. This court declared that it did not have
jurisdiction and clarified:
We have interpreted [Section 7, Article IX-A of the Constitution]34
to mean final orders, rulings and decisionsof the COMELEC rendered
in the exercise of its adjudicatory or quasi-judicial powers." This
decision must be a final decision or resolution of the Comelec en
banc, not of a division, certainly not an interlocutory order of a
division.The Supreme Court has no power to review viacertiorari, an
interlocutory order or even a final resolution of a Division of the
Commission on Elections.35 (Emphasis in the original, citations
omitted)
However, in the next case cited by respondents, Repol v. COMELEC,
this court provided exceptions to this general rule. Repolwas
another election protest case, involving the mayoralty elections in
Pagsanghan, Samar.36 This time, the case was brought to this court
because the COMELEC First Division issued a status quo ante order
against the Regional Trial Court executing its decision pending
appeal.37 This courts ponencia discussed the general rule
enunciated in Ambil, Jr. that it cannot take jurisdiction to review
interlocutory orders of a COMELEC Division.38 However, consistent
with ABS-CBN Broadcasting Corporation v. COMELEC,39 it clarified
the exception:
This Court, however, has ruled in the past that this procedural
requirement [of filing a motion for reconsideration] may be glossed
over to prevent miscarriage of justice, when the issue involves the
decision or resolution sought to be set aside is a nullity, or when the
need for relief is extremely urgent and certiorari is the only
adequate and speedy remedy available.40
Based on ABS-CBN, this court could review orders and decisions of
COMELEC in electoral contests despite not being reviewed by
the COMELEC En Banc, if:
1) It will prevent the miscarriage of justice;
2) The issue involves a principle of social justice;
3) The issue involves the protection of labor;
4) The decision or resolution sought tobe set aside is a nullity; or
5) The need for relief is extremely urgent and certiorari is the only
adequate and speedy remedy available.
Ultimately, this court took jurisdiction in Repoland decided that the
status quo anteorder issued by the COMELEC Division was
unconstitutional.
Respondents also cite Soriano, Jr. v. COMELEC.This case was also an
election protest case involving candidates for the city council of
Muntinlupa City.41 Petitioners in Soriano, Jr.filed before this court a
petition for certiorari against an interlocutory order of the COMELEC
First
Division.42 While the petition was pending in this court, the
COMELEC First Division dismissed the main election protest case.43
Sorianoapplied the general rule that only final orders should be
questioned with this court. The ponencia for this court, however,
acknowledged the exceptions to the general rule in ABS-CBN.44
Blanco v. COMELEC, another case cited by respondents, was a
disqualification case of one of the mayoralty candidates of
Meycauayan, Bulacan.45 The COMELEC Second Division ruled that
petitioner could not qualify for the 2007 elections due to the
findings in an administrative case that he engaged in vote buying in
the 1995 elections.46 No motion for reconsideration was filed
before the COMELEC En Banc. This court, however, took cognizance
of this case applying one of the exceptions in ABS-CBN: The assailed
resolution was a nullity.47
Finally, respondents cited Cayetano v. COMELEC, a recent election
protest case involving the mayoralty candidates of Taguig City.48
Petitioner assailed a resolution of the COMELEC denying her motion
for reconsideration to dismiss the election protest petition for lack
of form and substance.49 This court clarified the general rule and
refused to take cognizance of the review of the COMELEC order.
While recognizing the exceptions in ABS-CBN, this court ruled that
these exceptions did not apply.50
Ambil, Jr., Repol, Soriano, Jr., Blanco, and Cayetano cited by
respondents do not operate as precedents to oust this court from
taking jurisdiction over this case. All these cases cited involve
election protests or disqualification cases filed by the losing
candidate against the winning candidate.
In the present case, petitioners are not candidates seeking for public
office. Their petition is filed to assert their fundamental right to
expression.
Furthermore, all these cases cited by respondents pertained to
COMELECs exercise of its adjudicatory or quasi-judicial power. This
case pertains to acts of COMELEC in the implementation of its
regulatory powers. When it issued the notice and letter, the
COMELEC was allegedly enforcingelection laws.
I.B
Rule 65, grave abuse of discretion,
and limitations on political speech
The main subject of thiscase is an alleged constitutional violation:
the infringement on speech and the "chilling effect" caused by
respondent COMELECs notice and letter.
Petitioners allege that respondents committed grave abuse of
discretion amounting to lack or excess of jurisdiction in issuing the
notice51 dated February 22,2013 and letter52 dated February 27,
2013 ordering the removal of the tarpaulin.53 It is their position that
these infringe on their fundamental right to freedom of expression
and violate the principle of separation of church and state and, thus,
are unconstitutional.54
The jurisdiction of this court over the subject matter is determined
from the allegations in the petition. Subject matter jurisdiction is
defined as the authority "to hear and determine cases of the general
class to which the proceedings in question belong and is conferred
by the sovereign authority which organizes the court and defines its
powers."55 Definitely, the subject matter in this case is different
from the cases cited by respondents.
Nothing less than the electorates political speech will be affected by
the restrictions imposed by COMELEC. Political speech is motivated
by the desire to be heard and understood, to move people to action.
It is concerned with the sovereign right to change the contours of
power whether through the election of representatives in a
republican government or the revision of the basic text of the
Constitution. The zeal with which we protect this kind of speech
does not depend on our evaluation of the cogency of the message.
Neither do we assess whether we should protect speech based on
the motives of COMELEC. We evaluate restrictions on freedom of
expression from their effects. We protect both speech and medium
because the quality of this freedom in practice will define the quality
of deliberation in our democratic society.
COMELECs notice and letter affect preferred speech. Respondents
acts are capable of repetition. Under the conditions in which it was
issued and in view of the novelty of this case,it could result in a
"chilling effect" that would affect other citizens who want their
voices heard on issues during the elections. Other citizens who wish
to express their views regarding the election and other related
issues may choose not to, for fear of reprisal or sanction by the
COMELEC. Direct resort to this court is allowed to avoid such
proscribed conditions. Rule 65 is also the procedural platform for
raising grave abuse of discretion.
Both parties point to constitutional provisions on jurisdiction. For
petitioners, it referred to this courts expanded exercise of certiorari
as provided by the Constitution as follows:
Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable
and enforceable, and to determine whether ornot there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government.56
(Emphasis supplied)
On the other hand, respondents relied on its constitutional mandate
to decide all questions affectingelections. Article IX-C, Section 2(3) of
the Constitution, provides:
Sec. 2. The Commission on Elections shall exercise the following
powers and functions:
....
(3) Decide, except those involving the right to vote, all questions
affecting elections, including determination of the number and
location of polling places, appointment of election officials and
inspectors, and registration of voters.
Respondents reliance on this provision is misplaced.
We are not confronted here with the question of whether the
COMELEC, in its exercise of jurisdiction, gravely abused it. We are
confronted with the question as to whether the COMELEC had any
jurisdiction at all with its acts threatening imminent criminal action
effectively abridging meaningful political speech.
It is clear that the subject matter of the controversy is the effect of
COMELECs notice and letter on free speech. This does not fall under
Article IX-C, Section 2(3) of the Constitution. The use of the word
"affecting" in this provision cannot be interpreted to mean that
COMELEC has the exclusive power to decide any and allquestions
that arise during elections. COMELECs constitutional competencies
during elections should not operate to divest this court of its own
jurisdiction.
The more relevant provision for jurisdiction in this case is Article VIII,
Section 5(1) of the Constitution.This provision provides for this
courts original jurisdiction over petitions for certiorari and
prohibition. This should be read alongside the expanded jurisdiction
of the court in Article VIII, Section 1 of the Constitution.
Certainly, a breach of the fundamental right of expression by
COMELEC is grave abuse of discretion. Thus, the constitutionality of
the notice and letter coming from COMELEC is within this courts
power to review.
During elections, we have the power and the duty to correct any
grave abuse of discretion or any act tainted with unconstitutionality
on the part of any government branch or instrumentality. This
includes actions by the COMELEC. Furthermore, it is this courts
constitutional mandate to protect the people against governments
infringement of their fundamental rights. This constitutional
mandate out weighs the jurisdiction vested with the COMELEC.
It will, thus, be manifest injustice if the court does not take
jurisdiction over this case.
I.C
Hierarchy of courts
This brings us to the issue of whether petitioners violated the
doctrine of hierarchy of courts in directly filing their petition before
this court.
Respondents contend that petitioners failure to file the proper suit
with a lower court of concurrent jurisdiction is sufficient ground for
the dismissal of their petition.57 They add that observation of the
hierarchy of courts is compulsory, citing Heirs of Bertuldo Hinog v.
Melicor.58 While respondents claim that while there are exceptions
to the general rule on hierarchy of courts, none of these are present
in this case.59
On the other hand, petitioners cite Fortich v. Corona60 on this
courts discretionary power to take cognizance of a petition filed
directly to it if warranted by "compelling reasons, or [by] the nature
and importance of the issues raised. . . ."61 Petitioners submit that
there are "exceptional and compelling reasons to justify a direct
resort [with] this Court."62
In Baez, Jr. v. Concepcion,63 we explained the necessity of the
application of the hierarchy of courts:
The Court must enjoin the observance of the policy on the hierarchy
of courts, and now affirms that the policy is not to be ignored
without serious consequences. The strictness of the policy is
designed to shield the Court from having to deal with causes that
are also well within the competence of the lower courts, and thus
leave time to the Court to deal with the more fundamental and
more essential tasks that the Constitution has assigned to it. The
Court may act on petitions for the extraordinary writs of certiorari,
prohibition and mandamus only when absolutely necessary or when
serious and important reasons exist to justify an exception to the
policy.64
In Baez, we also elaborated on the reasons why lower courts are
allowed to issue writs of certiorari, prohibition, and mandamus,
citing Vergara v. Suelto:65
The Supreme Court is a court of lastresort, and must so remain if it is
to satisfactorily perform the functions assigned to it by the
fundamental charter and immemorial tradition. It cannot and should
not be burdened with the task of dealing with causes in the first
instance. Its original jurisdiction to issue the so-called extraordinary
writs should be exercised only where absolutely necessary or where
serious and important reasons exist therefore. Hence, that
jurisdiction should generally be exercised relative to actions or
proceedings before the Court of Appeals, or before constitutional or
other tribunals, bodies or agencies whose acts for some reason or
another are not controllable by the Court of Appeals. Where the
issuance of an extraordinary writ is also within the competence of
the Court of Appeals or a Regional Trial Court, it is in either of these
courts that the specific action for the writs procurement must be
presented. This is and should continue to be the policy in this regard,
a policy that courts and lawyers must strictly observe.66 (Emphasis
omitted)
The doctrine that requires respect for the hierarchy of courts was
created by this court to ensure that every level of the judiciary
performs its designated roles in an effective and efficient manner.
Trial courts do not only determine the facts from the evaluation of
the evidence presented before them. They are likewise competent
to determine issues of law which may include the validity of an
ordinance, statute, or even an executive issuance in relation to the
Constitution.67 To effectively perform these functions, they are
territorially organized into regions and then into branches. Their
writs generally reach within those territorial boundaries.
Necessarily, they mostly perform the all-important task of inferring
the facts from the evidence as these are physically presented before
them. In many instances, the facts occur within their territorial
jurisdiction, which properly present the actual case that makes ripe
a determination of the constitutionality of such action. The
consequences, of course, would be national in scope. There are,
however, some cases where resort to courts at their level would not
be practical considering their decisions could still be appealed
before the higher courts, such as the Court of Appeals.
The Court of Appeals is primarily designed as an appellate court that
reviews the determination of facts and law made by the trial courts.
It is collegiate in nature. This nature ensures more standpoints in the
review of the actions of the trial court. But the Court of Appeals also
has original jurisdiction over most special civil actions. Unlike the
trial courts, its writs can have a nationwide scope. It is competent to
determine facts and, ideally, should act on constitutional issues
thatmay not necessarily be novel unless there are factual questions
to determine.
This court, on the other hand, leads the judiciary by breaking new
ground or further reiterating in the light of new circumstances or
in the light of some confusions of bench or bar existing
precedents. Rather than a court of first instance or as a repetition of
the actions of the Court of Appeals, this court promulgates these
doctrinal devices in order that it truly performs that role.
In other words, the Supreme Courts role to interpret the
Constitution and act in order to protect constitutional rights when
these become exigent should not be emasculated by the doctrine in
respect of the hierarchy of courts. That has never been the purpose
of such doctrine.
Thus, the doctrine of hierarchy of courts is not an iron-clad rule.68
This court has "full discretionary power to take cognizance and
assume jurisdiction [over] special civil actions for certiorari . . .filed
directly with it for exceptionally compelling reasons69 or if
warranted by the nature of the issues clearly and specifically raised
in the petition."70 As correctly pointed out by petitioners,71 we
have provided exceptions to this doctrine:
First, a direct resort to this court is allowed when there are genuine
issues of constitutionality that must be addressed at the most
immediate time. A direct resort to this court includes availing of the
remedies of certiorari and prohibition toassail the constitutionality
of actions of both legislative and executive branches of the
government.72
In this case, the assailed issuances of respondents prejudice not only
petitioners right to freedom of expression in the present case, but
also of others in future similar cases. The case before this court
involves an active effort on the part of the electorate to reform the
political landscape. This has become a rare occasion when private
citizens actively engage the public in political discourse. To quote an
eminent political theorist:
[T]he theory of freedom of expression involves more than a
technique for arriving at better social judgments through democratic
procedures. It comprehends a vision of society, a faith and a whole
way of life. The theory grew out of an age that was awakened and
invigorated by the idea of new society in which man's mind was free,
his fate determined by his own powers of reason, and his prospects
of creating a rational and enlightened civilization virtually unlimited.
It is put forward as a prescription for attaining a creative,
progressive, exciting and intellectually robust community. It
contemplates a mode of life that, through encouraging toleration,
skepticism, reason and initiative, will allow man to realize his full
potentialities.It spurns the alternative of a society that is tyrannical,
conformist, irrational and stagnant.73
In a democracy, the citizens right tofreely participate in the
exchange of ideas in furtherance of political decision-making is
recognized. It deserves the highest protection the courts may
provide, as public participation in nation-building isa fundamental
principle in our Constitution. As such, their right to engage in free
expression of ideas must be given immediate protection by this
court.
A second exception is when the issuesinvolved are of transcendental
importance.74 In these cases, the imminence and clarity of the
threat to fundamental constitutional rights outweigh the necessity
for prudence. The doctrine relating to constitutional issues of
transcendental importance prevents courts from the paralysis of
procedural niceties when clearly faced with the need for substantial
protection.
In the case before this court, there is a clear threat to the
paramount right of freedom of speech and freedom of expression
which warrants invocation of relief from this court. The principles
laid down in this decision will likely influence the discourse of
freedom of speech in the future, especially in the context of
elections. The right to suffrage not only includes the right to vote for
ones chosen candidate, but also the right to vocalize that choice to
the public in general, in the hope of influencing their votes. It may
be said that in an election year, the right to vote necessarily includes
the right to free speech and expression. The protection of these
fundamental constitutional rights, therefore, allows for the
immediate resort to this court.
Third, cases of first impression75 warrant a direct resort to this
court. In cases of first impression, no jurisprudence yet exists that
will guide the lower courts on this matter. In Government of the
United States v. Purganan,76 this court took cognizance of the case
as a matter of first impression that may guide the lower courts:
In the interest of justice and to settle once and for all the important
issue of bail in extradition proceedings, we deem it best to take
cognizance of the present case. Such proceedings constitute a
matter of first impression over which there is, as yet, no local
jurisprudence to guide lower courts.77
This court finds that this is indeed a case of first impression involving
as it does the issue of whether the right of suffrage includes the
right of freedom of expression. This is a question which this court
has yet to provide substantial answers to, through jurisprudence.
