G.R. No.

L-19650 September 29, 1966

CALTEX (PHILIPPINES), INC., petitioner-appellee,

vs.

ENRICO PALOMAR, in his capacity as THE POSTMASTER GENERAL, respondent-appellant.

Office of the Solicitor G eneral for respondent and appellant.

Ross, Selph and Carrascoso for petitioner and appellee.

CASTRO, J.:

In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceived and laid the
groundwork for a promotional scheme calculated to drum up patronage for its oil products. Denominated
"Caltex Hooded Pump Contest", it calls for participants therein to estimate the actual number of liters a hooded
gas pump at each Caltex station will dispense during a specified period. Employees of the Caltex (Philippines)
Inc., its dealers and its advertising agency, and their immediate families excepted, participation is to be open
indiscriminately to all "motor vehicle owners and/or licensed drivers". For the privilege to participate, no fee or
consideration is required to be paid, no purchase of Caltex products required to be made. Entry forms are to be
made available upon request at each Caltex station where a sealed can will be provided for the deposit of
accomplished entry stubs.

A three-staged winner selection system is envisioned. At the station level, called "Dealer Contest", the
contestant whose estimate is closest to the actual number of liters dispensed by the hooded pump thereat is to
be awarded the first prize; the next closest, the second; and the next, the third. Prizes at this level consist of a
3-burner kerosene stove for first; a thermos bottle and a Ray-O-Vac hunter lantern for second; and an
Everready Magnet-lite flashlight with batteries and a screwdriver set for third. The first-prize winner in each
station will then be qualified to join in the "Regional Contest" in seven different regions. The winning stubs of
the qualified contestants in each region will be deposited in a sealed can from which the first-prize, second-
prize and third-prize winners of that region will be drawn. The regional first-prize winners will be entitled to
make a three-day all-expenses-paid round trip to Manila, accompanied by their respective Caltex dealers, in
order to take part in the "National Contest". The regional second-prize and third-prize winners will receive cash
prizes of P500 and P300, respectively. At the national level, the stubs of the seven regional first-prize winners
will be placed inside a sealed can from which the drawing for the final first-prize, second-prize and third-prize
winners will be made. Cash prizes in store for winners at this final stage are: P3,000 for first; P2,000 for
second; Pl,500 for third; and P650 as consolation prize for each of the remaining four participants.

Foreseeing the extensive use of the mails not only as amongst the media for publicizing the contest but also
for the transmission of communications relative thereto, representations were made by Caltex with the postal
authorities for the contest to be cleared in advance for mailing, having in view sections 1954(a), 1982 and 1983
of the Revised Administrative Code, the pertinent provisions of which read as follows:

SECTION 1954. Absolutely non-mailable matter. — No matter belonging to any of the following classes,
whether sealed as first-class matter or not, shall be imported into the Philippines through the mails, or to be
deposited in or carried by the mails of the Philippines, or be delivered to its addressee by any officer or
employee of the Bureau of Posts:

Written or printed matter in any form advertising, describing, or in any manner pertaining to, or conveying or
purporting to convey any information concerning any lottery, gift enterprise, or similar scheme depending in
whole or in part upon lot or chance, or any scheme, device, or enterprise for obtaining any money or property
of any kind by means of false or fraudulent pretenses, representations, or promises.

"SECTION 1982. Fraud orders.—Upon satisfactory evidence that any person or company is engaged in
conducting any lottery, gift enterprise, or scheme for the distribution of money, or of any real or personal
property by lot, chance, or drawing of any kind, or that any person or company is conducting any scheme,
device, or enterprise for obtaining money or property of any kind through the mails by means of false or
fraudulent pretenses, representations, or promises, the Director of Posts may instruct any postmaster or other
officer or employee of the Bureau to return to the person, depositing the same in the mails, with the word
"fraudulent" plainly written or stamped upon the outside cover thereof, any mail matter of whatever class
mailed by or addressed to such person or company or the representative or agent of such person or company.

SECTION 1983. Deprivation of use of money order system and telegraphic transfer service.—The Director of
Posts may, upon evidence satisfactory to him that any person or company is engaged in conducting any
lottery, gift enterprise or scheme for the distribution of money, or of any real or personal property by lot,
chance, or drawing of any kind, or that any person or company is conducting any scheme, device, or enterprise
for obtaining money or property of any kind through the mails by means of false or fraudulent pretenses,
representations, or promise, forbid the issue or payment by any postmaster of any postal money order or
telegraphic transfer to said person or company or to the agent of any such person or company, whether such
agent is acting as an individual or as a firm, bank, corporation, or association of any kind, and may provide by
regulation for the return to the remitters of the sums named in money orders or telegraphic transfers drawn in
favor of such person or company or its agent.

The overtures were later formalized in a letter to the Postmaster General, dated October 31, 1960, in which the
Caltex, thru counsel, enclosed a copy of the contest rules and endeavored to justify its position that the contest
does not violate the anti-lottery provisions of the Postal Law. Unimpressed, the then Acting Postmaster
General opined that the scheme falls within the purview of the provisions aforesaid and declined to grant the
requested clearance. In its counsel's letter of December 7, 1960, Caltex sought a reconsideration of the
foregoing stand, stressing that there being involved no consideration in the part of any contestant, the contest
was not, under controlling authorities, condemnable as a lottery. Relying, however, on an opinion rendered by
the Secretary of Justice on an unrelated case seven years before (Opinion 217, Series of 1953), the
Postmaster General maintained his view that the contest involves consideration, or that, if it does not, it is
nevertheless a "gift enterprise" which is equally banned by the Postal Law, and in his letter of December 10,
1960 not only denied the use of the mails for purposes of the proposed contest but as well threatened that if
the contest was conducted, "a fraud order will have to be issued against it (Caltex) and all its representatives".

Caltex thereupon invoked judicial intervention by filing the present petition for declaratory relief against
Postmaster General Enrico Palomar, praying "that judgment be rendered declaring its 'Caltex Hooded Pump
Contest' not to be violative of the Postal Law, and ordering respondent to allow petitioner the use of the mails
to bring the contest to the attention of the public". After issues were joined and upon the respective
memoranda of the parties, the trial court rendered judgment as follows:

In view of the foregoing considerations, the Court holds that the proposed 'Caltex Hooded Pump Contest'
announced to be conducted by the petitioner under the rules marked as Annex B of the petitioner does not
violate the Postal Law and the respondent has no right to bar the public distribution of said rules by the mails.

The respondent appealed.

The parties are now before us, arrayed against each other upon two basic issues: first, whether the petition
states a sufficient cause of action for declaratory relief; and second, whether the proposed "Caltex Hooded
Pump Contest" violates the Postal Law. We shall take these up in seriatim.

1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was the applicable legal basis
for the remedy at the time it was invoked, declaratory relief is available to any person "whose rights are
affected by a statute . . . to determine any question of construction or validity arising under the . . . statute and
for a declaration of his rights thereunder" (now section 1, Rule 64, Revised Rules of Court). In amplification,
this Court, conformably to established jurisprudence on the matter, laid down certain conditions sine qua non
therefor, to wit: (1) there must be a justiciable controversy; (2) the controversy must be between persons
whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the
controversy; and (4) the issue involved must be ripe for judicial determination (Tolentino vs. The Board of
Accountancy, et al., G.R. No. L-3062, September 28, 1951; Delumen, et al. vs. Republic of the Philippines, 50
O.G., No. 2, pp. 576, 578-579; Edades vs. Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of
the appellant's stand being that the petition herein states no sufficient cause of action for declaratory relief, our
duty is to assay the factual bases thereof upon the foregoing crucible.

As we look in retrospect at the incidents that generated the present controversy, a number of significant points
stand out in bold relief. The appellee (Caltex), as a business enterprise of some consequence, concededly has
the unquestioned right to exploit every legitimate means, and to avail of all appropriate media to advertise and
stimulate increased patronage for its products. In contrast, the appellant, as the authority charged with the
enforcement of the Postal Law, admittedly has the power and the duty to suppress transgressions thereof —
particularly thru the issuance of fraud orders, under Sections 1982 and 1983 of the Revised Administrative
Code, against legally non-mailable schemes. Obviously pursuing its right aforesaid, the appellee laid out plans
for the sales promotion scheme hereinbefore detailed. To forestall possible difficulties in the dissemination of
information thereon thru the mails, amongst other media, it was found expedient to request the appellant for an
advance clearance therefor. However, likewise by virtue of his jurisdiction in the premises and construing the
pertinent provisions of the Postal Law, the appellant saw a violation thereof in the proposed scheme and
accordingly declined the request. A point of difference as to the correct construction to be given to the
applicable statute was thus reached. Communications in which the parties expounded on their respective
theories were exchanged. The confidence with which the appellee insisted upon its position was matched only
by the obstinacy with which the appellant stood his ground. And this impasse was climaxed by the appellant's
open warning to the appellee that if the proposed contest was "conducted, a fraud order will have to be issued
against it and all its representatives."

Against this backdrop, the stage was indeed set for the remedy prayed for. The appellee's insistent assertion
of its claim to the use of the mails for its proposed contest, and the challenge thereto and consequent denial by
the appellant of the privilege demanded, undoubtedly spawned a live controversy. The justiciability of the
dispute cannot be gainsaid. There is an active antagonistic assertion of a legal right on one side and a denial
thereof on the other, concerning a real — not a mere theoretical — question or issue. The contenders are as
real as their interests are substantial. To the appellee, the uncertainty occasioned by the divergence of views
on the issue of construction hampers or disturbs its freedom to enhance its business. To the appellant, the
suppression of the appellee's proposed contest believed to transgress a law he has sworn to uphold and
enforce is an unavoidable duty. With the appellee's bent to hold the contest and the appellant's threat to issue
a fraud order therefor if carried out, the contenders are confronted by the ominous shadow of an imminent and
inevitable litigation unless their differences are settled and stabilized by a tranquilizing declaration (Pablo y
Sen, et al. vs. Republic of the Philippines, G.R. No. L-6868, April 30, 1955). And, contrary to the insinuation of
the appellant, the time is long past when it can rightly be said that merely the appellee's "desires are thwarted
by its own doubts, or by the fears of others" — which admittedly does not confer a cause of action. Doubt, if
any there was, has ripened into a justiciable controversy when, as in the case at bar, it was translated into a
positive claim of right which is actually contested (III Moran, Comments on the Rules of Court, 1963 ed., pp.
132-133, citing: Woodward vs. Fox West Coast Theaters, 36 Ariz., 251, 284 Pac. 350).

We cannot hospitably entertain the appellant's pretense that there is here no question of construction because
the said appellant "simply applied the clear provisions of the law to a given set of facts as embodied in the
rules of the contest", hence, there is no room for declaratory relief. The infirmity of this pose lies in the fact that
it proceeds from the assumption that, if the circumstances here presented, the construction of the legal
provisions can be divorced from the matter of their application to the appellee's contest. This is not feasible.
Construction, verily, is the art or process of discovering and expounding the meaning and intention of the
authors of the law with respect to its application to a given case, where that intention is rendered doubtful,
amongst others, by reason of the fact that the given case is not explicitly provided for in the law (Black,
Interpretation of Laws, p. 1). This is precisely the case here. Whether or not the scheme proposed by the
appellee is within the coverage of the prohibitive provisions of the Postal Law inescapably requires an inquiry
into the intended meaning of the words used therein. To our mind, this is as much a question of construction or
interpretation as any other.

Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter at hand can amount to
nothing more than an advisory opinion the handing down of which is anathema to a declaratory relief action. Of
course, no breach of the Postal Law has as yet been committed. Yet, the disagreement over the construction
thereof is no longer nebulous or contingent. It has taken a fixed and final shape, presenting clearly defined
legal issues susceptible of immediate resolution. With the battle lines drawn, in a manner of speaking, the
propriety — nay, the necessity — of setting the dispute at rest before it accumulates the asperity distemper,
animosity, passion and violence of a full-blown battle which looms ahead (III Moran, Comments on the Rules of
Court, 1963 ed., p. 132 and cases cited), cannot but be conceded. Paraphrasing the language in Zeitlin vs.
Arnebergh 59 Cal., 2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p. 869, to deny
declaratory relief to the appellee in the situation into which it has been cast, would be to force it to choose
between undesirable alternatives. If it cannot obtain a final and definitive pronouncement as to whether the
anti-lottery provisions of the Postal Law apply to its proposed contest, it would be faced with these choices: If it
launches the contest and uses the mails for purposes thereof, it not only incurs the risk, but is also actually
threatened with the certain imposition, of a fraud order with its concomitant stigma which may attach even if the
appellee will eventually be vindicated; if it abandons the contest, it becomes a self-appointed censor, or
permits the appellant to put into effect a virtual fiat of previous censorship which is constitutionally
unwarranted. As we weigh these considerations in one equation and in the spirit of liberality with which the
Rules of Court are to be interpreted in order to promote their object (section 1, Rule 1, Revised Rules of Court)
— which, in the instant case, is to settle, and afford relief from uncertainty and insecurity with respect to, rights
and duties under a law — we can see in the present case any imposition upon our jurisdiction or any futility or
prematurity in our intervention.

The appellant, we apprehend, underrates the force and binding effect of the ruling we hand down in this case if
he believes that it will not have the final and pacifying function that a declaratory judgment is calculated to
subserve. At the very least, the appellant will be bound. But more than this, he obviously overlooks that in this
jurisdiction, "Judicial decisions applying or interpreting the law shall form a part of the legal system" (Article 8,
Civil Code of the Philippines). In effect, judicial decisions assume the same authority as the statute itself and,
until authoritatively abandoned, necessarily become, to the extent that they are applicable, the criteria which
must control the actuations not only of those called upon to abide thereby but also of those in duty bound to
enforce obedience thereto. Accordingly, we entertain no misgivings that our resolution of this case will
terminate the controversy at hand.

It is not amiss to point out at this juncture that the conclusion we have herein just reached is not without
precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J., 399, 117 A. 2d., 487, where a corporation engaged in
promotional advertising was advised by the county prosecutor that its proposed sales promotion plan had the
characteristics of a lottery, and that if such sales promotion were conducted, the corporation would be subject
to criminal prosecution, it was held that the corporation was entitled to maintain a declaratory relief action
against the county prosecutor to determine the legality of its sales promotion plan. In pari materia, see also:
Bunis vs. Conway, 17 App. Div. 2d., 207, 234 N.Y.S. 2d., 435; Zeitlin vs. Arnebergh, supra; Thrillo, Inc. vs.
Scott, 15 N.J. Super. 124, 82 A. 2d., 903.

In fine, we hold that the appellee has made out a case for declaratory relief.

2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost identical terminology in
sections 1954(a), 1982 and 1983 thereof, supra, condemns as absolutely non-mailable, and empowers the
Postmaster General to issue fraud orders against, or otherwise deny the use of the facilities of the postal
service to, any information concerning "any lottery, gift enterprise, or scheme for the distribution of money, or
of any real or personal property by lot, chance, or drawing of any kind". Upon these words hinges the
resolution of the second issue posed in this appeal.

Happily, this is not an altogether untrodden judicial path. As early as in 1922, in "El Debate", Inc. vs. Topacio,
44 Phil., 278, 283-284, which significantly dwelt on the power of the postal authorities under the
abovementioned provisions of the Postal Law, this Court declared that —

While countless definitions of lottery have been attempted, the authoritative one for this jurisdiction is that of
the United States Supreme Court, in analogous cases having to do with the power of the United States
Postmaster General, viz.: The term "lottery" extends to all schemes for the distribution of prizes by chance,
such as policy playing, gift exhibitions, prize concerts, raffles at fairs, etc., and various forms of gambling. The
three essential elements of a lottery are: First, consideration; second, prize; and third, chance. (Horner vs.
States [1892], 147 U.S. 449; Public Clearing House vs. Coyne [1903], 194 U.S., 497; U.S. vs. Filart and
Singson [1915], 30 Phil., 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395; U.S. vs. Baguio [1919], 39 Phil.,
962; Valhalla Hotel Construction Company vs. Carmona, p. 233, ante.)

Unanimity there is in all quarters, and we agree, that the elements of prize and chance are too obvious in the
disputed scheme to be the subject of contention. Consequently as the appellant himself concedes, the field of
inquiry is narrowed down to the existence of the element of consideration therein. Respecting this matter, our
task is considerably lightened inasmuch as in the same case just cited, this Court has laid down a definitive
yard-stick in the following terms —

In respect to the last element of consideration, the law does not condemn the gratuitous distribution of property
by chance, if no consideration is derived directly or indirectly from the party receiving the chance, but does
condemn as criminal schemes in which a valuable consideration of some kind is paid directly or indirectly for
the chance to draw a prize.

Reverting to the rules of the proposed contest, we are struck by the clarity of the language in which the
invitation to participate therein is couched. Thus —
No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have to buy anything? Simply
estimate the actual number of liter the Caltex gas pump with the hood at your favorite Caltex dealer will
dispense from — to —, and win valuable prizes . . . ." .

Nowhere in the said rules is any requirement that any fee be paid, any merchandise be bought, any service be
rendered, or any value whatsoever be given for the privilege to participate. A prospective contestant has but to
go to a Caltex station, request for the entry form which is available on demand, and accomplish and submit the
same for the drawing of the winner. Viewed from all angles or turned inside out, the contest fails to exhibit any
discernible consideration which would brand it as a lottery. Indeed, even as we head the stern injunction, "look
beyond the fair exterior, to the substance, in order to unmask the real element and pernicious tendencies
which the law is seeking to prevent" ("El Debate", Inc. vs. Topacio, supra, p. 291), we find none. In our
appraisal, the scheme does not only appear to be, but actually is, a gratuitous distribution of property by
chance.

There is no point to the appellant's insistence that non-Caltex customers who may buy Caltex products simply
to win a prize would actually be indirectly paying a consideration for the privilege to join the contest. Perhaps
this would be tenable if the purchase of any Caltex product or the use of any Caltex service were a pre-
requisite to participation. But it is not. A contestant, it hardly needs reiterating, does not have to buy anything or
to give anything of value.1awphîl.nèt

Off-tangent, too, is the suggestion that the scheme, being admittedly for sales promotion, would naturally
benefit the sponsor in the way of increased patronage by those who will be encouraged to prefer Caltex
products "if only to get the chance to draw a prize by securing entry blanks". The required element of
consideration does not consist of the benefit derived by the proponent of the contest. The true test, as laid
down in People vs. Cardas, 28 P. 2d., 99, 137 Cal. App. (Supp.) 788, is whether the participant pays a
valuable consideration for the chance, and not whether those conducting the enterprise receive something of
value in return for the distribution of the prize. Perspective properly oriented, the standpoint of the contestant is
all that matters, not that of the sponsor. The following, culled from Corpus Juris Secundum, should set the
matter at rest:

The fact that the holder of the drawing expects thereby to receive, or in fact does receive, some benefit in the
way of patronage or otherwise, as a result of the drawing; does not supply the element of consideration. Griffith
Amusement Co. vs. Morgan, Tex. Civ. App., 98 S.W., 2d., 844" (54 C.J.S., p. 849).

Thus enlightened, we join the trial court in declaring that the "Caltex Hooded Pump Contest" proposed by the
appellee is not a lottery that may be administratively and adversely dealt with under the Postal Law.

But it may be asked: Is it not at least a "gift enterprise, or scheme for the distribution of money, or of any real or
personal property by lot, chance, or drawing of any kind", which is equally prescribed? Incidentally, while the
appellant's brief appears to have concentrated on the issue of consideration, this aspect of the case cannot be
avoided if the remedy here invoked is to achieve its tranquilizing effect as an instrument of both curative and
preventive justice. Recalling that the appellant's action was predicated, amongst other bases, upon Opinion
217, Series 1953, of the Secretary of Justice, which opined in effect that a scheme, though not a lottery for
want of consideration, may nevertheless be a gift enterprise in which that element is not essential, the
determination of whether or not the proposed contest — wanting in consideration as we have found it to be —
is a prohibited gift enterprise, cannot be passed over sub silencio.

While an all-embracing concept of the term "gift enterprise" is yet to be spelled out in explicit words, there
appears to be a consensus among lexicographers and standard authorities that the term is commonly applied
to a sporting artifice of under which goods are sold for their market value but by way of inducement each
purchaser is given a chance to win a prize (54 C.J.S., 850; 34 Am. Jur., 654; Black, Law Dictionary, 4th ed., p.
817; Ballantine, Law Dictionary with Pronunciations, 2nd ed., p. 55; Retail Section of Chamber of Commerce of
Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13; Barker vs. State, 193 S.E., 605, 56 Ga. App., 705; Bell vs.
State, 37 Tenn. 507, 509, 5 Sneed, 507, 509). As thus conceived, the term clearly cannot embrace the scheme
at bar. As already noted, there is no sale of anything to which the chance offered is attached as an inducement
to the purchaser. The contest is open to all qualified contestants irrespective of whether or not they buy the
appellee's products.

Going a step farther, however, and assuming that the appellee's contest can be encompassed within the
broadest sweep that the term "gift enterprise" is capable of being extended, we think that the appellant's pose
will gain no added comfort. As stated in the opinion relied upon, rulings there are indeed holding that a gift
enterprise involving an award by chance, even in default of the element of consideration necessary to
constitute a lottery, is prohibited (E.g.: Crimes vs. States, 235 Ala 192, 178 So. 73; Russell vs. Equitable Loan
& Sec. Co., 129 Ga. 154, 58 S.E., 88; State ex rel. Stafford vs. Fox-Great Falls Theater Corporation, 132 P.
2d., 689, 694, 698, 114 Mont. 52). But this is only one side of the coin. Equally impressive authorities declare
that, like a lottery, a gift enterprise comes within the prohibitive statutes only if it exhibits the tripartite elements
of prize, chance and consideration (E.g.: Bills vs. People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio vs.
Jacobs, 275 P. 563, 565, 151 Wash., 297; People vs. Psallis, 12 N.Y.S., 2d., 796; City and County of Denver
vs. Frueauff, 88 P., 389, 394, 39 Colo., 20, 7 L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851, citing:
Barker vs. State, 193 S.E., 605, 607, 56 Ga. App., 705; 18 Words and Phrases, perm. ed., pp. 590-594). The
apparent conflict of opinions is explained by the fact that the specific statutory provisions relied upon are not
identical. In some cases, as pointed out in 54 C.J.S., 851, the terms "lottery" and "gift enterprise" are used
interchangeably (Bills vs. People, supra); in others, the necessity for the element of consideration or chance
has been specifically eliminated by statute. (54 C.J.S., 351-352, citing Barker vs. State, supra; State ex rel.
Stafford vs. Fox-Great Falls Theater Corporation, supra). The lesson that we derive from this state of the
pertinent jurisprudence is, therefore, that every case must be resolved upon the particular phraseology of the
applicable statutory provision.

Taking this cue, we note that in the Postal Law, the term in question is used in association with the word
"lottery". With the meaning of lottery settled, and consonant to the well-known principle of legal hermeneutics
noscitur a sociis — which Opinion 217 aforesaid also relied upon although only insofar as the element of
chance is concerned — it is only logical that the term under a construction should be accorded no other
meaning than that which is consistent with the nature of the word associated therewith. Hence, if lottery is
prohibited only if it involves a consideration, so also must the term "gift enterprise" be so construed.
Significantly, there is not in the law the slightest indicium of any intent to eliminate that element of
consideration from the "gift enterprise" therein included.

This conclusion firms up in the light of the mischief sought to be remedied by the law, resort to the
determination thereof being an accepted extrinsic aid in statutory construction. Mail fraud orders, it is
axiomatic, are designed to prevent the use of the mails as a medium for disseminating printed matters which
on grounds of public policy are declared non-mailable. As applied to lotteries, gift enterprises and similar
schemes, justification lies in the recognized necessity to suppress their tendency to inflame the gambling spirit
and to corrupt public morals (Com. vs. Lund, 15 A. 2d., 839, 143 Pa. Super. 208). Since in gambling it is
inherent that something of value be hazarded for a chance to gain a larger amount, it follows ineluctably that
where no consideration is paid by the contestant to participate, the reason behind the law can hardly be said to
obtain. If, as it has been held —

Gratuitous distribution of property by lot or chance does not constitute "lottery", if it is not resorted to as a
device to evade the law and no consideration is derived, directly or indirectly, from the party receiving the
chance, gambling spirit not being cultivated or stimulated thereby. City of Roswell vs. Jones, 67 P. 2d., 286, 41
N.M., 258." (25 Words and Phrases, perm. ed., p. 695, emphasis supplied).

we find no obstacle in saying the same respecting a gift enterprise. In the end, we are persuaded to hold that,
under the prohibitive provisions of the Postal Law which we have heretofore examined, gift enterprises and
similar schemes therein contemplated are condemnable only if, like lotteries, they involve the element of
consideration. Finding none in the contest here in question, we rule that the appellee may not be denied the
use of the mails for purposes thereof.

Recapitulating, we hold that the petition herein states a sufficient cause of action for declaratory relief, and that
the "Caltex Hooded Pump Contest" as described in the rules submitted by the appellee does not transgress
the provisions of the Postal Law.

ACCORDINGLY, the judgment appealed from is affirmed. No costs.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ.,
concur.

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,

vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and
F.E. ZUELLIG (M), INC., respondents.

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari seeking to modify the decision of the National Labor Relations Commission in
NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v.
F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio
Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which dismissed the appeal of
petitioners herein and in effect affirmed the decision of the Labor Arbiter ordering private respondent to pay
petitioners separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for
every year of service.

The antecedent facts are as follows:

Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor
(Regional Office No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco,
Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly on the ground of
retrenchment due to financial losses. This application was seasonably opposed by petitioners alleging that the
company is not suffering from any losses. They alleged further that they are being dismissed because of their
membership in the union. At the last hearing of the case, however, petitioners manifested that they are no
longer contesting their dismissal. The parties then agreed that the sole issue to be resolved is the basis of the
separation pay due to petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries
of at least P40,000. In addition, they received commissions for every sale they made.

