MARIA E. MANAHAN, petitioner, vs.

EMPLOYEES' COMPENSATION COMMISSION

and GSIS (LAS PI?AS MUNICIPAL HIGH SCHOOL), respondents.
1981-04-22 | G.R. No. L-44899
D E C I S I O N
FERNANDEZ, J.:
This is a petition to review the decision of the Employees' Compensation Commission in ECC Case No.
0070 (Nazario Manahan, Jr., deceased), entitled "Maria Manahan, Appellant, versus Government
Service Insurance System, (Las Pias Municipal High School), Respondent" affirming the decision of the
Government Service Insurance System which denied the claim for death benefit 1
The claimant, petitioner herein, Maria E. Manahan, is the widow of Nazario Manahan, Jr., who died of
"Enteric Fever" while employed as classroom teacher in Las Pias Municipal High School, Las Pias,
Rizal, on May 8, 1975.
The petitioner filed a claim with the Government Service Insurance System for death benefit under
Presidential Decree 626. In a letter dated June 19, 1975, the Government Service Insurance System
denied the claim on a finding that the ailment of Nazario Manahan, Jr., typhoid fever, is not an
occupational disease.
The petitioner filed a motion for reconsideration on the ground that the deceased, Nazario Manahan, Jr.,
was in perfect health when admitted to the service and that the ailment of said deceased was attributable
to his employment.
The Government Service Insurance System affirmed the denial of the claim on the ground that enteric
fever or paratyphoid is similar in effect to typhoid fever, in the sense that both are produced by
Salmonella organisms.
The petitioner appealed to the Employees' Compensation Commission which affirmed the decision of the
Government Service Insurance System on a finding that the ailment of the deceased, enteric fever, was
not induced by or aggravated by the nature of the duties of Nazario Manahan, Jr. as a teacher. 2
To support her theory that the disease of Nazario Manahan, Jr., enteric fever, resulted from his
employment as classroom teacher of the Las Pias Municipal High School, the petitioner cites the
following authority:
"EPIDEMOLOGY AND PATHOLOGY OF
ENTERIC FEVER
"THE SOURCE OF INFECTION is feces or urine from patients and carriers. Family contacts may be
transient carriers and 2 to 5% of patients become chronic carriers. In poorly sanitized communities,
water is the most frequent vehicle of transmission; food, especially milk, is the next most important. In
modern urban areas, food, contaminated by healthy carriers who are food handlers, is the principal
vehicle. Flies may spread the organism from feces to food. Direct contact infection is infrequent.
"The organism enters the body through the gastrointestinal tract, invading the bloodstream by way of the
lymphatic channels. There is hyperplasia and often ulceration of Pyeris patches, especially in the ileum
and cecum. When the ulcers heals, no scar results. The kidneys and liver usually show cloudly swelling
and the latter may reveal a patchy necrosis. The spleen is enlarged and soft. Rarely the lungs show
pneumonic changes. (Merck Manuel, 10th Edit., p. 842)"
The factual findings of the respondent Commission indicate that the deceased was in perfect health
when he entered government service on July 20, 1969, and that in the course of his employment in 1974,
he was treated for epigastric pain. He succumbed to enteric fever on May 8, 1975.
Enteric fever is referred to in medical books as typhoid fever (Dorland's Illustrated Medical Dictionary,
24th Ed., p. 548) or paratyphoid fever (Harrison's Principles of Internal Medicine, 6th Ed., p. 817). Its
symptoms include abdominal pain (id., p. 810). In discussing the clinical manifestations of the disease,
Mr. Harrison states that recovery (from enteric or paratyphoid fever) may be followed by continued
excretion of the causative organism in the stools for several months (id., p. 817). This lingering nature of
the species producing enteric fever points out the possibility that the illness which afflicted the deceased
in 1974 was the same as, or at least, related to, his 1975 illness.
The medical record of the deceased shows that he had a history of ulcer-like symptoms (p. 3, ECC rec.).
This buttresses the claimant's claim that her husband had been suffering from ulcer several months
before his death on May 8, 1975. This is likewise sustained by the medical certificate (p. 12, ECC rec.)
issued by Dr. Aquilles Bernabe to the effect that "Nazario Manahan was treated for epigastric pain
probably due to hyperacidity on December 10, 1974. "Epigastric pain is a symptom of ulcer, and ulcer is
a common complication of typhoid fever. There is even such a thing as "typhoidal ulcer" (p. 812, supra).