Thus, direct resort to this court is allowed.
Fourth, the constitutional issues raisedare better decided by this
court. In Drilon v. Lim,78 this court held that:
. . . it will be prudent for such courts, if only out of a becoming
modesty, to defer to the higher judgmentof this Court in the
consideration of its validity, which is better determined after a
thorough deliberation by a collegiate body and with the concurrence
of the majority of those who participated in its discussion.79
(Citation omitted)
In this case, it is this court, with its constitutionally enshrined judicial
power, that can rule with finality on whether COMELEC committed
grave abuse of discretion or performed acts contrary to the
Constitution through the assailed issuances.
Fifth, the time element presented in this case cannot be ignored.
This case was filed during the 2013 election period. Although the
elections have already been concluded, future cases may be filed
that necessitate urgency in its resolution. Exigency in certain
situations would qualify as an exception for direct resort to this
court.
Sixth, the filed petition reviews the act of a constitutional organ.
COMELEC is a constitutional body. In Albano v. Arranz,80 cited by
petitioners, this court held that "[i]t is easy to realize the chaos that
would ensue if the Court of First Instance ofeach and every province
were [to] arrogate itself the power to disregard, suspend, or
contradict any order of the Commission on Elections: that
constitutional body would be speedily reduced to impotence."81
In this case, if petitioners sought to annul the actions of COMELEC
through pursuing remedies with the lower courts, any ruling on their
part would not have been binding for other citizens whom
respondents may place in the same situation. Besides, thiscourt
affords great respect to the Constitution and the powers and duties
imposed upon COMELEC. Hence, a ruling by this court would be in
the best interest of respondents, in order that their actions may be
guided accordingly in the future.
Seventh, petitioners rightly claim that they had no other plain,
speedy, and adequate remedy in the ordinary course of law that
could free them from the injurious effects of respondents acts in
violation of their right to freedom of expression.
In this case, the repercussions of the assailed issuances on this basic
right constitute an exceptionally compelling reason to justify the
direct resort to this court. The lack of other sufficient remedies in
the course of law alone is sufficient ground to allow direct resort to
this court.
Eighth, the petition includes questionsthat are "dictated by public
welfare and the advancement of public policy, or demanded by the
broader interest of justice, or the orders complained of were found
to be patent nullities, or the appeal was consideredas clearly an
inappropriate remedy."82 In the past, questions similar to these
which this court ruled on immediately despite the doctrine of
hierarchy of courts included citizens right to bear arms,83
government contracts involving modernization of voters
registration lists,84 and the status and existence of a public office.85
This case also poses a question of similar, if not greater import.
Hence, a direct action to this court is permitted.
It is not, however, necessary that all of these exceptions must occur
at the same time to justify a direct resort to this court. While
generally, the hierarchy of courts is respected, the present case falls
under the recognized exceptions and, as such, may be resolved by
this court directly.
I.D
The concept of a political question
Respondents argue further that the size limitation and its
reasonableness is a political question, hence not within the ambit of
this courts power of review. They cite Justice Vitugs separate
opinion in Osmea v. COMELEC86 to support their position:
It might be worth mentioning that Section 26, Article II, of the
Constitution also states that the "State shall guarantee equal access
to opportunities for public service, and prohibit political dynasties as
may be defined by law." I see neither Article IX (C)(4) nor Section 26,
Article II, of the Constitution to be all that adversarial or
irreconcilably inconsistent with the right of free expression. In any
event, the latter, being one of general application, must yield to the
specific demands of the Constitution. The freedom of expression
concededly holds, it is true, a vantage point in hierarchy of
constitutionally-enshrined rights but, like all fundamental rights, it is
not without limitations.
The case is not about a fight between the "rich" and the "poor" or
between the "powerful" and the "weak" in our society but it is to me
a genuine attempt on the part of Congress and the Commission on
Elections to ensure that all candidates are given an equal chance to
media coverage and thereby be equally perceived as giving real life
to the candidates right of free expression rather than being viewed
as an undue restriction of that freedom. The wisdom in the
enactment of the law, i.e., that which the legislature deems to be
best in giving life to the Constitutional mandate, is not for the Court
to question; it is a matter that lies beyond the normal prerogatives
of the Court to pass upon.87
This separate opinion is cogent for the purpose it was said. But it is
not in point in this case.
The present petition does not involve a dispute between the rich
and poor, or the powerful and weak, on their equal opportunities for
media coverage of candidates and their right to freedom of
expression. This case concerns the right of petitioners, who are non-
candidates, to post the tarpaulin in their private property, asan
exercise of their right of free expression. Despite the invocation of
the political question doctrine by respondents, this court is not
proscribed from deciding on the merits of this case.
In Taada v. Cuenco,88 this court previously elaborated on the
concept of what constitutes a political question:
What is generally meant, when it is said that a question is political,
and not judicial, is that it is a matter which is to be exercised by the
people in their primary political capacity, or that it has been
specifically delegated to some other department or particular officer
of the government, withdiscretionary power to act.89 (Emphasis
omitted)
It is not for this court to rehearse and re-enact political debates on
what the text of the law should be. In political forums, particularly
the legislature, the creation of the textof the law is based on a
general discussion of factual circumstances, broadly construed in
order to allow for general application by the executive branch. Thus,
the creation of the law is not limited by particular and specific facts
that affect the rights of certain individuals, per se.
Courts, on the other hand, rule on adversarial positions based on
existing facts established on a specific case-to-case basis, where
parties affected by the legal provision seek the courts
understanding of the law.
The complementary nature of the political and judicial branches of
government is essential in order to ensure that the rights of the
general public are upheld at all times. In order to preserve this
balance, branches of government must afford due respectand
deference for the duties and functions constitutionally delegated to
the other. Courts cannot rush to invalidate a law or rule. Prudence
dictates that we are careful not to veto political acts unless we can
craft doctrine narrowly tailored to the circumstances of the case.
The case before this court does not call for the exercise of prudence
or modesty. There is no political question. It can be acted upon by
this court through the expanded jurisdiction granted to this court
through Article VIII, Section 1 of the Constitution.
A political question arises in constitutional issues relating to the
powers or competence of different agencies and departments of the
executive or those of the legislature. The political question doctrine
is used as a defense when the petition asks this court to nullify
certain acts that are exclusively within the domain of their
respective competencies, as provided by the Constitution or the law.
In such situation, presumptively, this court should act with
deference. It will decline to void an act unless the exercise of that
power was so capricious and arbitrary so as to amount to grave
abuse of discretion.
The concept of a political question, however, never precludes
judicial review when the act of a constitutional organ infringes upon
a fundamental individual or collective right. Even assuming
arguendo that the COMELEC did have the discretion to choose the
manner of regulation of the tarpaulin in question, it cannot do so by
abridging the fundamental right to expression.
Marcos v. Manglapus90 limited the use of the political question
doctrine:
When political questions are involved, the Constitution limits the
determination to whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of
the official whose action is being questioned. If grave abuse is not
established, the Court will not substitute its judgment for that of the
official concerned and decide a matter which by its nature or by law
is for the latter alone to decide.91
How this court has chosen to address the political question doctrine
has undergone an evolution since the timethat it had been first
invoked in Marcos v. Manglapus. Increasingly, this court has taken
the historical and social context of the case and the relevance of
pronouncements of carefully and narrowly tailored constitutional
doctrines. This trend was followed in cases such as Daza v.
Singson92 and Coseteng v. Mitra Jr.93
Daza and Coseteng involved a question as to the application of
Article VI, Section 18 of the 1987 Constitution involving the removal
of petitioners from the Commission on Appointments. In times past,
this would have involved a quint essentially political question as it
related to the dominance of political parties in Congress. However,
in these cases, this court exercised its power of judicial review
noting that the requirement of interpreting the constitutional
provision involved the legality and not the wisdom of a manner by
which a constitutional duty or power was exercised. This approach
was again reiterated in Defensor Santiago v. Guingona, Jr.94
In Integrated Bar of the Philippines v. Zamora,95 this court declared
again that the possible existence ofa political question did not bar an
examination of whether the exercise of discretion was done with
grave abuse of discretion. In that case, this court ruled on the
question of whether there was grave abuse of discretion in the
Presidents use of his power to call out the armed forces to prevent
and suppress lawless violence.
In Estrada v. Desierto,96 this court ruled that the legal question as to
whether a former President resigned was not a political question
even if the consequences would be to ascertain the political
legitimacy of a successor President.
Many constitutional cases arise from political crises. The actors in
such crises may use the resolution of constitutional issues as
leverage. But the expanded jurisdiction of this court now mandates
a duty for it to exercise its power of judicial review expanding on
principles that may avert catastrophe or resolve social conflict.
This courts understanding of the political question has not been
static or unbending. In Llamas v. Executive Secretary Oscar Orbos,97
this court held:
While it is true that courts cannot inquire into the manner in which
the President's discretionary powers are exercised or into the
wisdom for its exercise, it is also a settled rule that when the issue
involved concerns the validity of such discretionary powers or
whether said powers are within the limits prescribed by the
Constitution, We will not decline to exercise our power of judicial
review. And such review does not constitute a modification or
correction of the act of the President, nor does it constitute
interference with the functions of the President.98
The concept of judicial power in relation to the concept of the
political question was discussed most extensively in Francisco v.
HRET.99 In this case, the House of Representatives arguedthat the
question of the validity of the second impeachment complaint that
was filed against former Chief Justice Hilario Davide was a political
question beyond the ambit of this court. Former Chief Justice
Reynato Puno elaborated on this concept in his concurring and
dissenting opinion:
To be sure, the force to impugn the jurisdiction of this Court
becomes more feeble in light of the new Constitution which
expanded the definition of judicial power as including "the duty of
the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government." As well observed by retired
Justice Isagani Cruz, this expanded definition of judicial power
considerably constricted the scope of political question. He opined
that the language luminously suggests that this duty (and power) is
available even against the executive and legislative departments
including the President and the Congress, in the exercise of their
discretionary powers.100 (Emphasis in the original, citations
omitted)
Francisco also provides the cases which show the evolution of the
political question, as applied in the following cases:
In Marcos v. Manglapus, this Court, speaking through Madame
Justice Irene Cortes, held: The present Constitution limits resort to
the political question doctrine and broadens the scope of judicial
inquiry into areas which the Court,under previous constitutions,
would have normally left to the political departments to decide. x x x
In Bengzon v. Senate Blue Ribbon Committee, through Justice
Teodoro Padilla, this Court declared:
The "allocation of constitutional boundaries" is a task that this Court
must perform under the Constitution. Moreover, as held in a recent
case, "(t)he political question doctrine neither interposes an
obstacle to judicial determination of the rival claims. The jurisdiction
to delimit constitutional boundaries has been given to this Court. It
cannot abdicate that obligation mandated by the 1987 Constitution,
although said provision by no means does away with the
applicability of the principle in appropriate cases." (Emphasis and
italics supplied)
And in Daza v. Singson, speaking through Justice Isagani Cruz, this
Court ruled:
In the case now before us, the jurisdictional objection becomes even
less tenable and decisive. The reason is that, even if we were to
assume that the issue presented before us was political in nature,
we would still not be precluded from resolving it under the
expanded jurisdiction conferred upon us that now covers, in proper
cases, even the political question.x x x (Emphasis and italics
supplied.)
....
In our jurisdiction, the determination of whether an issue involves a
truly political and non-justiciable question lies in the answer to the
question of whether there are constitutionally imposed limits on
powers or functions conferred upon political bodies. If there are,
then our courts are duty-bound to examine whether the branch or
instrumentality of the government properly acted within such
limits.101 (Citations omitted)
As stated in Francisco, a political question will not be considered
justiciable if there are no constitutionally imposed limits on powers
or functions conferred upon political bodies. Hence, the existence of
constitutionally imposed limits justifies subjecting the official actions
of the body to the scrutiny and review of this court.
In this case, the Bill of Rights gives the utmost deference to the right
to free speech. Any instance that this right may be abridged
demands judicial scrutiny. It does not fall squarely into any doubt
that a political question brings.
I.E
Exhaustion of administrative remedies
Respondents allege that petitioners violated the principle of
exhaustion of administrative remedies. Respondents insist that
petitioners should have first brought the matter to the COMELEC En
Banc or any of its divisions.102
Respondents point out that petitioners failed to comply with the
requirement in Rule 65 that "there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law."103
They add that the proper venue to assail the validity of the assailed
issuances was in the course of an administrative hearing to be
conducted by COMELEC.104 In the event that an election offense is
filed against petitioners for posting the tarpaulin, they claim that
petitioners should resort to the remedies prescribed in Rule 34 of
the COMELEC Rules of Procedure.105
The argument on exhaustion of administrative remedies is not
proper in this case.
Despite the alleged non-exhaustion of administrative remedies, it is
clear that the controversy is already ripe for adjudication. Ripeness
is the "prerequisite that something had by then been accomplished
or performed by either branch [or in this case, organ of government]
before a court may come into the picture."106
Petitioners exercise of their rightto speech, given the message and
their medium, had understandable relevance especially during the
elections. COMELECs letter threatening the filing of the election
offense against petitioners is already an actionable infringement of
this right. The impending threat of criminal litigation is enough to
curtail petitioners speech.
In the context of this case, exhaustion of their administrative
remedies as COMELEC suggested in their pleadings prolongs the
violation of their freedom of speech.
Political speech enjoys preferred protection within our
constitutional order. In Chavez v. Gonzales,107 Justice Carpio in a
separate opinion emphasized: "[i]f everthere is a hierarchy of
protected expressions, political expression would occupy the highest
rank, and among different kinds of political expression, the subject
of fair and honest elections would be at the top."108 Sovereignty
resides in the people.109 Political speech is a direct exercise of the
sovereignty. The principle of exhaustion of administrative remedies
yields in order to protect this fundamental right.
Even assuming that the principle of exhaustion of administrative
remedies is applicable, the current controversy is within the
exceptions to the principle. In Chua v. Ang,110 this court held:
On the other hand, prior exhaustion of administrative remedies may
be dispensed with and judicial action may be validly resorted to
immediately: (a) when there is a violation of due process; (b) when
the issue involved is purely a legal question; (c) when the
administrative action is patently illegal amounting to lack or excess
of jurisdiction; (d) when there is estoppel on the part ofthe
administrative agency concerned; (e) when there is irreparable
injury; (f) when the respondent is a department secretary whose
acts as analter ego of the President bear the implied and assumed
approval of the latter; (g) when to require exhaustion of
administrative remedies would be unreasonable; (h) when it would
amount to a nullification of a claim; (i) when the subject matter is a
private land in land case proceedings; (j) whenthe rule does not
provide a plain, speedy and adequate remedy; or (k) when there are
circumstances indicating the urgency of judicial intervention."111
(Emphasis supplied, citation omitted)
The circumstances emphasized are squarely applicable with the
present case. First, petitioners allegethat the assailed issuances
violated their right to freedom of expression and the principle of
separation of church and state. This is a purely legal question.
Second, the circumstances of the present case indicate the urgency
of judicial intervention considering the issue then on the RH Law as
well as the upcoming elections. Thus, to require the exhaustion of
administrative remedies in this case would be unreasonable.