The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees Association, of
which petitioners are members, contains the following provision (p. 71, Rollo):

ARTICLE XIV — Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or permanent
lay-off not due to the fault of said employee shall receive from the company a retirement gratuity in an amount
equivalent to one (1) month's salary per year of service. One month of salary as used in this paragraph shall
be deemed equivalent to the salary at date of retirement; years of service shall be deemed equivalent to total
service credits, a fraction of at least six months being considered one year, including probationary
employment. (Emphasis supplied)

On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. — The termination of employment of any employee due to the installation of
labor saving-devices, redundancy, retrenchment to prevent losses, and other similar causes, shall entitle the
employee affected thereby to separation pay. In case of termination due to the installation of labor-saving
devices or redundancy, the separation pay shall be equivalent to one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and other
similar causes, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year. (Emphasis supplied)

In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:

xxx

Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to prevent
losses or other similar causes, or where the employee suffers from a disease and his continued employment is
prohibited by law or is prejudicial to his health or to the health of his co-employees, the employee shall be
entitled to termination pay equivalent at least to his one month salary, or to one-half month pay for every year
of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year.

xxx

Sec. 10. Basis of termination pay. — The computation of the termination pay of an employee as provided
herein shall be based on his latest salary rate, unless the same was reduced by the employer to defeat the
intention of the Code, in which case the basis of computation shall be the rate before its deduction. (Emphasis
supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p. 78, Rollo):

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the complainants
separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year
of service that they have worked with the company.

SO ORDERED.

The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit.

Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of
Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to abide by
the decision appealed from" since he had "received, to his full and complete satisfaction, his separation pay,"
resolved to dismiss the petition as to him.

The issue is whether or not earned sales commissions and allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation pay.

The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether
under the Labor Code or the CBA, their basic salary, earned sales commissions and allowances should be
added together. They cited Article 97(f) of the Labor Code which includes commission as part on one's salary,
to wit;

(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. 'Fair reasonable value' shall not include any
profit to the employer or to any person affiliated with the employer.

Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to include
commission in the computation of separation pay, it could have explicitly said so in clear and unequivocal
terms. Furthermore, in the definition of the term "wage", "commission" is used only as one of the features or
designations attached to the word remuneration or earnings.

Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners for the
purpose of computation of their separation pay is concerned, this has been settled in the case of Santos v.
NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled that "in the computation
of backwages and separation pay, account must be taken not only of the basic salary of petitioner but also of
her transportation and emergency living allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R.
No. 75510, October 27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No.
78524, January 20, 1989.

We shall concern ourselves now with the issue of whether or not earned sales commission should be included
in the monthly salary of petitioner for the purpose of computation of their separation pay.

Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been
repeatedly declared by the courts that where the law speaks in clear and categorical language, there is no
room for interpretation or construction; there is only room for application (Cebu Portland Cement Co. v.
Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous statute speaks for itself, and any
attempt to make it clearer is vain labor and tends only to obscurity. How ever, it may be argued that if We
correlate Article 97(f) with Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code
and Sections 9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this regard, the
Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):

The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a general
definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any indication that
commission is part of salary. We can say that commission by itself may be considered a wage. This is not
something novel for it cannot be gainsaid that certain types of employees like agents, field personnel and
salesmen do not earn any regular daily, weekly or monthly salaries, but rely mainly on commission earned.

Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in conjunction
with Articles 273 and 274 (sic) of the Code specifically states that the basis of the termination pay due to one
who is sought to be legally separated from the service is 'his latest salary rates.

x x x.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.

The above terms found in those Articles and the particular Rules were intentionally used to express the intent
of the framers of the law that for purposes of separation pay they mean to be specifically referring to salary
only.

.... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning is attached to
simplify matters that may arise there from. The general guidelines in (sic) the formation of specific rules for
particular purpose. Thus, that what should be controlling in matters concerning termination pay should be the
specific provisions of both Book VI of the Code and the Rules. At any rate, settled is the rule that in matters of
conflict between the general provision of law and that of a particular- or specific provision, the latter should
prevail.

On its part, the NLRC ruled (p. 110, Rollo):

From the aforequoted provisions of the law and the implementing rules, it could be deduced that wage is used
in its generic sense and obviously refers to the basic wage rate to be ascertained on a time, task, piece or
commission basis or other method of calculating the same. It does not, however, mean that commission,
allowances or analogous income necessarily forms part of the employee's salary because to do so would lead
to anomalies (sic), if not absurd, construction of the word "salary." For what will prevent the employee from
insisting that emergency living allowance, 13th month pay, overtime, and premium pay, and other fringe
benefits should be added to the computation of their separation pay. This situation, to our mind, is not the real
intent of the Code and its rules.

We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing
Rules, which mention the terms "pay" and "salary", is more apparent than real. Broadly, the word "salary"
means a recompense or consideration made to a person for his pains or industry in another man's business.
Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with
it the fundamental idea of compensation for services rendered. Indeed, there is eminent authority for holding
that the words "wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38 Permanent
Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the
etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's
Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and
commission is included in the definition of "wage", the logical conclusion, therefore, is, in the computation of
the separation pay of petitioners, their salary base should include also their earned sales commissions.

The aforequoted provisions are not the only consideration for deciding the petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of
incentives or encouragement, so that the petitioners would be inspired to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct remuneration services rendered which
contributed to the increase of income of Zuellig . Commission is the recompense, compensation or reward of
an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed.,
citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and the
reason for such type of remuneration for services rendered demonstrate clearly that commission are part of
petitioners' wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic
salary but depend on commissions and allowances or commissions alone, are part of petitioners' wage or
salary. We take judicial notice of the fact that some salesman do not received any basic salary but depend on
commissions and allowances or commissions alone, although an employer-employee relationship exists.
Bearing in mind the preceeding dicussions, if we adopt the opposite view that commissions, do not form part of
wage or salary, then, in effect, We will be saying that this kind of salesmen do not receive any salary and
therefore, not entitled to separation pay in the event of discharge from employment. Will this not be absurd?
This narrow interpretation is not in accord with the liberal spirit of our labor laws and considering the purpose of
separation pay which is, to alleviate the difficulties which confront a dismissed employee thrown the the streets
to face the harsh necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in
computing the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not properly
includible in such base figure since such commissions must be earned by actual market transactions
attributable to petitioner.

Applying this by analogy, since the commissions in the present case were earned by actual market
transactions attributable to petitioners, these should be included in their separation pay. In the computation
thereof, what should be taken into account is the average commissions earned during their last year of
employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its implementing
regulations, the workingman's welfare should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided for in
Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of the
provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of
labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et
al., G.R. No. 78763, July 12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the
laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor Relations
Commission is MODIFIED by including allowances and commissions in the separation pay of petitioners Jose
Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper computation of said
separation pay.

SO ORDERED.

Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.

[G.R. No. L-48437. September 30, 1986.]

MANTRADE/FMMC DIVISION EMPLOYEES AND WORKERS UNION (represented by PHILIPPINE SOCIAL

SECURITY LABOR UNION — PSSLU Fed. — TUCP), Petitioner, v. ARBITRATOR FROILAN M. BACUNGAN
and MANTRADE DEVELOPMENT CORPORATION, Respondents.
SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; VOLUNTARY ARBITRATORS; DECISIONS

SUBJECT TO JUDICIAL REVIEW. — The contentions of respondent corporation have been ruled against in
the decision of this court in the case of Oceanic Bic Division (FFW) v. Romero, promulgated on July 16, 1984,
wherein it stated: . . . "A voluntary arbitrator by the nature of her functions acts in a quasijudicial capacity.
There is no reason why her decisions involving interpretation of law should be beyond this court’s review.
Administrative officials are presumed to act in accordance with law and yet we do not hesitate to pass upon
their work where a question of law is involved or where a showing of abuse of discretion in their officials acts is
properly raised in petitions for certiorari." (130 SCRA 392, 399, 400-401)

2. ID.; ID.; GRANT FOR HOLIDAY PAY MONTHLY PAID EMPLOYEES; ISSUE SETTLED IN THE CASES OF
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES’ UNION VS. INCIONG, [132 SCRA 633], AND
CHARTERED BANK EMPLOYEES UNION VS. OPLE [141 SCRA 9]. — Respondent arbitrator opined that
respondent corporation does not have any legal obligation to grant its monthly salaried employees holiday pay,
unless it is argued that the pertinent section of the Rule and Regulations implementing Section 94 of the Labor
Code is not in conformity with the law, and thus, without force and effect. This issue was subsequently decided
on October 24, 1984 by a division of this court in the case of Insular Bank of Asia and American Employees’
Union (IBAAEU) v. Inciong, wherein it held as follows: "We agree with petitioner’s contention that Section 2,
Rule IV, Book III of the implementing rules and Policy Instruction No. 9 issued by the then Secretary of Labor
are null and void since in the guise of clarifying the Labor Code’s provisions on holiday pay, they in effect
amended them enlarging the scope of their exclusion (p. 11, rec.). . . . "From the above-cited provisions, it is
clear that monthly paid employees are not excluded from the benefits of holiday pay. However, the
implementing rules on holiday pay promulgated by the then Secretary of Labor excludes monthly paid
employees from the said benefits by inserting under Rule IV, Book III of the implementing rules, section 2,
which provides that: ‘employees who are uniformly paid by the month, irrespective of the number of working
days therein , with the salary of not less than the statutory or established minimum wage shall be presumed to
be paid for all days in the month whether worked or not." (132 SCRA 663, 672-673) This ruling was reiterated
by the court en banc on August 28, 1985 in the case of Chartered Bank Employees Association v. Ople,
wherein it added that: "The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the Secretary’s
Policy Instruction No. 9 add another excluded group, namely ‘employees who are uniformly paid by the month’.
While additional exclusion is only in the form of a presumption that all monthly paid employees have already
been paid holiday paid, it constitutes a taking away or a deprivation which must be in the law if it is to be valid.
An administrative interpretation which diminishes the benefits of labor more than what the statute delimits or
withholds is obviously ultra vires." (138 SCRA 273, 282. See also CBTC Employees Union v. Clave, January 7,
1986, 141 SCRA 9.)

3. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS; APPROPRIATE EQUITABLE REMEDY IN CASE
AT BAR. — Respondent corporation contends that mandamus does not lie to compel the performance of an
act which the law does not clearly enjoin as a duty. True it is also that mandamus is not proper to enforce a
contractual obligation, the remedy being an action for specific performance (Province of Pangasinan v.
Reparations Commission, November 29, 1977, 80 SCRA 376). In the case at bar, however, in view of the
above-cited subsequent decisions of this Court clearly defining the legal duty to grant holiday pay to monthly
salaried employees, mandamus is an appropriate equitable remedy (Dionisio v. Paterno, July 23, 1980, 98
SCRA 677; Gonzales v. Government Service Insurance System, September 10, 1981, 107 SCRA 492).

DECISION
FERIA, J.:

This is a petition for Certiorari and Mandamus filed by petitioner against arbitrator Froilan M. Bacungan and
Mantrade Development Corporation arising from the decision of respondent arbitrator, the dispositive part of
which reads as follows:jgc:chanrobles.com.ph

"CONSIDERING ALL THE ABOVE, We rule that Mantrade Development Corporation is not under legal
obligation to pay holiday pay (as provided for in Article 94 of the Labor Code in the third official Department of
Labor edition) to its monthly paid employees who are uniformly paid by the month, irrespective of the number
of working days therein, with a salary of not less than the statutory or established minimum wage, and this rule
is applicable not only as of March 2, 1976 but as of November 1, 1974."cralaw virtua1aw library

Petitioner questions the validity of the pertinent section of the Rules and Regulations Implementing the Labor
Code as amended on which respondent arbitrator based his decision.

On the other hand, respondent corporation has raised procedural and substantive objections. It contends that
petitioner is barred from pursuing the present action in view of Article 263 of the Labor Code, which provides in
part that "voluntary arbitration awards or decisions shall be final, inappealable, and executory," as well as the
rules implementing the same; the pertinent provision of the Collective Bargaining Agreement between
petitioner and respondent corporation; and Article 2044 of the Civil Code which provides that "any stipulation
that the arbitrators’ award or decision shall be final, is valid, without prejudice to Articles 2038, 2039, and
2040." Respondent corporation further contends that the special civil action of certiorari does not lie because
respondent arbitrator is not an "officer exercising judicial functions" within the contemplation of Rule 65,
Section 1, of the Rules of Court; that the instant petition raises an error of judgment on the part of respondent
arbitrator and not an error of jurisdiction; that it prays for the annulment of certain rules and regulations issued
by the Department of Labor, not for the annulment of the voluntary arbitration proceedings; and that appeal by
certiorari under Section 29 of the Arbitration Law, Republic Act No. 876, is not applicable to the case at bar
because arbitration in labor disputes is expressly excluded by Section 3 of said law.chanrobles law library : red

These contentions have been ruled against in the decision of this Court in the case of Oceanic Bic Division
(FFW) v. Romero, promulgated on July 16, 1984, wherein it stated:jgc:chanrobles.com.ph

"We agree with the petitioner that the decisions of voluntary arbitrators must be given the highest respect and
as a general rule must be accorded a certain measure of finality. This is especially true where the arbitrator
chosen by the parties enjoys the first rate credentials of Professor Flerida Ruth Pineda Romero, Director of the
U.P. Law Center and an academician of unquestioned expertise in the field of Labor Law. It is not correct,
however, that this respect precludes the exercise of judicial review over their decisions. Article 262 of the Labor
Code making voluntary arbitration awards final, inappealable and executory, except where the money claims
exceed P100,000.00 or 40% of the paid-up capital of the employer or where there is abuse of discretion or
gross incompetence refers to appeals to the National Labor Relations Commission and not to judicial review.

"In spite of statutory provisions making ‘final’ the decisions of certain administrative agencies, we have taken
cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial justice, or erroneous interpretation of the Law were brought to
our attention. . . .

x x x
"A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity. There is no reason why
her decisions involving interpretation of law should be beyond this Court’s review. Administrative officials are
presumed to act in accordance with law and yet we do not hesitate to pass upon their work where a question of
law is involved or where a showing of abuse of discretion in their official acts is properly raised in petitions for
certiorari." (130 SCRA 392, 399, 400-401)

In denying petitioner’s claim for holiday pay, respondent arbitrator stated that although monthly salaried
employees are not among those excluded from receiving such additional pay under Article 94 of the Labor
Code of the Philippines, to wit:chanrobles virtual lawlibrary

ART. 94. Right to holiday pay. — (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid
compensation equivalent to twice his regular rate; and

(c) As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth of
April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and the
thirtieth of December, and the day designated by law for holding a general election.

they appear to be excluded under Sec. 2, Rule IV, Book III of the Rules and Regulations implementing said
provision which reads thus:chanrob1es virtual 1aw library

SEC. 2. Status of employees paid by the month. — Employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether worked or not.

Respondent arbitrator further opined that respondent corporation does not have any legal obligation to grant its
monthly salaried employees holiday pay, unless it is argued that the pertinent section of the Rules and
Regulations implementing Section 94 of the Labor Code is not in conformity with the law, and thus, without
force and effect.

This issue was subsequently decided on October 24, 1984 by a division of this Court in the case of Insular
Bank of Asia and America Employees’ Union (IBAAEU) v. Inciong, wherein it held as
follows:jgc:chanrobles.com.ph

"WE agree with the petitioner’s contention that Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9, issued by the then Secretary of Labor are null and void since in the guise of clarifying the
Labor Code’s provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion
(p. 11, rec.)

"Article 94 of the Labor Code, as amended by P.D. 850, provides:chanrob1es virtual 1aw library
‘Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than ten (10) workers . . .’

"The coverage and scope of exclusion of the Labor Code’s holiday pay provisions is spelled out under Article
82 thereof which reads:chanrob1es virtual 1aw library

‘Art. 82. Coverage. — The provision of this Title shall apply to employees in all establishments and
undertakings, whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic helpers,
persons, in the personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.’

x x x

"From the above-cited provisions, it is clear that monthly paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated by the then Secretary of Labor
excludes monthly paid employees from the said benefits by inserting under Rule IV, Book III of the
implementing rules, Section 2, which provides that: ‘employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether worked or not.’" (132 SCRA
663, 672-673).

This ruling was reiterated by the Court en banc on August 28, 1985 in the case of Chartered Bank Employees
Association v. Ople, wherein it added that:chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

"The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the Secretary’s Policy Instruction No. 9
add another excluded group, namely ‘employees who are uniformly paid by the month.’ While the additional
exclusion is only in the form of a presumption that all monthly paid employees have already been paid holiday
pay, it constitutes a taking away or a deprivation which must be in the law if it is to be valid. An administrative
interpretation which diminishes the benefits of labor more than what the statute delimits or withholds is
obviously ultra vires." (138 SCRA 273, 282. See also CBTC Employees Union v. , Clave, January 7, 1986, 141
SCRA 9.)

Lastly, respondent corporation contends that mandamus does not lie to compel the performance of an act
which the law does not clearly enjoin as a duty. True it is also that mandamus is not proper to enforce a
contractual obligation, the remedy being an action for specific performance (Province of Pangasinan v.
Reparations Commission, November 29, 1977, 80 SCRA 376). In the case at bar, however, in view of the
above cited subsequent decisions of this Court clearly defining the legal duty to grant holiday pay to monthly
salaried employees, mandamus is an appropriate equitable remedy (Dionisio v. Paterno, July 23, 1980, 98
SCRA 677; Gonzales v. Government Service Insurance System, September 10, 1981, 107 SCRA 492).

WHEREFORE, the questioned decision of respondent arbitrator is SET ASIDE and Respondent Corporation is
ordered to GRANT holiday pay to its monthly salaried employees. No costs.

SO ORDERED.
Fernan, Alampay, Gutierrez, Jr. and Paras, JJ., concur.

G.R. No. 70443 September 15, 1986

BRAULIO CONDE, RUFINA CONDE, GERARDO CONDE, CONCHITA C. LUNDANG, and ALFREDO
VENTURA, petitioners,

vs.

INTERMEDIATE APPELLATE COURT, HON. CESAR C. PERALEJO, in his capacity as Presiding Judge,
Regional Trial Court, Branch LXVI, Third Judicial Region, Capas, Tarlac, and MARCELO GUTIERREZ,
respondents.

Tomas P. Matic, Jr. for petitioners.

Adelaido G. Rivera for private respondent.

GUTIERREZ, JR., J.:

On January 16, 1984, the petitioners filed an action to annul the judgment of the Court of Appeals dated
September 23, 1981, which reversed the decision of the Regional Trial Court and ordered the petitioners
and/or their successors-in-interest to deliver immediately the ownership and possession of the property in
question to the then plaintiff-appellant Marcelo Gutierrez. In their complaint filed before the Regional Trial Court
of Capas, Tarlac, the petitioners alleged that through fraud, Gutierrez was able to make it appear that he was
the son of Esteban Gutierrez and Fermina Ramos and as a necessary consequence of such filiation, was the
absolute owner by succession of the property in question.

On February 27, 1984, the trial court dismissed the petitioners' complaint on the ground that it had no
jurisdiction to annul the judgment of the Court of Appeals. Upon the denial of their motion for reconsideration,
the petitioners filed a petition for certiorari, mandamus and a writ of injunction before the appellate court. The
said court in turn, dismissed the petition and a subsequent motion for reconsideration on the grounds that a
Regional Trial Court is without jurisdiction to annul the judgment of the Court of Appeals and that only the
Supreme Court is empowered to review the judgment of said appellate court. Hence, the petitioners elevated
the case before this Court.

On August 31, 1984, we issued a resolution dated August 22, 1984, remanding the case to the appellate court
for decision on the merits.

The resolution reads as follows:

The respondent intermediate Appellate Court erred when it declared that the complaint for annulment of
judgment in this case should be filed with the Supreme Court. This Court has no original jurisdiction to look into
allegations of fraud upon which the complaint for annulment is based. In January, 1984, the petitioners filed a
complaint with the Regional Trial Court of Tarlac seeking among other things the annulment of a decision
which had already passed, on appeal, the Court of Appeals in CA-G.R. No. 60139-R. On February 17, 1984,
the lower court dismissed the petitioners' complaint for annulment of judgment. The petitioners appealed the
dismissal to the respondent Intermediate Appellate Court which denied due course to the petition stating that
what is sought to be annulled is a decision of the Court of Appeals over which the regional trial court is
obviously without jurisdiction. The decision sought to be annulled calls for the turning over of possession to the
original respondent of the disputed properties. While the judgment being enforced may have been that of the
Court of Appeals, it was actually an appellate judgment rendered on a review of the trial court's decision.
Considering that Section 9 of the Judiciary Reorganization Act of 1980-B.P. No. 129 gives the Intermediate
Appellate Court exclusive jurisdiction over actions for annulment of judgments of regional trial courts, the
COURT RESOLVED to REMAND this case to the Intermediate Appellate Court for it to hear and decide the
action.

On January 29, 1985, the appellate court rendered a decision dismissing the petition for lack of jurisdiction and
for lack of merit. In its decision on the issue of jurisdiction, the respondent court ruled that since the decision of
the Metropolitan Trial Court can be annulled by the Regional Trial Court and a decision of the latter is
annullable by the Court of Appeals, then logically the decision of the appellate court should be annullable only
by the Supreme Court. Moreover, the appellate court ruled that it is but logical to conclude that it cannot annul
its own decision unless there is an express grant under the Judiciary Reorganization Act of 1980. Finding
none, it stated that it must perforce dismiss the case for lack of jurisdiction.

On the merits of the petition, the appellate court ruled that the fraud relied upon by the petitioners is only
intrinsic and thus, even on the assumption that it has jurisdiction to decide the case, still the same has no
merit. It dismissed the petition. The petitioners elevated this decision to us.

On June 5, 1985, we resolved to require the respondents to comment on the petition. Notwithstanding proof
that a copy of the petition was served on the respondents' counsel on June 24, 1985, no comment has been
filed.

We decide the petition.

We need not emphasize the rule that this Court decides appeals which only involve questions of law and that
"it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction
being limited to receiving errors of law that might have been committed by the lower court." (Baniqued v. Court
of Appeals, 127 SCRA 596, 601; citing Tiongco v. de la Merced, 58 SCRA 89). It was, thus, totally pointless for
the Intermediate Appellate Court to delve into the question of whether or not it has jurisdiction to pass upon the
merits of the petition which then alleged the perpetration of fraud by one of the parties in the original case, and
which thereby called for a review of the factual findings of the court. Furthermore, the fact that this Court
already remanded the case to the appellate court for decision on the merits should have prompted the latter to
limit its decision only to the merits of the case.

There are instances when this Court desires a further review of facts or a detailed analysis and systematic
presentation of issues which the appellate court is in a more favored position to accomplish. Standing between
the trial courts and the Supreme Court, the appellate court was precisely created to take over much of the work
that used to be previously done by this Court. It has been of great help to the Supreme Court in synthesizing
facts, issues, and rulings in an orderly and intelligible manner and in Identifying errors which ordinarily might
have escaped detection. Statistics will show that the great majority of petitions to review the decisions of the
appellate court have been denied due course for lack of merit in minute resolutions. The appellate court has,
therefore, freed this Court to better discharge its constitutional duties and perform its most important work
which, in the words of Dean Vicente G. Sinco, "is less concerned with the decision of cases that begin and end
with the transient rights and obligations of particular individuals but is more intertwined with the direction of
national policies, momentous economic and social problems, the delimitation of governmental authority and its
impact upon fundamental rights." (Philippine Political Law, 10th Edition, p. 323). It is, therefore, difficult to
understand why a Division of the Intermediate Appellate Court should hesitate to help the Supreme Court and
to act on an action which it was specifically ordered to hear and decide.

If its initial hesitation was due to doubts about the correctness of our action, then it should recall the admonition
in Tugade v. Court of Appeals (85 SCRA 226, 230-231) that:

xxx xxx xxx

Respondent Court of Appeals really was devoid of any choice at all It could not have ruled in any other way on
the legal question raised. This Tribunal having spoken, its duty was to obey. It is as simple as that. There is
relevance to this excerpt from Barrera v. Barrera (34 SCRA 98): 'The delicate task of ascertaining the
significance that attaches to a constitutional or statutory provision, an executive order, a procedural norm or a
municipal ordinance is committed to the judiciary. It thus discharges a role no less crucial than that
appertaining to the other two departments in the maintenance of the rule of law. To assure stability in legal
relations and avoid confusion, it has to speak with one voice. It does so with finality, logically and rightly,
through the highest judicial organ, this Court. What it says then should be definitive and authoritative, binding
on those occupying the lower ranks in the judicial hierarchy. They have to defer and to submit.' (Ibid. 107. The
opinion of Justice Laurel in People v. Vera, 65 Phil. 56 [1937] was cited.) The ensuing paragraphs of the
opinion in Barrera further emphasizes the point: 'Such a thought was reiterated in an opinion of Justice J.B.L.
Reyes and further emphasized in these words: 'Judge Gaudencio Cloribel need not be reminded that the
Supreme Court, by tradition and in our system of judicial administration, has the last word on what the law is it
is the final arbiter of any justifiable controversy. There is only one Supreme Court from whose decisions an
other courts should take their bearings. (Justice J.B.L. Reyes spoke thus in Albert v. Court of First Instance of
Manila [Br. VI], 23 SCRA 948, 961).
The fault of the Intermediate Appellate Court is mitigated by the fact that it still decided the remanded case on
the merits. It stated:

On February of 1950 an original complaint for recovery of possession of a parcel of land was filed before the
Court of First Instance of Tarlac, which was subsequently amended on March 19, 1951.