Because of these circumstances, the illness that claimed the life of the deceased could have had its
onset months before December 10, 1974. Such being the case, his cause of action accrued before
December 10, 1974.
In the case of Corales vs. ECC (L-44063, Feb. 27, 1979), We ruled that:
". . . Article 294, Title III (Transitory and Final Provisions) of the New Labor Code provides that all actions
and claims accruing prior to the effectivity of this Code shall be determined in accordance with the laws
in force at the time of their accrual and under the third paragraph of Article 292, Title II (Prescription of
Offenses and Claims), workmen's compensation claims accruing prior to the effectivity of this Code and
during the period from November 1, 1974 up to December 31, 1974 shall be processed and adjudicated
in accordance with the laws and rules at the time their causes of action accrued Hence, this Court
applied the provisions of the Workmen's Compensation Act, as amended, on passing upon petitioner's
claim."
Pursuant to such doctrine and applying now the provisions of the Workmen's Compensation Act in this
case, the presumption of compensability subsists in favor of the claimant.
In any case, We have always maintained that in case of doubt, the same should be resolved in favor of
the worker, and that social legislations - like the Workmen's Compensation Act and the Labor Code -
should be liberally construed to attain their laudable objective, i.e., to give relief to the workman and/or
his dependents in the event that the former should die or sustain an injury.
Moreover, the constitutional guarantee of social justice and protection to labor make Us take a second
look at the evidence presented by the claimant.
As a teacher of the Las Pias Municipal High School at Las Pias, Rizal, the deceased used to eat his
meals at the school canteen. He also used the toilet and other facilities of the school. Said the
respondent Commission, ". . . it is not improbable that the deceased might have contracted the illness
during those rare moments that he was away from his family, since it is medically accepted that enteric
fever is caused by 'salmonella' organisms which are acquired by ingestion of contaminated food or
drinks. Contamination of food or water may come from the excretion of animals such as rodents, flies, or
human beings who are sick or who are carriers, or infection in meat of animals as food. Meat, milk and
eggs are the foods most frequently involved in the transmission of this type of species, since the
organism may multiply even before ingestion . . . ." These findings of the respondent Commission lead to
the conclusion that the risk of contracting the fatal illness was increased by the decedent's working
condition.
In view of the foregoing, the petition for review is meritorious.
WHEREFORE, the decision of the Employees' Compensation Commission sought to be reviewed is
hereby set aside and the Government Service Insurance System is ordered:
1. To pay the petitioner the amount of SIX THOUSAND PESOS (P6,000.00) as death compensation
benefit;
2. To pay the petitioner the amount of SIX HUNDRED PESOS (P600.00) as attorney's fees;
3. To reimburse the petitioner expenses incurred for medical services, hospitalization and medicines of
the deceased Nazario Manahan, Jr., duly supported by proper receipts; and
4. To pay administrative fees.
SO ORDERED.
Teehankee (Chairman), Makasiar, Guerrero and De Castro, JJ., concur.
Separate Opinions
MELENCIO-HERRERA, J., concurring:
Although enteric fever is not an occupational disease, considering the cause of said illness, the risk of
contracting it could have been increased by the working conditions of the deceased, a teacher, who used
to eat his meals at the school canteen and used the comfort room and other facilities of the school.
--------------
Footnotes
1. Rollo, pp. 25-27.
2. Idem.
FRANCISCO S. TANTUICO, JR., petitioner, vs. HON. EUFEMIO DOMINGO, in his
capacity as Chairman of the Commission on Audit, ESTELITO SALVADOR,
MARGARITO SILOT, VALENTINA EUSTAQUIO, ANICIA CHICO and GERMINIANO
PASCO, respondents.
1994-02-28 | G.R. No. 96422
D E C I S I O N
QUIASON, J.:
This is a petition for certiorari, prohibition and mandamus, with prayer for temporary restraining order or
preliminary injunction, under Rule 65 of the Revised Rules of Court.
The petition mainly questions the withholding of one-half of petitioner's retirement benefits.
I
On January 26, 1980, petitioner was appointed Chairman of the Commission on Audit (COA) to serve a
term of seven years expiring on January 26, 1987. Petitioner had discharged the functions of Chairman
of the COA in an acting capacity since 1975.
On December 31, 1985, petitioner applied for clearance from all money, property and other
accountabilities in preparation for his retirement. He obtained the clearance applied for, which covered
the period from 1976 to December 31, 1985. The clearance had all the required signatures and bore a
certification that petitioner was "cleared from money, property and/or other accountabilities by this
Commission." (Rollo, p. 44).