Time and again, we have held that this court "has the power to relax
or suspend the rules or to except a case from their operation when
compelling reasons so warrant, or whenthe purpose of justice
requires it, [and when] [w]hat constitutes [as] good and sufficient
cause that will merit suspension of the rules is discretionary upon
the court".112 Certainly, this case of first impression where
COMELEC has threatenedto prosecute private parties who seek to
participate in the elections by calling attention to issues they want
debated by the publicin the manner they feel would be effective is
one of those cases.
II
SUBSTANTIVE ISSUES
II.A
COMELEC had no legal basis to regulate expressions made by private
citizens
Respondents cite the Constitution, laws, and jurisprudence to
support their position that they had the power to regulate the
tarpaulin.113 However, all of these provisions pertain to candidates
and political parties. Petitioners are not candidates. Neither do
theybelong to any political party. COMELEC does not have the
authority to regulate the enjoyment of the preferred right to
freedom of expression exercised by a non-candidate in this case.
II.A.1
First, respondents cite Article IX-C, Section 4 of the Constitution,
which provides:
Section 4. The Commission may,during the election period,
supervise or regulate the enjoyment or utilization of all franchises or
permits for the operation of transportation and other public utilities,
media of communication or information, all grants, special
privileges, or concessions granted by the Government or any
subdivision, agency, or instrumentality thereof, including any
government-owned or controlled corporation or its subsidiary. Such
supervision or regulation shall aim to ensure equal opportunity,
time, and space, and the right to reply, including reasonable, equal
rates therefor, for public information campaigns and forums among
candidates in connection with the objective of holding free, orderly,
honest, peaceful, and credible elections.114 (Emphasis supplied)
Sanidad v. COMELEC115 involved the rules promulgated by
COMELEC during the plebiscite for the creation of the Cordillera
Autonomous Region.116 Columnist Pablito V. Sanidad questioned
the provision prohibiting journalists from covering plebiscite issues
on the day before and on plebiscite day.117 Sanidad argued that the
prohibition was a violation of the "constitutional guarantees of the
freedom of expression and of the press. . . ."118 We held that the
"evil sought to be prevented by this provision is the possibility that a
franchise holder may favor or give any undue advantage to a
candidate in terms of advertising space or radio or television
time."119 This court found that "[m]edia practitioners exercising
their freedom of expression during plebiscite periods are neither the
franchise holders nor the candidates[,]"120 thus, their right to
expression during this period may not be regulated by COMELEC.121
Similar to the media, petitioners in the case at bar are neither
franchise holders nor candidates. II.A.2
Respondents likewise cite Article IX-C, Section 2(7) of the
Constitution as follows:122
Sec. 2. The Commission on Elections shall exercise the following
powers and functions:
....
(7) Recommend to the Congress effective measures to minimize
election spending, including limitation of places where propaganda
materials shall be posted, and to prevent and penalize all forms of
election frauds, offenses, malpractices, and nuisance candidates.
(Emphasis supplied) Based on the enumeration made on actsthat
may be penalized, it will be inferred that this provision only affects
candidates.
Petitioners assail the "Notice to Remove Campaign Materials" issued
by COMELEC. This was followed bythe assailed letter regarding the
"election propaganda material posted on the church vicinity
promoting for or against the candidates and party-list groups. . .
."123
Section 9 of the Fair Election Act124 on the posting of campaign
materials only mentions "parties" and "candidates":
Sec. 9. Posting of Campaign Materials. - The COMELEC may
authorize political parties and party-list groups to erect common
poster areas for their candidates in not more than ten (10) public
places such as plazas, markets, barangay centers and the like,
wherein candidates can post, display or exhibit election propaganda:
Provided, That the size ofthe poster areas shall not exceed twelve
(12) by sixteen (16) feet or its equivalent. Independent candidates
with no political parties may likewise be authorized to erect
common poster areas in not more than ten (10) public places, the
size of which shall not exceed four (4) by six (6) feet or its
equivalent. Candidates may post any lawful propaganda material in
private places with the consent of the owner thereof, and in public
places or property which shall be allocated equitably and impartially
among the candidates. (Emphasis supplied)
Similarly, Section 17 of COMELEC Resolution No. 9615, the rules and
regulations implementing the Fair Election Act, provides as follows:
SECTION 17. Posting of Campaign Materials. - Parties and candidates
may post any lawful campaign material in:
a. Authorized common poster areasin public places subject to the
requirements and/or limitations set forth in the next following
section; and
b. Private places provided it has the consent of the owner thereof.
The posting of campaign materials in public places outside of the
designated common poster areas and those enumerated under
Section 7 (g) of these Rules and the like is prohibited. Persons
posting the same shall be liable together with the candidates and
other persons who caused the posting. It will be presumed that the
candidates and parties caused the posting of campaign materials
outside the common poster areas if they do not remove the same
within three (3) days from notice which shall be issued by the
Election Officer of the city or municipality where the unlawful
election propaganda are posted or displayed.
Members of the PNP and other law enforcement agencies called
upon by the Election Officeror other officials of the COMELEC shall
apprehend the violators caught in the act, and file the appropriate
charges against them. (Emphasis supplied)
Respondents considered the tarpaulin as a campaign material in
their issuances. The above provisions regulating the posting of
campaign materials only apply to candidates and political parties,
and petitioners are neither of the two.
Section 3 of Republic Act No. 9006on "Lawful Election Propaganda"
also states that these are "allowed for all registered political parties,
national, regional, sectoral parties or organizations participating
under the party-list elections and for all bona fide candidates
seeking national and local elective positions subject to the limitation
on authorized expenses of candidates and political parties. . . ."
Section 6 of COMELEC Resolution No. 9615 provides for a similar
wording. These provisions show that election propaganda refers to
matter done by or on behalf of and in coordination with candidates
and political parties. Some level of coordination with the candidates
and political parties for whom the election propaganda are released
would ensure that these candidates and political parties maintain
within the authorized expenses limitation.
The tarpaulin was not paid for byany candidate or political party.125
There was no allegation that petitioners coordinated with any of the
persons named in the tarpaulin regarding its posting. On the other
hand, petitioners posted the tarpaulin as part of their advocacy
against the RH Law. Respondents also cite National Press Club v.
COMELEC126 in arguing that its regulatory power under the
Constitution, to some extent, set a limit on the right to free speech
during election period.127
National Press Club involved the prohibition on the sale and
donation of space and time for political advertisements, limiting
political advertisements to COMELEC-designated space and time.
This case was brought by representatives of mass media and two
candidates for office in the 1992 elections. They argued that the
prohibition on the sale and donation of space and time for political
advertisements is tantamount to censorship, which necessarily
infringes on the freedom of speech of the candidates.128
This court upheld the constitutionality of the COMELEC prohibition
in National Press Club. However, this case does not apply as most of
the petitioners were electoral candidates, unlike petitioners in the
instant case. Moreover, the subject matter of National Press Club,
Section 11(b) of Republic Act No. 6646,129 only refers to a particular
kind of media such as newspapers, radio broadcasting, or
television.130 Justice Feliciano emphasized that the provision did
not infringe upon the right of reporters or broadcasters to air their
commentaries and opinions regarding the candidates, their
qualifications, and program for government. Compared to
Sanidadwherein the columnists lost their ability to give their
commentary on the issues involving the plebiscite, National Press
Clubdoes not involve the same infringement.
In the case at bar, petitioners lost their ability to give a commentary
on the candidates for the 2013 national elections because of the
COMELEC notice and letter. It was not merelya regulation on the
campaigns of candidates vying for public office. Thus, National Press
Clubdoes not apply to this case.
Finally, Section 79 of Batas Pambansa Blg. 881, otherwise known as
the Omnibus Election Code, defines an"election campaign" as
follows:
....
(b) The term "election campaign" or "partisan political activity"
refers to an act designed to promote the election or defeat of a
particular candidate or candidates to a public office which shall
include:
(1) Forming organizations, associations, clubs, committees or other
groups of persons for the purpose of soliciting votes and/or
undertaking any campaign for or against a candidate;
(2) Holding political caucuses, conferences, meetings, rallies,
parades, or other similar assemblies, for the purpose of soliciting
votes and/or undertaking any campaign or propaganda for or
against a candidate;
(3) Making speeches, announcements or commentaries, or holding
interviews for or against the election of any candidate for public
office;
(4) Publishing or distributing campaign literature or materials
designed to support or oppose the election of any candidate; or
(5) Directly or indirectly soliciting votes, pledges or support for or
against a candidate.
The foregoing enumerated acts ifperformed for the purpose of
enhancing the chances of aspirants for nomination for candidacy to
a public office by a political party, aggroupment, or coalition of
parties shall not be considered as election campaign or partisan
election activity. Public expressions or opinions or discussions of
probable issues in a forthcoming electionor on attributes of or
criticisms against probable candidates proposed to be nominated in
a forthcoming political party convention shall not be construed as
part of any election campaign or partisan political activity
contemplated under this Article. (Emphasis supplied)
True, there is no mention whether election campaign is limited only
to the candidates and political parties themselves. The focus of the
definition is that the act must be "designed to promote the election
or defeat of a particular candidate or candidates to a public office."
In this case, the tarpaulin contains speech on a matter of public
concern, that is, a statement of either appreciation or criticism on
votes made in the passing of the RH law. Thus, petitioners invoke
their right to freedom of expression.
II.B
The violation of the constitutional right
to freedom of speech and expression
Petitioners contend that the assailed notice and letter for the
removal of the tarpaulin violate their fundamental right to freedom
of expression.
On the other hand, respondents contend that the tarpaulin is an
election propaganda subject to their regulation pursuant to their
mandate under Article IX-C, Section 4 of the Constitution. Thus, the
assailed notice and letter ordering itsremoval for being oversized are
valid and constitutional.131
II.B.1
Fundamental to the consideration of this issue is Article III, Section 4
of the Constitution:
Section 4. No law shall be passed abridging the freedom of speech,
of expression, or of the press, or the right of the people peaceably to
assemble and petition the government for redress of grievances.132
No law. . .
While it is true that the present petition assails not a law but an
opinion by the COMELEC Law Department, this court has applied
Article III, Section 4 of the Constitution even to governmental acts.
In Primicias v. Fugoso,133 respondent Mayor applied by analogy
Section 1119 of the Revised Ordinances of 1927 of Manila for the
public meeting and assembly organized by petitioner Primicias.134
Section 1119 requires a Mayors permit for the use of streets and
public places for purposes such as athletic games, sports, or
celebration of national holidays.135 What was questioned was not a
law but the Mayors refusal to issue a permit for the holding of
petitioners public meeting.136 Nevertheless, this court recognized
the constitutional right to freedom of speech, to peaceful assembly
and to petition for redress of grievances, albeit not absolute,137 and
the petition for mandamus to compel respondent Mayor to issue
the permit was granted.138
In ABS-CBN v. COMELEC, what was assailed was not a law but
COMELEC En Banc Resolution No. 98-1419 where the COMELEC
resolved to approve the issuance of a restraining order to stop ABS-
CBN from conducting exit surveys.139 The right to freedom of
expression was similarly upheld in this case and, consequently, the
assailed resolution was nullified and set aside.140
. . . shall be passed abridging. . .
All regulations will have an impact directly or indirectly on
expression. The prohibition against the abridgment of speech should
not mean an absolute prohibition against regulation. The primary
and incidental burden on speech must be weighed against a
compelling state interest clearly allowed in the Constitution. The
test depends on the relevant theory of speech implicit in the kind of
society framed by our Constitution.
. . . of expression. . .
Our Constitution has also explicitly included the freedom of
expression, separate and in addition to the freedom of speech and
of the press provided in the US Constitution. The word "expression"
was added in the 1987 Constitution by Commissioner Brocka for
having a wider scope:
MR. BROCKA: This is a very minor amendment, Mr. Presiding Officer.
On Section 9, page 2, line 29, it says: "No law shall be passed
abridging the freedom of speech." I would like to recommend to the
Committee the change of the word "speech" to EXPRESSION; or if
not, add the words AND EXPRESSION after the word "speech,"
because it is more expansive, it has a wider scope, and it would refer
to means of expression other than speech.
THE PRESIDING OFFICER (Mr.Bengzon): What does the Committee
say?
FR. BERNAS: "Expression" is more broad than speech. We accept it.
MR. BROCKA: Thank you.
THE PRESIDING OFFICER (Mr.Bengzon): Is it accepted?
FR. BERNAS: Yes.
THE PRESIDING OFFICER (Mr.Bengzon): Is there any objection?
(Silence) The Chair hears none; the amendment is approved.
FR. BERNAS: So, that provision will now read: "No law shall be
passed abridging the freedom of speech, expression or of the press .
. . ."141 Speech may be said to be inextricably linked to freedom
itself as "[t]he right to think is the beginning of freedom, and speech
must be protected from the government because speech is the
beginning of thought."142
II.B.2
Communication is an essential outcome of protected speech.143
Communication exists when "(1) a speaker, seeking to signal others,
uses conventional actions because he orshe reasonably believes that
such actions will be taken by the audience in the manner intended;
and (2) the audience so takes the actions."144 "[I]n communicative
action[,] the hearer may respond to the claims by . . . either
accepting the speech acts claims or opposing them with criticism or
requests for justification."145
Speech is not limited to vocal communication. "[C]onduct is treated
as a form of speech sometimes referred to as symbolic
speech[,]"146 such that "when speech and nonspeech elements It is easy to discern why size matters.
are combined in the same course of conduct, the communicative
element of the conduct may be sufficient to bring into play the
[right to freedom of expression]."147
The right to freedom of expression, thus, applies to the entire
continuum of speech from utterances made to conduct enacted, and
even to inaction itself as a symbolic manner of communication.
In Ebralinag v. The Division Superintendent of Schools of Cebu,148
students who were members of the religious sect Jehovahs
Witnesses were to be expelled from school for refusing to salute the
flag, sing the national anthem, and recite the patriotic pledge.149 In
his concurring opinion, Justice Cruz discussed how the salute is a
symbolic manner of communication and a valid form of
expression.150 He adds that freedom of speech includes even the
right to be silent:
Freedom of speech includes the right to be silent. Aptly has it been
said that the Bill of Rights that guarantees to the individual the
liberty to utter what is in his mind also guarantees to him the liberty
not to utter what is not in his mind. The salute is a symbolic manner
of communication that conveys its messageas clearly as the written
or spoken word. As a valid form of expression, it cannot be
compelled any more than it can be prohibited in the face of valid
religious objections like those raised in this petition. To impose it on
the petitioners is to deny them the right not to speak when their
religion bids them to be silent. This coercion of conscience has no
place in the free society.
The democratic system provides for the accommodation of diverse
ideas, including the unconventional and even the bizarre or
eccentric. The will of the majority prevails, but it cannot regiment
thought by prescribing the recitation by rote of its opinions or
proscribing the assertion of unorthodox or unpopular views as inthis
case. The conscientious objections of the petitioners, no less than
the impatience of those who disagree with them, are protected by
the Constitution. The State cannot make the individual speak when
the soul within rebels.151
Even before freedom "of expression" was included in Article III,
Section 4 of the present Constitution,this court has applied its
precedent version to expressions other than verbal utterances.
In the 1985 case of Gonzalez v. Chairman Katigbak,152 petitioners
objected to the classification of the motion picture "Kapit sa
Patalim" as "For Adults Only." They contend that the classification
"is without legal and factual basis and is exercised as impermissible
restraint of artistic expression."153 This court recognized that
"[m]otion pictures are important both as a medium for the
communication of ideas and the expression of the artistic
impulse."154 It adds that "every writer,actor, or producer, no
matter what medium of expression he may use, should be freed
from the censor."155 This court found that "[the Boards]
perception of what constitutes obscenity appears to be unduly
restrictive."156 However, the petition was dismissed solely on the
ground that there were not enough votes for a ruling of grave abuse
of discretion in the classification made by the Board.157
II.B.3
Size does matter
The form of expression is just as important as the information
conveyed that it forms part of the expression. The present case is in
point.