On May 20, 1976, after a full blown trial the Regional Trial Court Branch 64 (formerly Court of First Instance) of
Tarlac, rendered a decision dismissing the complaint and ordering plaintiff Marcelo Gutierrez to pay the
defendants the costs of the suit. The dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered dismissing the complaint and ordering plaintiff Marcelo Gutierrez
to pay the defendants the costs of this suit. He (sic) pronouncement as to damages for want of proof.

From the above judgment an appeal was filed with the Court of Appeals.

On September 23, 1981, the then Court of Appeals reversed the decision of the Regional Trial Court, Branch
64, this time ordering the ten appellees (now petitioners) to deliver the ownership and possession of the
litigated property to then appellant (now respondent Marcelo Gutierrez), which decision became final and
executory on December 20, 1982, the dispositive portion of which reads, as follows:

WHEREFORE, in the light of the foregoing, the decision appealed from, not being in accordance with the
applicable law and evidence and finding validity in the errors assigned, is hereby reversed and set aside. In
lieu thereof, another one is entered ordering defendants-appellees and/or their successors-in-interest to deliver
immediately the ownership and possession of the property described under par. 3 of the complaint to herein
plaintiff- appellant Marcelo Gutierrez. With costs.

On January 16, 1984, an action to annul the judgment of the former Court of Appeals was filed before the
Regional Trial Court, Branch 56, Third Judicial Region in Capas, Tarlac.

On February 27, 1984, the respondent Court (Regional Trial Court), dismissed the case for annulment of
judgment on the ground that it has no jurisdiction to annul the judgment of the Court of Appeals.

On March 19, 1984, the motion for reconsideration filed by herein petitioner was denied by the respondent
court. Accordingly, a petition for certiorari, mandamus and a writ of injunction was filed before the Intermediate
Appellate Court and raffled to the Third Special Cases Division, The court dismissed the petition for lack of
merit on the ground that a Regional Trial Court is without jurisdiction to annul a judgment of the Intermediate
Appellate Court, the dispositive portion of which reads:

WHEREFORE, this case should be, as it is hereby DISMISSED OUTRIGHT. With costs against the
petitioners.

On June 14, 1984, the motion for reconsideration filed by herein petitioner was denied by this Court.

xxx xxx xxx

Finally, a judgment based on alleged false testimony is not an extrinsic fraud by which an action for annulment
of judgment could be grounded. The Supreme Court in Ilacad v. Court of Appeals (supra, p. 302), declared
that:

xxx xxx xxx

... and speaking of extrinsic fraud, it is that fraudulent scheme of the prevailing litigant which prevents a party
from having his day in court from presenting his case. Fraud has been regarded as extrinsic or collateral, within
the meaning of the rule 'where it is one of the effect of which prevents a party from having a trial, or real
contests, or from presenting all of his case to the court, or where it operates upon matters pertaining not to the
judgment itself, but to the manner by which it was procured so that there is not a fair submission of the
controversy. In other words, extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation
which is committed outside of the trial of the case, where the defeated party has been prevented from
presenting fully his side of the case, by fraud or deception practiced on him by his opponent.

The resort to fraud in introducing fabricated evidence is definitely an intrinsic fraud, hence false testimony
being a matter of evidence is definitely intrinsic and not extrinsic. Fraud consisting in acting fictitious cause of
false testimony is intrinsic (sic) (Francisco v. David, 38 CG 714). Intrinsic fraud takes the form of acts of a party
in a litigation during the trial such as the use of forged instruments or perjured testimony, which did not affect
the presentation of the case, but did prevent a fair and just determination of the case (Libudan v. Palma, [S1,
45 SCRA 17]). Intrinsic fraud is not sufficient to attack a judgment (Yatco v. Sumagui, 44623-R, July 31, 1971).

Petitioners stand that extrinsic fraud was employed by the respondents, is bereft of any factual basis, hence,
even on the assumption that this court has jurisdiction to decide this issue, still the petitioners cause of action
must fail.

A careful review of the present petition and of the records of the appellate court on this case shows that even
on the assumption that all the facts alleged in the petition are true, the petition should be dismissed for lack of
merit because the fraud allegedly perpetrated by the private respondent in AC-G.R. SP No. 03301 is only
intrinsic in nature and not extrinsic. Fraud is regarded as extrinsic or collateral where it has prevented a party
from having a trial or from presenting an of his case to the court. (Asian Surety and Insurance Co. v. Island
Steel, Inc., 118 SCRA 233, 239; citing Amuran v. Aquino, 38 Phil. 29). In the case at bar, the fraud was in the
nature of documents allegedly manufactured by Marcelo Gutierrez to make it appear that he was the rightful
heir of the disputed property, Hence, the Intermediate Appellate Court is correct in finding the fraud to be
intrinsic in nature.

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The respondents' counsel, Atty. Adelaido
G. Rivera is fined Five Hundred Pesos (P500.00) for his failure to act on the order to file comment.

SO ORDERED.

Feria (Chairman), Fernan, Alampay and Paras, JJ., concur,

G.R. No. 186400 October 20, 2010

CYNTHIA S. BOLOS, Petitioner,

vs.

DANILO T. BOLOS, Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a review of the December
10, 2008 Decision1 of the Court of Appeals (CA) in an original action for certiorari under Rule 65 entitled
"Danilo T. Bolos v. Hon. Lorifel Lacap Pahimna and Cynthia S. Bolos," docketed as CA-G.R. SP. No. 97872,
reversing the January 16, 2007 Order of the Regional Trial Court of Pasig City, Branch 69 (RTC), declaring its
decision pronouncing the nullity of marriage between petitioner and respondent final and executory.

On July 10, 2003, petitioner Cynthia Bolos (Cynthia) filed a petition for the declaration of nullity of her marriage
to respondent Danilo Bolos (Danilo) under Article 36 of the Family Code, docketed as JDRC No. 6211.

After trial on the merits, the RTC granted the petition for annulment in a Decision, dated August 2, 2006, with
the following disposition:

WHEREFORE, judgment is hereby rendered declaring the marriage between petitioner CYNTHIA S. BOLOS
and respondent DANILO T. BOLOS celebrated on February 14, 1980 as null and void ab initio on the ground
of psychological incapacity on the part of both petitioner and respondent under Article 36 of the Family Code
with all the legal consequences provided by law.

Furnish the Local Civil Registrar of San Juan as well as the National Statistics Office (NSO) copy of this
decision.

SO ORDERED.2

A copy of said decision was received by Danilo on August 25, 2006. He timely filed the Notice of Appeal on
September 11, 2006.
In an order dated September 19, 2006, the RTC denied due course to the appeal for Danilo’s failure to file the
required motion for reconsideration or new trial, in violation of Section 20 of the Rule on Declaration of
Absolute Nullity of Void Marriages and Annulment of Voidable Marriages.

On November 23, 2006, a motion to reconsider the denial of Danilo’s appeal was likewise denied.

On January 16, 2007, the RTC issued the order declaring its August 2, 2006 decision final and executory and
granting the Motion for Entry of Judgment filed by Cynthia.

Not in conformity, Danilo filed with the CA a petition for certiorari under Rule 65 seeking to annul the orders of
the RTC as they were rendered with grave abuse of discretion amounting to lack or in excess of jurisdiction, to
wit: 1) the September 19, 2006 Order which denied due course to Danilo’s appeal; 2) the November 23, 2006
Order which denied the motion to reconsider the September 19, 2006 Order; and 3) the January 16, 2007
Order which declared the August 2, 2006 decision as final and executory. Danilo also prayed that he be
declared psychologically capacitated to render the essential marital obligations to Cynthia, who should be
declared guilty of abandoning him, the family home and their children.

As earlier stated, the CA granted the petition and reversed and set aside the assailed orders of the RTC. The
appellate court stated that the requirement of a motion for reconsideration as a prerequisite to appeal under
A.M. No. 02-11-10-SC did not apply in this case as the marriage between Cynthia and Danilo was solemnized
on February 14, 1980 before the Family Code took effect. It relied on the ruling of this Court in Enrico v. Heirs
of Sps. Medinaceli3 to the effect that the "coverage [of A.M. No. 02-11-10-SC] extends only to those marriages
entered into during the effectivity of the Family Code which took effect on August 3, 1988."

Cynthia sought reconsideration of the ruling by filing her Manifestation with Motion for Extension of Time to File
Motion for Reconsideration and Motion for Partial Reconsideration [of the Honorable Court’s Decision dated
December 10, 2008]. The CA, however, in its February 11, 2009 Resolution,4 denied the motion for extension
of time considering that the 15-day reglementary period to file a motion for reconsideration is non-extendible,
pursuant to Section 2, Rule 40, 1997 Rules on Civil Procedure citing Habaluyas v. Japson, 142 SCRA 208.
The motion for partial reconsideration was likewise denied.

Hence, Cynthia interposes the present petition via Rule 45 of the Rules of Court raising the following

ISSUES

THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE QUESTIONED DECISION DATED
DECEMBER 10, 2008 CONSIDERING THAT:

A. THE PRONOUNCEMENT OF THE HONORABLE COURT IN ENRICO V. SPS. MEDINACELI IS NOT

APPLICABLE TO THE INSTANT CASE CONSIDERING THAT THE FACTS AND THE ISSUE THEREIN ARE
NOT SIMILAR TO THE INSTANT CASE.

B. ASSUMING ARGUENDO THAT THE PRONOUNCEMENT OF THE HONORABLE COURT IS

APLLICABLE TO THE INSTANT CASE, ITS RULING IN ENRICO V. SPS. MEDINACELI IS PATENTLY
ERRONEOUS BECAUSE THE PHRASE "UNDER THE FAMILY CODE" IN A.M. NO. 02-11-10-SC PERTAINS
TO THE WORD "PETITIONS" RATHER THAN TO THE WORD "MARRIAGES."

C. FROM THE FOREGOING, A.M. NO. 02-11-10-SC ENTITLED "RULE ON DECLARATION OF ABSOLUTE
NULLITY OF VOID MARRIAGES AND ANNULMENT OF VOIDABLE MARRIAGES" IS APPLICABLE TO
MARRIAGES SOLEMNIZED BEFORE THE EFFECTIVITY OF THE FAMILY CODE. HENCE, A MOTION FOR
RECONSIDERATION IS A PRECONDITION FOR AN APPEAL BY HEREIN RESPONDENT.

D. CONSIDERING THAT HEREIN RESPONDENT REFUSED TO COMPLY WITH A PRECONDITION FOR

APPEAL, A RELAXATION OF THE RULES ON APPEAL IS NOT PROPER IN HIS CASE.

II

THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE QUESTIONED RESOLUTION DATED
FEBRUARY 11, 2009 CONSIDERING THE FOREGOING AND THE FACTUAL CIRCUMSTANCES OF THIS
CASE.

III
THE TENETS OF JUSTICE AND FAIR PLAY, THE NOVELTY AND IMPORTANCE OF THE ISSUE AND THE
SPECIAL CIRCUMSTANCES IN THIS CASE JUSTIFY AND WARRANT A LIBERAL VIEW OF THE RULES
IN FAVOR OF THE PETITIONER. MOREOVER, THE INSTANT PETITION IS MERITORIOUS AND NOT
INTENDED FOR DELAY.5

From the arguments advanced by Cynthia, the principal question to be resolved is whether or not A.M. No. 02-
11-10-SC entitled "Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable
Marriages," is applicable to the case at bench.

Petitioner argues that A.M. No. 02-11-10-SC is also applicable to marriages solemnized before the effectivity of
the Family Code. According to Cynthia, the CA erroneously anchored its decision to an obiter dictum in the
aforecited Enrico case, which did not even involve a marriage solemnized before the effectivity of the Family
Code.

She added that, even assuming arguendo that the pronouncement in the said case constituted a decision on
its merits, still the same cannot be applied because of the substantial disparity in the factual milieu of the
Enrico case from this case. In the said case, both the marriages sought to be declared null were solemnized,
and the action for declaration of nullity was filed, after the effectivity of both the Family Code in 1988 and of
A.M. No. 02-11-10-SC in 2003. In this case, the marriage was solemnized before the effectivity of the Family
Code and A.M. No. 02-11-10-SC while the action was filed and decided after the effectivity of both.

Danilo, in his Comment,6 counters that A.M. No. 02-11-10-SC is not applicable because his marriage with
Cynthia was solemnized on February 14, 1980, years before its effectivity. He further stresses the meritorious
nature of his appeal from the decision of the RTC declaring their marriage as null and void due to his purported
psychological incapacity and citing the mere "failure" of the parties who were supposedly "remiss," but not
"incapacitated," to render marital obligations as required under Article 36 of the Family Code.

The Court finds the petition devoid of merit.

Petitioner insists that A.M. No. 02-11-10-SC governs this case. Her stance is unavailing. The Rule on
Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages as contained in A.M.
No. 02-11-10-SC which the Court promulgated on March 15, 2003, is explicit in its scope. Section 1 of the
Rule, in fact, reads:

Section 1. Scope – This Rule shall govern petitions for declaration of absolute nullity of void marriages and
annulment of voidable marriages under the Family Code of the Philippines.

The Rules of Court shall apply suppletorily.

The categorical language of A.M. No. 02-11-10-SC leaves no room for doubt. The coverage extends only to
those marriages entered into during the effectivity of the Family Code which took effect on August 3, 1988.7
The rule sets a demarcation line between marriages covered by the Family Code and those solemnized under
the Civil Code.8

The Court finds Itself unable to subscribe to petitioner’s interpretation that the phrase "under the Family Code"
in A.M. No. 02-11-10-SC refers to the word "petitions" rather than to the word "marriages."

A cardinal rule in statutory construction is that when the law is clear and free from any doubt or ambiguity,
there is no room for construction or interpretation. There is only room for application.9 As the statute is clear,
plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.
This is what is known as the plain-meaning rule or verba legis. It is expressed in the maxim, index animi
sermo, or "speech is the index of intention." Furthermore, there is the maxim verba legis non est recedendum,
or "from the words of a statute there should be no departure."10

There is no basis for petitioner’s assertion either that the tenets of substantial justice, the novelty and
importance of the issue and the meritorious nature of this case warrant a relaxation of the Rules in her favor.
Time and again the Court has stressed that the rules of procedure must be faithfully complied with and should
not be discarded with the mere expediency of claiming substantial merit.11 As a corollary, rules prescribing the
time for doing specific acts or for taking certain proceedings are considered absolutely indispensable to
prevent needless delays and to orderly and promptly discharge judicial business. By their very nature, these
rules are regarded as mandatory.12
The appellate court was correct in denying petitioner’s motion for extension of time to file a motion for
reconsideration considering that the reglementary period for filing the said motion for reconsideration is non-
extendible. As pronounced in Apex Mining Co., Inc. v. Commissioner of Internal Revenue, 13

The rule is and has been that the period for filing a motion for reconsideration is non-extendible. The Court has
made this clear as early as 1986 in Habaluyas Enterprises vs. Japzon. Since then, the Court has consistently
and strictly adhered thereto.1avvphil

Given the above, we rule without hesitation that the appellate court’s denial of petitioner’s motion for
reconsideration is justified, precisely because petitioner’s earlier motion for extension of time did not
suspend/toll the running of the 15-day reglementary period for filing a motion for reconsideration. Under the
circumstances, the CA decision has already attained finality when petitioner filed its motion for reconsideration.
It follows that the same decision was already beyond the review jurisdiction of this Court.

In fine, the CA committed no reversible error in setting aside the RTC decision which denied due course to
respondent’s appeal and denying petitioner’s motion for extension of time to file a motion for reconsideration.

Appeal is an essential part of our judicial system. Its purpose is to bring up for review a final judgment of the
lower court. The courts should, thus, proceed with caution so as not to deprive a party of his right to appeal.14
In the recent case of Almelor v. RTC of Las Pinas City, Br. 254,15 the Court reiterated: While the right to
appeal is a statutory, not a natural right, nonetheless it is an essential part of our judicial system and courts
should proceed with caution so as not to deprive a party of the right to appeal, but rather, ensure that every
party-litigant has the amplest opportunity for the proper and just disposition of his cause, free from the
constraints of technicalities.

In the case at bench, the respondent should be given the fullest opportunity to establish the merits of his
appeal considering that what is at stake is the sacrosanct institution of marriage.

No less than the 1987 Constitution recognizes marriage as an inviolable social institution. This constitutional
policy is echoed in our Family Code. Article 1 thereof emphasizes its permanence and inviolability, thus:

Article 1. Marriage is a special contract of permanent union between a man and a woman entered into in
accordance with law for the establishment of conjugal and family life. It is the foundation of the family and an
inviolable social institution whose nature, consequences, and incidents are governed by law and not subject to
stipulation, except that marriage settlements may fix the property relations during the marriage within the limits
provided by this Code.

This Court is not unmindful of the constitutional policy to protect and strengthen the family as the basic
autonomous social institution and marriage as the foundation of the family.16

Our family law is based on the policy that marriage is not a mere contract, but a social institution in which the
State is vitally interested. The State finds no stronger anchor than on good, solid and happy families. The
break up of families weakens our social and moral fabric and, hence, their preservation is not the concern
alone of the family members.17

WHEREFORE, the petition is DENIED.

G.R. No. 182069

SERENO, J.:

This is a Petition for Certiorari under Rule 64, in relation to Rule 65 of the Rules or Court, seeking to annul
Decision No. 2008-022 dated 15 February 2008 of the Commission on Audit (COA).[1]

On 30 October 2003, the City Council or the Sangguniang Panglungsod ng Malabon (SPM), presided over by
Hon. Benjamin Galauran, then acting Vice-Mayor, adopted and approved City Ordinance No. 15-2003, entitled
"An Ordinance Granting Authority to the City Vice-Mayor, Hon. Jay Jay Yambao, to Negotiate and Enter into
Contract for Consultancy Services for Consultants in the SanggunianSecretariat Tasked to Function in their
Respective Areas of Concern x x x."[2]

On 9 December 2003 and 1 March 2004, the City of Malabon, represented by Hon. Galauran, entered into
separate Contracts for Consultancy Services with Ms. Jannette O. Vijiga,[3] Mr. Meynardo E. Virtucio[4] and
Mr. Hernando D. Dabalus (2003 Consultancy Contracts).[5]

Subsequently, during the May 2004 elections, petitioner was elected City Vice-Mayor of Malabon. By virtue of
this office, he also became the Presiding Officer of the SPM and, at the same time, the head of the
Sanggunian Secretariat.

To complement the manpower requirements of the existing Sanggunian Secretariat, petitioner deemed it
necessary to hire the services of consultants with the end view of augmenting and upgrading its performance
capability for the effective operation of the legislative machinery of the city.

Petitioner thus wrote a letter dated 19 July 2004 to Atty. Danilo T. Diaz , the City Legal Officer of Malabon,
inquiring as to whether it was still necessary for the SPM to ratify a newly entered contract of consultancy
services between it and the candidate for the consultancy position. The letter states in part:

This is an inquiry regarding the hiring of consultants by virtue of an ordinance giving authority to the City Vice
Mayor to enter into consultancy services (Ordinance no. 15-2003).

As you very well know, the services of the consultants hired by the former administration, particularly by the
Sangguniang Panglungsod, ended last June 30, 2004. Hence, we are confronted by this inquiry:

Would there still be a need for the Sangguniang Panglungsod to ratify a newly entered contract of consultancy
services between the SP and the candidate for said consultancy position?

Kindly render your humble opinion on the matter.[6]

Atty. Diaz then responded to the said inquiry through a letter dated 26 July 2004, which categorically stated
that ratification was no longer necessary, provided that the services to be contracted were those stipulated in
the ordinance. The letter states thus:

In response to your query contained in your letter dated July 19, 2004, regarding the hiring of consultants for
the Sanggunian Secretariat by virtue of Ordinance No. 15-2003, giving authority to the City Vice Mayor to enter
into consultancy services and whether there is still a need for ratification of said consultancy contract by the
Sanggunian, the answer is, such a ratification is no longer necessary provided that the contract of consultancy
services to be executed is precisely the services stipulated in said ordinance. In essence, the Ordinance no.
15-2003 already stated what consultancy services should be secured and hence, if the contract for consultancy
services to be executed is precisely those as provided in said ordinance, ratification is a mere suplasage.[7]

On 21 January 2005, the SPM adopted City Ordinance No. 01-2005 entitled "An Ordinance Appropriating
Funds to Cover the Various Expenditures and Activities of the Local Government of Malabon City for the
Period from January 01, 2005 to December 31, 2005." The total amount of funds appropriated was
P511,070,019 for the spending of the entire city government. Out of this amount, P792,000 was earmarked for
consultancy services under the Legislative Secretariat.

On 1 February 2005, petitioner, representing the City Government of Malabon City, entered into Contracts for
Consultancy Services with Ms. Jennifer S. Catindig[8] and Atty. Rodolfo C. delos Santos (2005 Consultancy
Contracts).[9] On 11 February 2005, another Contract for Consultancy Services was entered into between Mr.
Marvin T. Amiana[10] and the city government.

After the signing of their respective contracts, the three consultants rendered consultancy services to the SPM.
Thereafter, they were correspondingly paid for their services pursuant to the contracts therefor.

On 19 December 2005, Audit Observation Memorandum (AOM) No. 2005-12-019[11] was issued by Ms.
Atenie F. Padilla, Supervising Auditor of the City Auditor's Office, Malabon City, disallowing the amount of
three hundred eighty-four thousand nine hundred eighty pesos (P384,980) for being an improper
disbursement. The AOM disclosed the following pertinent findings:

City Ordinance No. 15-2003 dated October 30, 2003 was used as basis of authority in hiring consultants.
Analysis of the said City Ordinance revealed that it specifically authorized the former Vice-Mayor, Hon. Mark
Allan Jay G. Yambao to enter into a contract for consultancy services in the Sangguniang Secretariat covering
the period June to December 2003 only. Said ordinance does not give authority to the incumbent City Vice-
Mayor Arnold D. Vicencio to hire consultants for CY 2005.

Progress accomplishment report for the month, to determine the services rendered were not attached to the
disbursement vouchers.

No information as to what method had been made by BAC in the hiring of individual consultants whether
through the selection from several registered professionals who offered consulting services or through direct
hiring without the intervention of the BAC.

Copies of the approved contracts together with supporting documents were not submitted to the City Auditor's
Office within five (5) days from execution of the contract for review and evaluation contrary to COA Circular No.
76-34 dated July 15, 1976, thus the City Auditor's Office was precluded to conduct timely review/evaluation to
inform management of whatever deficiencies noted so that immediate remedial measures could be properly
taken.[12]

On 12 May 2006, respondent Elizabeth S. Zosa issued Notice of Disallowance (ND) No. 06-009-101 (05)[13]
containing the result of the evaluation conducted on the AOM issued by Ms. Padilla. The persons held liable for
the disallowed amount relative to the hiring of the three consultants were the following: (1) petitioner, in his
capacity as City Vice- Mayor, for certifying that the expenses/cash advances were necessary, lawful and
incurred under his direct supervision and for approving the transaction; (2) Mr. Eustaquio M. Angeles, in his
capacity as Officer-in- Charge, City Accountant, for certifying to the completeness and propriety of the
supporting documents of the expenditures; and (3) Ms. Catindig, Atty. Delos Santos, and Mr. Amiana, as
payees. The above-named persons were further directed to settle the said disallowance immediately. Pursuant
to Sections 48, 50 and 51 of Presidential Decree No. (P.D.) 1445, the parties found liable had a period of six
months within which to file an appeal. The disallowance was anchored on the following findings:

- There was no authority for the incumbent City Vice-Mayor Arnold D. Vicencio to hire consultants for CY 2005.
City Ordinance No. 15-2003 dated October 30, 2003 which was used as basis of authority to hire consultants
specifically authorized the former Vice-Mayor, Hon. Mark Allan Jay G. Yambao to enter into a contract for
consultancy services in the Sangguniang Secretariat covering the period June to December 2003 only.

- There were no Progress Accomplishment Reports for the month, to determine the services rendered.

- No information as to what method had been made by BAC in the hiring of individual consultants whether
through the selection from several registered professionals who offered consulting services or through direct
hiring without the intervention of the BAC.[14]

On 22 June 2006, the SPM wrote a letter[15] informing Ms. Padilla that the three consultants hired by petitioner
rendered services covering the period January to December 2005. In its view, the hiring of these consultants
and the services they rendered were in good faith.

Aggrieved by the disallowance, petitioner appealed it to the Adjudication and Settlement Board (ASB) of the
COA. On 12 June 2007, the ASB issued Decision No. 2007-030,[16] the dispositive portion of which reads as
follows:

Premises considered, the instant appeal of Hon. Arnold Vicencio is hereby denied. Accordingly, Notice of
Disallowance No. 06-009-101 (05) dated 12 May 2006 involving the amount of P384,980.00 representing fees
to consultants Mr. Marvin T. Amiana, Atty. Rodolfo Delos Santos and Ms. Jennifer Catindig, is hereby affirmed.
However, the instant appeal of Mr. Estaquio Angeles is hereby granted. Mr. Angeles is therefore excluded from
the persons liable listed under Notice of Disallowance No. 06-009-101 (05).[17]

Thereafter, herein petitioner filed a letter dated 7 July 2007,[18] addressed to Hon. Guillermo N. Carague, COA
Chairperson. The letter prayed for the reversal and setting aside of the earlier Decision of the ASB.

On 15 February 2008, public respondent issued the assailed Order. It appears that the letter of petitioner was
treated as an appeal to the Commission Proper of the COA and was subsequently denied. The dispositive
portion states:

WHEREFORE, premises considered, the instant motion for reconsideration, which was treated as an appeal,
is denied.[19]
On 28 March 2008, the instant Petition was filed, raising the following issue:

WHETHER OR NOT PUBLIC RESPONDENT COMMISSION ON AUDIT COMMITTED SERIOUS ERRORS

AND GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR EXCESS OF JURISDICTION WHEN
IT AFFIRMED ASB DECISION NO. 2007-030, RELATIVE TO THE DISALLOWANCE OF DISBURSEMENTS
CONCERNING THE SERVICES RENDERED BY HIRED CONSULTANTS FOR THE SANGGUNIANG
PANLUNGSOD NG MALABON.