After the EDSA Revolution, petitioner submitted his courtesy resignation to President Corazon C. Aquino.
He relinquished his office to the newly appointed Chairman, now Executive Secretary Teofisto Guingona,
Jr. on March 10, 1986. That same day, he applied for retirement effective immediately.
Petitioner sought a second clearance to cover the period from January 1, 1986 to March 9, 1986. All the
signatures necessary to complete the second clearance, except that of Chairman Guingona, were
obtained. The second clearance embodies a certificate that petitioner was "cleared from money, property
and/or accountability by this Commission" (Rollo, p. 49). Chairman Guingona, however, failed to take
any action thereon.
Chairman Guingona was replaced by respondent Chairman. A year later, respondent Chairman issued
COA Office Order No. 87-10182 (Rollo, p. 50), which created a committee to inventory all equipment
acquired during the tenure of his two predecessors.
On May 7, 1987, respondent Chairman indorsed petitioner's retirement application to the Government
Service Insurance System (GSIS), certifying, among other matters, that petitioner was cleared of money
and property accountability (Rollo, p. 52). The application was returned to the COA pursuant to R.A. No.
1568, which vests in the COA the final approval thereof.
On September 25, 1987, the inventory committee finally submitted its report, recommending petitioner's
clearance from property accountability inasmuch as there was no showing that he personally gained
from the missing property or was primarily liable for the loss thereof (Rollo, pp. 53-58).
Not satisfied with the report, respondent Chairman issued a Memorandum directing the inventory
committee to explain why no action should be filed against its members for failure to complete a physical
inventory and verification of all equipment; for exceeding their authority in recommending clearances for
petitioner and Chairman Guingona; and for recommending petitioner's clearance in total disregard of
Section 102 of P.D. No. 1445 (Government Auditing Code of the Philippines). The members of the
committee were subsequently administratively charged.
On January 2, 1988, respondent Chairman created a special audit team for the purpose of conducting a
financial and compliance audit of the COA transactions and accounts during the tenure of petitioner from
1976 to 1984 (COA Office Order 88-10677; Rollo, pp. 66-67).
On February 28, 1989, the special audit team submitted its report stating: (i) that the audit consisted of
selective review of post-audit transactions in the head offices and the State Accounting and Auditing
Center; (ii) that the audit disclosed a number of deficiencies which adversely affected the financial
condition and operation of the COA, such as violations of executive orders, presidential decrees and
related rules and regulations; and (iii) that there were some constraints in the audit, such as the
unavailability of records and documents, and personnel movements and turnover. While the report did
not make any recommendation, it instead mentioned several officials and employees, including petitioner,
who may be responsible or accountable for the questioned transactions (Rollo, pp. 73, 147-151).
Respondent Chairman rendered a Decision dated November 20, 1989, in the administrative case filed
against the principal members of the first inventory committee. He found them guilty as charged and
issued them a reprimand. The other members were meted a stern warning, except for one who was
exonerated for not taking part in the preparation of the inventory report.
In a letter dated December 21, 1989, a copy of which was received by petitioner on December 27, 1989,
respondent Chairman informed petitioner of the approval of his application for retirement under R.A. No.
1568, effective as of March 9, 1986 (Rollo, pp. 68-69). However, respondent Chairman added:
". . . In view, however, of the audit findings and inventory report adverted to above, payment of only
one-half (1/2) of the money value of the benefits due you by reason of such retirement will be allowed,
subject to the availability of funds and the usual accounting and auditing rules. Payment of the balance
of said retirement benefits shall be subject to the final results of the audit concerning your fiscal
responsibility and/or accountability as former Chairman of this Commission."
In a letter dated January 22, 1990, petitioner requested full payment of his retirement benefits.
Petitioner was furnished a copy of the report of the special audit team in the letter dated December 21,
1989 of respondent Chairman on January 29, 1990, nearly a year after its completion. Attached to a
copy of the report was a letter dated November 14, 1989 from respondent Chairman, who required
petitioner to submit his comment within 30 days (Rollo, p. 153).
Petitioner submitted a letter-comment, wherein he cited certain defects in the manner the audit was
conducted. He further claimed that the re-audit was not authorized by law since it covered closed and
settled accounts.
Upon petitioner's request, he was furnished a set of documents which he needed to prepare his
comment. He was likewise given another 30-days to submit it.