First, it enhances efficiency in communication. A larger tarpaulin
allows larger fonts which make it easier to view its messages from
greater distances. Furthermore, a larger tarpaulin makes it easier for
passengers inside moving vehicles to read its content. Compared
with the pedestrians, the passengers inside moving vehicles have
lesser time to view the content of a tarpaulin. The larger the fonts
and images, the greater the probability that it will catch their
attention and, thus, the greater the possibility that they will
understand its message.
Second, the size of the tarpaulin may underscore the importance of
the message to the reader. From an ordinary persons perspective,
those who post their messages in larger fonts care more about their
message than those who carry their messages in smaller media. The
perceived importance given by the speakers, in this case petitioners,
to their cause is also part of the message. The effectivity of
communication sometimes relies on the emphasis put by the
speakers and onthe credibility of the speakers themselves. Certainly,
larger segments of the public may tend to be more convinced of the
point made by authoritative figures when they make the effort to
emphasize their messages.
Third, larger spaces allow for more messages. Larger spaces,
therefore, may translate to more opportunities to amplify, explain,
and argue points which the speakers might want to communicate.
Rather than simply placing the names and images of political
candidates and an expression of support, larger spaces can allow for
brief but memorable presentations of the candidates platforms for
governance. Larger spaces allow for more precise inceptions of
ideas, catalyze reactions to advocacies, and contribute more to a
more educated and reasoned electorate. A more educated
electorate will increase the possibilities of both good governance
and accountability in our government.
These points become more salient when it is the electorate, not the
candidates or the political parties, that speaks. Too often, the terms
of public discussion during elections are framed and kept hostage by
brief and catchy but meaningless sound bites extolling the character
of the candidate. Worse, elections sideline political arguments and
privilege the endorsement by celebrities. Rather than provide
obstacles to their speech, government should in fact encourage it.
Between the candidates and the electorate, the latter have the
better incentive to demand discussion of the more important issues.
Between the candidates and the electorate, the former have better
incentives to avoid difficult political standpoints and instead focus
on appearances and empty promises.
Large tarpaulins, therefore, are not analogous to time and place.158
They are fundamentally part of expression protected under Article
III, Section 4 of the Constitution.
II.B.4
There are several theories and schools of thought that strengthen
the need to protect the basic right to freedom of expression.
First, this relates to the right ofthe people to participate in public
affairs, including the right to criticize government actions.
Proponents of the political theory on "deliberative democracy"
submit that "substantial, open, [and] ethical dialogue isa critical, and
indeed defining, feature of a good polity."159 This theory may be
considered broad, but it definitely "includes [a] collective decision
making with the participation of all who will beaffected by the
decision."160 It anchors on the principle that the cornerstone of
every democracy is that sovereignty resides in the people.161 To
ensure order in running the states affairs, sovereign powers were
delegated and individuals would be elected or nominated in key
government positions to represent the people. On this note, the
theory on deliberative democracy may evolve to the right of the
people to make government accountable. Necessarily, this includes
the right of the people to criticize acts made pursuant to
governmental functions.
Speech that promotes dialogue on publicaffairs, or airs out
grievances and political discontent, should thus be protected and
encouraged.
Borrowing the words of Justice Brandeis, "it is hazardous to
discourage thought, hope and imagination; that fear breeds
repression; that repression breeds hate; that hate menaces stable
government; that the path of safety lies in the opportunity to discuss
freely supposed grievances and proposed remedies."162
In this jurisdiction, this court held that "[t]he interest of society and
the maintenance of good government demand a full discussion of
public affairs."163 This court has, thus, adopted the principle that
"debate on public issues should be uninhibited, robust,and wide
open . . . [including even] unpleasantly sharp attacks on government
and public officials."164
Second, free speech should be encouraged under the concept of a
market place of ideas. This theory was articulated by Justice Holmes
in that "the ultimate good desired is better reached by [the] free
trade in ideas:"165
When men have realized that time has upset many fighting faiths,
they may come to believe even more than they believe the very
foundations of their own conduct that the ultimate good desired is
better reached by free trade in ideas - that the best test of truth is
the power of the thought to get itself accepted in the competition of
the market, and that truth is the only ground upon which their
wishes safely can be carried out.166
The way it works, the exposure to the ideas of others allows one to
"consider, test, and develop their own conclusions."167 A free,
open, and dynamic market place of ideas is constantly shaping new
ones. This promotes both stability and change where recurring
points may crystallize and weak ones may develop. Of course, free
speech is more than the right to approve existing political beliefs
and economic arrangements as it includes, "[t]o paraphrase Justice
Holmes, [the] freedom for the thought that we hate, no less than for
the thought that agrees with us."168 In fact, free speech may "best
serve its high purpose when it induces a condition of unrest, creates
dissatisfaction with conditions as they are, or even stirs people to
anger."169 It is in this context that we should guard against any
curtailment of the peoples right to participate in the free trade of
ideas.
Third, free speech involves self-expression that enhances human
dignity. This right is "a means of assuring individual self-
fulfillment,"170 among others. In Philippine Blooming Mills
Employees Organization v. Philippine Blooming Mills Co., Inc,171 this
court discussed as follows:
The rights of free expression, free assembly and petition, are not
only civil rights but also political rights essential to man's enjoyment
of his life, to his happiness and to his full and complete
fulfillment.Thru these freedoms the citizens can participate not
merely in the periodic establishment of the government through
their suffrage but also in the administration of public affairs as well
as in the discipline of abusive public officers. The citizen is accorded
these rights so that he can appeal to the appropriate governmental
officers or agencies for redress and protection as well as for the
imposition of the lawful sanctions on erring public officers and
employees.172 (Emphasis supplied)
Fourth, expression is a marker for group identity. For one,
"[v]oluntary associations perform [an] important democratic role [in
providing] forums for the development of civil skills, for deliberation,
and for the formation of identity and community spirit[,] [and] are
largely immune from [any] governmental interference."173 They
also "provide a buffer between individuals and the state - a free
space for the development of individual personality, distinct group
identity, and dissident ideas - and a potential source of opposition to
the state."174 Free speech must be protected as the vehicle to find
those who have similar and shared values and ideals, to join
together and forward common goals.
Fifth, the Bill of Rights, free speech included, is supposed to "protect
individuals and minorities against majoritarian abuses perpetrated
through [the] framework [of democratic governance]."175
Federalist framers led by James Madison were concerned about two
potentially vulnerable groups: "the citizenry at large - majorities -
who might be tyrannized or plundered by despotic federal
officials"176 and the minorities who may be oppressed by
"dominant factions of the electorate [that] capture [the]
government for their own selfish ends[.]"177 According to Madison,
"[i]t is of great importance in a republic not only to guard the society
against the oppression of its rulers, but to guard one part of the
society against the injustice of the other part."178 We should strive
to ensure that free speech is protected especially in light of any
potential oppression against those who find themselves in the
fringes on public issues.
Lastly, free speech must be protected under the safety valve
theory.179 This provides that "nonviolent manifestations of dissent
reduce the likelihood of violence[.]"180 "[A] dam about to burst . . .
resulting in the banking up of a menacing flood of sullen anger
behind the walls of restriction"181 has been used to describe the
effect of repressing nonviolent outlets.182 In order to avoid this
situation and prevent people from resorting to violence, there is a
need for peaceful methods in making passionate dissent. This
includes "free expression and political participation"183 in that they
can "vote for candidates who share their views, petition their
legislatures to [make or] change laws, . . . distribute literature
alerting other citizens of their concerns[,]"184 and conduct peaceful
rallies and other similar acts.185 Free speech must, thus, be
protected as a peaceful means of achieving ones goal, considering
the possibility that repression of nonviolent dissent may spill over to
violent means just to drive a point.
II.B.5
Every citizens expression with political consequences enjoys a high
degree of protection. Respondents argue that the tarpaulinis
election propaganda, being petitioners way of endorsing candidates
who voted against the RH Law and rejecting those who voted for
it.186 As such, it is subject to regulation by COMELEC under its
constitutional mandate.187 Election propaganda is defined under
Section 1(4) of COMELEC Resolution No. 9615 as follows: SECTION 1.
Definitions . . .
....
4. The term "political advertisement" or "election propaganda"
refers to any matter broadcasted, published, printed, displayed or
exhibited, in any medium, which contain the name, image, logo,
brand, insignia, color motif, initials, and other symbol or graphic
representation that is capable of being associated with a candidate
or party, and is intended to draw the attention of the public or a
segment thereof to promote or oppose, directly or indirectly, the
election of the said candidate or candidates to a public office. In
broadcast media, political advertisements may take the form of
spots, appearances on TV shows and radio programs, live or taped
announcements, teasers, and other forms of advertising messages
or announcements used by commercial advertisers. Political
advertising includes matters, not falling within the scope of personal
opinion, that appear on any Internet website, including, but not
limited to, social networks, blogging sites, and micro-blogging sites,
in return for consideration, or otherwise capable of pecuniary
estimation.
On the other hand, petitioners invoke their "constitutional right to
communicate their opinions, views and beliefs about issues and
candidates."188 They argue that the tarpaulin was their statement
of approval and appreciation of the named public officials act of
voting against the RH Law, and their criticism toward those who
voted in its favor.189 It was "part of their advocacy campaign
against the RH Law,"190 which was not paid for by any candidate or
political party.191 Thus, "the questioned orders which . . . effectively
restrain[ed] and curtail[ed] [their] freedom of expression should be
declared unconstitutional and void."192
This court has held free speech and other intellectual freedoms as
"highly ranked in our scheme of constitutional values."193 These
rights enjoy precedence and primacy.194 In Philippine Blooming
Mills, this court discussed the preferred position occupied by
freedom of expression:
Property and property rights can belost thru prescription; but
human rights are imprescriptible. If human rights are extinguished
by the passage of time, then the Bill of Rights is a useless attempt to
limit the power of government and ceases to be an efficacious shield
against the tyranny of officials, of majorities, ofthe influential and
powerful, and of oligarchs - political, economic or otherwise.
In the hierarchy of civil liberties, the rights of free expression and of
assembly occupy a preferred position as they are essential to the
preservation and vitality of our civil and political institutions; and
such priority "gives these liberties the sanctity and the sanction not
permitting dubious intrusions."195 (Citations omitted)
This primordial right calls for utmost respect, more so "when what
may be curtailed is the dissemination of information to make more
meaningful the equally vital right of suffrage."196 A similar idea
appeared in our jurisprudence as early as 1969, which was Justice
Barredos concurring and dissenting opinion in Gonzales v.
COMELEC:197
I like to reiterate over and over, for it seems this is the fundamental
point others miss, that genuine democracy thrives only where the
power and right of the people toelect the men to whom they would
entrust the privilege to run the affairs of the state exist. In the
language of the declaration of principles of our Constitution, "The
Philippines is a republican state. Sovereignty resides in the people
and all government authority emanates from them" (Section 1,
Article II). Translating this declaration into actuality, the Philippines
is a republic because and solely because the people in it can be
governed only by officials whom they themselves have placed in
office by their votes. And in it is on this cornerstone that I hold it
tobe self-evident that when the freedoms of speech, press and
peaceful assembly and redress of grievances are being exercised in
relation to suffrage or asa means to enjoy the inalienable right of the
qualified citizen to vote, they are absolute and timeless. If our
democracy and republicanism are to be worthwhile, the conduct of
public affairs by our officials must be allowed to suffer incessant and
unabating scrutiny, favorable or unfavorable, everyday and at all
times. Every holder of power in our government must be ready to
undergo exposure any moment of the day or night, from January to
December every year, as it is only in this way that he can rightfully
gain the confidence of the people. I have no patience for those who
would regard public dissection of the establishment as an attribute
to be indulged by the people only at certain periods of time. I
consider the freedoms of speech, press and peaceful assembly and
redress of grievances, when exercised in the name of suffrage, as
the very means by which the right itself to vote can only be properly
enjoyed.It stands to reason therefore, that suffrage itself would be
next to useless if these liberties cannot be untrammelled [sic]
whether as to degree or time.198 (Emphasis supplied)
Not all speech are treated the same. In Chavez v. Gonzales, this
court discussed that some types of speech may be subject to
regulation:
Some types of speech may be subjected to some regulation by the
State under its pervasive police power, in order that it may not be
injurious to the equal right of others or those of the community or
society. The difference in treatment is expected because the
relevant interests of one type of speech, e.g., political speech, may
vary from those of another, e.g., obscene speech. Distinctionshave
therefore been made in the treatment, analysis, and evaluation
ofthe permissible scope of restrictions on various categories of
speech. We have ruled, for example, that in our jurisdiction slander
or libel, lewd and obscene speech, as well as "fighting words" are
not entitled to constitutional protection and may be penalized.199
(Citations omitted)
We distinguish between politicaland commercial speech. Political
speech refers to speech "both intended and received as a
contribution to public deliberation about some issue,"200
"foster[ing] informed and civicminded deliberation."201 On the
other hand, commercial speech has been defined as speech that
does "no more than propose a commercial transaction."202 The
expression resulting from the content of the tarpaulin is, however,
definitely political speech. In Justice Brions dissenting opinion, he
discussed that "[t]he content of the tarpaulin, as well as the timing
of its posting, makes it subject of the regulations in RA 9006 and
Comelec Resolution No. 9615."203 He adds that "[w]hile indeed the
RH issue, by itself,is not an electoralmatter, the slant that the
petitioners gave the issue converted the non-election issue into a
live election one hence, Team Buhay and Team Patay and the plea to
support one and oppose the other."204
While the tarpaulin may influence the success or failure of the
named candidates and political parties, this does not necessarily
mean it is election propaganda. The tarpaulin was not paid for or
posted "in return for consideration" by any candidate, political
party, or party-list group.
The second paragraph of Section 1(4) of COMELEC Resolution No.
9615, or the rules and regulations implementing Republic Act No.
9006 as an aid to interpret the law insofar as the facts of this case
requires, states:
4. The term "political advertisement" or "election propaganda"
refers to any matter broadcasted, published, printed, displayed or
exhibited, in any medium, which contain the name, image, logo,
brand, insignia, color motif, initials, and other symbol or graphic
representation that is capable of being associated with a candidate
or party, and is intended to draw the attention of the public or a
segment thereof to promote or oppose, directly or indirectly, the
election of the said candidate or candidates to a public office. In
broadcast media, political advertisements may take the form of
spots, appearances on TV shows and radio programs, live or taped
announcements, teasers, and other forms of advertising messages
or announcements used by commercial advertisers. Political
advertising includes matters, not falling within the scope of personal
opinion, that appear on any Internet website, including, but not
limited to, social networks, blogging sites, and micro-blogging sites,
in return for consideration, or otherwise capable of pecuniary
estimation. (Emphasis supplied)
It is clear that this paragraph suggests that personal opinions are not
included, while sponsored messages are covered.
Thus, the last paragraph of Section 1(1) of COMELEC Resolution No.
9615 states:
SECTION 1. Definitions - As used in this Resolution:
1. The term "election campaign" or "partisan political activity" refers
to an act designed to promote the election or defeat of a particular
candidate or candidates to a public office, and shall include any of
the following:
....
Personal opinions, views, and preferences for candidates, contained
in blogs shall not be considered acts of election campaigning or
partisan politicalactivity unless expressed by government officials in
the Executive Department, the Legislative Department, the Judiciary,
the Constitutional Commissions, and members of the Civil Service.