On 8 April 2008, this Court directed respondents to comment on the Petition. On 28 July 2008, they filed their
Comment, in which they averred that Ordinance No. 15-2003 specifically authorized the expenditure of funds
for the compensation of consultants only from June to December 2003. Thus, the contracts for consultancy
entered into in 2005 were contrary to the ordinance cited and were therefore void for being unauthorized and
bereft of any legal basis. There is also no room for interpretation of the ordinance, as the same is clear, and,
additionally, actually contains no preamble. Further, respondents argue that to allow the disbursement of public
funds to pay for the services of the consultants, despite the absence of authority for the same, would allow a
circumvention of the applicable COA rules and circulars.

Petitioner thereafter filed his Reply to the Comment, in compliance with this Court's 12 August 2008
Resolution. In his Reply, he contended that he had the authority to enter into the consultancy contracts
pursuant to Ordinance No. 15-2003. As the ordinance was ambiguous, there was a need to interpret its
provisions by looking into the intent of the law. He also manifested that the Ombusdman had dismissed the
administrative and criminal Complaints for violation of Republic Act No. (R.A.) 6713 and for Usurpation of
Authority, previously filed against him over the same transactions. The Ombudsman held that, while Ordinance
No. 15-2003 specifically mentions then Vice-Mayor Yambao, the intent in passing the law may not be ignored.
It was the intention of the city council to authorize the Office of the Vice-Mayor to enter into consultancy
contracts, and not Vice-Mayor Yambao only. Petitioner also argued that the ends of substantial justice and
equity would be better served by allowing the disbursement for consultancy services that have already been
rendered.

We deny the Petition.

At the outset, we note that the Petition has a procedural flaw that should merit its outright dismissal. Through
the Verification and Certification attached to the instant Petition, petitioner states that the contents of the
Petition "are true and correct of [his] own personal knowledge and belief and based on authentic records
and/or documents."[20] Section 4, Rule 7 of the Rules of Court provides that a pleading required to be verified
which contains a verification based on "information and belief" or "knowledge, information and belief," shall be
treated as an unsigned pleading. A pleading, therefore, in which the verification is based merely on the party's
knowledge and belief as in the instant Petition produces no legal effect, subject to the discretion of the court to
allow the deficiency to be remedied.[21]

In any case, we find no grave abuse of discretion on the part of the COA in issuing the assailed Decision.

Petitioner contends that the ordinance authorizes the Office of the Vice-Mayor, and not Vice-Mayor Yambao in
particular, to enter into consultancy contracts. Notably, it was even Hon. Vice-Mayor Benjamin C. Galauran,
who was acting Vice-Mayor at the time, who entered into the 2003 Consultancy Contracts. Petitioner also
argues that there is no indication from the preamble of the ordinance, which can be read from the minutes of
the SPM meeting, that the ordinance was specifically designed to empower only Vice-Mayor Yambao, or to
limit such power to hire for the period June to December 2003 only.

We disagree.

Under Section 456 of R.A. 7160, or the Local Government Code, the following are the powers and duties of a
city vice-mayor:

ARTICLE II

The City Vice-Mayor

SECTION 456. Powers, Duties and Compensation. (a) The city vice-mayor shall:

(1) Be the presiding officer of the sangguniang panlungsod and sign all warrants drawn on the city treasury for
all expenditures appropriated for the operation of the sangguniang panlungsod;

(2) Subject to civil service law, rules and regulations, appoint all officials and employees of the sangguniang
panlungsod, except those whose manner of appointment is specifically provided in this Code;

(3) Assume the office of the city mayor for the unexpired term of the latter in the event of permanent vacancy
as provided for in Section 44, Book I of this Code;

(4) Exercise the powers and perform the duties and functions of the city mayor in cases of temporary vacancy
as provided for in Section 46, Book I of this Code; and

(5) Exercise such other powers and perform such other duties and functions as may be prescribed by law or
ordinance.

(b) The city vice-mayor shall receive a monthly compensation corresponding to Salary Grade twenty-eight (28)
for a highly urbanized city and Salary Grade twenty-six (26) for a component city, as prescribed under R.A. No.
6758 and the implementing guidelines issued pursuant thereto.

Under this provision, therefore, there is no inherent authority on the part of the city vice-mayor to enter into
contracts on behalf of the local government unit, unlike that provided for the city mayor.[22] Thus, the authority
of the vice-mayor to enter into contracts on behalf of the city was strictly circumscribed by the ordinance
granting it. Ordinance No. 15-2003 specifically authorized Vice-Mayor Yambao to enter into contracts for
consultancy services. As this is not a power or duty given under the law to the Office of the Vice-Mayor,
Ordinance No. 15-2003 cannot be construed as a "continuing authority" for any person who enters the Office of
the Vice-Mayor to enter into subsequent, albeit similar, contracts.
Ordinance No. 15-2003 provides in full:

City Ordinance No. 15-2003

An Ordinance Granting Authority to the City Vice Mayor, Hon. Jay Jay G. Yambao, to Negotiate, and Enter into
a Contract for Consultancy Services in the Sanggunian Secretariat Tasked to Function in their Respective
Areas of Concern, as Aforementioned, To Wit:

(1) A Legal Consultant

(2) A Consultant on Education Affairs and

(3) A Management Consultant

That said consultants shall be paid/compensated at the rate of Twenty Two Thousand Pesos (P22,000.00)
each, per month, effective upon approval of this ordinance subject to the usual accounting and auditing
procedures, rules and/or regulations;

That the source of funds for appropriations thereof shall be made available for expenditures to be earmarked
for payment/compensation for said consultants, covering the period from June to December of 2003, thereby
authorizing further the City Vice Mayor to effect the necessary funding thereof, pursuant to the pertinent
provision, aforecited, in Chapter 4, Section 336 of R.A. 7160;

That copies of this ordinance be furnished all concerned for their information and guidance.

Adopted: October 30, 2003.[23]

Ordinance No. 15-2003 is clear and precise and leaves no room for interpretation. It only authorized the then
City Vice-Mayor to enter into consultancy contracts in the specific areas of concern. Further, the appropriations
for this particular item were limited to the savings for the period June to December 2003. This was an
additional limitation to the power granted to Vice-Mayor Yambao to contract on behalf of the city. The fact that
any later consultancy contract would necessarily require further appropriations from the city council
strengthens the contention that the power granted under Ordinance No. 15-2003 was limited in scope. Hence,
petitioner was without authority to enter into the 2005 Consultancy Contracts.

Where the words of a statute are clear, plain, and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.[24] Thus, the ordinance should be applied according to its express
terms, and interpretation would be resorted to only where a literal interpretation would be either impossible or
absurd or would lead to an injustice.[25] In the instant case, there is no reason to depat1 from this rule, since
the subject ordinance is not at all impossible, absurd, or unjust.

Section 103 of P.D. 1445 declares that expenditures of government funds or uses of government property in
violation of law or regulations shall be a personal liability of the of1icial or employee found to be directly
responsible therefor. The public official's personal liability arises only if the expenditure of government funds
was made in violation of law. In this case, petitioner's act of entering into a contract on behalf of the local
government unit without the requisite authority therefor was in violation of the Local Government Code. While
petitioner may have relied on the opinion of the City Legal Officer, such reliance only serves to buttress his
good faith. It does not, however, exculpate him from his personal liability under P.D. 1445.

In sum, the COA's assailed Decision was made in faithful compliance with its mandate and in judicious
exercise of its general audit power as conferred on it by the Constitution[26] The COA was merely fulfilling its
mandate in observing the policy that government funds and property should be fully protected and conserved;
and that irregular, unnecessary, excessive or extravagant expenditures or uses of such funds and property
should be prevented.[27] Thus, no grave abuse of discretion may be imputed to the COA.

WHEREFORE, the Commission on Audit Decision dated 4 January 2008 is hereby AFFIRMED.

G.R. No. L-61236 January 31, 1984

NATIONAL FEDERATION OF LABOR and ZAMBOWOOD MONTHLY EMPLOYEES UNION, ITS OFFICERS
AND MEMBERS, petitioners,

vs.

THE HONORABLE CARLITO A. EISMA, LT. COL. JACOB CARUNCHO, COMMANDING OFFICER,
ZAMBOANGA DISTRICT COMMAND, PC, AFP, and ZAMBOANGA WOOD PRODUCTS, respondents.

Jose C. Espina and Potenciano Flores for petitioners.

The Solicitor General for public respondents.

Gaspar V. Tagalo for private respondent Zamboanga Wood Products.

FERNANDO, C.J.:

This Court is confronted once again with the question of whether or not it is a court or a labor arbiter that can
pass on a suit for damages filed by the employer, here private respondent Zamboanga Wood Products.
Respondent Judge Carlito A. Eisma 1 then of the Court of First Instance, now of the Regional Trial Court of
Zamboanga City, was of the view that it is a court and denied a motion to dismiss filed by petitioners National
Federation of labor and Zambowood Monthly Employees Union, its officers and members. It was such an order
dated July 20, 1982 that led to the filing of this certiorari and prohibition proceeding. In the order assailed, it
was required that the officers and members of petitioner union appear before the court to show cause why a
writ of preliminary injunction should not be issued against them and in the meanwhile such persons as well as
any other persons acting under their command and on their behalf were "temporarily restrained and ordered to
desist and refrain from further obstructing, impeding and impairing plaintiff's use of its property and free ingress
to or egress from plaintiff's Manufacturing Division facilities at Lumbayao, Zamboanga City and on its road right
of way leading to and from said plaintiff's facilities, pending the determination of the litigation, and unless a
contrary order is issued by this Court." 2
The record discloses that petitioner National Federation of Labor, on March 5, 1982, filed with the Ministry of
Labor and Employment, Labor Relations Division, Zamboanga City, a petition for direct certification as the sole
exclusive collective bargaining representative of the monthly paid employees of the respondent Zamboanga
Wood Products, Inc. at its manufacturing plant in Lumbayao, Zamboanga City. 3 Such employees, on April 17,
1982 charged respondent firm before the same office of the Ministry of Labor for underpayment of monthly
living allowances. 4 Then came, on May 3, 1982, from petitioner union, a notice of strike against private
respondent, alleging illegal termination of Dionisio Estioca, president of the said local union; unfair labor
practice, non-payment of living allowances; and "employment of oppressive alien management personnel
without proper permit. 5 It was followed by the union submitting the minutes of the declaration of strike,
"including the ninety (90) ballots, of which 79 voted for yes and three voted for no." 6 The strike began on May
23, 1982. 7 On July 9, 1982, private respondent Zambowood filed a complaint with respondent Judge against
the officers and members of petitioners union, for "damages for obstruction of private property with prayer for
preliminary injunction and/or restraining order." 8 It was alleged that defendants, now petitioners, blockaded
the road leading to its manufacturing division, thus preventing customers and suppliers free ingress to or
egress from such premises. 9 Six days later, there was a motion for the dismissal and for the dissolution of the
restraining order and opposition to the issuance of the writ of preliminary injunction filed by petitioners. It was
contended that the acts complained of were incidents of picketing by defendants then on strike against private
respondent, and that therefore the exclusive jurisdiction belongs to the Labor Arbiter pursuant to Batas
Pambansa Blg. 227, not to a court of first instance.10 There was, as noted earlier, a motion to dismiss, which
was denied. Hence this petition for certiorari.

Four days after such petition was filed, on August 3, 1982, this Court required respondents to answer and set
the plea for a preliminary injunction to be heard on Thursday, August 5, 1982. 11 After such hearing, a
temporary restraining order was issued, "directing respondent Judge and the commanding officer in
Zamboanga and his agents from enforcing the ex-parte order of injunction dated July 20, 1982; and to restrain
the respondent Judge from proceeding with the hearing of the until otherwise case effective as of [that] date
and continuing ordered by [the] Court. In the exercise of the right to peaceful picketing, petitioner unions must
abide strictly with Batas Pambansa Blg. 227, specifically Section 6 thereof, amending Article 265 of the Labor
Code, which now reads: '(e) No person engaged in picketing shall commit any act of violence, coercion or
intimidation or obstruct the free ingress to or egress from the employer's premises for lawful purposes, or
obstruct public thoroughfares.' " 12

On August 13, 1982, the answer of private respondent was filed sustaining the original jurisdiction of
respondent Judge and maintaining that the order complained of was not in excess of such jurisdiction, or
issued with grave abuse of discretion. Solicitor General Estelito P. Mendoza, 13 on the other hand, instead of
filing an answer, submitted a Manifestation in lieu thereof. He met squarely the issue of whether or not
respondent Judge had jurisdiction, and answered in the negative. He (i)ncluded that "the instant petition has
merit and should be given due course."

He traced the changes undergone by the Labor Code, citing at the same time the decisions issued by this
Court after each of such changes. As pointed out, the original wording of Article 217 vested the labor arbiters
with jurisdictional. 14 So it was applied by this Court in Garcia v. Martinez 15 and in Bengzon v. Inciong. 16 On
May 1, 1978, however, Presidential Decree No. 1367 was issued, amending Article 217, and provided "that the
Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral and other forms of
damages." 17 The ordinary courts were thus vested with jurisdiction to award actual and moral damages in the
case of illegal dismissal of employees. 18 That is not, as pointed out by the Solicitor General, the end of the
story, for on May 1, 1980, Presidential Decree No. 1691 was issued, further amending Article 217, returning
the original jurisdiction to the labor arbiters, thus enabling them to decide "3. All money claims of workers,
including those based on non-payment or underpayment of wages, overtime compensation, separation pay
and other benefits provided by law or appropriate agreement, except claims for employees compensation,
social security, medicare and maternity benefits; [and] (5) All other claims arising from employer-employee
relations unless expressly excluded by tills Code." 19 An equally conclusive manifestation of the lack of
jurisdiction of a court of first instance then, a regional trial court now, is Batas Pambansa Blg. 130, amending
Article 217 of the Labor Code. It took effect on August 21, 1981. Subparagraph 2, paragraph (a) is now worded
thus: "(2) those that involve wages, hours of work and other terms and conditions of employment." 20 This is to
be compared with the former phraseology "(2) unresolved issue in collective bargaining, including those that
involve wages, hours of work and other terms and conditions of employment." 21 It is to be noted that Batas
Pambansa Blg. 130 made no change with respect to the original and exclusive jurisdiction of Labor Arbiters
with respect to money claims of workers or claims for damages arising from employer-employee relations.

Nothing becomes clearer, therefore, than the meritorious character of this petition. certiorari and prohibition lie,
respondent Judge being devoid of jurisdiction to act on the matter.

1. Article 217 is to be applied the way it is worded. The exclusive original jurisdiction of a labor arbiter is therein
provided for explicitly. It means, it can only mean, that a court of first instance judge then, a regional trial court
judge now, certainly acts beyond the scope of the authority conferred on him by law when he entertained the
suit for damages, arising from picketing that accompanied a strike. That was squarely within the express terms
of the law. Any deviation cannot therefore be tolerated. So it has been the constant ruling of this Court even
prior to Lizarraga Hermanos v. Yap Tico, 22 a 1913 decision. The ringing words of the ponencia of Justice
Moreland still call for obedience. Thus, "The first and fundamental duty of courts, in our judgment, is to apply
the law. Construction and interpretation come only after it has been demonstrated that application is impossible
or inadequate without them." 23 It is so even after the lapse of sixty years. 24

2. On the precise question at issue under the law as it now stands, this Court has spoken in three decisions.
They all reflect the utmost fidelity to the plain command of the law that it is a labor arbiter, not a court, that
ossesses original and exclusive jurisdiction to decide a claim for damages arising from picketing or a strike. In
Pepsi-Cola Bottling Co. v. Martinez, 25 the issue was set forth in the opening paragraph, in the ponencia of
Justice Escolin: "This petition for certiorari, prohibition and mandamus raises anew the legal question often
brought to this Court: Which tribunal has exclusive jurisdiction over an action filed by an employee against his
employer for recovery of unpaid salaries, separation benefits and damages — the court of general jurisdiction
or the Labor Arbiter of the National Labor Relations Commission [NLRC]?" 26 It was categorically held: "We
rule that the Labor Arbiter has exclusive jurisdiction over the case." 27 Then came this portion of the opinion:
"Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which
organizes the court; and it is given only by law. Jurisdiction is never presumed; it must be conferred by law in
words that do not admit of doubt. Since the jurisdiction of courts and judicial tribunals is derived exclusively
from the statutes of the forum, the issue before us should be resolved on the basis of the law or statute now in
force. We find that law in presidential Decree 1691 which took effect on May 1, 1980, Section 3 of which reads
as follows: ... Article 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The Labor Arbiters shall
have the original and exclusive jurisdiction to hear and decide the following cases involving all workers,
whether agricultural or non-agricultural: ... 3. All money claims of workers, including those based on
nonpayment or underpayment of wages, overtime compensation, separation pay and other benefits provided
by law or appropriate agreement, except claims for employees' compensation, social security, medicare and
maternity benefits; 4. Cases involving household services; and 5. All other claims arising from employer-
employee relations, unless expressly excluded by this Code." 28 That same month, two other cases were
similarly decided, Ebon v. De Guzman 29 and Aguda v. Vallejos. 30

3. It is regrettable that the ruling in the above three decisions, decided in March of 1982, was not followed
by private respondent when it filed the complaint for damages on July 9, 1982, more than four months later. 31
On this point, reference may be made to our decision in National Federation of Labor, et al. v. The Honorable
Minister of Labor and Employment, 32 promulgated on September 15, 1983. In that case, the question
involved was the failure of the same private respondent, Zamboanga Wood Products, Inc., to admit the striking
petitioners, eighty-one in number, back to work after an order of Minister Blas F. Ople certifying to the National
Labor Relations Commission the labor dispute for compulsory arbitration pursuant to Article 264 (g) of the
Labor Code of the Philippines. It was noted in the first paragraph of our opinion in that case: "On the face of it,
it seems difficult to explain why private respondent would not comply with such order considering that the
request for compulsory arbitration came from it. It ignored this notification by the presidents of the labor unions
involved to its resident manager that the striking employees would lift their picket line and start returning to
work on August 20, 1982. Then, too, Minister Ople denied a partial motion for reconsideration insofar as the
return-to-work aspect is concerned which reads: 'We find no merit in the said Motion for Reconsideration. The
Labor code, as amended, specifically Article 264 (g), mandates that whenever a labor dispute is certified by the
Minister of Labor and Employment to the National Labor Relations Commission for compulsory arbitration and
a strike has already taken place at the time of certification, "all striking employees shall immediately return to
work and the employees shall immediately resume operations and readmit all workers under the same terms
and conditions prevailing before the strike." ' " 33 No valid distinction can be made between the exercise of
compulsory arbitration vested in the Ministry of Labor and the jurisdiction of a labor arbiter to pass over claims
for damages in the light of the express provision of the Labor Code as set forth in Article 217. In both cases, it
is the Ministry, not a court of justice, that is vested by law with competence to act on the matter.

4. The issuance of Presidential Decree No. 1691 and the enactment of Batas Pambansa Blg. 130, made clear
that the exclusive and original jurisdiction for damages would once again be vested in labor arbiters. It can be
affirmed that even if they were not that explicit, history has vindicated the view that in the appraisal of what was
referred to by Philippine American Management & Financing Co., Inc. v. Management & Supervisors
Association of the Philippine-American Management & Financing Co., Inc. 34 as "the rather thorny question as
to where in labor matters the dividing line is to be drawn"35 between the power lodged in an administrative
body and a court, the unmistakable trend has been to refer it to the former. Thus: "Increasingly, this Court has
been committed to the view that unless the law speaks clearly and unequivocally, the choice should fall on [an
administrative agency]." 36 Certainly, the present Labor Code is even more committed to the view that on
policy grounds, and equally so in the interest of greater promptness in the disposition of labor matters, a court
is spared the often onerous task of determining what essentially is a factual matter, namely, the damages that
may be incurred by either labor or management as a result of disputes or controversies arising from employer-
employee relations.

WHEREFORE, the writ of certiorari is granted and the order of July 20, 1982, issued by respondent Judge, is
nullified and set aside. The writ of prohibition is likewise granted and respondent Judge, or whoever acts in his
behalf in the Regional Trial Court to which this case is assigned, is enjoin from taking any further action on Civil
Case No. 716 (2751), except for the purpose of dismissing it. The temporary restraining order of August 5,
1982 is hereby made permanent.

G. R. No. L-41001 September 30, 1976

MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF THE ELKS, INC., petitioner,

vs.

THE HONORABLE COURT OF APPEALS, CITY OF MANILA, and TARLAC DEVELOPMENT

CORPORATION, respondents.

No. L-41012 September 30, 1976

TARLAC DEVELOPMENT CORPORATION, petitioner,

vs.

HONORABLE COURT OF APPEALS, CITY OF MANILA, LODGE NO. 761, BENEVOLENT AND
PROTECTIVE ORDER OF ELKS, INC., respondents.

CASTRO, C.J.:têñ.£îhqwâ£
STATEMENT OF THE CASE AND STATEMENTOF THE FACTS

These two cases are petitions on certiorari to review the decision dated June 30, 1975 of the Court of Appeals
in CA-G.R. No. 51590-R entitled "Tarlac Development Corporation vs. City of Manila, and Manila Lodge No.
761, Benevolent and Protective Order of Elks, Inc.," affirming the trial court's finding in Civil Case No. 83009
that the property subject of the decision a quo is a "public park or plaza."

On June 26, 1905 the Philippine Commission enacted Act No. l360 which authorized the City of Manila to
reclaim a portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The Act
provided that the reclaimed area "Shall be the property of the City of Manila" and that "the City of Manila is
hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension x x x at the north
end not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to lease the same, with the
approval of the Governor General, to a responsible person or corporation for a term not exceed ninety-nine
years."

Subsequently, the Philippine Commission passed on May 18, 1907 Act No. 1657, amending Act No. 1360, so
as to authorize the City of' Manila either to lease or to sell the portion set aside as a hotel site.

The total area reclaimed was a little over 25 hectares. The City of Manila applied for the registration of the
reclaimed area, and on January 20, 1911, O.C.T. No. 1909 was issued in the name of the City of Manila. The
title described the registered land as "un terreno conocido con el nombre de Luneta Extension, situato en el
distrito de la Ermita x x x." The registration was "subject, however to such of the incumbrances mentioned in
Article 39 of said law (Land Registration Act) as may be subsisting" and "sujeto a las disposiciones y
condiciones impuestas en la Ley No. 1360; y sujeto tambein a los contratos de venta, celebrados y otorgados
por la Ciudad de Manila a favor del Army and Navy Club y la Manila Lodge No. 761, Benevolent and Protective
Order of Elks, fechados respectivamente, en 29 de Diciembre de 1908 y 16 de Enero de 1909." 1

On July 13, 1911 the City of Manila, affirming a prior sale dated January 16, 1909 cancelled 5,543.07 square
meters of the reclaimed area to the Manila Lodge No. 761, Benevolent and Protective Order of Elks of the
U.S.A. (BPOE, for short) on the basis of which TCT No. 2195 2 was issued to the latter over the Marcela de
terreno que es parte de la Luneta Extension, Situada en el Distrito le la Ermita ... ." At the back of this title vas
annotated document 4608/T-1635, which in part reads as follows: "que la citada Ciusdad de Manila tendra
derecho a su opcion, de recomparar la expresada propiedad para fines publicos solamete in cualquier tiempo
despues de cincuenta anos desde el 13 le Julio le 1911, precio de la misma propiedad, mas el valor que
entonces tengan las mejoras."

For the remainder of the Luneta Extension, that is, after segregating therefrom the portion sold to the Manila
Lodge No. 761, PBOE, a new Certificate of Title No. 2196 3 was issued on July 17, 1911 to the City of Manila.

Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square meters to the Elks Club, Inc., to
which was issued TCT No. 67488. 4 The registered owner, "The Elks Club, Inc.," was later changed by court
oder to "Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc."

In January 1963 the BPOE. petitioned the Court of First Instance of Manila, Branch IV, for the cancellation of
the right of the City of Manila to repurchase the property This petition was granted on February 15, 1963.
On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land together with all the improvements
thereon to the Tarlac Development Corporation (TDC, for short) which paid P1,700.000 as down payment and
mortgaged to the vendor the same realty to secure the payment of the balance to be paid in quarterly
installments.5 At the time of the sale,, there was no annotation of any subsisting lien on the title to the property.
On December 12, 1963 TCT No. 73444 was issued to TDC over the subject land still described as "UNA
PARCELA DE TERRENO, que es parte de la Luneta Extension, situada en el Distrito de Ermita ... ."

In June 1964 the City of Manila filed with the Court of First Instance of Manila a petition for the reannotation of
its right to repurchase; the court, after haering, issued an order, dated November 19, 1964, directing the
Register of Deeds of the City of Manila to reannotate in toto the entry regarind the right of the City of Manila to
repurchase the property after fifty years. From this order TDC and BPOE appealed to this Court which on July
31, 1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's order of reannotation, but reserved to
TDC the right to bring another action for the clarification of its rights.