A series of correspondence between petitioner and respondent Chairman ensued. On September 10,
1990, petitioner requested a copy of the working papers on which the audit report was based. This was
denied by respondent Chairman, who claimed that under the State Audit Manual, access to the working
paper was restricted. Petitioner's reconsideration was likewise denied and he was given a
non-extendible period of five days to submit his comment.
Instead of submitting his comment, petitioner sought several clarifications and specifications, and
requested for 90 days within which to submit his comment, considering that the report covered a
ten-year period of post-audited transactions. Ignoring petitioner's request, respondent Chairman
demanded an accounting of funds and a turn over of the assets of the Fiscal Administration Foundation,
Inc. within 30 days.
II
Petitioner then filed the instant petition. As prayed for by petitioner, this Court issued a temporary
restraining order on January 17, 1991.
Petitioner argues that notwithstanding the two clearances previously issued, and respondent Chairman's
certification that petitioner had been cleared of money and property accountability, respondent Chairman
still refuses to release the remaining half of his retirement benefits ---- a purely ministerial act.
Petitioner was already issued an initial clearance during his tenure, effective December 31, 1985 (Rollo,
p. 44). All the required signatures were present. It also bore a certification that petitioner "is cleared from
money, property and/or other accountabilities by this commission" with the following notation:
"No property accountability under the Chairman's name as the person. Final clearance as COA
Chairman subject to the completion of ongoing reconciliation of Accounting & P(roperty) records and to
complete turnover of COA property assigned to him as agency head.
xxx xxx xxx
The responsibility of the Chairman for the disbursement and collection accounts of this Commission for
CYs Sept. '75 to Aug. '85, were completely post-audited, however as of Dec. 31, 1985, the suspensions
and disallowances in the amounts of P36,196,962.11 and P28,762.36 respectively are still in the process
of settlement" (Rollo, pp. 44-45).
Petitioner also applied for a second clearance to cover the period from January 1 to March 9, 1986,
which application had been signed by all the officials, except the Chairman (Rollo, p. 49).
Whatever infirmities or limitations existed in said clearances were cured after respondent Chairman
favorably indorsed petitioner's application for retirement to the Government Service Insurance System
and recommended its approval to take effect on March 10, 1986. In said endorsement, respondent
Chairman made it clear that there were no pending administrative and criminal cases against petitioner
(Rollo, p. 52).
Regardless of petitioner's monetary liability to the government that may be discovered from the audit
concerning his fiscal responsibility or accountability as former COA Chairman, respondent Chairman
cannot withhold the benefits due petitioner under the retirement laws.
In Romana Cruz v. Hon. Francisco Tantuico, 166 SCRA 670 (1988), the National Treasurer withheld the
retirement benefits of an employee because of his finding that she negligently allowed the anomalous
encashment of falsified treasury warrants.
In said case, where petitioner herein was one of the respondents, we found that the employee had been
cleared by the National Treasurer from all money and property responsibility, and held that the
retirement pay accruing to a public officer may not be withheld and applied to his indebtedness to the
government.
In Tantuico, we cited Justice Laurel's essay on the rationale for the benign ruling in favor of the retired
employees, thus:
". . . Pension in this case is a bounty flowing from the graciousness of the Government intended to
reward past services and, at the same time, to provide the pensioner with the means with which to
support himself and his family. Unless otherwise clearly provided, the pension should inure wholly to the
benefit of the pensioner. It is true that the withholding and application of the amount involved was had
under Section 624 of the Administrative Code and not by any judicial process, but if the gratuity could not
attached or levied upon execution in view of the prohibition of Section 3 of Act No. 4051, the
appropriation thereof by administrative action, if allowed, would lead to the same prohibited result and
enable the respondent to do indirectly what they can not do directly under Section 3 of the Act No. 4051.
Act No. 4051 is a later statute having been approved on February 21, 1933, whereas the Administrative
Code of 1917 which embodies Section 624 relied upon by the respondents was approved on March 10
of that year. Considering Section 3 of Act No. 4051 as an exception to the general authority granted in
Section 624 of the Administrative Code, antagonism between the two provisions is avoided (Hunt v.
Hernandez, 64 Phil. 753 [1937]).
Under Section 4 of R.A. No. 1568 (An Act to Provide Life Pension to the Auditor General and the
Chairman or Any Member of the Commission on Elections), the benefits granted by said law to the
Auditor General and the Chairman and Members of the Commission on Elections shall not be subject to
garnishment, levy or execution. Likewise, under Section 33 of P.D. No. 1146, as amended (The Revised
Government Service Insurance Act of 1977), the benefits granted thereunder "shall not be subject,
among others, to attachment, garnishment, levy or other processes."