In any event, this case does not refer to speech in cyberspace, and
its effects and parameters should be deemed narrowly tailored only
in relation to the facts and issues in this case. It also appears that
such wording in COMELEC Resolution No. 9615 does not similarly
appear in Republic Act No. 9006, the law it implements.
We should interpret in this manner because of the value of political
speech.
As early as 1918, in United States v. Bustos,205 this court recognized
the need for full discussion of public affairs. We acknowledged that
free speech includes the right to criticize the conduct of public men:
The interest of society and the maintenance of good government
demand a full discussion of public affairs. Complete liberty to
comment on the conduct of public men is a scalpel in the case of
free speech. The sharp incision of its probe relieves the abscesses of
official dom. Men in public life may suffer under a hostile and an
unjust accusation; the wound can be assuaged with the balm of a
clear conscience. A public officer must not be too thin-skinned with
reference to comment upon his official acts. Only thus can the
intelligence and dignity of the individual be exalted.206
Subsequent jurisprudence developed the right to petition the
government for redress of grievances, allowing for criticism, save for
some exceptions.207 In the 1951 case of Espuelas v. People,208 this
court noted every citizens privilege to criticize his or her
government, provided it is "specific and therefore constructive,
reasoned or tempered, and not a contemptuous condemnation of
the entire government set-up."209
The 1927 case of People v. Titular210 involved an alleged violation
of the Election Law provision "penaliz[ing] the anonymous criticism
of a candidate by means of posters or circulars."211 This court
explained that it is the posters anonymous character that is being
penalized.212 The ponente adds that he would "dislike very muchto
see this decision made the vehicle for the suppression of public
opinion."213
In 1983, Reyes v. Bagatsing214 discussed the importance of allowing
individuals to vent their views. According to this court, "[i]ts value
may lie in the fact that there may be something worth hearing from
the dissenter [and] [t]hat is to ensurea true ferment of ideas."215
Allowing citizens to air grievances and speak constructive criticisms
against their government contributes to every societys goal for
development. It puts forward matters that may be changed for the
better and ideas that may be deliberated on to attain that purpose.
Necessarily, it also makes the government accountable for acts that
violate constitutionally protected rights.
In 1998, Osmea v. COMELEC found Section 11(b) of Republic Act
No. 6646, which prohibits mass media from selling print space and
air time for campaign except to the COMELEC, to be a democracy-
enhancing measure.216 This court mentioned how "discussion of
public issues and debate on the qualifications of candidates in an
election are essential to the proper functioning of the government
established by our Constitution."217
As pointed out by petitioners, "speech serves one of its greatest
public purposes in the context of elections when the free exercise
thereof informs the people what the issues are, and who are
supporting what issues."218 At the heart of democracy is every
advocates right to make known what the people need to know,219
while the meaningful exercise of ones right of suffrage includes the
right of every voter to know what they need to know in order to
make their choice.
Thus, in Adiong v. COMELEC,220 this court discussed the importance
of debate on public issues, and the freedom of expression especially
in relation to information that ensures the meaningful exercise of
the right of suffrage:
We have adopted the principle that debate on public issues should
be uninhibited, robust, and wide open and that it may well include
vehement, caustic and sometimes unpleasantly sharp attacks on
government and public officials. Too many restrictions will deny to
people the robust, uninhibited, and wide open debate, the
generating of interest essential if our elections will truly be free,
clean and honest.
We have also ruled that the preferred freedom of expression calls all
the more for the utmost respect when what may be curtailed is the
dissemination of information to make more meaningful the equally
vital right of suffrage.221 (Emphasis supplied, citations omitted)
Speech with political consequences isat the core of the freedom of
expression and must be protected by this court.
Justice Brion pointed out that freedomof expression "is not the god
of rights to which all other rights and even government protection of
state interest must bow."222

The right to freedom of expression isindeed not absolute. Even some
forms of protected speech are still subjectto some restrictions. The
degree of restriction may depend on whether the regulation is
content-based or content-neutral.223 Content-based regulations
can either be based on the viewpoint of the speaker or the subject
of the expression.
II.B.6
Content-based regulation
COMELEC contends that the order for removal of the tarpaulin is a
content-neutral regulation. The order was made simply because
petitioners failed to comply with the maximum size limitation for
lawful election propaganda.224
On the other hand, petitioners argue that the present size regulation
is content-based as it applies only to political speech and not to
other forms of speech such as commercial speech.225 "[A]ssuming
arguendo that the size restriction sought to be applied . . . is a mere
time, place, and manner regulation, its still unconstitutional for lack
of a clear and reasonable nexus with a constitutionally sanctioned
objective."226
The regulation may reasonably be considered as either content-
neutral or content-based.227 Regardless, the disposition of this case
will be the same. Generally, compared with other forms of speech,
the proposed speech is content-based.
As pointed out by petitioners, the interpretation of COMELEC
contained in the questioned order applies only to posters and
tarpaulins that may affect the elections because they deliver
opinions that shape both their choices. It does not cover, for
instance, commercial speech.
Worse, COMELEC does not point to a definite view of what kind of
expression of non-candidates will be adjudged as "election
paraphernalia." There are no existing bright lines to categorize
speech as election-related and those that are not. This is especially
true when citizens will want to use their resources to be able to raise
public issues that should be tackled by the candidates as what has
happened in this case. COMELECs discretion to limit speech in this
case is fundamentally unbridled.
Size limitations during elections hit ata core part of expression. The
content of the tarpaulin is not easily divorced from the size of its
medium.
Content-based regulation bears a heavy presumption of invalidity,
and this court has used the clear and present danger rule as
measure.228 Thus, in Chavez v. Gonzales:
A content-based regulation, however, bears a heavy presumption of
invalidity and is measured against the clear and present danger rule.
The latter will pass constitutional muster only if justified by a
compelling reason, and the restrictions imposedare neither
overbroad nor vague.229 (Citations omitted)
Under this rule, "the evil consequences sought to be prevented must
be substantive, extremely serious and the degree of imminence
extremely high."230 "Only when the challenged act has overcome
the clear and present danger rule will it pass constitutional muster,
with the government having the burden of overcoming the
presumed unconstitutionality."231
Even with the clear and present danger test, respondents failed to
justify the regulation. There is no compelling and substantial state
interest endangered by the posting of the tarpaulinas to justify
curtailment of the right of freedom of expression. There is no reason
for the state to minimize the right of non-candidate petitioners to
post the tarpaulin in their private property. The size of the tarpaulin
does not affect anyone elses constitutional rights.
Content-based restraint or censorship refers to restrictions "based
on the subject matter of the utterance or speech."232 In contrast,
content-neutral regulation includes controls merely on the incidents
of the speech such as time, place, or manner of the speech.233
This court has attempted to define "content-neutral" restraints
starting with the 1948 case of Primicias v. Fugoso.234 The ordinance
in this case was construed to grant the Mayor discretion only to
determine the public places that may be used for the procession
ormeeting, but not the power to refuse the issuance of a permit for
such procession or meeting.235 This court explained that free
speech and peaceful assembly are "not absolute for it may be so
regulated that it shall not beinjurious to the equal enjoyment of
others having equal rights, nor injurious to the rights of the
community or society."236
The earlier case of Calalang v. Williams237 involved the National
Traffic Commission resolution that prohibited the passing of animal-
drawn vehicles along certain roads at specific hours.238 This court
similarly discussed police power in that the assailed rules carry
outthe legislative policy that "aims to promote safe transit upon and
avoid obstructions on national roads, in the interest and
convenience of the public."239
As early as 1907, United States v. Apurado240 recognized that
"more or less disorder will mark the public assembly of the people to
protest against grievances whether real or imaginary, because on
such occasions feeling is always wrought to a high pitch of
excitement. . . ."241 It is with this backdrop that the state is justified
in imposing restrictions on incidental matters as time, place, and
manner of the speech.
In the landmark case of Reyes v. Bagatsing, this court summarized
the steps that permit applicants must follow which include
informing the licensing authority ahead of time as regards the date,
public place, and time of the assembly.242 This would afford the
public official time to inform applicants if there would be valid
objections, provided that the clear and present danger test is the
standard used for his decision and the applicants are given the
opportunity to be heard.243 This ruling was practically codified in
Batas Pambansa No. 880, otherwise known as the Public Assembly
Act of 1985.
Subsequent jurisprudence have upheld Batas Pambansa No. 880 as a
valid content-neutral regulation. In the 2006 case of Bayan v.
Ermita,244 this court discussed how Batas Pambansa No. 880 does
not prohibit assemblies but simply regulates their time, place, and
manner.245 In 2010, this court found in Integrated Bar of the
Philippines v. Atienza246 that respondent Mayor Atienza committed
grave abuse of discretion when he modified the rally permit by
changing the venue from Mendiola Bridge to Plaza Miranda without
first affording petitioners the opportunity to be heard.247
We reiterate that the regulation involved at bar is content-based.
The tarpaulin content is not easily divorced from the size of its
medium.
II.B.7
Justice Carpio and Justice Perlas-Bernabe suggest that the provisions
imposing a size limit for tarpaulins are content-neutral regulations as
these "restrict the mannerby which speech is relayed but not the
content of what is conveyed."248
If we apply the test for content-neutral regulation, the questioned
acts of COMELEC will not pass the three requirements for evaluating
such restraints on freedom of speech.249 "When the speech
restraints take the form of a content-neutral regulation, only a
substantial governmental interest is required for its validity,"250 and
it is subject only to the intermediate approach.251
This intermediate approach is based on the test that we have
prescribed in several cases.252 A content-neutral government
regulation is sufficiently justified:
[1] if it is within the constitutional power of the Government; [2] if it
furthers an important or substantial governmental interest; [3] if the
governmental interest is unrelated to the suppression of free
expression; and [4] if the incident restriction on alleged [freedom of
speech & expression] is no greater than is essential to the
furtherance of that interest.253
On the first requisite, it is not within the constitutional powers of the
COMELEC to regulate the tarpaulin. As discussed earlier, this is
protected speech by petitioners who are non-candidates. On the
second requirement, not only must the governmental interest be
important or substantial, it must also be compelling as to justify the
restrictions made.
Compelling governmental interest would include constitutionally
declared principles. We have held, for example, that "the welfare of
children and the States mandate to protect and care for them, as
parens patriae,254 constitute a substantial and compelling
government interest in regulating . . . utterances in TV
broadcast."255
Respondent invokes its constitutional mandate to ensure equal
opportunity for public information campaigns among candidates in
connection with the holding of a free, orderly, honest, peaceful, and
credible election.256
Justice Brion in his dissenting opinion discussed that "[s]ize limits to
posters are necessary to ensure equality of public information
campaigns among candidates, as allowing posters with different
sizes gives candidates and their supporters the incentive to post
larger posters[,] [and] [t]his places candidates with more money
and/or with deep-pocket supporters at an undue advantage against
candidates with more humble financial capabilities."257
First, Adiong v. COMELEC has held that this interest is "not as
important as the right of [a private citizen] to freely express his
choice and exercise his right of free speech."258 In any case, faced
with both rights to freedom of speech and equality, a prudent
course would be to "try to resolve the tension in a way that protects
the right of participation."259
Second, the pertinent election lawsrelated to private property only
require that the private property owners consent be obtained when
posting election propaganda in the property.260 This is consistent
with the fundamental right against deprivation of property without
due process of law.261 The present facts do not involve such posting
of election propaganda absent consent from the property owner.
Thus, this regulation does not apply in this case.
Respondents likewise cite the Constitution262 on their authority to
recommend effective measures to minimize election spending.
Specifically, Article IX-C, Section 2(7) provides:
Sec. 2. The Commission on Elections shall exercise the following
powers and functions:
....
(7) Recommend to the Congress effective measures to minimize
election spending, including limitation of places where propaganda
materials shall be posted, and to prevent and penalize all forms of
election frauds, offenses, malpractices, and nuisance candidates.
(Emphasis supplied) This does not qualify as a compelling and
substantial government interest to justify regulation of the preferred
right to freedom of expression.
The assailed issuances for the removal of the tarpaulin are based on
the two feet (2) by three feet (3) size limitation under Section 6(c)
of COMELEC Resolution No. 9615. This resolution implements the
Fair Election Act that provides for the same size limitation.263
This court held in Adiong v. COMELEC that "[c]ompared to the
paramount interest of the State in guaranteeing freedom of
expression, any financial considerations behind the regulation are of
marginal significance."264 In fact, speech with political
consequences, as in this case, should be encouraged and not
curtailed. As petitioners pointed out, the size limitation will not
serve the objective of minimizing election spending considering
there is no limit on the number of tarpaulins that may be posted.265
The third requisite is likewise lacking. We look not only at the
legislative intent or motive in imposing the restriction, but more so
at the effects of such restriction, if implemented. The restriction
must not be narrowly tailored to achieve the purpose. It must be
demonstrable. It must allow alternative avenues for the actor to
make speech.
In this case, the size regulation is not unrelated to the suppression of
speech. Limiting the maximum sizeof the tarpaulin would render
ineffective petitioners message and violate their right to exercise
freedom of expression.
The COMELECs act of requiring the removal of the tarpaulin has the
effect of dissuading expressions with political consequences. These
should be encouraged, more so when exercised to make more
meaningful the equally important right to suffrage.
The restriction in the present case does not pass even the lower test
of intermediate scrutiny for content-neutral regulations.
The action of the COMELEC in thiscase is a strong deterrent to
further speech by the electorate. Given the stature of petitioners
and their message, there are indicators that this will cause a "chilling
effect" on robust discussion during elections.
The form of expression is just as important as the message itself. In
the words of Marshall McLuhan, "the medium is the message."266
McLuhans colleague and mentor Harold Innis has earlier asserted
that "the materials on which words were written down have often
counted for more than the words themselves."267
III
Freedom of expression and equality
III.A
The possibility of abuse
Of course, candidates and political parties do solicit the help of
private individuals for the endorsement of their electoral campaigns.
On the one extreme, this can take illicit forms such as when
endorsement materials in the form of tarpaulins, posters, or media
advertisements are made ostensibly by "friends" but in reality are
really paid for by the candidate or political party. This skirts the
constitutional value that provides for equal opportunities for all
candidates.
However, as agreed by the parties during the oral arguments in this
case, this is not the situation that confronts us. In such cases, it will
simply be a matter for investigation and proof of fraud on the part of
the COMELEC.
The guarantee of freedom of expression to individuals without any
relationship to any political candidate should not be held hostage by
the possibility of abuse by those seeking to be elected. It is true that
there can be underhanded, covert, or illicit dealings so as to hide the
candidates real levels of expenditures. However, labelling all
expressions of private parties that tend to have an effect on the
debate in the elections as election paraphernalia would be too
broad a remedy that can stifle genuine speech like in this case.
Instead, to address this evil, better and more effective enforcement
will be the least restrictive means to the fundamental freedom.
On the other extreme, moved by the credentials and the message of
a candidate, others will spend their own resources in order to lend
support for the campaigns. This may be without agreement between
the speaker and the candidate or his or her political party. In lieu of
donating funds to the campaign, they will instead use their
resources directly in a way that the candidate or political party
would have doneso. This may effectively skirt the constitutional and
statutory limits of campaign spending.
Again, this is not the situation in this case.
The message of petitioners in thiscase will certainly not be what
candidates and political parties will carry in their election posters or
media ads. The message of petitioner, taken as a whole, is an
advocacy of a social issue that it deeply believes. Through rhetorical
devices, it communicates the desire of Diocese that the positions of
those who run for a political position on this social issue be
determinative of how the public will vote. It primarily advocates a
stand on a social issue; only secondarily even almost incidentally
will cause the election or non-election of a candidate.