As a consequence of such reservation, TDC filed on April 28, 1971 against the City of Manila and the Manila
Lodge No. 761, BPOE, a complaint, docketed as Civil Case No. 83009 of the Court of First Instance of Manila,
containing three causes of action and praying -

a) On the first cause of action, that the plaintiff TDC be declared to have purchased the parcel of land now
in question with the buildings and improvements thereon from the defendant BPOE for value and in good faith,
and accordingly ordering the cancellation of Entry No. 4608/T-1635 on Transfer Certificate of Title No. 73444 in
the name of the Plaintiff;

b) On the second cause of action, ordering the defendant City of Manila to pay the plaintiff TDC damages
in the sum of note less than one hundred thousand pesos (P100,000.00);

c) On the third cause of action, reserving to the plaintiff TDC the right to recover from the defendant BPOE
the amounts mentioned in par. XVI of the complaint in accordance with Art. 1555 of the Civil Code, in the
remote event that the final judgment in this case should be that the parcel of land now in question is a public
park; and

d) For costs, and for such other and further relief as the Court may deem just and equitable. 6

Therein defendant City of Manila, in its answer dated May 19, 1971, admitted all the facts alleged in the first
cause of action except the allegation that TDC purchased said property "for value and in good faith," but
denied for lack of knowledge or information the allegations in the second and third causes of action. As, special
and affirmative defense, the City of Manila claimed that TDC was not a purchaser in good faith for it had actual
notice of the City's right to repurchase which was annotated at the back of the title prior to its cancellation, and
that, assuming arguendo that TDC had no notice of the right to repurchase, it was, nevertheless, under
obligation to investigate inasmuch as its title recites that the property is a part of the Luneta extension. 7

The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971, admitted having sold the land together
with the improvements thereon for value to therein plaintiff which was in good faith, but denied for lack of
knowledge as to their veracity the allegations under the second cause of action. It furthermore admitted that
TDC had paid the quarterly installments until October l5, 1964 but claimed that the latter failed without
justifiable cause to pay the subsequent installments. It also asserted that it was a seller for value in good faith
without having misrepresented or concealed tacts relative to the title on the property. As counterclaim, Manila
Lodge No. 761 (BPOE) sought to recover the balance of the purchase price plus interest and costs. 8
On June 15, 1971 TDC answered the aforesaid counterclaim, alleging that its refusal to make further payments
was fully justified.9

After due trial the court a quo rendered on July 14, 1972 its decision finding the subject land to be part of the
"public park or plaza" and, therefore, part of the public domain. The court consequently declared that the sale
of the subject land by the City of Manila to Manila Lodge No. 761, BPOE, was null and void; that plaintiff TDC
was a purchaser thereof in g faith and for value from BPOE and can enforce its rights against the latter; and
that BPOE is entitled to recover from the City of Manila whatever consideration it had 'paid the latter. 'The
dispositive part of the decision reads: ñé+.£ªwph!1

WHEREFORE, the Court hereby declares that the parcel of land formerly covered by Transfer Certificate of
Title Nos 2195 and 67488 in the name of BPOE and now by Transfer Certificate of Title No. 73444 in the name
of Tarlac Development Corporation is a public' park or plaza, and, consequently, instant complaint is dimissed,
without pronouncement as to costs.

In view of the reservation made by plaintiff Tarlac Development Corporation to recover from defendant BPOE
the amounts mentioned in paragraph XVI of the complaint in accordance with Article 1555 of the Civil Code,
the Court makes no pronouncement on this point. 10

From said decision the therein plaintiff TDC as well as the defendant Manila Lodge No. 761, BPOE, appealed
to the Court of Appeals.

In its appeal docketed as CA-G.R. No. 51590-R, the Manila Lodge No. 761, BPOE, avers that the trial court
committed the following errors, namely:

1. In holding that the property subject of the action is not patrimonial property of the City of Manila; and

2. In holding that the Tarlac Development Corporation may recover and enforce its right against the
defendant BPOE. 11

The Tarlac Development Corporation, on the other hand, asserts that the trial court erred:

(1) In finding that the property in question is or was a public park and in consequently nullifying the sale
thereof by the City of Manila to BPOE;

(2) In applying the cases of Municipality of Cavite vs. Rojas, 30 Phil. 602, and Government vs. Cabangis,
53 Phil. 112, to the case at bar; and

(3) In not holding that the plaintiff-appellant is entitled to ,recover damages from the defendant City of
Manila. 12
Furthermore, TDC as appellee regarding the second assignment of error raised by BPOE, maintained that it
can recover and enforce its rigth against BPOE in the event that the land in question is declared a public park
or part thereof.13

In its decision promulgated on June 30, 1975, the Court of Appeals concur ed in the findings and conclusions
of the lower court upon the ground that they are supported by he evidence and are in accordance with law, and
accordingly affirmed the lower court's judgment.

Hence, the present petitions for review on certiorari.

G.R. No. L-41001

The Manila Lodge No. 761, BPOE, contends, in its petition for review on certiorari docketed as G.R. No. L-
41001, that the Court of Appeals erred in (1) disregarding the very enabling acts and/or statutes according to
which the subject property was, and still is, patrimonial property of the City of Manila and could therefore be
sold and/or disposed of like any other private property; and (2) in departing from the accepted and usual
course of judicial proceedings when it simply made a general affirmance of the court a quo's findings and
conclusions without bothering to discuss or resolve several vital points stressed by the BPOE in its assigned
errrors. 14

G.R. No. L-41012

The Tarlac Development Corporation, in its petition for review on certiorari docketed as G.R. No. L-41012,
relies on the following grounds for the allowance of its petition:

1. that the Court of Appeals did not correctly interpret Act No. 1360, as amended by Act No. 1657, of the
Philippine Commission; and

2. that the Court of Appeals has departed from the accepted and usual course of judicial proceedings in
that it did not make its own findings but simply recited those of the lower court. 15

ISSUES AND ARGUMENTS

FIRST ISSUE

Upon the first issue, both petitioners claim that the property subject of the action, pursuant to the provisions of
Act No. 1360, as amended by Act No. 1657, was patrimonial property of the City of Manila and not a park or
plaza.

Arguments of Petitioners
In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that "there appears to be some logic in the
conclusion" of the Court of Appeals that "neither Act No. 1360 nor Act No. 1657 could have meant to supply
the City of Manila the authority to sell the subject property which is located at the south end not the north — of
the reclaimed area." 16 It argues, however, that when Act No. 1360, as amended, authorized the City of Manila
to undertake the construction of the Luneta extension by reclaimed land from the Manila Bay, and declared
that the reclaimed land shall be the "property of the City of Manila," the State expressly granted the ownership
thereof to the City of Manila which. consequently. could enter into transactions involving it; that upon the
issuance of O.C.T. No. 1909, there could he no doubt that the reclaimed area owned by the City was its
patrimonial property;" that the south end of the reclaimed area could not be for public use for. as argued by
TDC a street, park or promenade can be property for public use pursuant to Article 344 of the Spanish Civil
Code only when it has already been so constructed or laid out, and the subject land, at the time it was sold to
the Elk's Club, was neither actually constructed as a street, park or promenade nor laid out as a street, park or
promenade;" that even assuming that the subject property was at the beginning property of public dominion, it
was subsequently converted into patrimonial property pursuant to Art. 422 of the Civil Code, inasmuch as it
had never been used, red or utilized since it was reclaimed in 1905 for purpose other than this of an ordinary
real estate for sale or lease; that the subject property had never been intended for public use, is further shown
by the fact that it was neither included as a part of the Luneta Park under Plan No. 30 of the National Planning
Commission nor considered a part of the Luneta National Park (now Rizal Park) by Proclamation No. 234
dated December 19, 1955 of President Ramon Magsaysay or by Proclamation Order No. 274 dated October 4,
1967 of President Ferdinand E. Marcos;" 19 that, such being the case, there is no reason why the subject
property should -not be considered as having been converted into patrimonial property, pursuant to the ruling
in Municipality vs. Roa 7 Phil. 20, inasmuch as the City of Manila has considered it as its patrimonial property
not only bringing it under the operation of the Land Registration Act but also by disposing of it; 20 and that to
consider now the subject property as a public plaza or park would not only impair the obligations of the parties
to the contract of sale (rated July 13, 1911, but also authorize deprivation of property without due process of
law.21

G.R. No. L-410112

In L-41012, the petitioner TDC stresses that the principal issue is the interpretation of Act No. 1360, as
amended by. Act No. 1657 of the Philippine Commission, 22 and avers that inasmuch as Section 6 of Act No.
1360, as amended by Act 1657, provided that the reclamation of the Luneta extension was to be paid for out of
the funds of the City of Manila which was authorized to borrow P350,000 "to be expended in the construction
of Luneta Extension," the reclaimed area became "public land" belonging to the City of Manila that spent for
the reclamation, conformably to the holding in Cabangis,23 and consequently, said land was subject to sale
and other disposition; that the Insular Government itself considered the reclaimed Luneta extension as
patrimonial property subject to disposition as evidenced by the fact that See. 3 of Act 1360 declared that "the
land hereby reclaimed shall be the property of the City of Manila;" that this property cannot be property for
public use for according to Article 344 of the Civil Code, the character of property for public use can only attach
to roads and squares that have already been constructed or at least laid out as such, which conditions did not
obtain regarding the subject land, that Sec. 5 of Act 1360 authorized the City of Manila to lease the northern
part of the reclaimed area for hotel purposes; that Act No. 1657 furthermore authorized the City of Manila to
sell the same; 24 that the express statutory authority to lease or sell the northern part of the reclaimed area
cannot be interpreted to mean that the remaining area could not be sold inasmuch as the purpose of the
statute was not merely to confer authority to sell the northern portion but rather to limit the city's power of
disposition thereof, to wit: to prevent disposition of the northern portion for any purpose other than for a hotel
site that the northern and southern ends of the reclaimed area cannot be considered as extension of the
Luneta for they lie beyond the sides of the original Luneta when extended in the direction of the sea, and that is
the reason why the law authorized the sale of the northern portion for hotel purposes, and, for the same
reason, it is implied that the southern portion could likewise be disposed of.26

TDC argues likewise that there are several items of uncontradicted circumstantial evidence which may serve
as aids in construing the legislative intent and which demonstrate that the subject property is patrimonial in
nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of the National Planning Commission showing the
Luneta and its vicinity, do not include the subject property as part of the Luneta Park; (2) Exhibit "K", which is
the plan of the subject property covered by TCT No. 67488 of BPOE, prepared on November 11, 1963,
indicates that said property is not a public park; (3) Exhibit "T", which is a certified copy of Proclamation No.
234 issued on December 15, 1955 is President Magsaysay, and Exhibit "U" which is Proclamation Order No.
273 issued on October 4, 1967 by President Marcos, do not include the subject property in the Luneta Park-,
(4) Exhibit "W", which is the location plan of the Luneta National Park under Proclamations Nos. 234 and 273,
further confirms that the subject property is not a public park; and (5) Exhibit "Y", which is a copy of O.C.T. No.
7333 in the name of the United States of America covering the land now occupied by the America covering the
land now occupied by the American Embassy, the boundaries of which were delineated by the Philippine
Legislature, states that the said land is bounded on the northwest by properties of the Army and Navy Club
(Block No. 321) and the Elks Club (Block No. 321), and this circumstance shows that even the Philippine
Legislature recognized the subject property as private property of the Elks Club. 27

TDC furthermore contends that the City of Manila is estopped from questioning the validity of the sale of the
subject property that it executed on July 13, 1911 to the Manila Lodge No. 761, BPOE, for several reasons,
namely: (1) the City's petition for the reannotation of Entry No. 4608/T-1635 was predicated on the validity of
said sale; (2) when the property was bought by the petitioner TDC it was not a public plaza or park as testified
to by both Pedro Cojuanco, treasurer of TDC, and the surveyor, Manuel Añoneuvo, according to whom the
subject property was from all appearances private property as it was enclosed by fences; (3) the property in
question was cadastrally surveyed and registered as property of the Elks Club, according to Manuel Anonuevo;
(4) the property was never used as a public park, for, since the issuance of T.C.T. No. 2165 on July 17, 1911 in
the name of the Manila Lodge NO. 761, the latter used it as private property, and as early as January 16, 1909
the City of Manila had already executed a deed of sale over the property in favor of the Manila Lodge No. 761;
and (5) the City of Manila has not presented any evidence to show that the subject property has ever been
proclaimed or used as a public park. 28

TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot apply to the subject land, for Com. Act No.
141 took effect on December 1, 1936 and at that time the subject land was no longer part of the part of the
public domain. 29

TDC also stresses that its rights as a purchaser in good faith cannot be disregarded, for the mere mention in
the certificate of title that the lot it purchased was "part of the Luneta extension" was not a sufficient warning
that tile title to the City of Manila was invalid; and that although the trial court, in its decision affirmed by the
Court of Appeals, found the TDC -to has been an innocent purchaser for value, the court disregarded the
petitioner's rights as such purchaser that relied on Torrens certificate of title. 30

The Court, continues the petitioner TDC erred in not holding that the latter is entitled to recover from the City of
Manila damages in the amount of P100,000 caused by the City's petition for- reannotation of its right to
repurchase.

DISCUSSION AND RESOLUTION OF FIRST ISSUE

It is a cardinal rule of statutory construction that courts must give effect to the general legislative intent that can
be discovered from or is unraveled by the four corners of the statute, 31 and in order to discover said intent,
the whole statute, and not only a particular provision thereof, should be considered.32 It is, therefore,
necessary to analyze all the provisions of Act No. 1360, as amended, in order to unravel the legislative intent.

Act No. 1360 which was enacted by the Philippine Commission on June 26, 1905, as amended by Act No.
1657 enacted on May 18, 1907, authorized the "construction of such rock and timber bulkheads or sea walls
as may be necessary for the making of an extension to the Luneta" (Sec. 1 [a]), and the placing of the material
dredged from the harbor of Manila "inside the bulkheads constructed to inclose the Luneta extension above
referred to" (Sec. 1 [a]). It likewise provided that the plan of Architect D. H. Burnham as "a general outline for
the extension and improvement of the Luneta in the City of Manila" be adopted; that "the reclamation from the
Bay of Manila of the land included in said projected Luneta extension... is hereby authorized and the land
thereby reclaimed shall be the property of the City of Manila" (Sec. 3); that "the City of Manila is hereby
authorized to set aside a tract of the reclaimed land formed by the Luneta extension authorized by this Act at
the worth end of said tract, not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to
lease the same with the approval of the Governor General, ... for a term not exceeding ninety-nine years; that
"should the Municipal Board ... deem it advisable it is hereby authorized to advertise for sale to sell said tract of
land ... ;" "that said tract shall be used for hotel purposes as herein prescribed, and shall not be devoted to any
other purpose or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel
x x x then the title to said tract of land sold, conveyed, and transferred, and shall not be devoted to any other
purpose or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel x x x
then the title to said tract of land sold, conveyed, and transferred to the grantee shall revert to the City of
Manila, and said City of Manila shall thereupon become entitled to immediate possession of said tract of land"
(Sec. 5); that the construction of the rock and timber bulkheads or sea wall "shall be paid for out of the funds of
the City of Manila, but the area to be reclaimed by said proposed Luneta extension shall be filled, without cost
to the City of Manila, with material dredged from Manila Bay at the expense of the Insular Government" (Sec.
6); and that "the City of Manila is hereby authorized to borrow from the Insular Government ... the sum of three
hundred thousand pesos, to be expended in the construction of Luneta extension provided for by paragraph (a)
of section one hereof" (Sec.7).

The grant made by Act No. 1360 of the reclaimed land to the City of Manila is a grant of "public" nature, the
same having been made to a local political subdivision. Such grants have always been strictly construed
against the grantee.33 One compelling reason given for the strict interpretation of a public grant is that there is
in such grant a gratuitous donation of, public money or resources which results in an unfair advantage to the
grantee and for that reason, the grant should be narrowly restricted in favor of the public.34 This reason for
strict interpretation obtains relative to the aforesaid grant, for, although the City of Manila was to pay for the
construction of such work and timber bulkheads or sea walls as may be necessary for the making of the
Luneta extension, the area to be reclaimed would be filled at the expense of the Insular Government and
without cost to the City of Manila, with material dredged from Manila Bay. Hence, the letter of the statute
should be narrowed to exclude maters which if included would defeat the policy of the legislation.

The reclaimed area, an extension to the Luneta, is declared to be property of the City of Manila. Property,
however, is either of public ownership or of private ownership. 35 What kind of property of the City is the
reclaimed land? Is it of public ownership (dominion) or of private ownership?

We hold that it is of public dominion, intended for public use.

Firstly, if the reclaimed area was granted to the City of Manila as its patrimonial property, the City could, by
virtue of its ownership, dispose of the whole reclaimed area without need of authorization to do so from the
lawmaking body. Thus Article 348 of the Civil Code of Spain provides that "ownership is the right to enjoy and
dispose of a thing without further limitations than those established by law." 36 The right to dispose (jus
disponendi) of one's property is an attribute of ownership. Act No. 1360, as amended, however, provides by
necessary implication, that the City of Manila could not dispose of the reclaimed area without being authorized
by the lawmaking body. Thus the statute provides that "the City of Manila is hereby authorized to set aside a
tract ... at the north end, for a hotel site, and to lease the same ... should the municipal board ... deem it
advisable, it is hereby authorized ...to sell said tract of land ... " (Sec. 5). If the reclaimed area were patrimonial
property of the City, the latter could dispose of it without need of the authorization provided by the statute, and
the authorization to set aside ... lease ... or sell ... given by the statute would indeed be superfluous. To so
construe the statute s to render the term "authorize," which is repeatedly used by the statute, superfluous
would violate the elementary rule of legal hermeneutics that effect must be given to every word, clause, and
sentence of the statute and that a statute should be so interpreted that no part thereof becomes inoperative or
superfluous. 37 To authorize means to empower, to give a right to act. 38 Act No. 1360 furthermore qualifies
the verb it authorize" with the adverb "hereby," which means "by means of this statue or section," Hence
without the authorization expressly given by Act No. 1360, the City of Manila could not lease or sell even the
northern portion; much less could it dispose of the whole reclaimed area. Consequently, the reclaimed area
was granted to the City of Manila, not as its patrimonial property. At most, only the northern portion reserved as
a hotel site could be said to be patrimonial property for, by express statutory provision it could be disposed of,
and the title thereto would revert to the City should the grantee fail to comply with the terms provided by the
statute.

TDC however, contends that the purpose of the authorization provided in Act No. 1360 to lease or sell was
really to limit the City's power of disposition. To sustain such contention is to beg the question. If the purpose of
the law was to limit the City's power of disposition then it is necessarily assumed that the City had already the
power to dispose, for if such power did not exist, how could it be limited? It was precisely Act 1360 that gave
the City the power to dispose for it was hereby authorized by lease of sale. Hence, the City of Manila had no
power to dispose of the reclaimed land had such power not been granted by Act No. 1360, and the purpose of
the authorization was to empower the city to sell or lease the northern part and not, as TDC claims, to limit only
the power to dispose. Moreover, it is presumed that when the lawmaking body enacted the statute, it had full
knowledge of prior and existing laws and legislation on the subject of the statute and acted in accordance or
with respect thereto.39 If by another previous law, the City of Manila could already dispose of the reclaimed
area, which it could do if such area were given to it as its patrimonial property, would it then not be a superfluity
for Act No. 1360 to authorize the City to dispose of the reclaimed land? Neither has petitioner TDC pointed to
any other law that authorized the City to do so, nor have we come across any. What we do know is that if the
reclaimed land were patrimonial property, there would be no need of giving special authorization to the City to
dispose of it. Said authorization was given because the reclaimed land was not intended to be patrimonial
property of the City of Manila, and without the express authorization to dispose of the northern portion, the City
could not dispose of even that part.

Secondly, the reclaimed area is an "extension to the Luneta in the City of Manila." 40 If the reclaimed area is
an extension of the Luneta, then it is of the same nature or character as the old Luneta. Anent this matter, it
has been said that a power to extend (or continue an act or business) cannot authorize a transaction that is
totally distinct. 41 It is not disputed that the old Luneta is a public park or plaza and it is so considered by
Section 859 of the Revised Ordinances of the City of Manila.42 Hence the "extension to the Luneta" must be
also a public park or plaza and for public use.

TDC, however, contends that the subject property cannot be considered an extension of the old Luneta
because it is outside of the limits of the old Luneta when extended to the sea. This is a strained interpretation
of the term "extension," for an "extension," it has been held, "signifies enlargement in any direction — in length,
breadth, or circumstance." 43

Thirdly, the reclaimed area was formerly a part of the manila Bay. A bay is nothing more than an inlet of the
sea. Pursuant to Article 1 of the Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores are
parts of the national domain open to public use. These are also property of public ownership devoted to public
use, according to Article 339 of the Civil Code of Spain.

When the shore or part of the bay is reclaimed, it does not lose its character of being property for public use,
according to Government of the Philippine Islands vs. Cabangis.44 The predecessor of the claimants in this
case was the owner of a big tract of land including the lots in question. From 1896 said land began to wear
away due to the action of the waters of Manila Bay. In 1901 the lots in question became completely submerged
in water in ordinary tides. It remained in such a state until 1912 when the Government undertook the dredging
of the Vitas estuary and dumped the Sand and - silt from estuary on the low lands completely Submerged in
water thereby gradually forming the lots in question. Tomas Cabangis took possession thereof as soon as they
were reclaimed hence, the claimants, his successors in interest, claimed that the lots belonged to them. The
trial court found for the claimants and the Government appealed. This Court held that when the lots became a
part of the shore. As they remained in that condition until reclaimed by the filling done by the Government, they
belonged to the public domain. for public use .4' Hence, a part of the shore, and for that purpose a part of the
bay, did not lose its character of being for public use after it was reclaimed.

Fourthly, Act 1360, as amended, authorized the lease or sale of the northern portion of the reclaimed area as a
hotel sites. The subject property is not that northern portion authorized to be leased or sold; the subject
property is the southern portion. Hence, applying the rule of expresio unius est exlusio alterius, the City of
Manila was not authorized to sell the subject property. The application of this principle of statutory construction
becomes the more imperative in the case at bar inasmuch as not only must the public grant of the reclaimed
area to the City of Manila be, as above stated, strictly construed against the City of Manila, but also because a
grant of power to a municipal corporation, as happens in this case where the city is author ized to lease or sell
the northern portion of the Luneta extension, is strictly limited to such as are expressly or impliedly authorized
or necessarily incidental to the objectives of the corporation.

Fifthly, Article 344 of the Civil Code of Spain provides that to property of public use, in provinces and in towns,
comprises the provincial and town roads, the squares streets fountains, and public waters the promenades,
and public works of general service paid for by such towns or provinces." A park or plaza, such as the
extension to the Luneta, is undoubtedly comprised in said article.

The petitioners, however, argue that, according to said Article 344, in order that the character of property for
public use may be so attached to a plaza, the latter must be actually constructed or at least laid out as such,
and since the subject property was not yet constructed as a plaza or at least laid out as a plaza when it was
sold by the City, it could not be property for public use. It should be noted, however, that properties of
provinces and towns for public use are governed by the same principles as properties of the same character
belonging to the public domain.46 In order to be property of public domain an intention to devote it to public
use is sufficient. 47 The, petitioners' contention is refuted by Manresa himself who said, in his comments", on
Article 344, that: ñé+.£ªwph!1

Las plazas, calles y paseos publicos correspondent sin duda aiguna aldominio publico municipal ), porque se
hallan establecidos sobre suelo municipal y estan destinadas al uso de todos Laurent presenta tratando de las
plazas, una question relativa a si deben conceptuarse como de dominio publico los lugares vacios libres, que
se encuenttan en los Municipios rurales ... Laurent opina contra Pioudhon que toda vez que estan al servicio
de todos pesos lugares, deben considerable publicos y de dominion publico. Realmente, pala decidir el punto,
bastara siempre fijarse en el destino real y efectivo de los citados lugares, y si este destino entraña un uso
comun de todos, no hay duda que son de dominio publico municipal si no patrimoniales.

It is not necessary, therefore, that a plaza be already constructed of- laid out as a plaza in order that it be
considered property for public use. It is sufficient that it be intended to be such In the case at bar, it has been
shown that the intention of the lawmaking body in giving to the City of Manila the extension to the Luneta was
not a grant to it of patrimonial property but a grant for public use as a plaza.

We have demonstrated ad satietatem that the Luneta extension as intended to be property of the City of
Manila for public use. But, could not said property-later on be converted, as the petitioners contend, to
patrimonial property? It could be. But this Court has already said, in Ignacio vs. The Director of Lands, 49 the
executive and possibly the legislation department that has the authority and the power to make the declaration
that said property, is no longer required for public use, and until such declaration i made the property must
continue to form paint of the public domain. In the case at bar, there has been no such explicit or unequivocal
declaration It should be noted, furthermore, anent this matter, that courts are undoubted v not. primarily called
upon, and are not in a position, to determine whether any public land is still needed for the purposes specified
in Article 4 of the Law of Waters .50
Having disposed of the petitioners' principal arguments relative to the main issue, we now pass to the items of
circumstantial evidence which TDC claims may serve as aids in construing the legislative intent in the
enactment of Act No. 1360, as amended. It is noteworthy that all these items of alleged circumstantial evidence
are acts far removed in time from the date of the enactment of Act No.1360 such that they cannot be
considered contemporaneous with its enactment. Moreover, it is not farfetched that this mass of circumstantial
evidence might have been influenced by the antecedent series of invalid acts, to wit: the City's having obtained
over the reclaimed area OCT No. 1909 on January 20,1911; the sale made by the City of the subject property
to Manila Lodge No. 761; and the issuance to the latter of T.C.T. No. 2195. It cannot gainsaid that if the
subsequent acts constituting the circumstantial evidence have been base on, or at least influenced, by those
antecedent invalid acts and Torrens titles S they can hardly be indicative of the intent of the lawmaking body in
enacting Act No. 1360 and its amendatory act.

TDC claims that Exhs. "J," "J-l" "K," "T," "U," "W" and "Y" show that the subject property is not a park.

Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed development" dated May 14, 1949, were
prepared by the National Urban Planning Commission of the Office of the President. It cannot be reasonably
expected that this plan for development of the Luneta should show that the subject property occupied by the
ElksClub is a public park, for it was made 38 years after the sale to the Elks, and after T.C.T. No. 2195 had
been issued to Elks. It is to be assumed that the Office of the President was cognizant of the Torrens title of
BPOE. That the subject property was not included as a part of the Luneta only indicated that the National
Urban Planning Commission that made the plan knew that the subject property was occupied by Elks and that
Elks had a Torrens title thereto. But this in no way proves that the subject property was originally intended to
be patrimonial property of the City of Manila or that the sale to Elks or that the Torrens-title of the latter is valid.

Exhibit "K" is the "Plan of land covered by T.C.T . No ----, as prepared for Tarlac Development Company." It
was made on November 11, 1963 by Felipe F. Cruz, private land surveyor. This surveyor is admittedly a
surveyor for TDC. 51 This plan cannot be expected to show that the subject property is a part of the Luneta
Park, for he plan was made to show the lot that "was to be sold to petitioner." This plan must have also
assumed the existence of a valid title to the land in favor of Elks.

Exhibits "T" and "U" are copies of Presidential Proclamations No. 234 issued on November 15, 1955 and No.
273 issued on October 4, 1967, respectively. The purpose of the said Proclamations was to reserve certain
parcels of land situated in the District of Ermita, City of Manila, for park site purposes. Assuming that the
subject property is not within the boundaries of the reservation, this cannot be interpreted to mean that the
subject property was not originally intended to be for public use or that it has ceased to be such. Conversely,
had the subject property been included in the reservation, it would mean, if it really were private property, that
the rights of the owners thereof would be extinguished, for the reservations was "subject to private rights, if any
there be." That the subject property was not included in the reservation only indicates that the President knew
of the existence of the Torrens titles mentioned above. The failure of the Proclamations to include the subject
property in the reservation for park site could not change the character of the subject property as originally for
public use and to form part of the Luneta Park. What has been said here applies to Exhibits "V", "V-1" to "V-3,"
and "W" which also refer to the area and location of the reservation for the Luneta Park.

Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935, covering the lot where now stands the
American Embassy [Chancery]. It states that the property is "bounded ... on the Northwest by properties of
Army and Navy Club (Block No.321) and Elks Club (Block No. 321)." Inasmuch as the said bounderies
delineated by the Philippine Legislature in Act No. 4269, the petitioners contend that the Legislature
recognized and conceded the existence of the Elks Club property as a primate property (the property in
question) and not as a public park or plaza. This argument is non sequitur plain and simple Said Original
Certificate of Title cannot be considered as an incontrovertible declaration that the Elks Club was in truth and in
fact the owner of such boundary lot. Such mention as boundary owner is not a means of acquiring title nor can
it validate a title that is null and void.

TDC finally claims that the City of Manila is estopped from questioning the validity of the sale it executed on
July 13,'1911 conconveying the subject property to the Manila Lodge No. 761, BPOE. This contention cannot
be seriously defended in the light of the doctrine repeatedly enunciated by this Court that the Government is
never estopped by mistakes or errors on the pan of its agents, and estoppel does not apply to a municipal
corporation to validate a contract that is prohibited by law or its against Republic policy, and the sale of July 13,
1911 executed by the City of Manila to Manila Lodge was certainly a contract prohibited by law. Moreover,
estoppel cannot be urged even if the City of Manila accepted the benefits of such contract of sale and the
Manila Lodge No. 761 had performed its part of the agreement, for to apply the doctrine of estoppel against the
City of Manila in this case would be tantamount to enabling it to do indirectly what it could not do directly. 52

The sale of the subject property executed by the City of Manila to the Manila Lodge No. 761, BPOE, was void
and inexistent for lack of subject matter. 53 It suffered from an incurable defect that could not be ratified either
by lapse of time or by express ratification. The Manila Lodge No. 761 therefore acquired no right by virtue of
the said sale. Hence to consider now the contract inexistent as it always has seen, cannot be, as claimed by
the Manila Lodge No. 761, an impairment of the obligations of contracts, for there was it, contemplation of law,
no contract at all.

The inexistence of said sale can be set up against anyone who asserts a right arising from it, not only against
the first vendee, the Manila Lodge No. 761, BPOE, but also against all its suceessors, including the TDC which
are not protected the doctrine of bona fide ii purchaser without notice, being claimed by the TDC does not
apply where there is a total absence of title in the vendor, and the good faith of the purchaser TDC cannot
create title where none exists. 55

The so-called sale of the subject property having been executed, the restoration or restitution of what has been
given is order 56

SECOND ISSUE

The second ground alleged in support of the instant petitions for review on certiorari is that the Court of
Appeals has departed from the accepted and usual course of judicial proceedings as to call for an exercise of
the power of supervision. TDC in L-41012, argues that the respondent Court did not make its own findings but
simply recited those of the lower court and made a general affirmance, contrary to the requirements of the
Constitution; that the respondent Court made glaring and patent mistakes in recounting even the copied
findings, palpably showing lack of deliberate consideration of the matters involved, as, for example, when said
court said that Act No. 1657 authorized the City of Manila to set aside a portion of the reclaimed land "formed
by the Luneta Extension of- to lease or sell the same for park purposes;" and that respondent Court. further
more, did not resolve or dispose of any of the assigned errors contrary to the mandate of the Judiciary Act..57

The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the reasons warranting review, that the
Court of Appeals departed from the accepted and usual course of Judicial proceedings by simply making a
general affirmance of the court a quo findings without bothering to resolve several vital points mentioned by the
BPOE in its assigned errors. 58

COMMENTS ON SECOND ISSUE

We have shown in our discussion of the first issue that the decision of the trial court is fully in accordance with
law. To follows that when such decision was affirmed by the Court of Appeals, the affirmance was likewise in
accordance with law. Hence, no useful purpose will be served in further discussing the second issue.

CONCLUSION

ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012 are denied for lack of merit, and the
decision of the Court of Appeals of June 30, 1975, is hereby affirmed, at petitioner's cost.

G.R. No. 190102 July 11, 2012

ACCENTURE, INC., Petitioner,

vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

SERENO, J.:

This is a Petition filed under Rule 45 of the 1997 Rules of Civil Procedure, praying for the reversal of the
Decision of the Court of Tax Appeals En Banc (CTA En Banc ) dated 22 September 2009 and its subsequent
Resolution dated 23 October 2009.1

Accenture, Inc. (Accenture) is a corporation engaged in the business of providing management consulting,
business strategies development, and selling and/or licensing of software.2 It is duly registered with the Bureau
of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer or enterprise in accordance with Section 236
of the National Internal Revenue Code (Tax Code).3

On 9 August 2002, Accenture filed its Monthly VAT Return for the period 1 July 2002 to 31 August 2002 (1st
period). Its Quarterly VAT Return for the fourth quarter of 2002, which covers the 1st period, was filed on 17
September 2002; and an Amended Quarterly VAT Return, on 21 June 2004.4 The following are reflected in
Accenture’s VAT Return for the fourth quarter of 2002:5

1âwphi1

Purchases Amount Input VAT

Domestic Purchases- Capital Goods ₱12,312,722.00 ₱1,231,272.20

Domestic Purchases- Goods other than capital Goods ₱64,789,507.90 ₱6,478,950.79

Domestic Purchases- Services ₱16,455,868.10 ₱1,645,586.81

Total Input Tax

₱9,355,809.80
Zero-rated Sales

₱316,113,513.34

Total Sales

₱335,640,544.74

Accenture filed its Monthly VAT Return for the month of September 2002 on 24 October 2002; and that for
October 2002, on 12 November 2002. These returns were amended on 9 January 2003. Accenture’s Quarterly
VAT Return for the first quarter of 2003, which included the period 1 September 2002 to 30 November 2002
(2nd period), was filed on 17 December 2002; and the Amended Quarterly VAT Return, on 18 June 2004. The
latter contains the following information:6

Purchases Amount Input VAT

Domestic Purchases- Capital Goods ₱80,765,294.10 ₱8,076,529.41

Domestic Purchases- Goods other than capital Goods ₱132,820,541.70 ₱13,282,054.17

Domestic Purchases-Services ₱63,238,758.00 ₱6,323,875.80

Total Input Tax

₱27,682,459.38

Zero-rated Sales

₱545,686,639.18

Total Sales ₱ ₱572,880,982.68

The monthly and quarterly VAT returns of Accenture show that, notwithstanding its application of the input VAT
credits earned from its zero-rated transactions against its output VAT liabilities, it still had excess or unutilized
input VAT credits. These VAT credits are in the amounts of P9,355,809.80 for the 1st period and
P27,682,459.38 for the 2nd period, or a total of P37,038,269.18.7

Out of the P37,038,269.18, only P35,178,844.21 pertained to the allocated input VAT on Accenture’s
"domestic purchases of taxable goods which cannot be directly attributed to its zero-rated sale of services."8
This allocated input VAT was broken down to P8,811,301.66 for the 1st period and P26,367,542.55 for the 2nd
period.9

The excess input VAT was not applied to any output VAT that Accenture was liable for in the same quarter
when the amount was earned—or to any of the succeeding quarters. Instead, it was carried forward to
petitioner’s 2nd Quarterly VAT Return for 2003.10
Thus, on 1 July 2004, Accenture filed with the Department of Finance (DoF) an administrative claim for the
refund or the issuance of a Tax Credit Certificate (TCC). The DoF did not act on the claim of Accenture.
Hence, on 31 August 2004, the latter filed a Petition for Review with the First Division of the Court of Tax
Appeals (Division), praying for the issuance of a TCC in its favor in the amount of P35,178,844.21.

The Commissioner of Internal Revenue (CIR), in its Answer,11 argued thus:

1. The sale by Accenture of goods and services to its clients are not zero-rated transactions.

2. Claims for refund are construed strictly against the claimant, and Accenture has failed to prove that it is
entitled to a refund, because its claim has not been fully substantiated or documented.

In a 13 November 2008 Decision,12 the Division denied the Petition of Accenture for failing to prove that the
latter’s sale of services to the alleged foreign clients qualified for zero percent VAT.13

In resolving the sole issue of whether or not Accenture was entitled to a refund or an issuance of a TCC in the
amount of P35,178,844.21,14 the Division ruled that Accenture had failed to present evidence to prove that the
foreign clients to which the former rendered services did business outside the Philippines.15 Ruling that
Accenture’s services would qualify for zero-rating under the 1997 National Internal Revenue Code of the
Philippines (Tax Code) only if the recipient of the services was doing business outside of the Philippines,16 the
Division cited Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao,
Inc. (Burmeister)17 as basis.

Accenture appealed the Division’s Decision through a Motion for Reconsideration (MR).18 In its MR, it argued
that the reliance of the Division on Burmeister was misplaced19 for the following reasons:

1. The issue involved in Burmeister was the entitlement of the applicant to a refund, given that the recipient of
its service was doing business in the Philippines; it was not an issue of failure of the applicant to present
evidence to prove the fact that the recipient of its services was a foreign corporation doing business outside the
Philippines.20

2. Burmeister emphasized that, to qualify for zero-rating, the recipient of the services should be doing business
outside the Philippines, and Accenture had successfully established that.21

3. Having been promulgated on 22 January 2007 or after Accenture filed its Petition with the Division,
Burmeister cannot be made to apply to this case.22

Accenture also cited Commissioner of Internal Revenue v. American Express (Amex)23 in support of its
position. The MR was denied by the Division in its 12 March 2009 Resolution.24

Accenture appealed to the CTA En Banc. There it argued that prior to the amendment introduced by Republic
Act No. (R.A.) 9337, 25 there was no requirement that the services must be rendered to a person engaged in
business conducted outside the Philippines to qualify for zero-rating. The CTA En Banc agreed that because
the case pertained to the third and the fourth quarters of taxable year 2002, the applicable law was the 1997
Tax Code, and not R.A. 9337.26 Still, it ruled that even though the provision used in Burmeister was Section
102(b)(2) of the earlier 1977 Tax Code, the pronouncement therein requiring recipients of services to be
engaged in business outside the Philippines to qualify for zero-rating was applicable to the case at bar,
because Section 108(B)(2) of the 1997 Tax Code was a mere reenactment of Section 102(b)(2) of the 1977
Tax Code.

The CTA En Banc concluded that Accenture failed to discharge the burden of proving the latter’s allegation
that its clients were foreign-based.27

Resolute, Accenture filed a Petition for Review with the CTA En Banc, but the latter affirmed the Division’s
Decision and Resolution.28 A subsequent MR was also denied in a Resolution dated 23 October 2009.

Hence, the present Petition for Review29 under Rule 45.

In a Joint Stipulation of Facts and Issues, the parties and the Division have agreed to submit the following
issues for resolution:

1. Whether or not Petitioner’s sales of goods and services are zero-rated for VAT purposes under Section
108(B)(2)(3) of the 1997 Tax Code.

2. Whether or not petitioner’s claim for refund/tax credit in the amount of P35,178,884.21 represents unutilized
input VAT paid on its domestic purchases of goods and services for the period commencing from 1 July 2002
until 30 November 2002.

3. Whether or not Petitioner has carried over to the succeeding taxable quarter(s) or year(s) the alleged
unutilized input VAT paid on its domestic purchases of goods and services for the period commencing from 1
July 2002 until 30 November 2002, and applied the same fully to its output VAT liability for the said period.

4. Whether or not Petitioner is entitled to the refund of the amount of P35,178,884.21, representing the
unutilized input VAT on domestic purchases of goods and services for the period commencing from 1 July
2002 until 30 November 2002, from its sales of services to various foreign clients.

5. Whether or not Petitioner’s claim for refund/tax credit in the amount of P35,178,884.21, as alleged unutilized
input VAT on domestic purchases of goods and services for the period covering 1 July 2002 until 30 November
2002 are duly substantiated by proper documents.30

For consideration in the present Petition are the following issues:

1. Should the recipient of the services be "doing business outside the Philippines" for the transaction to be
zero-rated under Section 108(B)(2) of the 1997 Tax Code?

2. Has Accenture successfully proven that its clients are entities doing business outside the Philippines?
Recipient of services must be doing business outside the Philippines for the transactions to qualify as zero-
rated.

Accenture anchors its refund claim on Section 112(A) of the 1997 Tax Code, which allows the refund of
unutilized input VAT earned from zero-rated or effectively zero-rated sales. The provision reads:

SEC. 112. Refunds or Tax Credits of Input Tax. -

(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were
made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable
to such sales, except transitional input tax, to the extent that such input tax has not been applied against output
tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and
Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly
accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,
further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or
exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis
of the volume of sales. Section 108(B) referred to in the foregoing provision was first seen when Presidential
Decree No. (P.D.) 199431 amended Title IV of P.D. 1158,32 which is also known as the National Internal
Revenue Code of 1977. Several Decisions have referred to this as the 1986 Tax Code, even though it merely
amended Title IV of the 1977 Tax Code.

Two years thereafter, or on 1 January 1988, Executive Order No. (E.O.) 27333 further amended provisions of
Title IV. E.O. 273 by transferring the old Title IV provisions to Title VI and filling in the former title with new
provisions that imposed a VAT.

The VAT system introduced in E.O. 273 was restructured through Republic Act No. (R.A.) 7716.34 This law,
which was approved on 5 May 1994, widened the tax base. Section 3 thereof reads:

SECTION 3. Section 102 of the National Internal Revenue Code, as amended, is hereby further amended to
read as follows:

"SEC. 102. Value-added tax on sale of services and use or lease of properties. x x x

xxx xxx xxx

"(b) Transactions subject to zero-rate. — The following services performed in the Philippines by VAT-
registered persons shall be subject to 0%:

"(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines
which goods are subsequently exported, where the services are paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
"(2) Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid
for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP)."

Essentially, Section 102(b) of the 1977 Tax Code—as amended by P.D. 1994, E.O. 273, and R.A. 7716—
provides that if the consideration for the services provided by a VAT-registered person is in a foreign currency,
then this transaction shall be subjected to zero percent rate.

The 1997 Tax Code reproduced Section 102(b) of the 1977 Tax Code in its Section 108(B), to wit:

(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by
VAT- registered persons shall be subject to zero percent (0%) rate.

(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines
which goods are subsequently exported, where the services are paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

(2) Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP); x x x.

On 1 November 2005, Section 6 of R.A. 9337, which amended the foregoing provision, became effective. It
reads:

SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows:

"SEC. 108. Value-added Tax on Sale of Services and Use or Lease of

Properties. -

(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by
VAT-registered persons shall be subject to zero percent (0%) rate:

(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines
which goods are subsequently exported, where the services are paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

"(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in
business conducted outside the Philippines or to a nonresident person not engaged in business who is outside
the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP); x x x." (Emphasis supplied)

The meat of Accenture’s argument is that nowhere does Section 108(B) of the 1997 Tax Code state that
services, to be zero-rated, should be rendered to clients doing business outside the Philippines, the
requirement introduced by R.A. 9337.35 Required by Section 108(B), prior to the amendment, is that the
consideration for the services rendered be in foreign currency and in accordance with the rules of the Bangko
Sentral ng Pilipinas (BSP). Since Accenture has complied with all the conditions imposed in Section 108(B), it
is entitled to the refund prayed for.

In support of its claim, Accenture cites Amex, in which this Court supposedly ruled that Section 108(B) reveals
a clear intent on the part of the legislators not to impose the condition of being "consumed abroad" in order for
the services performed in the Philippines to be zero-rated.36

The Division ruled that this Court, in Amex and Burmeister, did not declare that the requirement—that the client
must be doing business outside the Philippines—can be disregarded, because this requirement is expressly
provided in Article 108(2) of the Tax Code.37

Accenture questions the Division’s application to this case of the pronouncements made in Burmeister.
According to petitioner, the provision applied to the present case was Section 102(b) of the 1977 Tax Code,
and not Section 108(B) of the 1997 Tax Code, which was the law effective when the subject transactions were
entered into and a refund was applied for.

In refuting Accenture’s theory, the CTA En Banc ruled that since Section 108(B) of the 1997 Tax Code was a
mere reproduction of Section 102(b) of the 1977 Tax Code, this Court’s interpretation of the latter may be used
in interpreting the former, viz:

In the Burmeister case, the Supreme Court harmonized both Sections 102(b)(1) and 102(b)(2) of the 1977 Tax
Code, as amended, pertaining to zero-rated transactions. A parallel approach should be accorded to the
renumbered provisions of Sections 108(B)(2) and 108(B)(1) of the 1997 NIRC. This means that Section
108(B)(2) must be read in conjunction with Section 108(B)(1). Section 108(B)(2) requires as follows: a)
services other than processing, manufacturing or repacking rendered by VAT registered persons in the
Philippines; and b) the transaction paid for in acceptable foreign currency duly accounted for in accordance
with BSP rules and regulations. The same provision made reference to Section 108(B)(1) further imposing the
requisite c) that the recipient of services must be performing business outside of Philippines. Otherwise, if both
the provider and recipient of service are doing business in the Philippines, the sale transaction is subject to
regular VAT as explained in the Burmeister case x x x.

xxx xxx xxx

Clearly, the Supreme Court’s pronouncements in the Burmeister case requiring that the recipient of the
services must be doing business outside the Philippines as mandated by law govern the instant case.38

Assuming that the foregoing is true, Accenture still argues that the tax appeals courts cannot be allowed to
apply to Burmeister this Court’s interpretation of Section 102(b) of the 1977 Tax Code, because the Petition of
Accenture had already been filed before the case was even promulgated on 22 January 2007,39 to wit:
x x x. While the Burmeister case forms part of the legal system and assumes the same authority as the statute
itself, however, the same cannot be applied retroactively against the Petitioner because to do so will be
prejudicial to the latter.40

The CTA en banc is of the opinion that Accenture cannot invoke the non-retroactivity of the rulings of the
Supreme Court, whose interpretation of the law is part of that law as of the date of its enactment.41

We rule that the recipient of the service must be doing business outside the Philippines for the transaction to
qualify for zero-rating under Section 108(B) of the Tax Code.

This Court upholds the position of the CTA en banc that, because Section 108(B) of the 1997 Tax Code is a
verbatim copy of Section 102(b) of the 1977 Tax Code, any interpretation of the latter holds true for the former.

Moreover, even though Accenture’s Petition was filed before Burmeister was promulgated, the
pronouncements made in that case may be applied to the present one without violating the rule against
retroactive application. When this Court decides a case, it does not pass a new law, but merely interprets a
preexisting one.42 When this Court interpreted Section 102(b) of the 1977 Tax Code in Burmeister, this
interpretation became part of the law from the moment it became effective. It is elementary that the
interpretation of a law by this Court constitutes part of that law from the date it was originally passed, since this
Court's construction merely establishes the contemporaneous legislative intent that the interpreted law carried
into effect.43

Accenture questions the CTA’s application of Burmeister, because the provision interpreted therein was
Section 102(b) of the 1977 Tax Code. In support of its position that Section 108 of the 1997 Tax Code does not
require that the services be rendered to an entity doing business outside the Philippines, Accenture invokes
this Court’s pronouncements in Amex. However, a reading of that case will readily reveal that the provision
applied was Section 102(b) of the 1977 Tax Code, and not Section 108 of the 1997 Tax Code. As previously
mentioned, an interpretation of Section 102(b) of the 1977 Tax Code is an interpretation of Section 108 of the
1997 Tax Code, the latter being a mere reproduction of the former.

This Court further finds that Accenture’s reliance on Amex is misplaced.

We ruled in Amex that Section 102 of the 1977 Tax Code does not require that the services be consumed
abroad to be zero-rated. However, nowhere in that case did this Court discuss the necessary qualification of
the recipient of the service, as this matter was never put in question. In fact, the recipient of the service in
Amex is a nonresident foreign client.

The aforementioned case explains how the credit card system works. The issuance of a credit card allows the
holder thereof to obtain, on credit, goods and services from certain establishments. As proof that this credit is
extended by the establishment, a credit card draft is issued. Thereafter, the company issuing the credit card
will pay for the purchases of the credit card holders by redeeming the drafts. The obligation to collect from the
card holders and to bear the loss—in case they do not pay—rests on the issuer of the credit card.

The service provided by respondent in Amex consisted of gathering the bills and credit card drafts from
establishments located in the Philippines and forwarding them to its parent company's regional operating
centers outside the country. It facilitated in the Philippines the collection and payment of receivables belonging
to its Hong Kong-based foreign client.

The Court explained how the services rendered in Amex were considered to have been performed and
consumed in the Philippines, to wit:

Consumption is "the use of a thing in a way that thereby exhausts it." Applied to services, the term means the
performance or "successful completion of a contractual duty, usually resulting in the performer’s release from
any past or future liability x x x." The services rendered by respondent are performed or successfully
completed upon its sending to its foreign client the drafts and bills it has gathered from service establishments
here. Its services, having been performed in the Philippines, are therefore also consumed in the Philippines.44

The effect of the place of consumption on the zero-rating of the transaction was not the issue in
Burmeister.1âwphi1 Instead, this Court addressed the squarely raised issue of whether the recipient of
services should be doing business outside the Philippines for the transaction to qualify for zero-rating. We
ruled that it should. Thus, another essential condition for qualification for zero-rating under Section 102(b)(2) of
the 1977 Tax Code is that the recipient of the business be doing that business outside the Philippines. In
clarifying that there is no conflict between this pronouncement and that laid down in Amex, we ruled thus:

x x x. As the Court held in Commissioner of Internal Revenue v. American Express International, Inc.
(Philippine Branch), the place of payment is immaterial, much less is the place where the output of the service
is ultimately used. An essential condition for entitlement to 0% VAT under Section 102 (b) (1) and (2) is that the
recipient of the services is a person doing business outside the Philippines. In this case, the recipient of the
services is the Consortium, which is doing business not outside, but within the Philippines because it has a 15-
year contract to operate and maintain NAPOCOR’s two 100-megawatt power barges in Mindanao. (Emphasis
in the original)45

In Amex we ruled that the place of performance and/or consumption of the service is immaterial. In Burmeister,
the Court found that, although the place of the consumption of the service does not affect the entitlement of a
transaction to zero-rating, the place where the recipient conducts its business does.

Amex does not conflict with Burmeister. In fact, to fully understand how Section 102(b)(2) of the 1977 Tax
Code—and consequently Section 108(B)(2) of the 1997 Tax Code—was intended to operate, the two
aforementioned cases should be taken together. The zero-rating of the services performed by respondent in
Amex was affirmed by the Court, because although the services rendered were both performed and consumed
in the Philippines, the recipient of the service was still an entity doing business outside the Philippines as
required in Burmeister.

That the recipient of the service should be doing business outside the Philippines to qualify for zero-rating is
the only logical interpretation of Section 102(b)(2) of the 1977 Tax Code, as we explained in Burmeister:

This can only be the logical interpretation of Section 102 (b) (2). If the provider and recipient of the "other
services" are both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise,
those subject to the regular VAT under Section 102 (a) can avoid paying the VAT by simply stipulating
payment in foreign currency inwardly remitted by the recipient of services. To interpret Section 102 (b) (2) to
apply to a payer-recipient of services doing business in the Philippines is to make the payment of the regular
VAT under Section 102 (a) dependent on the generosity of the taxpayer. The provider of services can choose
to pay the regular VAT or avoid it by stipulating payment in foreign currency inwardly remitted by the payer-
recipient. Such interpretation removes Section 102 (a) as a tax measure in the Tax Code, an interpretation this
Court cannot sanction. A tax is a mandatory exaction, not a voluntary contribution.

xxx xxx xxx

Further, when the provider and recipient of services are both doing business in the Philippines, their
transaction falls squarely under Section 102 (a) governing domestic sale or exchange of services. Indeed, this
is a purely local sale or exchange of services subject to the regular VAT, unless of course the transaction falls
under the other provisions of Section 102 (b).