Well-settled is the rule that retirement laws are liberally interpreted in favor of the retiree because the
intention is to provide for the retiree's sustenance and comfort, when he is no longer capable of earning
his livelihood (Profeta vs. Drilon, 216 SCRA 777 [1992]).
Petitioner also wants us to enjoin the re-audit of his fiscal responsibility or accountability, invoking the
following grounds:
1. The re-audit involved settled and closed accounts which under Section 52 of the Audit Code can no
longer be re-opened and reviewed.
2. The re-audit was initiated by respondent Chairman alone, and not by the Commission as a collegial
body;
3. The report of the special audit team that recommended the re-audit is faulty as the team members
themselves admitted several constraints in conducting the re-audit, e.g. unavailability of the documents,
frequent turn-over and movement of personnel, etc.;
4. The re-audit covered transactions done even after petitioner's retirement;
5. He was not given prior notice of the re-audit;
6. He was not given access to the working papers; and
7. Respondents were barred by res judicata from proceeding with the re-audit (Rollo, pp. 19-40).
The petition must fail insofar as it seeks to abort the completion of the re-audit. While at the beginning
petitioner raised objections to the manner the audit was conducted and the authority of respondents to
re-open the same, he subsequently cooperated with the examination of his accounts and transactions as
a COA official.
With respect to the legal objections raised by petitioner to the partial findings of the respondents with
respect to his accountability, such findings are still tentative. As petitioner has requested, he is entitled to
a reasonable time within which to submit his comment thereon.
But in order to prepare his comment, petitioner should be given access to the working papers used by
the special audit team. The audit report covered a period of ten years (1976-1985) and involved
numerous transactions. It would be unfair to expect petitioner to comment on the COA's findings of the
report without giving him a chance to verify how those findings were arrived at.
It has been seven years since petitioner's retirement. Since then he was only paid half of his retirement
benefits, with the other half being withheld despite the issuance of two clearances and the approval of
his retirement application. As of the filing of this petition on December 21, 1990, no criminal or
administrative charge had been filed against petitioner in connection with his position as former Acting
Chairman and Chairman of the COA.
WHEREFORE, the petition is GRANTED insofar as it seeks to compel respondent Chairman of the COA
to pay petitioner's retirement benefits in full and his monthly pensions beginning in March 1991.
The petition is DENIED insofar as it seeks to nullify COA Office Order No. 88-10677 and the audit report
dated February 28, 1989 but petitioner should be given full access to the working papers to enable him
to prepare his comment to any adverse findings in said report. The temporary restraining order is
LIFTED.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, Melo,
Puno, Vitug and Kapunan, JJ., concur.
PHILACOR CREDIT CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, Respondent.
2013-02-06 | G.R. No. 169899
SECOND DIVISION
D E C I S I O N
BRION, J.:
Before us is a petition for review on certiorari1under Rule 45 of the Rules of Court seeking the reversal
of the decision2 dated September 23, 2005 of the Court of Tax Appeals (CTA) en bane in C.T.A, E.B. No.
19 (C.T.A. Case No. 5674). In the assailed decision, the CTA en banc affirmed the CTA Division's
resolution3 of April 6, 2004. Both courts held that petitioner Philacor Credit Corporation (Philacor), as an
assignee of promissory notes, is liable for deficiency documentary stamp tax (DST) on (1) the issuance
of promissory notes; and (2) the assignment of promissory notes for the fiscal year ended 1993.
The facts are not disputed.