The twin tarpaulins consist of satire of political parties. Satire is a
"literary form that employs such devices as sarcasm, irony and
ridicule to deride prevailing vices or follies,"268 and this may target
any individual or group in society, private and government alike. It
seeks to effectively communicate a greater purpose, often used for
"political and social criticism"269 "because it tears down facades,
deflates stuffed shirts, and unmasks hypocrisy. . . . Nothing is more
thoroughly democratic than to have the high-and-mighty
lampooned and spoofed."270 Northrop Frye, wellknown in this
literary field, claimed that satire had two defining features: "one is
wit or humor founded on fantasy or a sense of the grotesque and
absurd, the other is an object of attack."271 Thus, satire frequently
uses exaggeration, analogy, and other rhetorical devices.
The tarpaulins exaggerate. Surely, "Team Patay" does not refer to a
list of dead individuals nor could the Archbishop of the Diocese of
Bacolod have intended it to mean that the entire plan of the
candidates in his list was to cause death intentionally. The tarpaulin
caricatures political parties and parodies the intention of those in
the list. Furthermore, the list of "Team Patay" is juxtaposed with the
list of "Team Buhay" that further emphasizes the theme of its
author: Reproductive health is an important marker for the church
of petitioners to endorse.
The messages in the tarpaulins are different from the usual
messages of candidates. Election paraphernalia from candidates and
political parties are more declarative and descriptive and contain no
sophisticated literary allusion to any social objective. Thus, they
usually simply exhort the public to vote for a person with a brief
description of the attributes of the candidate. For example "Vote for
[x], Sipag at Tiyaga," "Vote for [y], Mr. Palengke," or "Vote for [z], Iba
kami sa Makati."
This courts construction of the guarantee of freedom of expression
has always been wary of censorship or subsequent punishment that
entails evaluation of the speakers viewpoint or the content of ones
speech. This is especially true when the expression involved has
political consequences. In this case, it hopes to affect the type of
deliberation that happens during elections. A becoming humility on
the part of any human institution no matter how endowed with the
secular ability to decide legal controversies with finality entails that
we are not the keepers of all wisdom.
Humanitys lack of omniscience, even acting collectively, provides
space for the weakest dissent. Tolerance has always been a
libertarian virtue whose version is embedded in our Billof Rights.
There are occasional heretics of yesterday that have become our
visionaries. Heterodoxies have always given us pause. The
unforgiving but insistent nuance that the majority surely and
comfortably disregards provides us with the checks upon reality that
may soon evolve into creative solutions to grave social problems.
This is the utilitarian version. It could also be that it is just part of
human necessity to evolve through being able to express or
communicate.
However, the Constitution we interpret is not a theoretical
document. It contains other provisions which, taken together with
the guarantee of free expression, enhances each others value.
Among these are the provisions that acknowledge the idea of
equality. In shaping doctrine construing these constitutional values,
this court needs to exercise extraordinary prudence and produce
narrowly tailored guidance fit to the facts as given so as not to
unwittingly cause the undesired effect of diluting freedoms as
exercised in reality and, thus, render them meaningless.
III.B.
Speech and equality:
Some considerations We first establish that there are two paradigms
of free speech that separate at the point of giving priority to equality
vis--vis liberty.272
In an equality-based approach, "politically disadvantaged speech
prevails over regulation[,] but regulation promoting political equality
prevails over speech."273 This view allows the government leeway
to redistribute or equalize speaking power, such as protecting,
even implicitly subsidizing, unpopular or dissenting voices often
systematically subdued within societys ideological ladder.274 This
view acknowledges that there are dominant political actors who,
through authority, power, resources, identity, or status, have
capabilities that may drown out the messages of others. This is
especially true in a developing or emerging economy that is part of
the majoritarian world like ours.
The question of libertarian tolerance
This balance between equality and the ability to express so as to find
ones authentic self or to participate in the self determination of
ones communities is not new only to law. It has always been a
philosophical problematique.
In his seminal work, Repressive Tolerance, philosopher and social
theorist Herbert Marcuse recognized how institutionalized
inequality exists as a background limitation, rendering freedoms
exercised within such limitation as merely "protect[ing] the already
established machinery of discrimination."275 In his view, any
improvement "in the normal course of events" within an unequal
society, without subversion, only strengthens existing interests of
those in power and control.276
In other words, abstract guarantees of fundamental rights like
freedom of expression may become meaningless if not taken in a
real context. This tendency to tackle rights in the abstract
compromises liberties. In his words:
Liberty is self-determination, autonomythis is almost a tautology,
but a tautology which results from a whole series of synthetic
judgments. It stipulates the ability to determine ones own life: to be
able to determine what to do and what not to do, what to suffer and
what not. But the subject of this autonomy is never the contingent,
private individual as that which he actually is or happens to be; it is
rather the individual as a human being who is capable of being free
with the others. And the problem of making possible such a
harmony between every individual liberty and the other is not that
of finding a compromise between competitors, or between freedom
and law, between general and individual interest, common and
private welfare in an established society, but of creating the society
in which man is no longer enslaved by institutions which vitiate self-
determination from the beginning. In other words, freedom is still to
be created even for the freest of the existing societies.277
(Emphasis in the original)
Marcuse suggests that the democratic argument with all opinions
presented to and deliberated by the people "implies a necessary
condition, namely, that the people must be capable of deliberating
and choosing on the basis of knowledge, that they must have access
to authentic information, and that, on this basis, their evaluation
must be the result of autonomous thought."278 He submits that
"[d]ifferent opinions and philosophies can no longer compete
peacefully for adherence and persuasion on rational grounds: the
marketplace of ideas is organized and delimited by those who
determine the national and the individual interest."279 A slant
toward left manifests from his belief that "there is a natural right of
resistance for oppressed and overpowered minorities to use
extralegal means if the legal ones have proved to be
inadequate."280 Marcuse, thus, stands for an equality that breaks
away and transcends from established hierarchies, power
structures, and indoctrinations. The tolerance of libertarian society
he refers to as "repressive tolerance."
Legal scholars
The 20th century also bears witness to strong support from legal
scholars for "stringent protections of expressive liberty,"281
especially by political egalitarians. Considerations such as
"expressive, deliberative, and informational interests,"282 costs or
the price of expression, and background facts, when taken together,
produce bases for a system of stringent protections for expressive
liberties.283
Many legal scholars discuss the interest and value of expressive
liberties. Justice Brandeis proposed that "public discussion is a
political duty."284 Cass Sustein placed political speech on the upper
tier of his twotier model for freedom of expression, thus, warranting
stringent protection.285 He defined political speech as "both
intended and received as a contribution to public deliberation about
some issue."286
But this is usually related also tofair access to opportunities for such
liberties.287 Fair access to opportunity is suggested to mean
substantive equality and not mere formal equalitysince "favorable
conditions for realizing the expressive interest will include some
assurance of the resources required for expression and some
guarantee that efforts to express views on matters of common
concern will not be drowned out by the speech of betterendowed
citizens."288 Justice Brandeis solution is to "remedy the harms of
speech with more speech."289 This view moves away from playing
down the danger as merely exaggerated, toward "tak[ing] the costs
seriously and embrac[ing] expression as the preferred strategy for
addressing them."290 However, in some cases, the idea of more
speech may not be enough. Professor Laurence Tribe observed the
need for context and "the specification of substantive values before
[equality] has full meaning."291 Professor Catherine A. MacKinnon
adds that "equality continues to be viewed in a formal rather than a
substantive sense."292 Thus, more speech can only mean more
speech from the few who are dominant rather than those who are
not.
Our jurisprudence
This court has tackled these issues.
Osmea v. COMELEC affirmed National Press Club v. COMELEC on
the validity of Section 11(b) ofthe Electoral Reforms Law of 1987.293
This section "prohibits mass media from selling or giving free of
charge print space or air time for campaign or other political
purposes, except to the Commission on Elections."294 This court
explained that this provision only regulates the time and manner of
advertising in order to ensure media equality among candidates.295
This court grounded this measure on constitutional provisions
mandating political equality:296 Article IX-C, Section 4
Section 4. The Commission may, during the election period,
supervise or regulate the enjoyment or utilization of all franchises or
permits for the operation of transportation and other public utilities,
media of communication or information, all grants, special
privileges, or concessions granted by the Government or any
subdivision, agency, or instrumentality thereof, including any
government-owned or controlled corporation or its subsidiary. Such
supervision or regulation shall aim to ensure equal opportunity,
time, and space, and the right to reply, including reasonable, equal
rates therefor, for public information campaigns and forums among
candidates in connection with the objective of holding free, orderly,
honest, peaceful, and credible elections. (Emphasis supplied)
Article XIII, Section 1
Section 1. The Congress shall give highest priorityto the enactment
of measures that protect and enhance the right of all the people to
human dignity, reducesocial, economic, and political inequalities,
and remove cultural inequities by equitably diffusing wealth and
political power for the common good.
To this end, the State shall regulate the acquisition, ownership, use,
and disposition of property and its increments. (Emphasis supplied)
Article II, Section 26

Section 26. The State shall guarantee equal access to opportunities
for public service, and prohibit political dynasties as may be defined
by law. (Emphasis supplied)
Thus, in these cases, we have acknowledged the Constitutions
guarantee for more substantive expressive freedoms that take
equality of opportunities into consideration during elections.
The other view
However, there is also the other view. This is that considerations of
equality of opportunity or equality inthe ability of citizens as
speakers should not have a bearing in free speech doctrine. Under
this view, "members of the public are trusted to make their own
individual evaluations of speech, and government is forbidden to
intervene for paternalistic or redistributive reasons . . . [thus,] ideas
are best left to a freely competitive ideological market."297 This is
consistent with the libertarian suspicion on the use of viewpoint as
well as content to evaluate the constitutional validity or invalidity of
speech.
The textual basis of this view is that the constitutional provision uses
negative rather than affirmative language. It uses speech as its
subject and not speakers.298 Consequently, the Constitution
protects free speech per se, indifferent to the types, status, or
associations of its speakers.299 Pursuant to this, "government must
leave speakers and listeners in the private order to their own
devices in sorting out the relative influence of speech."300
Justice Romeros dissenting opinion in Osmea v. COMELEC
formulates this view that freedom of speech includes "not only the
right to express ones views, but also other cognate rights relevant
to the free communication [of] ideas, not excluding the right to be
informed on matters of public concern."301 She adds:
And since so many imponderables may affect the outcome of
elections qualifications of voters and candidates, education,
means of transportation, health, public discussion, private
animosities, the weather, the threshold of a voters resistance to
pressure the utmost ventilation of opinion of men and issues,
through assembly, association and organizations, both by the
candidate and the voter, becomes a sine qua non for elections to
truly reflect the will of the electorate.302 (Emphasis supplied)
Justice Romeros dissenting opinion cited an American case, if only
to emphasize free speech primacy such that"courts, as a rule are
wary to impose greater restrictions as to any attempt to curtail
speeches with political content,"303 thus:
the concept that the government may restrict the speech of some
elements in our society in order to enhance the relative voice of the
others is wholly foreign to the First Amendment which was designed
to "secure the widest possible dissemination of information from
diverse and antagonistic sources" and "to assure unfettered
interchange of ideas for the bringing about of political and social
changes desired by the people."304
This echoes Justice Oliver Wendell Holmes submission "that the
market place of ideas is still the best alternative to censorship."305
Parenthetically and just to provide the whole detail of the argument,
the majority of the US Supreme Court in the campaign expenditures
case of Buckley v. Valeo "condemned restrictions (even if content-
neutral) on expressive liberty imposed in the name of enhanc[ing]
the relative voice of others and thereby equaliz[ing] access to the
political arena."306 The majority did not use the equality-based
paradigm.
One flaw of campaign expenditurelimits is that "any limit placed on
the amount which a person can speak, which takes out of his
exclusive judgment the decision of when enough is enough, deprives
him of his free speech."307
Another flaw is how "[a]ny quantitative limitation on political
campaigning inherently constricts the sum of public information and
runs counter to our profound national commitment that debate on
public issues should be uninhibited, robust, and wide-open."308
In fact, "[c]onstraining those who have funds or have been able to
raise funds does not ease the plight of those without funds in the
first place . . . [and] even if ones main concern isslowing the
increase in political costs, it may be more effective torely on market
forces toachieve that result than on active legal intervention."309
According to Herbert Alexander, "[t]o oppose limitations is not
necessarily to argue that the skys the limit [because in] any
campaign there are saturation levels and a point where spending no
longer pays off in votes per dollar."310
III. C.
When private speech amounts
to election paraphernalia
The scope of the guarantee of free expression takes into
consideration the constitutional respect for human potentiality and
the effect of speech. It valorizes the ability of human beings to
express and their necessity to relate. On the other hand, a complete
guarantee must also take into consideration the effects it will have
in a deliberative democracy. Skewed distribution of resources as
well as the cultural hegemony of the majority may have the effect of
drowning out the speech and the messages of those in the minority.
In a sense, social inequality does have its effect on the exercise and
effect of the guarantee of free speech. Those who have more will
have better access to media that reaches a wider audience than
those who have less. Those who espouse the more popular ideas
will have better reception than the subversive and the dissenters of
society.To be really heard and understood, the marginalized view
normally undergoes its own degree of struggle.
The traditional view has been to tolerate the viewpoint of the
speaker and the content of his or her expression. This view, thus,
restricts laws or regulation that allows public officials to make
judgments of the value of such viewpoint or message content. This
should still be the principal approach.
However, the requirements of the Constitution regarding equality in
opportunity must provide limits to some expression during electoral
campaigns.
Thus clearly, regulation of speech in the context of electoral
campaigns made by candidates or the members of their political
parties or their political parties may be regulated as to time, place,
and manner. This is the effect of our rulings in Osmea v. COMELEC
and National Press Club v. COMELEC.
Regulation of speech in the context of electoral campaigns made by
persons who are not candidates or who do not speak as members of
a political party which are, taken as a whole, principally advocacies
of a social issue that the public must consider during elections is
unconstitutional. Such regulation is inconsistent with the guarantee
of according the fullest possible range of opinions coming from the
electorate including those that can catalyze candid, uninhibited, and
robust debate in the criteria for the choice of a candidate.
This does not mean that there cannot be a specie of speech by a
private citizen which will not amount toan election paraphernalia to
be validly regulated by law.
Regulation of election paraphernalia will still be constitutionally valid
if it reaches into speech of persons who are not candidates or who
do not speak as members of a political party if they are not
candidates, only if what is regulated is declarative speech that, taken
as a whole, has for its principal object the endorsement of a
candidate only. The regulation (a) should be provided by law, (b)
reasonable, (c) narrowly tailored to meet the objective of enhancing
the opportunity of all candidates to be heard and considering the
primacy of the guarantee of free expression, and (d) demonstrably
the least restrictive means to achieve that object. The regulation
must only be with respect to the time, place, and manner of the
rendition of the message. In no situation may the speech be
prohibited or censored onthe basis of its content. For this purpose, it
will notmatter whether the speech is made with or on private
property.
This is not the situation, however, in this case for two reasons. First,
as discussed, the principal message in the twin tarpaulins of
petitioners consists of a social advocacy.
Second, as pointed out in the concurring opinion of Justice Antonio
Carpio, the present law Section 3.3 of Republic Act No. 9006 and
Section 6(c) of COMELEC Resolution No. 9615 if applied to this
case, will not pass the test of reasonability. A fixed size for election
posters or tarpaulins without any relation to the distance from the
intended average audience will be arbitrary. At certain distances,
posters measuring 2 by 3 feet could no longer be read by the general
public and, hence, would render speech meaningless. It will amount
to the abridgement of speech with political consequences.