Thus, when Section 102 (b) (2) speaks of "services other than those mentioned in the preceding
subparagraph," the legislative intent is that only the services are different between subparagraphs 1 and 2. The
requirements for zero-rating, including the essential condition that the recipient of services is doing business
outside the Philippines, remain the same under both subparagraphs. (Emphasis in the original)46

Lastly, it is worth mentioning that prior to the promulgation of Burmeister, Congress had already clarified the
intent behind Sections 102(b)(2) of the 1977 Tax Code and 108(B)(2) of the 1997 Tax Code amending the
earlier provision. R.A. 9337 added the following phrase: "rendered to a person engaged in business conducted
outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines
when the services are performed."

Accenture has failed to establish that the recipients of its services do business outside the Philippines.

Accenture argues that based on the documentary evidence it presented,47 it was able to establish the
following circumstances:

1. The records of the Securities and Exchange Commission (SEC) show that Accenture’s clients have not
established any branch office in which to do business in the Philippines.

2. For these services, Accenture bills another corporation, Accenture Participations B.V. (APB), which is
likewise a foreign corporation with no "presence in the Philippines."

3. Only those not doing business in the Philippines can be required under BSP rules to pay in acceptable
currency for their purchase of goods and services from the Philippines. Thus, in a domestic transaction, where
the provider and recipient of services are both doing business in the Philippines, the BSP cannot require any
party to make payment in foreign currency.48

Accenture claims that these documentary pieces of evidence are supported by the Report of Emmanuel
Mendoza, the Court-commissioned Independent Certified Public Accountant. He ascertained that Accenture’s
gross billings pertaining to zero-rated sales were all supported by zero-rated Official Receipts and Billing
Statements. These documents show that these zero-rated sales were paid in foreign exchange currency and
duly accounted for in the rules and regulations of the BSP.49
In the CTA’s opinion, however, the documents presented by Accenture merely substantiate the existence of
the sales, receipt of foreign currency payments, and inward remittance of the proceeds of these sales duly
accounted for in accordance with BSP rules. Petitioner presented no evidence whatsoever that these clients
were doing business outside the Philippines.50

Accenture insists, however, that it was able to establish that it had rendered services to foreign corporations
doing business outside the Philippines, unlike in Burmeister, which allegedly involved a foreign corporation
doing business in the Philippines.51

We deny Accenture’s Petition for a tax refund.

The evidence presented by Accenture may have established that its clients are foreign.1âwphi1 This fact does
not automatically mean, however, that these clients were doing business outside the Philippines. After all, the
Tax Code itself has provisions for a foreign corporation engaged in business within the Philippines and vice
versa, to wit:

SEC. 22. Definitions - When used in this Title:

xxx xxx xxx

(H) The term "resident foreign corporation" applies to a foreign corporation engaged in trade or business within
the Philippines.

(I) The term ‘nonresident foreign corporation’ applies to a foreign corporation not engaged in trade or business
within the Philippines. (Emphasis in the original)

Consequently, to come within the purview of Section 108(B)(2), it is not enough that the recipient of the service
be proven to be a foreign corporation; rather, it must be specifically proven to be a nonresident foreign
corporation.

There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. We ruled
thus in Commissioner of Internal Revenue v. British Overseas Airways Corporation:52

x x x. There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business.
Each case must be judged in the light of its peculiar environmental circumstances. The term implies a
continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts
or works or the exercise of some of the functions normally incident to, and in progressive prosecution of
commercial gain or for the purpose and object of the business organization. "In order that a foreign corporation
may be regarded as doing business within a State, there must be continuity of conduct and intention to
establish a continuous business, such as the appointment of a local agent, and not one of a temporary
character."53

A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis of that
claim.1âwphi1 Tax refunds, like tax exemptions, are construed strictly against the taxpayer.54
Accenture failed to discharge this burden. It alleged and presented evidence to prove only that its clients were
foreign entities. However, as found by both the CTA Division and the CTA En Banc, no evidence was
presented by Accenture to prove the fact that the foreign clients to whom petitioner rendered its services were
clients doing business outside the Philippines.

As ruled by the CTA En Banc, the Official Receipts, Intercompany Payment Requests, Billing Statements,
Memo Invoices-Receivable, Memo Invoices-Payable, and Bank Statements presented by Accenture merely
substantiated the existence of sales, receipt of foreign currency payments, and inward remittance of the
proceeds of such sales duly accounted for in accordance with BSP rules, all of these were devoid of any
evidence that the clients were doing business outside of the Philippines.55

WHEREFORE, the instant Petition is DENIED. The 22 September 2009 Decision and the 23 October 2009
Resolution of the Court of Tax Appeals En Banc in C.T.A. EB No. 477, dismissing the Petition for the refund of
the excess or unutilized input VAT credits of Accenture, Inc., are AFFIRMED.

[G.R. No. 112965. January 30, 1997]

PHILIPPINES TODAY, INC., BETTY GO-BELMONTE, MAXIMO V. SOLIVEN, ARTURO A. BORJAL, and
ISAAC G. BELMONTE petitioners, v. NATIONAL LABOR RELATIONS COMMISSION and FELIX R. ALEGRE,
JR., Respondents.

DECISION

PANGANIBAN, J.:

May a "Memorandum for File" which did not mention the words "resign" and/or "resignation" nonetheless
juridically constitute voluntary resignation? In answering this question, the Court took into account not merely
the literal meaning of the words and phrases used but, more importantly, the peculiar circumstances attendant
to its writing as well as antecedent, contemporaneous and subsequent actions, which were inconsistent with
the desire for continued employment of the writer, an intelligent executive occupying a position of trust in the
Philippine Star and gifted with an unusual writing ability.

These circumstances and actions are explained by this Court in re- solving this petition for certiorari assailing
the Decision 1 of the National Labor Relations Commission (Second Division) 2 in NLRC NCR CA 001863-91
entitled "Felix R. Alegre, Jr. vs. Philippines Today, Inc." promulgated on September 30, 1993, which reversed
the decision of Labor Arbiter Pablo C. Espiritu, Jr., dated May 15; 1991. In a Resolution dated November 16,
1993, petitioners' motion for reconsideration was denied. 3chanroblesvirtuallawlibrary

The Facts

The undisputed facts are as follows: Petitioner Philippines Today, Inc. (PTI) is the owner of the Philippine Star,
a daily newspaper of national and international circulation, while the individual petitioners are officers and
members of the board of directors of PTI, namely, Betty Go-Belmonte, chairman of the board; Arturo A. Borjal,
president; Maximo V. Soliven, publisher and chairman, editorial board; and Isaac G. Belmonte, treasurer.
Private Respondent Felix R. Alegre, Jr. was employed by PTI in July 1986 as a senior investigative reporter of
the Philippine Star with a monthly salary of eight thousand pesos (P8,000.00). He later became chief
investigative writer and then assistant to the publisher. His monthly compensation was correspondingly
increased to ten thousand pesos (P10,000.00).

On October 20, 1988, Respondent Alegre filed a request for a thirty-day leave of absence effective on the
same date, citing the advice of his personal physician for him to undergo further medical consultations abroad.
4 Four days later, on October 24, 1988, he wrote a "Memorandum for File" 5 addressed to Petitioner Betty Go-
Belmonte with copies furnished to members of the board of directors of PTI, the text of which is reproduced
below:

"MEMORANDUM FOR FILE.

FOR : BETTY GO-BELMONTE

Chairman & CEO, The STAR Group of Publications

FROM : FELIX R. ALEGRE, JR.

DATE : 24 October 1988

SUBJECT : HAVING IT ALL

Truth like medicine hurts. But it cures.

The nice little chat we had last Thursday was most revealing. And certainly disconcerting.

What you had to tell me pained me, of course. But it has helped me just as much. It enabled me to see things
clearly in their right perspectives. More importantly, it provided me with the answers to the questions that had
long nagged me in my wakeful state.

For quite a time, I got this sinking feeling of being treated like a pariah of sorts by most of the senior executives
around here. The frustration at my inability to put a finger at such a feeling somehow enhanced the angst
within me. Until our chat. Now all the demons of my anxiety have been exorcised. And I am left alone to lick the
wounds of my betrayal. It isn't easy, I know. But I shall pull through. Your candor and demonstrated faith in my
person have been most assuaging. And for that alone, I am most grateful.

It has never occurred to me that, in my acceptance of the invitation from no less than the publisher himself, to
join him at the Philippines Today, Inc., and the STAR Group of Publications, I was unwittingly signing my own
death warrant as well. The insults he had later on hurled at my person, the malicious innuendoes he had
spread around, casting doubts on my personal and professional integrity, had mercilessly torn at my soul,
causing metaphysical death.
My credentials as a working journalist, I'd like to believe, got me this job at the STAR in the first place. And my
bylines in the series of articles in the STAR From Day One of my official affiliation with the Company, should
establish that fact.

I was an investigative reporter at the Manila Times when the publisher offered me to work with him at the
STAR in 1986. I was given the assignment as senior investigative reporter, then chief investigative writer, until I
was given a fancy title of assistant to the publisher.

As a corporate guy assisting the publisher in his day-to-day official functionand this is where I feel very strongly
about citing some specifics of the things I did in this area, to wit:

... (omitted are said "specifics" of Respondent Alegre's accomplishments as assistant to the publisher deemed
by this Court as not relevant to the appreciation of this memorandum in relation to the consideration of the
petition.)

As can be gleaned from this recital of some of the "things done" (despite my distaste for trumpeting one's
deeds, but has to be said, to set the record straight, in this instance), one can see that I obviously don different
hats at any one time, doing administration and operations functions, apart from my journalistic duties. That I
work as a teamplayer, and trying hard to be good at (sic) it, cannot be denied.

FOR DOING ALL THESE in the best spirit of corporate team-upmanship, what did I get in RETURN?

1. A pittance, salary/compensation-wise

2. Being conveniently bypassed in promotions, pay hikes, and other perks

3. Hindered from active participation in corporate affairs, by shooting at my ideas that otherwise would have
been workable and profitable for the Company and its people (CF. Item 2 of my memo dtd 06 September 88
which had you interested in and supportive of).

4. Personally and professionally maligned, and accused of being an NPA (non-performing asshole, pardon my
French).

By and large, all that I got are the twin demons of a civilized, unconscionable society: ECONOMIC INJUSTICE
and PROFESSIONAL SABOTAGE.

When push comes to a shove... anything or everything comes crashing down. I'M HAVING IT ALL!

Since I am on leave, I guess I won't be able to see you for a while. I wish to take this opportunity to express my
profound appreciation and sincere thanks for your genuine con-cren (sic) and honest initiatives to do a good
turn on my behalf. You have been most candid and forthright with me. I can't be any less.
Thank you for everything. God bless.

Very sincerely,

(Sgd.) FELIX R. ALEGRE, JR.

copy furnished:

Members-of the Board, Phils. Today, Inc.

Dr. Ronaldo G. Asuncion

Mr. Antonio Roces"

On December 6, 1988, Respondent Alegre received from Petitioner Belmonte a letter, 6 as follows:

"November 9, 1988

MR. FELIX ALEGRE

Dear Jun,

During our board meeting yesterday, we discussed your letter dated October 24, 1988, and the Board decided
to accept your resignation and that it would take effect on November 22, 1988 upon expiration of your one-
month leave.

I would like to take this opportunity to say that we were happy to have had you with the STAR Group of
Publications and that we would like to wish you the best of luck.

God bless. Thank you.

Very truly yours,

BETTY GO BELMONTE
Chairman of the Board

The Philippine Star"

The following day, Respondent Alegre wrote Petitioner Belmonte expressing surprise over the acceptance of
his "resignation" as stated in the above-quoted letter. His letter 7 partly stated:

"It certainly beats me to be told that my 'resignation' has been accepted, when in truth and in fact no such
move, however implicit it may be, and no such letter has ever been made from my end.

xxx xxx xxx

I am writing this letter not, certainly, to make any appeal, but simply to go on record that I did not resign. I filed
a leave of absence. Yes. And that was dully (sic.,) approved. Then I sent you a memorandum for file
expressing my sentiments on certain things, candid statements that came to b4 (sic) expressed inspired by
your candor and sincerity in our last little chat. Now, if you read that memo to mean resignation, that is your
responsibility. And I am not just about to contest it. x x x"

This was followed by another letter on January 2, 1989, wherein Alegre, through counsel, 8 reiterated that he
never resigned. He accused petitioners of illegal dismissal as can be perceived allegedly from the
discrimination against him in promotions, benefits and the ploy to oust him by considering his memorandum as
a resignation. He claimed that as a result, he suffered mental anguish, social humiliation, besmirched
reputation and moral shock. He thus demanded indemnification for "the material and moral losses he has
incurred". He further wrote that he was not insisting to be taken back after being shown that he was no longer
wanted in the company.

Counsel 9 for petitioners, in a reply on January 19, 1989, explained that the acceptance of Alegre's resignation
was a collective decision of the board of directors since "nobody in his right mind would write a memorandum
of the sort he wrote and still not resign. To them, the memorandum was tantamount to a resignation even if Mr.
Alegre did not say so in so much words." With respect to his claim for damages, petitioners' counsel said, "he
has not shown any specific fact or circumstance that would justify his claim, even remotely." Hence, "the Star
cannot accede to the same."

On May 17, 1989, Respondent Alegre filed a complaint for illegal dismissal and damages against herein
petitioners. 10 The labor arbiter dismissed said complaint in his decision of May 15, 1991. We quote significant
portions of said decision:

"This office has minutely disected (sic) the letter and while it be said that nothing therein mentions about
resigning from his position as Assistant to the Publisher, a perusal of the letter as a whole shows that the
intention of the complainant was to resign from his post. The subject as "Having it all" together with his
frustrations and disappointment in the office coupled with his statement that "when push comes to a shove,
everything comes crushing (sic) down" and that: he is "having it all" and with his concluding sentence of
"Thank you for everything" are (sic) clear indications that he was in fact resigning.

As a journalist and a writer, complainant need not write his letter of resignation in black and white. He can do
so in many other ways, words and actions to show his real intention of leaving his job.
xxx xxx xxx

Complainant's subsequent overt acts particularly his failure to report to his job after the expiration of his leave
of absence, his being gainfully employed with the Office of Senator Laurel (as Chief of Staff) and his act of
clearing and removing his personal files, things and belongings from his desk prior to his (complainant)
knowledge or receipt of the letter accepting his resignation(,) clearly indicates that complainant was not
terminated from his job but rather he resigned from his job...

xxx xxx xxx

WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal
dismissal and damages for lack of merit, and ordering respondent, Philippines Today, Inc., to pay complainant
the amount of THIRTY THOUSAND (P30,000.00) PESOS by way of separation pay in the interest of
compassionate labor justice and; dismissing Respondents (sic) counterclaim for damages for lack of merit. 11

On appeal by Alegre, the above decision was set aside by the NLRC. Adopting the definition in Black's Law
Dictionary (5th Edition) of resignation as a "formal renouncement or relinquishment of an office," it held that
herein Respondent Alegre did not resign as there was no actual act of relinquishment to constitute complete
and operative resignation. According to the NLRC, the request for a leave of absence by Respondent Alegre
meant that he intended to return after the period of his absence. Such intent was bolstered by his filing of a
request for an extension of his leave. Further, when he received the letter of Petitioner Belmonte dated
November 9, 1988 informing him of the acceptance by the Board of his resignation, he immediately wrote a
letter to Petitioner Belmonte, expressing in no uncertain terms that he did not resign. These circumstances led
the NLRC to hold that Respondent Alegre was constructively dismissed without just cause and to order
petitioners to pay him full backwages for three years from the time of dismissal, separation pay in lieu of
reinstatement, moral and exemplary damages and attorney's fees. 12chanroblesvirtuallawlibrary

Issues

Petitioners argue that the NLRC committed grave abuse of discretion:

1. in finding them guilty of illegally dismissing Respondent Alegre;

2. in awarding Respondent Alegre moral and exemplary damages and attorney's fees without any factual and
legal basis; and,

3. even assuming that Respondent Alegre was illegally dismissed, in contravening and disregarding this
Court's ruling in Alex Ferrer, et al. vs. NLRC (Second Division) 13 by erroneously computing backwages, as it
did not deduct the amounts earned by Respondent Alegre while he was admittedly employed in the office of
Senator Sotero H. Laurel.

The pivotal question is whether the Memorandum for File of Respondent Alegre addressed to Petitioner
Belmonte constitutes a letter of resignation.
In construing it so, petitioners advance these arguments: (1) Respondent Alegre had spoken openly to
Petitioner Belmonte of his desire to leave the Philippine Star; (2) the contents of his memorandum indicate an
intention on his part not to return to his job even if he did not categorically mention resignation; (3) he never
returned to work after his authorized leave expired and even cleared his desk of his personal belongings; and,
(4) he obtained employment as chief of staff of the office of Senator Sotero Laurel for which he was paid a
higher salary. Having been led to believe that Alegre wanted to resign and in honestly perceiving his
memorandum as a resignation letter, petitioners cannot be held liable for moral and exemplary damages
because they believe their action was in accordance with law. Lastly, petitioners contend that, even assuming
they were liable for illegal dismissal, the NLRC, in granting backwages, should have deducted the amount
earned by Alegre from his subsequent employment.

Private respondent, on the other hand, maintains that he had no intention of resigning from PTI. He insists that:
(1) in writing the memorandum, he was merely lamenting the work environment at PTI and apprising Petitioner
Belmonte of the situation; (2) a resignation should be unequivocal in nature; (3) his non-return to work after his
original leave expired is explained by his subsequent request for an extension thereof due to medical reasons;
(4) and the letter of Petitioner Belmonte obviated any desire for him to return to his work since petitioners
practically terminated his employment. He further contends that petitioners' tenacious resistance in admitting
their mistake bespeaks of bad faith and shows their real intention to end his services, which entitles him to
moral and exemplary damages. In representation of public respondent, the Solicitor General supported private
respondent's position.

The Court's Ruling

The petition is meritorious.

Pivotal Issue: Did the Memorandum for File Constitute Voluntary Resignation?

After a thorough scrutiny of the Memorandum for File of Respondent Alegre and a careful deliberation on the
peculiar circumstances attendant to its writing and the antecedent, contemporaneous and subsequent actions
of private respondent, we hold that said memorandum juridically constituted a letter of resignation.

We see merit in the findings and conclusions drawn by the labor arbiter. They are more in accord with
prudence, common sense and sound judgment. The labor arbiter correctly deduced from Alegre's
memorandum and attendant actuations that he resigned. In contrast, the NLRC was too strict in its
interpretation of what constitutes "resignation." It adhered literally to the dictionary meaning of the word without
relating it to the peculiarity of the factual circumstances surrounding the case. Courts and quasi-judicial bodies,
in the exercise of their functions and in making decisions, must not be too dogmatic as to restrict themselves to
literal interpretations of words, phrases and sentences. A complete and wholistic view must be taken in order
to render a just and equitable judgment.

Incendiary words and sarcastic remarks negate alleged desire to improve relations

Alegre's choice of words and way of expression betray his allegation that the memorandum was simply an
"opportunity to open the eyes of (Petitioner) Belmonte to the work environment in petitioners' newspaper with
the end in view of persuading (her) to take a hand at improving said environment." Apprising his employer (or
top-level management) of his frustrations in his job and differences with his immediate superior is certainly not
done in an abrasive, offensive and disrespectful manner. A cordial or, at the very least, civil attitude, according
due deference to one's superiors, is still observed, especially among high-ranking management officers. The
Court takes judicial notice of the Filipino values of pakikisama and paggalang which are not only prevalent
among members of a family and community but within organizations as well, including work sites. An employee
is expected to extend due respect to management, the employer being the "proverbial hen that lays the golden
egg," 14 so to speak. An aggrieved employee who wants to unburden himself of his disappointments and
frustrations in his job or relations with his immediate superior would normally approach said superior directly or
otherwise ask some other officer possibly to mediate and discuss the problem with the end in view of settling
their differences without causing ferocious conflicts. No matter how the employee dislikes his. employer
professionally, and even if he is in a confrontational disposition, he cannot afford to be disrespectful and dare
to talk with an unguarded tongue and/or with a baleful pen. Here, respondent Alegre was anything but
respectful and polite. His memorandum is too affrontive, combative and confrontational. It certainly causes
resentment, even when read by an objective reader. His incendiary words and sarcastic remarks, to quote
some:

"For quite a time, I got this sinking feeling of being treated like a pariah of sorts by most of the senior
executives around here. The frustration at my inability to put a finger at such a feeling somehow enhanced the
angst within me....Now all the demons of my anxiety have been exorcised. And I am left alone to lick the
wounds of my betrayal. x x x

It has never occurred to me that, in my acceptance of the invitation from no less than the publisher himself, to-
join him... I was unwittingly signing my own death warrant as well. The insults he had later on hurled at my
person, the malicious innuendoes he had spread around casting doubts on my personal and professional
integrity, had mercilessly torn at my soul, causing metaphysical death."

negate any desire to improve work relations with Petitioner Soliven and other PTI executives. Such strongly
worded letter constituted an act of "burning his bridges" with the officers of the company.

Seeking relief incompatible withwriting offensive letter

Any management officer, much so an immediate superior, would be offended, if not enraged, with the insults
and innuendoes stated in said memorandum; more so because the memorandum was not directly addressed
to him but to the chairman and CEO and copy furnished all other officers and members of the board of
directors. Any discerning mind can perceive that the letter is not simply a recitation of respondent Alegre's
gripes, disappointments, frustrations and heartaches against the company and its officers particularly Petitioner
Soliven, as postulated by the Solicitor General in his comment. 15 If it were so, why was it not addressed
directly to the person concerned? His memorandum clearly indicated that his problems involved, or were
supposedly caused by only one person, Mr. Soliven, his immediate superior. But it was not even addressed to
him! How can he expect amends in their relations if that was all he wanted? The Solicitor General was simply
turning a blind eye to the obvious fact that said memorandum, for all intents and purposes, was intended,
wittingly or unwittingly, to end employment relations.

Respondent Alegre a well-educated journalist

It should not escape our attention that respondent Alegre is a. professional journalist and persuasive writer. On
top of that, he was a law graduate. He must have known the drilling effect of his bitter and sarcastic remarks
upon the petitioners and must have intended the same. Ordinary words are to be construed in their ordinary
meaning. Commonsense dictates that Alegre meant to resign when he wrote the memorandum. Otherwise, he
should have used a more tempered language and a less confrontational tone. Moreover, he held a position of
evident responsibility requiring the utmost confidence of his immediate superior. As assistant to the publisher
doing, in his very own words, "administration and operations functions, apart from (my) journalistic duties," it is
apparent that Alegre was not employed simply for his writing skills. Top management certainly reposed full
trust and confidence in him and placed him in a position of considerable management influence.

PTI officers of uncommon intelligence and perception

Furthermore, his memorandum was addressed to the chairman and chief executive officer of PTI and furnished
all members of the board of directors. These officers which include the likes of the late Betty Go-Belmonte,
Maximo V. Soliven and Arturo A. Borjal, long-time and well-respected journalists acclaimed locally and
internationally, are themselves people of uncommon perception and intellect. They will not miscomprehend the
meaning and intent of Alegre's memorandum, which was not by any means a simple way of seeking relief but
well a way to get out of the company. What else could he have meant with these concluding remarks:

"By and large, all that I got are the twin demons of a civilized, unconscionable society: ECONOMIC
INJUSTICE and PROFESSIONAL SABOTAGE.

When push comes to a shove.... anything or everything comes crashing down. I'M HAVING IT ALL!"

Respondent Alegre, being a journalist himself and having worked with them for sometime, knew how his letter
would be perceived and received. Besides, as discussed earlier, Alegre is likewise a well-educated man of
more than average intelligence. The conclusion is inevitable that he had more than enough sense to anticipate
the consequences and effects of his words and actions. Indeed, what a man sows, he reaps.

Trust and confidence breached

In addition, respondent Alegre is a highly confidential employee who holds his job at the pleasure of his
employer or, stated otherwise, for as long as he enjoys the trust and confidence of his employer. Corollarily, he
likewise must repose trust and confidence in his employer or, at the very least, his immediate superior. But any
superior hurled with invectives from a confidential employee, much more one occupying a managerial position
at the same time, will definitely lose trust and confidence in the latter. And there can be no way to interpret
such letter other than as a withering of trust and confidence by the employee in his boss. The use of offensive
language can only mean expression of disloyalty and disrespect. It renders the writer unworthy of the trust and
confidence demanded by his position. It is beyond human nature to expect two persons with underlying
mistrust in each other to continue to work together effectively, not to say, harmoniously.

Antecedent, Contemporaneous and Subsequent Actions Affirming Resignation

In addition to his memorandum and the circumstances attendant thereto which were just discussed, the Court
notes some peculiar actions confirming Alegres' intention to terminate his employment with the Star.

(1) Medical reasons for leave of absence not proved

First, he claims that his leave of absence was due to medical reasons, for which he was supposed to seek
relief abroad. However, the Court scoured the records but found nothing to show that he actually underwent
any medical check-up. Much less, medical examination abroad. Nothing really backs up such claim except his
bare statements which, evidentially, are at best self-serving.

(1) Cleared desk of personal belongings

Second, respondent Alegre cleared his desk of his personal belongings even before he knew of the
acceptance of his resignation. 16 Such act certainly bares his intent to leave his job. Respondent Alegre has
not refuted nor offered any sufficient explanation for this action. We cannot but-give due credit to the
petitioners' contention that such act was expressive of his intent to resign.

(1) Did not report back to work

Third, respondent Alegre did not return to his job after his authorized leave of absence expired in November
1988. Although he sent another letter 17 requesting for an extension of his leave, there is no showing on
record that the same was approved by petitioners. It is standard office procedure that applications for leave of
absence are subject to the approval of the employer. These are not automatically granted upon filing. Except to
cite in his request "travel log (sic) coupled with advice of my physician," respondent Alegre has not proven the
emergency nature of the cause/s of his extended leave. Again, we cannot but give due credence to petitioners'
contention that this was another operative evidence of Alegre's intent to resign.