Philacor is a domestic corporation organized under Philippine laws and is engaged in the business of
retail financing. Through retail financing, a prospective buyer of a home appliance - with neither cash nor
any credit card - may purchase appliances on installment basis from an appliance dealer. After Philacor
conducts a credit investigation and approves the buyer's application, the buyer executes a unilateral
promissory note in favor of the appliance dealer. The same promissory note is subsequently assigned by
the appliance dealer to Philacor.4
Pursuant to Letter of Authority No. 17107 dated July 6, 1974, Revenue Officer Celestino Mejia examined
Philacor's books of accounts and other accounting records for the fiscal year August 1, 1992 to July 31,
1993. Philacor received tentative computations of deficiency taxes for this year. Philacor's Finance
Manager, Leticia Pangan, contested the tentative computations of deficiency taxes (totaling
P20,037,013.83) through a letter dated April 17, 1995.5
On May 16, 1995, Mr. Mejia sent a letter to Philacor revising the preliminary assessments as follows:
Deficiency Income Tax P 9,832,098.22
Deficiency Percentage Tax 866,287.60
Deficiency Documentary Stamp Tax 3,368,169. 45
==============
Total P 14,066,555.276
==============
Philacor then received Pre-Assessment Notices (PANs), all dated July 18, 1996, covering the alleged
deficiency income, percentage and DSTs, including increments.7
On February 3, 1998, Philacor received demand letters and the corresponding assessment notices, all
dated January 28, 1998. The assessments, inclusive of increments, cover the following:
Deficiency Income Tax P 12, 888,085.09
Deficiency Percentage Tax 1,185,977.07
Deficiency DST Tax 3,368,196. 45
===============
Total P 17,442,231.618
===============
On March 4, 1998, Philacor protested the PANs, with a request for reconsideration and reinvestigation. It
alleged that the assessed deficiency income tax was erroneously computed when it failed to take into
account the reversing entries of the revenue accounts and income adjustments, such as repossessions,
write-offs and legal accounts. Similarly, the Bureau of Internal Revenue (BIR) failed to take into account
the reversing entries of repossessions, legal accounts, and write-offs when it computed the percentage
tax; thus, the total income reported, that the BIR arrived at, was not equal to the actual receipts of
payment from the customers. As for the deficiency DST, Philacor claims that the accredited appliance
dealers were required by law to affix the documentary stamps on all promissory notes purchased until
the enactment of Republic Act No. 7660, otherwise known as An Act Rationalizing Further the Structure
and Administration of the Documentary Stamp Tax,9 which took effect on January 15, 1994. In addition,
Philacor filed, on the following day, a supplemental protest, arguing that the assessments were void for
failure to state the law and the facts on which they were based.10
On September 30, 1998, Philacor filed a petition for review before the CTA Division, docketed as C.T.A.
Case No. 5674. 11
The CTA Division rendered its decision on August 14, 2003.12 After examining the documents submitted
by the parties, it concluded that Philacor failed to declare part of its income, making it liable for deficiency
income tax and percentage tax. However, it also found that the Commissioner of Internal Revenue (CIR)
erred in his analysis of the entries in Philacor's books thereby considerably reducing Philacor's liability to
a deficiency income tax of P1,757,262.47 and a deficiency percentage tax of P613,987.86. The CTA
also ruled that Philacor is liable for the DST on the issuance of the promissory notes and their
subsequent transfer or assignment. Noting that Philacor failed to prove that the DST on its promissory
notes had been paid for these two transactions, the CTA held Philacor liable for deficiency DST of
P673,633.88, which is computed as follows:
Total Notes purchased during the taxable year P 269,453,556.94
Divided by rate under Section 180 200.00
-----------------------
Basis of DST P 1,347,267.78
Multiply by DST rate (Section 180, 1993Tax Code .20
-----------------------
DST on notes purchased P 269,453.55
Add: Total DST on Notes assigned (Section 180) 269,453.55
-----------------------
P 538,907.10
Deficiency Documentary Stamp Tax
Add: 25% surcharge 134,726.78
-----------------------
Total Deficiency Documentary Stamp Tax P 673,633.8813
===============
All sums for deficiency taxes included surcharge and interest.
Both parties filed their motions for reconsideration. The CIR's motion was denied for having been filed
out of time.14 On the other hand, the CTA partially granted Philacor's motion in the resolution of April 6,
2004,15 wherein it cancelled the assessment for deficiency income tax and deficiency percentage tax.
These assessments were withdrawn because the CTA found that Philacor had correctly declared its
income; the discrepancy of P2,180,564.00 had been properly accounted for as proper adjustments to
Philacor's net revenues. Nevertheless, the CTA Division sustained the assessment for deficiency DST in
the amount of P673,633.88.
Philacor filed a petition for review before the CTA en banc.16
In its decision17 dated September 23, 2005, the CTA en banc affirmed the resolution of April 6, 2004 of
the CTA Division. It reiterated that Philacor is liable for the DST due on two transactions - the issuance of
promissory notes and their subsequent assignment in favor of Philacor. With respect to the issuance of
the promissory notes, Philacor is liable as the transferee which "accepted" the promissory notes from the
appliance dealer in accordance with Section 180 of Presidential Decree No. 1158, as amended (1986
Tax Code).18 Further citing Section 4219 of Regulations No. 26,20 the CTA en banc held that a person
"using" a promissory note is one of the persons who can be held liable to pay the DST. Since the subject
promissory notes do not bear documentary stamps, Philacor can be held liable for DST. As for the
assignment of the promissory notes, the CTA en banc held that each and every transaction involving
promissory notes is subject to the DST under Section 173 of the 1986 Tax Code; Philacor is liable as the
transferee and assignee of the promissory notes.