IV
Right to property
Other than the right to freedom of expression311 and the
meaningful exercise of the right to suffrage,312 the present case
also involves ones right to property.313
Respondents argue that it is the right of the state to prevent the
circumvention of regulations relating to election propaganda by
applying such regulations to private individuals.314 Certainly, any
provision or regulation can be circumvented. But we are not
confronted with this possibility. Respondents agree that the
tarpaulin in question belongs to petitioners. Respondents have also
agreed, during the oral arguments, that petitioners were neither
commissioned nor paid by any candidate or political party to post
the material on their walls.
Even though the tarpaulin is readily seen by the public, the tarpaulin
remains the private property of petitioners. Their right to use their
property is likewise protected by the Constitution.
In Philippine Communications Satellite Corporation v. Alcuaz:315
Any regulation, therefore, which operates as an effective
confiscation of private property or constitutes an arbitrary or
unreasonable infringement of property rights is void, because it is
repugnant to the constitutional guaranties of due process and equal
protection of the laws.316 (Citation omitted)
This court in Adiong held that a restriction that regulates where
decals and stickers should be posted is "so broad that it
encompasses even the citizens private property."317 Consequently,
it violates Article III, Section 1 of the Constitution which provides
thatno person shall be deprived of his property without due process
of law. This court explained:
Property is more than the mere thing which a person owns, it
includes the right to acquire, use, and dispose of it; and the
Constitution, in the 14th Amendment, protects these essential
attributes.
Property is more than the mere thing which a person owns. It is
elementary that it includes the right to acquire, use, and dispose of
it. The Constitution protects these essential attributes of property.
Holden v. Hardy, 169 U.S. 366, 391, 41 L. ed. 780, 790, 18 Sup. Ct.
Rep. 383. Property consists of the free use, enjoyment, and disposal
of a persons acquisitions without control or diminution save by the
law of the land. 1 Cooleys Bl. Com. 127. (Buchanan v. Warley 245 US
60 [1917])318
This court ruled that the regulation in Adiong violates private
property rights:
The right to property may be subject to a greater degree of
regulation but when this right is joined by a "liberty" interest, the
burden of justification on the part of the Government must be
exceptionally convincing and irrefutable. The burden is not met in
this case.
Section 11 of Rep. Act 6646 is so encompassing and invasive that it
prohibits the posting or display of election propaganda in any place,
whether public or private, except inthe common poster areas
sanctioned by COMELEC. This means that a private person cannot
post his own crudely prepared personal poster on his own front
dooror on a post in his yard. While the COMELEC will certainly never
require the absurd, there are no limits to what overzealous and
partisan police officers, armed with a copy of the statute or
regulation, may do.319 Respondents ordered petitioners, who are
private citizens, to remove the tarpaulin from their own property.
The absurdity of the situation is in itself an indication of the
unconstitutionality of COMELECs interpretation of its powers.
Freedom of expression can be intimately related with the right to
property. There may be no expression when there is no place where
the expression may be made. COMELECs infringement upon
petitioners property rights as in the present case also reaches out to
infringement on their fundamental right to speech.
Respondents have not demonstrated thatthe present state interest
they seek to promote justifies the intrusion into petitioners
property rights. Election laws and regulations must be reasonable. It
must also acknowledge a private individuals right to exercise
property rights. Otherwise, the due process clause will be violated.
COMELEC Resolution No. 9615 and the Fair Election Act intend to
prevent the posting of election propaganda in private property
without the consent of the owners of such private property.
COMELEC has incorrectly implemented these regulations. Consistent
with our ruling in Adiong, we find that the act of respondents in
seeking to restrain petitioners from posting the tarpaulin in their
own private property is an impermissible encroachments on the
right to property.
V
Tarpaulin and its message are not religious speech
We proceed to the last issues pertaining to whether the COMELEC in
issuing the questioned notice and letter violated the right of
petitioners to the free exercise of their religion.
At the outset, the Constitution mandates the separation of church
and state.320 This takes many forms. Article III, Section 5 of the
Constitution, for instance provides:
Section 5. No law shall be made respecting an establishment of
religion, or prohibiting the free exercise thereof. The free exercise
and enjoyment of religious profession and worship, without
discrimination or preference, shall forever be allowed. Noreligious
test shall be required for the exercise of civil or political rights.
There are two aspects of this provision.321 The first is the none
stablishment clause.322 Second is the free exercise and enjoyment
of religious profession and worship.323
The second aspect is atissue in this case.
Clearly, not all acts done by those who are priests, bishops, ustadz,
imams, or any other religious make such act immune from any
secular regulation.324 The religious also have a secular existence.
They exist within a society that is regulated by law.
The Bishop of Bacolod caused the posting of the tarpaulin. But not
all acts of a bishop amounts to religious expression. This
notwithstanding petitioners claim that "the views and position of
the petitioners, the Bishop and the Diocese of Bacolod, on the RH
Bill is inextricably connected to its Catholic dogma, faith, and moral
teachings. . . ."325
The difficulty that often presents itself in these cases stems from the
reality that every act can be motivated by moral, ethical, and
religious considerations. In terms of their effect on the corporeal
world, these acts range from belief, to expressions of these faiths, to
religious ceremonies, and then to acts of a secular character that
may, from the point of view of others who do not share the same
faith or may not subscribe to any religion, may not have any
religious bearing.
Definitely, the characterizations ofthe religious of their acts are not
conclusive on this court. Certainly, our powers of adjudication
cannot be blinded by bare claims that acts are religious in nature.
Petitioners erroneously relied on the case of Ebralinag v. The
Division Superintendent of Schools of Cebu326 in claiming that the
court "emphatically" held that the adherents ofa particular religion
shall be the ones to determine whether a particular matter shall be
considered ecclesiastical in nature.327 This court in
Ebralinagexempted Jehovahs Witnesses from participating in the
flag ceremony "out of respect for their religious beliefs, [no matter
how] "bizarre" those beliefsmay seem to others."328 This court
found a balance between the assertion of a religious practice and
the compelling necessities of a secular command. It was an early
attempt at accommodation of religious beliefs.
In Estrada v. Escritor,329 this court adopted a policy of benevolent
neutrality:
With religion looked upon with benevolence and not hostility,
benevolent neutrality allows accommodation of religion under
certain circumstances. Accommodations are government policies
that take religion specifically intoaccount not to promote the
governments favored form of religion, but to allow individuals and
groups to exercise their religion without hindrance. Their purpose or
effect therefore is to remove a burden on, or facilitate the exercise
of, a persons or institutions religion. As Justice Brennan explained,
the "government [may] take religion into account . . . to exempt,
when possible, from generally applicable governmental regulation
individuals whose religious beliefs and practices would otherwise
thereby be infringed, or to create without state involvement an
atmosphere in which voluntary religious exercise may flourish."330
This court also discussed the Lemon test in that case, such that a
regulation is constitutional when: (1) it has a secular legislative
purpose; (2) it neither advances nor inhibits religion; and (3) it does
not foster an excessive entanglement with religion.331
As aptly argued by COMELEC, however, the tarpaulin, on its face,
"does not convey any religious doctrine of the Catholic church."332
That the position of the Catholic church appears to coincide with the
message of the tarpaulin regarding the RH Law does not, by itself,
bring the expression within the ambit of religious speech. On the
contrary, the tarpaulin clearly refers to candidates classified under
"Team Patay" and "Team Buhay" according to their respective votes
on the RH Law.
The same may be said of petitioners reliance on papal encyclicals to
support their claim that the expression onthe tarpaulin is an
ecclesiastical matter. With all due respect to the Catholic faithful,
the church doctrines relied upon by petitioners are not binding upon
this court. The position of the Catholic religion in the Philippines as
regards the RH Law does not suffice to qualify the posting by one of
its members of a tarpaulin as religious speech solely on such basis.
The enumeration of candidates on the face of the tarpaulin
precludes any doubtas to its nature as speech with political
consequences and not religious speech.
Furthermore, the definition of an "ecclesiastical affair" in Austria v.
National Labor Relations Commission333 cited by petitioners finds
no application in the present case. The posting of the tarpaulin does
not fall within the category of matters that are beyond the
jurisdiction of civil courts as enumerated in the Austriacase such as
"proceedings for excommunication, ordinations of religious
ministers, administration of sacraments and other activities
withattached religious significance."334
A FINAL NOTE
We maintain sympathies for the COMELEC in attempting to do what
it thought was its duty in this case. However, it was misdirected.
COMELECs general role includes a mandate to ensure equal
opportunities and reduce spending among candidates and their
registered political parties. It is not to regulate or limit the speech of
the electorate as it strives to participate inthe electoral exercise.
The tarpaulin in question may be viewed as producing a caricature
of those who are running for public office.Their message may be
construed generalizations of very complex individuals and party-list
organizations.
They are classified into black and white: as belonging to "Team
Patay" or "Team Buhay."
But this caricature, though not agreeable to some, is still protected
speech.
That petitioners chose to categorize them as purveyors of death or
of life on the basis of a single issue and a complex piece of
legislation at that can easily be interpreted as anattempt to
stereo type the candidates and party-list organizations. Not all may
agree to the way their thoughts were expressed, as in fact there are
other Catholic dioceses that chose not to follow the example of
petitioners.
Some may have thought that there should be more room to
consider being more broad-minded and non-judgmental. Some may
have expected that the authors would give more space to practice
forgiveness and humility.
But, the Bill of Rights enumerated in our Constitution is an
enumeration of our fundamental liberties. It is not a detailed code
that prescribes good conduct. It provides space for all to be guided
by their conscience, not only in the act that they do to others but
also in judgment of the acts of others.
Freedom for the thought we can disagree with can be wielded not
only by those in the minority. This can often be expressed by
dominant institutions, even religious ones. That they made their
point dramatically and in a large way does not necessarily mean that
their statements are true, or that they have basis, or that they have
been expressed in good taste.
Embedded in the tarpaulin, however, are opinions expressed by
petitioners. It is a specie of expression protected by our
fundamental law. It is an expression designed to invite attention,
cause debate, and hopefully, persuade. It may be motivated by the
interpretation of petitioners of their ecclesiastical duty, but their
parishioners actions will have very real secular consequences.
Certainly, provocative messages do matter for the elections.
What is involved in this case is the most sacred of speech forms:
expression by the electorate that tends to rouse the public to debate
contemporary issues. This is not speechby candidates or political
parties to entice votes. It is a portion of the electorate telling
candidates the conditions for their election. It is the substantive
content of the right to suffrage.
This. is a form of speech hopeful of a quality of democracy that we
should all deserve. It is protected as a fundamental and primordial
right by our Constitution. The expression in the medium chosen by
petitioners deserves our protection.
WHEREFORE, the instant petition is GRANTED. The temporary
restraining order previously issued is hereby made permanent. The
act of the COMELEC in issuing the assailed notice dated February 22,
2013 and letter dated February 27, 2013 is declared
unconstitutional.
SO ORDERED.
FIRST DIVISION
[G.R. No. 156295. September 23, 2003]
MARCELO R. SORIANO, petitioner, vs. SPOUSES RICARDO and
ROSALINA GALIT, respondents.
DECISION
YNARES-SANTIAGO, J.:
Petitioner was issued a writ of possession in Civil Case No. 6643[1]
for Sum of Money by the Regional Trial Court of Balanga, Bataan,
Branch 1. The writ of possession was, however, nullified by the
Court of Appeals in CA-G.R. SP No. 65891[2] because it included a
parcel of land which was not among those explicitly enumerated in
the Certificate of Sale issued by the Deputy Sheriff, but on which
stand the immovables covered by the said Certificate. Petitioner
contends that the sale of these immovables necessarily
encompasses the land on which they stand.
Dissatisfied, petitioner filed the instant petition for review on
certiorari.
Respondent Ricardo Galit contracted a loan from petitioner Marcelo
Soriano, in the total sum of P480,000.00, evidenced by four
promissory notes in the amount of P120,000.00 each dated August
2, 1996;[3] August 15, 1996;[4] September 4, 1996[5] and
September 14, 1996.[6] This loan was secured by a real estate
mortgage over a parcel of land covered by Original Certificate of
Title No. 569.[7] After he failed to pay his obligation, Soriano filed a
complaint for sum of money against him with the Regional Trial
Court of Balanga City, Branch 1, which was docketed as Civil Case
No. 6643.[8]
Respondents, the Spouses Ricardo and Rosalina Galit, failed to file
their answer. Hence, upon motion of Marcelo Soriano, the trial court
declared the spouses in default and proceeded to receive evidence
for petitioner Soriano ex parte.
On July 7, 1997, the Regional Trial Court of Balanga City, Branch 1
rendered judgment[9] in favor of petitioner Soriano, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
and against the defendant ordering the latter to pay:
1. the plaintiff the amount of P350,000.00 plus 12% interest to be
computed from the dates of maturity of the promissory notes until
the same are fully paid;
2. the plaintiff P20,000.00, as attorneys fees; and
3. the costs of suit.
SO ORDERED.[10]
The judgment became final and executory. Accordingly, the trial
court issued a writ of execution in due course, by virtue of which,
Deputy Sheriff Renato E. Robles levied on the following real
properties of the Galit spouses:
1. A parcel of land covered by Original Certificate of Title No. T-569
(Homestead Patent No. 14692) situated in the Bo. of Tapulac, Orani,
Bataan. Bounded on the SW, along line 1-2 by Lot No. 3, Cad. 145;
containing an area of THIRTY FIVE THOUSAND SEVEN HUNDRED
FIFTY NINE (35,759) SQUARE METERS, more or less x x x;
2. STORE/HOUSE CONSTRUCTED on Lot No. 1103 made of strong
materials G.I. roofing situated at Centro I, Orani, Bataan, x x x
containing an area of 30 sq. meters, more or less x x x (constructed
on TCT No. T40785);
3. BODEGA constructed on Lot 1103, made of strong materials, G.I.
roofing, situated in Centro I, Orani, Bataan, x x x with a floor area of
42.75 sq. m. more or less x x x.[11]
At the sale of the above-enumerated properties at public auction
held on December 23, 1998, petitioner was the highest and only
bidder with a bid price of P483,000.00. Accordingly, on February 4,
1999, Deputy Sheriff Robles issued a Certificate of Sale of Execution
of Real Property,[12] which reads:
CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY
TO ALL WHO MAY SEE THESE PRESENTS:
GREETINGS:

I HEREBY that (sic) by virtue of the writ of execution dated October
16, 1998, issued in the above-entitled case by the HON. BENJAMIN
T. VIANZON, ordering the Provincial Sheriff of Bataan or her
authorized Deputy Sheriff to cause to be made (sic) the sum of
P350,000.00 plus 12% interest to be computed from the date of
maturity of the promissory notes until the same are fully paid;
P20,000.00 as attorneys fees plus legal expenses in the
implementation of the writ of execution, the undersigned Deputy
Sheriff sold at public auction on December 23, 1998 the rights and
interests of defendants Sps. Ricardo and Rosalina Galit, to the
plaintiff Marcelo Soriano, the highest and only bidder for the
amount of FOUR HNDRED EIGHTY THREE THOUSAND PESOS
(P483,000.00, Philippine Currency), the following real estate
properties more particularly described as follows :
ORIGINAL CERTIFICATE OF TITLE NO. T-569
A parcel of land (Homestead Patent No. 14692) situated in the Bo. of
Tapulac, Orani, Bataan, x x x. Bounded on the SW., along line 1-2 by
Lot No. 3, Cad. 145, containing an area of THIRTY FIVE THOUSAND
SEVEN HUNDRED FIFTY NINE (35,759) SQUARE METERS, more or less
xxx
TAX DEC. NO. PROPERTY INDEX NO. 018-09-001-02
STOREHOUSE constructed on Lot 1103, made of strong materials G.I.
roofing situated at Centro I, Orani, Bataan x x x containing an area of
30 sq. meters, more or less x x (constructed on TCT No. 40785)
TAX DEC. NO. 86 PROPERTY INDEX No. 018-09-001-02
BODEGA constructed on Lot 1103, made of strong materials G.I.
roofing situated in Centro I, Orani, Bataan, x x x with a floor area of
42.75 sq. m. more or less x x x
IT IS FURTHER CERTIFIED, that the aforesaid highest and lone bidder,
Marcelo Soriano, being the plaintiff did not pay to the Provincial
Sheriff of Bataan the amount of P483,000.00, the sale price of the
above-described property which amount was credited to partial/full
satisfaction of the judgment embodied in the writ of execution.