His non-return to work, though, is not equivalent to abandonment of work. For in the latter, it is necessary to
prove "clear and deliberate intent" coupled with unjustified. absence and overt acts unerringly pointing to the
fact that the employee simply does not want to work anymore. 18 In the case at bench, Alegre voluntarily
resigned through his memorandum albeit written in the guise of a grievance letter. The law and jurisprudence
on abandonment have thus no application in the present case.

(4) Not deprived of chance to return to work

Fourth, if Respondent Alegre had really no intention to resign, he could have reported back to work. His
contention that he was effectively deprived of any chance to return to his work because of the acceptance of
his purported resignation cannot be sustained. He claims that he received the notice dated November 9, 1988
only on December 6, 1988. But this means that for about two weeks after his leave expired, he had all chances
to return to his work. Yet he chose not to. The obvious reason is that he had actually no intention of doing so.

(5) Alegre expressly manifested intention to resign

Prior to sending his memorandum, Respondent Alegre informed Petitioner Belmonte of his intention to resign
from the Philippine Star. This is shown by the testimony (cross examination) of the late Mrs. Belmonte before
the labor arbiter on January 13, 1990 as follows:

"ATTY. BORRETA:
And you took that action, meaning the Board acted on this Memo for File which you considered as his letter of
resignation without consulting or talking with the complainant first?

WITNESS:

The complainant had also applied for leave of absence and he talked with me that he was leaving for the
United States. Actually I remember he requested a conversation but he did not specify what the conversation
was about, Your Honor. He was telling me that he wanted to leave, has signed another job. And I told him that
is not my prerogative and I am only Chairman of the Board; and he came upon the recommendation of our
Publisher and he was at that time Assistant to the Publisher; that he should talk to the Publisher first and I even
advised him to patch up whatever differences he might have. In that conversation, he said something about
leaving and he even said to me that when he leaves, he would ask his two (2) sons who were working with us
to leave too. And I think I made a comment, and that must be what he was referring to. I said; oh, but your
sons are very hardworking. In fact I said the Publisher, Max Soliven, told me that 'sana you were as good as
your sons' maybe that was his feeling. That is my way of trying to tell him that your sons are very hard-working
because he said when I leave I am going to ask them to leave too. Maybe because of that he gave me the
impression that he wanted to leave.

ATTY. BORRETA:

And this happened before he wrote this memo for file on October 24, 1988?

WITNESS:

Yes, sir

ATTY. BORRETA:

And because of that you got the impression that he had the intention to resign?

WITNESS:

Yes sir" 19chanroblesvirtuallawlibrary

(6) Assumed job in another office

Finally, the most telling of the actions undertaken by Respondent Alegre which evidently demonstrate his intent
to resign was his immediate employment as chief of staff of the office of then Senator Sotero H. Laurel, with a
much higher compensation at P14,600.00 per month plus P2,000.00 per month driver's allowance. He
admitted in his testimony before the labor arbiter on November 6, 1989 that he was employed therein about a
year before (the date of his testimony) or sometime in November 1988. 20 The date coincided with the period
of his leave of absence or immediately thereafter. If he had no intention of resigning and was on leave for
medical reasons as he alleged, why then did he commence a new job in another office at about the same
period? His assumption of a new job prior to receiving Mrs. Belmonte's letter on December 6, 1988 is clearly
inconsistent with any desire to remain in employment with PTI. This is particularly evident because both jobs
required full-time work. Moreover, working in a newspaper which prides in its independence from partisan
activities is incompatible with a concurrent political office held by respondent.

Side Issue: May a Resignation Be Unilaterally Withdrawn?

Having established that Respondent Alegre resigned, we now tackle the corollary issue of whether he can
unilaterally withdraw his resignation. We hold that he cannot do so.

The case of Intertrod Maritime, Inc. vs. NLRC 21 is in point. The employee therein who was a ship engineer,
while at Port Pylus, Greece, requested for relief due to "personal reasons." The master of the ship, who had
authority to "sign off" an employee requesting relief, approved his request but informed the employee that
repatriation expenses were for his account and that he had to give thirty days notice in view of clause 5 of the
employment contract. When the vessel was at Port Said, Egypt four days later, the master "signed him off" and
paid him in cash all amounts due him less repatriation expenses. On his return to the Philippines, the
employee filed a complaint charging his employer with breach of employment contract and violation of the
National Seamen Board rules and regulations. He claimed that his request for relief was only for the sole
purpose of enabling him to take care of a fellow member of the crew who was hospitalized in Greece. Hence,
after he was disallowed from disembarking thereat, the reason no longer existed and, consequently, he was
illegally dismissed when he was forced to "sign off" in Egypt even as he signified his intention of continuing his
work.

The Court ruled against the employee. It held that resignations, once accepted, may not be withdrawn without
the consent of the employer. If the employer accepts the withdrawal, the employee retains his job. If the
employer does not, the employee cannot claim illegal dismissal. To say that an employee who has resigned is
illegally dismissed, is to encroach upon the right of employers to hire persons who will be of service to them.

Obviously, this is a recognition of the contractual nature of employment which requires mutuality of consent
between the parties. An employment contract is consensual and voluntary. Hence, if the employee "finds-
himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of
the service, then he has no other choice but to disassociate himself from his employment". 22 If accepted by
the employer, the consequent effect of resignation is severance of the contract of employment.

A resigned employee who desires to take his job back has to re-apply therefor and he shall have the status of
a stranger who cannot unilaterally demand an appointment. He cannot arrogate unto himself the same position
which he earlier decided to leave. To allow him to do so would be to deprive the employer of his basic right to
choose whom to employ. Such is tantamount to undue oppression of the employer. It has been held that an
employer is free to regulate, according to his own discretion and judgment, all aspects of employment including
hiring. 23 The law, in protecting the rights of the laborer, impels neither the oppression nor self-destruction of
the employer. 24

Consistent with our ruling in Intertrod, the resignation of respondent Alegre after its acceptance by petitioners
can no longer be withdrawn without the consent of the latter. In fairness to the employer, an employee cannot
backtrack on his resignation at his whim and without the conformity of the former.

The instant case is unlike Molave Tours Corporation vs. NLRC 25 and People's Security, Inc. vs. NLRC. 26 In
Molave, acting on reports that the employee was on several occasions found drunk within work premises, the
employer required him to explain in writing said charges. Notwithstanding his explanation and request for a
confrontation with his accusers, the employee was made to sign a resignation letter. Two months after, he filed
a complaint for illegal dismissal. The labor arbiter, affirmed by the NLRC, found that the employee was merely
forced and intimidated into resigning. The Court reiterated that resignation must be voluntary on the part of the
employee. It thus ordered the employer to reinstate the employee and award backwages and other benefits
due him since there was no effective resignation.

Likewise in People's Security, there was a finding of involuntary resignation. The employees therein who were
security guards were not given assignments by their employer after the latter's security services contract with
Meralco expired. The employees requested for loans to be deducted from their security bond deposits, which
requests were denied by the employer who insisted that they must turn in their resignations first before their
security bond deposits could be released. Not having been given new work assignments and being in dire
financial need, the employees submitted their resignation letters. Three months later, they filed money claims
which were later amended to include illegal dismissal. The employer contended that the employees voluntarily
severed their employment because they turned in their resignation letters and assumed jobs with another
security agency. Again the Court held that resignation is a voluntary act of the employee. When the employees
were told that they would not be granted loans unless they resigned, they had no choice since they desperately
needed money to meet their respective families' needs. They were also forced to accept jobs at another
agency as a practical solution to their employment problems which were caused by the employer's refusal and
failure to provide them with new assignments.

In the case of Indophil vs. NLRC, 27 on the other hand, the employee voluntarily submitted a resignation letter
but later tried to retrieve the same. He contended though, that he was thereafter prevented by the company
guard from entering the work premises because of his resignation. He sued for illegal dismissal. His employer
claimed abandonment of work since he was required to report and to explain his unauthorized absences but
did not. In holding that there was no dismissal, the Court regarded the employer's act of requiring the
employee to report and explain his unauthorized absences as non-acceptance of the previous resignation of
the employee. Thus, the employer still considered him as its employee in spite of the filed resignation letter.
With respect to the latter's allegation that he was prevented by the company guard from entering the premises,
the Court chided him for not having inquired into its veracity and for simply relying on the bare statement of the
guard. It said that the employee should be more vigilant of his rights.

The above three cases are dissimilar to the case at bar. In the first two cases, there were involuntary
resignations while in the third there was an unaccepted resignation. In the instant case, however, the
resignation was voluntary and it was accepted by the employer. Thus, our grant of the petition.

Since we find no case of illegal dismissal, we will no longer pass upon the two other issues raised by
petitioners which are mere consequences of the contrary finding made by the NLRC. Necessarily, there can be
no award of any moral or exemplary damages, backwages and separation pay.

Epilogue

Both the Constitution and the Labor Code mandate a bias in favor of labor. Hence, this Court, as a matter of
judicial policy, leans backwards to protect labor and the working class against the machinations and incursions
of their more financially entrenched employers. In the present case, however, it is obvious to us that private
respondent's memorandum could not have been intended merely to persuade management to improve the
work environment at the Philippine Star. Rather, it was evidently a recitation of the facts and reasons why
respondent Alegre could no longer continue working under what he believed were unbearable conditions in the
work place. The offensive language used by a well-educated man endowed with unusual writing skill could not
have been intended merely for the "suggestion box." That it was addressed and given to persons of
uncommon perception themselves takes the letter out of ordinary employer employee communications. It is
true that there was no direct mention of the word "resignation." However, the incendiary words employed
denote a clear intent to end the writer's association of trust and confidence with his superiors and employer.
This intent becomes even more manifest when viewed in light of attendant acts of Alegre, particularly his
prolonged leave of absence, his clearing of his own desk of personal belongings, his failure to report back to
work after the expiration of his approved leave, his verbal expression of his intent to resign, and most notably,
his assumption of a higher paying job in a political office which was incompatible with his work at the Star.

In deciding cases, this Court does not matter-of-factly apply and interpret laws in a vacuum. General principles
do not decide specific cases. Rather, laws are interpreted always in the context of the peculiar factual situation
of each case. Each case has its own flesh and blood and cannot be decided simply on the basis of isolated
clinical classroom principles. The circumstances of time, place, event, person, and particularly attendant
circumstances and actions before, during and after the operative fact should all be taken in their totality so that
justice can be rationally and fairly dispensed.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and Resolution of the
NLRC are SET ASIDE. The temporary restraining order issued by this Court is made PERMANENT. No costs.

93 Phil. 696

MONTEMAYOR, J.:

This is a joint appeal from the decision of the Court of First Instance of Manila declaring section 13 of Republic
Act No. 590 unconstitutional, and ordering the appellant Saturnino David as collector of Internal Revenue to
refund to Justice Pastor M. Endencia the sum of P1,744.45 representing the income tax collected on his salary
as Associate Justice of the Court of Appeals in 1951, and to Justice Fernando Jugo the amount of P2,345.46,
representing the income tax collected on his salary from January 1, 1950 to October 19, 1950, as Presiding
Justice of the Court of Appeals, and from October 20, 1950 to December 31, 1950, as Associate Justice of the
Supreme Court, without special pronouncement as to costs.

Because of the similarity of the two cases, involving as they do the same question of law, they were jointly
submitted for determination in the lower court. Judge Higinio B. Macadaeg presiding, in a rather exhaustive
and well considered decision found and held that under the doctrine laid down by this Court in the case of
Perfecto vs. Meer, 85 Phil., 552, the collection of income taxes from the salaries of Justice Jugo and Justice
Endencia was a diminution of their compensation and therefore was in violation of the Constitution of the
Philippines, and so ordered the refund of said taxes.

We see no profit and necessity in again discussing and considering the proposition and the arguments pro and
con involved in the case of Perfecto vs. Meer, supra, which are raised, brought up and presented hers. In that
case, we have held despite the ruling enunciated by the United States Federal Supreme Court in the case of
O'Malley vs. Woodrought 307 U. S., 277, that taxing the salary of a judicial officer in the Philippines is a
diminution of such salary and so violates the Constitution. We shall now confine ourselves to a discussion and
determination of the remaining question of whether or not Republic Act No. 590, particularly section 13, can
justify and legalize the collection of income tax on the salary of judicial officers.

According to the brief of the Solicitor General on behalf of appellant Collector of Internal Revenue, our decision
in the case of Perfecto vs. Meer, supra, was not received favorably by Congress, because immediately after its
promulgation, Congress enacted Republic Act No. 590. To bring home his point, the Solicitor General
reproduces what he considers the pertinent discussion in the Lower House of House Bill No. 1127 which
became Republic Act No. 590.

For purpose of reference, we are reproducing section 9, Article VIII of our Constitution:

"SEC. 9. The members of the Supreme Court and all judges of inferior courts shall hold office during good
behavior, until they reach the age of seventy years, or become incapacitated to discharge the duties of their
office. They shall receive such compensation as may fixed by law, which shall not be diminished during their
continuance in office. Until the Congress shall provide otherwise, the Chief Justice of the Supreme Court shall
receive an annual compensation of sixteen thousand pesos, and each Associate Justice, fifteen thousand
pesos."

As already stated construing and applying the above constitutional provision, we held in the Perfecto case that
judicial officers are exempt from the payment of income tax on their salaries, because the collection thereof by
the Government was a decrease or diminution of their salaries during their continuance in office, a thing which
is expressly prohibited by the Constitution. Thereafter, according to the Solicitor General, because Congress
did not favorably receive the decision in the Perfecto case, Congress promulgated Republic Act No. 590, if not
to counteract the ruling in that decision, at least now to authorize and legalize the collection of income tax on
the salaries of judicial officer. We quote section 13 of Republic Act No. 590:

"SEC. 13. No salary wherever received by any public officer of the Republic of the Philippines shall be
considered as exempt from the income tax, payment of which is hereby declared not to be a diminution of his
compensation fixed by the Constitution or by law."

So we have this situation. The Supreme Court in a decision interpreting the Constituion, particularly section 9,
Article VIII, has held that judicial officers are exempt from payment of income tax on their salaries, because the
collection thereof was a diminution of such salaries, specifically prohibited by the Constitution. Now comes the
Legislature and in section 13, Republic Act No. 590, says that "no salary wherever received by any public
officer of the Republic (naturally including a judicial officer) shall be considered as exempt from the income
tax," and proceeds to declare that payment of said income tax is not a diminution of his compensation. Can
the Legislature validly do this? May the Legislature lawfully declare the collection of income tax on the salary
of a public official, specially a judicial officer, not a decrease of his salary, after the Supreme Court has found
and decided otherwise? To determine this question, we shall have to go back to the fundamental principles
regarding separation of powers.

Under our system of constitutional government, the Legislative department is assigned the power to make and
enact laws. The Executive department is charged with the execution or carrying out of the provisions of said
laws. But the interpretation and application of said laws belong exclusively to the Judicial department. And
this authority to interpret and apply the laws extends to the Constitution. Before the courts can determine
whether a law is constitutional or not, it will have to interpret and ascertain the meaning not only of said law,
but also of the pertinent portion of the Constitution in order to decide whether there is a conflict between the
two, because if there is, then the law will have to give way and has to be declared invalid and unconstitutional.

"Defining and interpreting the law is a judicial function and the legislative branch may not limit or restrict the
power granted to the courts by the1 constitution." (Brandy vs. Mickelson et al., 44 N. W. 2nd 341, 342.)

"When it is clear that a statute transgresses the authority vested in the legislature by the Constitution, it is the
duty of the courts to declare the act unconstitutional because they cannot shrink from it without violating their
oaths of office. This duty of the courts to maintain the Constitution as the fundamental law of the state is
imperative and unceasing; and, as Chief Justice Marshall said, whenever a statute is in violation of the
fundamental law, the courts must so adjudge and thereby give effect to the Constitution. Any other course
would lead to the destruction of the Constitution. Since the question as to the constitutionality of a statute is a
judicial matter, the courts will not decline the exercise of jurisdiction upon the suggestion that action might be
taken by political agencies in disregard of the judgment of the judicial tribunals." (11 Am. Jur., 714-715).
"Under the American system of constitutional government, among the most important functions intrusted to the
judiciary are the interpreting of Constitutions and, as a closely connected power, the determination of whether
laws and acts of the legislature are or are not contrary to the provisions of the Federal and state Constitutions."
(11 Am. Jur., 905.)

By legislative fiat as enunciated in section 13, Republic Act No. 590, Congress says that taxing the salary of a
judicial officer is not a decrease of compensation. This is a clear example of interpretation or ascertainment of
the meaning of the phrase "which shall not be diminished during their continuance in office," found in section 9,
Article VIII of the Constitution, referring to the salaries of judicial officers. This act of interpreting the
Constitution or any part thereof by the Legislature is an invasion of the well-defined and established province
and jurisdiction of the Judiciary.

"The rule is recognized elsewhere that the legislature cannot pass any declaratory act, or declaratory of what
the law was before its passage, so as to give it any binding weight with the courts. A legislative definition of a
word as used in a statute is not conclusive of its meaning as used elsewhere; otherwise, the legislature would
be usurping a judicial function in defining a term. (11 Am. Jur., 914, italics supplied).

"The legislature cannot, upon passing a law which violates a constitutional provision, validate it so as to
prevent an attack thereon in the courts, by a declaration that it shall be so construed as not to violate the
constitutional inhibition." (11 Am. Jur., 919, italics supplied).

We have already said that the Legislature under our form of government is assigned the task and the power to
make and enact laws, but not to interpret them. This is more true with regard to the interpretation of the basic
law, the Constitution, which is not within the sphere of the Legislative department. If the Legislature may
declare what a law means, or what a specific portion of the Constitution means, especially after the courts
have in actual case ascertain its meaning by interpretation and applied it in a decision, this would surely cause
confusion and instability in judicial processes and court decisions. Under such a system, a final court
determination of a case based on a judicial interpretation of the law or of the Constitution may be undermined
or even annulled by a subsequent and different interpretation of the law or of the Constitution by the Legislative
department. That would be neither wise nor desirable, besides being clearly violative of the fundamental
principles of our constitutional system of government, particularly those governing the separation of powers.

So much for the constitutional aspect of the case. Considering the practical side thereof, we believe that the
collection of income tax on a salary is an actual and evident diminution thereof. Under the old system where
the income tax was paid at the end of the year or sometime thereafter, the decrease may not be so apparent
and clear. All that the official who had previously received his full salary was called upon to do, was to fulfill his
obligation and to exercise his privilege of paying his income tax on his salary. His salary fixed by law was
received by him in full, and when he later pays his income tax, especially when the amount of said tax comes
from his other sources of income, he may not fully realize the fact that his salary had been decreased in the
amount of said income tax. But under the present system of withholding the income tax at the source, where
the full amount of the income tax corresponding to his salary is computed in advance and divided into equal
portions corresponding to the number of paydays during the year and actually deducted from his salary
corresponding to each payday, said official actually does not receive his salary in full, because the income tax
is deducted therefrom every payday, that is to say, twice a month. Let us take the case of Justice Endencia.
As Associate Justice of the Court of Appeals, his salary is fixed at P12,000 a year, that is to say, he should
receive P1,000 a month or P500 every payday, fifteenth and end of month. In the present case, the amount
collected by the Collector of Internal Revenue on said salary is P1,744.45 for one year. Divided by twelve
(months) we shall have P145.37 a month. And further dividing it by two paydays will bring it down to P72.685,
which is the income tax deducted from and collected on his salary each half month. So, if Justice Endencia's
salary as a judicial officer were not exempt from payment of the income tax, instead of receiving P500 every
payday, he would be actually receiving P427.31 only, and instead of receiving P12,000 a year, he would be
receiving but P10,255.55. Is it not therefore clear that every payday, his salary is actually decreased by
P72.685 and every year is decreased by P1,744.45?

Reading the discussion in the lower House in connection with House Bill No. 1127, which became Republic Act
No. 590, it would seem that one of the main reasons behind the enactment of the law was the feeling among
certain legislators that members of the Supreme Court should not enjoy any exemption and that as citizens,
out of patriotism and love for their country, they should pay income tax on their salaries. It might be stated in
this connection that the exemption is not enjoyed by the members of the Supreme Court alone but also by all
judicial officers including Justices of the Court of Appeals and judges of inferior courts. The exemption also
extends to other constitutional officers, like the President of the Republic, the Auditor General, the members of
the Commission on Elections, and possibly members of the Board of Tax Appeals, commissioners of the
Public Service Commission, and judges of the Court of Industrial Relations. Compared to the number of all
these officials, that of the Supreme Court Justices is relatively insignificant. There are more than 990 other
judicial officers enjoying the exemption, including 15 Justices of the Court of Appeals, about 107 Judges of
First Instance, 38 Municipal Judges and about 830 Justices of the Peace. The reason behind the exemption in
the Constitution, as interpreted by the United States Federal Supreme Court and this Court, is to preserve the
independence of the Judiciary, not only of this High Tribunal but of the other courts, whose present
membership number more than 990 judicial officials.

The exemption was not primarily intended to benefit judicial officers, but was grounded on public policy. As
said by Justice Van Devanter of the United States Supreme Court in the case of Evans vs. Gore (253 U. S.,
245):

"The primary purpose of the prohibition against diminution was not to benefit the judges, but, like the clause in
respect of tenure, to attract good and competent men to the bench and to promote that independence of action
and judgment which is essential to the maintenance of the guaranties, limitations and pervading principles of
the Constitution and to the administration of justice without respect to persons and with equal concern for the
poor and the rich. Such being its purpose, it is to be construed, not as a private grant, but as a limitation
imposed in the public interest; in other words, not restrictively, but in accord with its spirit and the principle on
which it proceeds."

Having in mind the limited number ofi judicial officers in the Philippines enjoying this exemption, especially
when the great bulk thereof are justices of the peace, many of them receiving as low as P200 a month, and
considering further the other exemptions allowed by the income tax law, such as P3,000 for a married person
and P600 for each dependent, the amount of national revenue to be derived from income tax on the salaries of
judicial officers, were it not for the constitutional exemption, could not be large or substantial. But even if it
were otherwise, it should not affect, much less outweigh the purpose and the consideration that prompted the
establishment of the constitutional exemption. In the same case of Evans vs. Gore, supra, the Federal
Supreme Court declared "that they (fathers of the Constitution) regarded the independence of the judges as of
far greater importance than any revenue that could come from taxing their salaries."

When a judicial officer assumes office, he does not exactly ask for exemption from payment of income tax on
his salary as a privilege. It is already attached to his office, provided and secured by the fundamental law, not
primarily for his benefit, but based on public interest, to secure and preserve his independence of judicial
thought and action. When we come to the members of the Supreme Court, this exemption to them is relatively
of short duration. Because of the limited membership in this High Tribunal, eleven, and due to the high
standards of experience, practice and training required, one generally enters its portals and comes to join its
membership quite late in life, on the average, around his sixtieth year, and being required to retire at seventy,
assuming that he does not die or become incapacitated earlier, naturally he is not in a position to receive the
benefit of exemption for long. It is rather to the justices of the peace that the exemption can give more benefit.
They are relatively more numerous, and because of the meager salary they receive, they can less afford to pay
the income tax on it and its diminution by the amount of the income tax if paid would be real, substantial and
onerous.

Considering exemption in the abstract, there is nothing unusual or abhorrent in it, as long as it is based on
public policy or public interest. While all other citizens are subject to arrest when charged with the commission
of a crime, members of the Senate and House of Representatives except in cases of treason, felony and
breach of the peace are exempt from arrest, during their attendance in the session of the Legislature; and
while all other citizens are generally liable for any speech, remark or statement, oral or written, tending to
cause the dishonor, discredit or contempt of a natural or juridical person or to blacken the memory of one who
is dead, Senators and Congressmen in making such statements during their sessions are extended immunity
and exemption.

And as to tax exemption, there are not a few citizens who enjoy this exemption. Persons, natural and juridical,
are exempt from taxes on their lands, buildings and improvements thereon when used exclusively for
educational purposes, even if they derive income therefrom. (Art. VI, Sec. 22[3].) Holders of government
bonds are exempted from the payment of taxes on the income or interest they receive therefrom (sec 29 (b)
[4], National Internal Revenue Code as amended by Republic Act No. 566). Payments or income received by
any person residing in the Philippines under the laws of the United States administered by the United States
Veterans Administration are exempt from taxation. (Republic Act No. 360). Funds received by officers and
enlisted men of the Philippine Army who served in the Armed Forces of the United States, allowances earned
by virtue of such services corresponding to the taxable years 1942 to 1945, inclusive, are exempted from
income tax. (Republic Act No. 210). The payment of wages and allowances of officers and enlisted men of
the Armed Forces of the Philippines sent to Korea are also exempted from taxation. (Republic Act No, 815).
New and necessary industries are also exempted from taxation for a certain number of years. (Republic Act
No. 35). In other words, for reasons of public policy and public interest, a citizen may justifiably by
constitutional provision or statute be exempted from his ordinary obligation of paying taxes on his income.
Under the same public policy and perhaps for the same it not higher considerations, the framers of the
Constitution deemed it wise and necessary to exempt judicial officers from paying taxes on their salaries so as
not to decrease their compensation, thereby insuring the independence of the Judiciary.

In conclusion we reiterate the doctrine laid down in the case of Perfecto vs. Meer, supra, to the effect that the
collection of income tax on the salary of a judicial officer is a diminution thereof and so violates the
Constitution. We further hold that the interpretation and application of the Constitution and of statutes is within
the exclusive province and jurisdiction of the Judicial department, and that in enacting a law, the Legislature
may not legally provide therein that it be interpreted in such a way that it may not violate a Constitutional
prohibition, thereby tying the hands of the courts in their task of later interpreting said statute, especially when
the interpretation sought and provided in said statute runs counter to a previous interpretation already given in
a case by the highest court of the land.

In view of the foregoing considerations, the decision appealed from is hereby affirmed, with no pronouncement
as to costs.