On November 18, 2005, Philacor filed the present petition, raising the following assignment of errors:
I
"USING" IN REGULATIONS NO. 26 DOES NOT APPEAR IN SECTIONS [SIC] 173 NOR 180 OF THE
TAX CODE; AND, THEREFORE WENT BEYOND THE LAW [SIC]
II
"ACCEPTING" IN SECTION 173 OF THE TAX CODE DOES NOT APPLY TO PROMISSORY NOTES
III
THE CTA EN BANC DECISION EXTENDED THE WORDS "ASSIGNMENT" AND "TRANSFERRING" IN
SECTION 173 TO THE PROMISSORY NOTES; SUCH THAT, THE "ASSIGNMENT" OR
"TRANSFERRING" OF PROMISSORY NOTES IS SUBJECT TO DST. HOWEVER SECTIONS 176, 178,
AND 198 OF TITLE VII OF THE TAX CODE EXPRESSLY IMPOSES [SIC] DST ON THE
TRANSFER/ASSIGNMENT OF CERTAIN DOCUMENTS WHICH REVEALS THE LEGISLATIVE
INTENT THAT ONLY THE ASSIGNMENT/TRANSFER OF CERTAIN DOCUMENTS IN SECTIONS 176,
178, AND 198 ARE SUBJECT TO DST
IV
BIR RULING 139-97 RULED THAT THE ASSIGNMENT OF A LOAN, WHICH IN SECTION 180 IS
TREATED IN THE SAME BREATH AS A PROMISSORY NOTE, IS NOT SUBJECT TO DST21
We find the petition meritorious.
Philacor is not liable for the DST on the issuance of the promissory notes.
Neither party questions that the issuances of promissory notes are transactions which are taxable under
the DST. The 1986 Tax Code clearly states that:
Section 180. Stamp tax on promissory notes, bills of exchange, drafts, certificates of deposit, debt
instruments used for deposit substitutes and others not payable on sight or demand. - On all bills of
exchange (between points within the Philippines), drafts, or certificates of deposits, debt instruments
used for deposit substitutes or orders for the payment of any sum of money otherwise than at sight or on
demand, on all promissory notes, whether negotiable or non-negotiable except bank notes issued for
circulation, and on each renewal of any such note, there shall be collected a documentary stamp tax of
twenty centavos on each two hundred pesos, or fractional part thereof, of the face value of any such bill
of exchange, draft certificate of deposit, debt instrument, or note. [emphasis supplied; underscores ours]
Under the undisputed facts and the above law, the issue that emerges is: who is liable for the tax?
Section 173 of the 1997 National Internal Revenue Code (1997 NIRC) names those who are primarily
liable for the DST and those who would be secondarily liable:
Section 173. Stamp taxes upon documents, instruments, and papers. - Upon documents, instruments,
and papers, and upon acceptances, assignments, sales, and transfers of the obligation, right, or property
incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or
accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this
Title, by the person making, signing, issuing, accepting, or transferring the same, and at the same time
such act is done or transaction had: Provided, that wherever one party to the taxable document enjoys
exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one
directly liable for the tax. [emphases supplied; underscores ours]
The persons primarily liable for the payment of the DST are the person (1) making; (2) signing; (3)
issuing; (4) accepting; or (5) transferring the taxable documents, instruments or papers. Should these
parties be exempted from paying tax, the other party who is not exempt would then be liable.
Philacor did not make, sign, issue, accept or transfer the promissory notes. The acts of making, signing,
issuing and transferring are unambiguous. The buyers of the appliances made, signed and issued the
documents subject to tax, while the appliance dealer transferred these documents to Philacor which
likewise indisputably received or "accepted" them. "Acceptance," however, is an act that is not even
applicable to promissory notes, but only to bills of exchange.22 Under Section 13223 of the Negotiable
Instruments Law (which provides for how acceptance should be made), the act of acceptance refers
solely to bills of exchange. Its object is to bind the drawee of a bill and make him an actual and bound
party to the instrument.24 Further, in a ruling adopted by the BIR as early as 1955, acceptance has
already been given a narrow definition with respect to incoming foreign bills of exchange, not the
common usage of the word "accepting" as in receiving:
The word "accepting" appearing in Section 210 of the National Internal Revenue Code has reference to
incoming foreign bills of exchange which are accepted in the Philippines by the drawees thereof.