The period of redemption of the above described real properties
together with all the improvements thereon will expire One (1) year
from and after the registration of this Certificate of Sale with the
Register of Deeds.
This Certificate of Sheriffs Sale is issued to the highest and lone
bidder, Marcelo Soriano, under guarantees prescribed by law.
Balanga, Bataan, February 4, 1999.
On April 23, 1999, petitioner caused the registration of the
Certificate of Sale on Execution of Real Property with the Registry of
Deeds.
The said Certificate of Sale registered with the Register of Deeds
includes at the dorsal portion thereof the following entry, not found
in the Certificate of Sale on file with Deputy Sheriff Renato E.
Robles:[13]
ORIGINAL CERTIFICATE OF TITLE NO. T-40785
A parcel of land (Lot No. 1103 of the Cadastral Survey of Orani) ,
with the improvements thereon, situated in the Municipality of
Orani, Bounded on the NE; by Calle P. Gomez; on the E. by Lot No.
1104; on the SE by Calle Washington; and on the W. by Lot 4102,
containing an area of ONE HUNDRED THIRTY NINE (139) SQUARE
METERS, more or less. All points referred to are indicated on the
plan; bearing true; declination 0 deg. 40E., date of survey, February
191-March 1920.
On February 23, 2001, ten months from the time the Certificate of
Sale on Execution was registered with the Registry of Deeds,
petitioner moved[14] for the issuance of a writ of possession. He
averred that the one-year period of redemption had elapsed
without the respondents having redeemed the properties sold at
public auction; thus, the sale of said properties had already become
final. He also argued that after the lapse of the redemption period,
the titles to the properties should be considered, for all legal intents
and purposes, in his name and favor.[15]
On June 4, 2001, the Regional Trial Court of Balanga City, Branch 1
granted the motion for issuance of writ of possession.[16]
Subsequently, on July 18, 2001, a writ of possession[17] was issued
in petitioners favor which reads:
WRIT OF POSSESSION
Mr. Renato E. Robles
Deputy Sheriff
RTC, Br. 1, Balanga City
Greetings :
WHEREAS on February 3, 2001, the counsel for plaintiff filed Motion
for the Issuance of Writ of Possession;
WHEREAS on June 4, 2001, this court issued an order granting the
issuance of the Writ of Possession;
WHEREFORE, you are hereby commanded to place the herein
plaintiff Marcelo Soriano in possession of the property involved in
this case situated (sic) more particularly described as:
1. STORE HOUSE constructed on Lot No. 1103 situated at Centro 1,
Orani, Bataan covered by TCT No. 40785;
2. BODEGA constructed on Lot No. 1103 with an area of 42.75
square meters under Tax Declaration No. 86 situated at Centro 1,
Orani, Bataan;
3. Original Certificate of Title No. 40785 with an area of 134 square
meters known as Lot No. 1103 of the Cadastral Survey of Orani
against the mortgagor/former owners Sps. Ricardo and Rosalinda
(sic) Galit, her (sic) heirs, successors, assigns and all persons claiming
rights and interests adverse to the petitioner and make a return of
this writ every thirty (30) days from receipt hereof together with all
the proceedings thereon until the same has been fully satisfied.
WITNESS THE HONORABLE BENJAMIN T. VIANZON, Presiding Judge,
this 18th day of July 2001, at Balanga City.
(Sgd) GILBERT S. ARGONZA
OIC
Respondents filed a petition for certiorari with the Court of Appeals,
which was docketed as CA-G.R. SP No. 65891, assailing the inclusion
of the parcel of land covered by Transfer Certificate of Title No. T-
40785 among the list of real properties in the writ of possession.[18]
Respondents argued that said property was not among those sold
on execution by Deputy Sheriff Renato E. Robles as reflected in the
Certificate of Sale on Execution of Real Property.

In opposition, petitioner prayed for the dismissal of the petition
because respondent spouses failed to move for the reconsideration
of the assailed order prior to the filing of the petition. Moreover, the
proper remedy against the assailed order of the trial court is an
appeal, or a motion to quash the writ of possession.
On May 13, 2002, the Court of Appeals rendered judgment as
follows:
WHEREFORE, the instant petition is hereby GRANTED. Accordingly,
the writ of possession issued by the Regional Trial Court of Balanga
City, Branch 1, on 18 July 2001 is declared NULL and VOID.
In the event that the questioned writ of possession has already been
implemented, the Deputy Sheriff of the Regional Trial Court of
Balanga City, Branch 1, and private respondent Marcelo Soriano are
hereby ordered to cause the redelivery of Transfer Certificate of
Title No. T-40785 to the petitioners.
SO ORDERED.[19]
Aggrieved, petitioner now comes to this Court maintaining that
1.) THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 IS
NOT THE PLAIN, SPEEDY AND ADEQUATE REMEDY OF THE
RESPONDENTS IN ASSAILING THE WRIT OF POSSESSION ISSUED BY
THE LOWER COURT BUT THERE WERE STILL OTHER REMEDIES
AVAILABLE TO THEM AND WHICH WERE NOT RESORTED TO LIKE THE
FILING OF A MOTION FOR RECONSIDERATION OR MOTION TO
QUASH OR EVEN APPEAL.
2.) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
DECLARAING THE CERTIFICATE OF SALE ON EXECUTION OF REAL
PROPERTY AS NULL AND VOID AND SUBSEQUENTLY THE WRIT OF
POSSESSION BECAUSE THE SAME IS A PUBLIC DOCUMENT WHICH
ENJOYS THE PRESUMPTION OF REGULARITY AND IT CANNOT BE
OVERCOME BY A MERE STRANGE FEELING THAT SOMETHING IS
AMISS ON ITS SURFACE SIMPLY BECAUSE THE TYPEWRITTEN WORDS
ON THE FRONT PAGE AND AT THE DORSAL PORTION THEREOF IS
DIFFERENT OR THAT IT IS UNLIKELY FOR THE SHERIFF TO USE THE
DORSAL PORTION OF THE FIRST PAGE BECAUSE THE SECOND PAGE
IS MERELY HALF FILLED AND THE NOTATION ON THE DORSAL
PORTION COULD STILL BE MADE AT THE SECOND PAGE.
On the first ground, petitioner contends that respondents were not
without remedy before the trial court. He points out that
respondents could have filed a motion for reconsideration of the
Order dated June 4, 1999, but they did not do so. Respondents could
also have filed an appeal but they, likewise, did not do so. When the
writ of possession was issued, respondents could have filed a motion
to quash the writ. Again they did not. Respondents cannot now avail
of the special civil action for certiorari as a substitute for these
remedies. They should suffer the consequences for sleeping on their
rights.
We disagree.
Concededly, those who seek to avail of the procedural remedies
provided by the rules must adhere to the requirements thereof,
failing which the right to do so is lost. It is, however, equally settled
that the Rules of Court seek to eliminate undue reliance on technical
rules and to make litigation as inexpensive as practicable and as
convenient as can be done.[20] This is in accordance with the
primary purpose of the 1997 Rules of Civil Procedure as provided in
Rule 1, Section 6, which reads:
Section 6. Construction. These rules shall be liberally construed in
order to promote their objective of securing a just, speedy and
inexpensive determination of every action and proceeding.[21]
The rules of procedure are not to be applied in a very rigid, technical
sense and are used only to help secure substantial justice. If a
technical and rigid enforcement of the rules is made, their aim
would be defeated.[22] They should be liberally construed so that
litigants can have ample opportunity to prove their claims and thus
prevent a denial of justice due to technicalities.[23] Thus, in China
Banking Corporation v. Members of the Board of Trustees of Home
Development Mutual Fund,[24] it was held:
while certiorari as a remedy may not be used as a substitute for an
appeal, especially for a lost appeal, this rule should not be strictly
enforced if the petition is genuinely meritorious.[25] It has been said
that where the rigid application of the rules would frustrate
substantial justice, or bar the vindication of a legitimate grievance,
the courts are justified in exempting a particular case from the
operation of the rules.[26] (Emphasis ours)
Indeed, well-known is the rule that departures from procedure may
be forgiven where they do not appear to have impaired the
substantial rights of the parties.[27] Apropos in this regard is
Cometa v. CA,[28] where we said that
There is no question that petitioners were remiss in attending with
dispatch to the protection of their interests as regards the subject
lots, and for that reason the case in the lower court was dismissed
on a technicality and no definitive pronouncement on the
inadequacy of the price paid for the levied properties was ever
made. In this regard, it bears stressing that procedural rules are not
to be belittled or dismissed simply because their non-observance
may have resulted in prejudice to a partys substantive rights as in
this case. Like all rules, they are required to be followed except
when only for the most persuasive of reasons they may be relaxed
to relieve a litigant of an injustice not commensurate with the
degree of his thoughtlessness in not complying with the procedure
prescribed.[29] (emphasis and italics supplied.)
In short, since rules of procedure are mere tools designed to
facilitate the attainment of justice, their strict and rigid application
which would result in technicalities that tend to frustrate rather
than promote substantial justice must always be avoided.[30]
Technicality should not be allowed to stand in the way of equitably
and completely resolving the rights and obligations of the
parties.[31]
Eschewing, therefore, the procedural objections raised by petitioner,
it behooves us to address the issue of whether or not the
questioned writ of possession is in fact a nullity considering that it
includes real property not expressly mentioned in the Certificate of
Sale of Real Property.
Petitioner, in sum, dwells on the general proposition that since the
certificate of sale is a public document, it enjoys the presumption of
regularity and all entries therein are presumed to be done in the
performance of regular functions.
The argument is not persuasive.
There are actually two (2) copies of the Certificate of Sale on
Execution of Real Properties issued on February 4, 1999 involved,
namely: (a) copy which is on file with the deputy sheriff; and (b)
copy registered with the Registry of Deeds. The object of scrutiny,
however, is not the copy of the Certificate of Sale on Execution of
Real Properties issued by the deputy sheriff on February 4, 1999,[32]
but the copy thereof subsequently registered by petitioner with the
Registry of Deeds on April 23, 1999,[33] which included an entry on
the dorsal portion of the first page thereof describing a parcel of
land covered by OCT No. T-40785 not found in the Certificate of Sale
of Real Properties on file with the sheriff.
True, public documents by themselves may be adequate to establish
the presumption of their validity. However, their probative weight
must be evaluated not in isolation but in conjunction with other
evidence adduced by the parties in the controversy, much more so
in this case where the contents of a copy thereof subsequently
registered for documentation purposes is being contested. No
reason has been offered how and why the questioned entry was
subsequently intercalated in the copy of the certificate of sale
subsequently registered with the Registry of Deeds. Absent any
satisfactory explanation as to why said entry was belatedly inserted,
the surreptitiousness of its inclusion coupled with the furtive
manner of its intercalation casts serious doubt on the authenticity of
petitioners copy of the Certificate of Sale. Thus, it has been held that
while a public document like a notarized deed of sale is vested with
the presumption of regularity, this is not a guarantee of the validity
of its contents.[34]
It must be pointed out in this regard that the issuance of a
Certificate of Sale is an end result of judicial foreclosure where
statutory requirements are strictly adhered to; where even the
slightest deviations therefrom will invalidate the proceeding[35] and
the sale.[36] Among these requirements is an explicit enumeration
and correct description of what properties are to be sold stated in
the notice. The stringence in the observance of these requirements
is such that an incorrect title number together with a correct
technical description of the property to be sold and vice versa is
deemed a substantial and fatal error which results in the invalidation
of the sale.[37]
The certificate of sale is an accurate record of what properties were
actually sold to satisfy the debt. The strictness in the observance of
accuracy and correctness in the description of the properties
renders the enumeration in the certificate exclusive. Thus,
subsequently including properties which have not been explicitly
mentioned therein for registration purposes under suspicious
circumstances smacks of fraud. The explanation that the land on
which the properties sold is necessarily included and, hence, was
belatedly typed on the dorsal portion of the copy of the certificate
subsequently registered is at best a lame excuse unworthy of belief.
The appellate court correctly observed that there was a marked
difference in the appearance of the typewritten words appearing on
the first page of the copy of the Certificate of Sale registered with
the Registry of Deeds[38] and those appearing at the dorsal portion
thereof. Underscoring the irregularity of the intercalation is the
clearly devious attempt to let such an insertion pass unnoticed by
typing the same at the back of the first page instead of on the
second page which was merely half-filled and could accommodate
the entry with room to spare.
The argument that the land on which the buildings levied upon in
execution is necessarily included is, likewise, tenuous. Article 415 of
the Civil Code provides:
ART. 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds adhered to
the soil.
xxxxxxxxx
(3) Everything attached to an immovable in a fixed manner, in such a
way that it cannot be separated therefrom without breaking them
material or deterioration of the object;
(4) Statues, reliefs, paintings or other objects for use or
ornamentation, placed in buildings or on lands by the owner of the
immovable in such a manner that it reveals the intention to attach
them permanently to the tenements;
(5) Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works;
(6) Animal houses, pigeon houses, beehives, fish ponds or breeding
places of similar nature, in case their owner has placed them or
preserves them with the intention to have them permanently
attached to the land, and forming a permanent part of it; the
animals in these places are also included;
xxxxxxxxx
(9) Docks and structures which, though floating, are intended by
their nature and object to remain at a fixed place on a river, lake or
coast;
x x x x x x x x x.
The foregoing provision of the Civil Code enumerates land and
buildings separately. This can only mean that a building is, by itself,
considered immovable.[39] Thus, it has been held that
. . . while it is true that a mortgage of land necessarily includes, in
the absence of stipulation of the improvements thereon, buildings,
still a building by itself may be mortgaged apart from the land on
which it has been built. Such mortgage would be still a real estate
mortgage for the building would still be considered immovable
property even if dealt with separately and apart from the land.[40]
(emphasis and italics supplied)
In this case, considering that what was sold by virtue of the writ of
execution issued by the trial court was merely the storehouse and
bodega constructed on the parcel of land covered by Transfer
Certificate of Title No. T-40785, which by themselves are real
properties of respondents spouses, the same should be regarded as
separate and distinct from the conveyance of the lot on which they
stand.
WHEREFORE, in view of all the foregoing, the petition is hereby
DENIED for lack of merit. The Decision dated May 13, 2002 of the
Court of Appeals in CA-G.R. SP No. 65891, which declared the writ of
possession issued by the Regional Trial Court of Balanga City, Branch
1, on July 18, 2001, null and void, is AFFIRMED in toto.
SO ORDERED.