Accordingly, the documentary stamp tax on freight receipts is due at the time the receipts are issued and
from the transportation company issuing the same. The fact that the transportation contractor issuing the
freight receipts shifts the burden of the tax to the shipper does not make the latter primarily liable to the
payment of the tax.25 (underscore ours)
This ruling, to our mind, further clarifies that a party to a taxable transaction who "accepts" any
documents or instruments in the plain and ordinary meaning of the act (such as the shipper in the cited
case) does not become primarily liable for the tax. In the same way, Philacor cannot be made primarily
liable for the DST on the issuance of the subject promissory notes, just because it had "accepted" the
promissory notes in the plain and ordinary meaning. In this regard, Section 173 of the 1997 NIRC
assumes materiality as it determines liability should the parties who are primarily liable turn out to be
exempted from paying tax; the other party to the transaction then becomes liable.
Revenue Regulations No. 9-200026 interprets the law more widely so that all parties to a transaction are
primarily liable for the DST, and not only the person making, signing, issuing, accepting or transferring
the same becomes liable as the law provides. It provides:
SEC. 2. Nature of the Documentary Stamp Tax and Persons Liable for the Tax. -
(a) In General. - The documentary stamp taxes under Title VII of the Code is a tax on certain
transactions. It is imposed against "the person making, signing, issuing, accepting, or transferring" the
document or facility evidencing the aforesaid transactions. Thus, in general, it may be imposed on the
transaction itself or upon the document underlying such act. Any of the parties thereto shall be liable for
the full amount of the tax due: Provided, however, that as between themselves, the said parties may
agree on who shall be liable or how they may share on the cost of the tax.
(b) Exception. - Whenever one of the parties to the taxable transaction is exempt from the tax imposed
under Title VII of the Code, the other party thereto who is not exempt shall be the one directly liable for
the tax. [emphasis ours]
But even under these terms, the liability of Philacor is not a foregone conclusion as from the face of the
promissory note itself, Philacor is not a party to the issuance of the promissory notes, but merely to their
assignment. On the face of the documents, the parties to the issuance of the promissory notes would be
the buyer of the appliance, as the maker, and the appliance dealer, as the payee.
We are aware that while Philacor denies being a party to the issuance of the promissory notes,27 the
appliance buyer is made to sign a promissory note only after Philacor has approved its credit application.
Moreover, the note Philacor marked as Annex "J" of its petition for review28 is the standard pro forma
promissory note that Philacor uses in all similar transactions;29 the same document contains the
issuance of the notes in favor of the appliance dealer and their assignments to Philacor. The promissory
notes are also transferred to Philacor by the appliance dealer on the same date that the appliance buyer
issues the promissory note in favor of the appliance buyer. Thus, it would seem that Philacor is the
person who ultimately benefits from the issuance of the notes, if not the intended payee of these notes.
These observations, however, pertain to facts and implications that are found outside the terms of the
documents under discussion and are contradictory to their outright terms. To consider these externalities
would go against the doctrine that the liability for the DST and the amount due are determined from the
document itself - examined through its form and face - and cannot be affected by proof of facts outside
it.30
Nor can the CIR justify his position that Philacor is liable for the tax by citing Section 42 of Regulations
No. 26, which was issued by the Department of Finance on March 26, 1924:
Section 42. Responsibility for payment of tax on promissory notes. - The person who signs or issues a
promissory note and any person transferring or using a promissory note can be held responsible for the
payment of the documentary stamp tax. [emphasis ours; italics supplied]
The rule uses the word "can" which is permissive, rather than the word "shall," which would make the
liability of the persons named definite and unconditional. In this sense, a person using a promissory note
can be made liable for the DST if he or she is: (1) among those persons enumerated under the law - i.e.,
the person who makes, issues, signs, accepts or transfers the document or instrument; or (2) if these
persons are exempt, a non-exempt party to the transaction. Such interpretation would avoid any conflict
between Section 173 of the 1997 NIRC and Section 42 of Regulations No. 26 and would make it
unnecessary for us to strike down the latter as having gone beyond the law it seeks to interpret.
However, we cannot interpret Section 42 of Regulations No. 26 to mean that anyone who "uses" the
document, regardless of whether such person is a party to the transaction, should be liable, as this
reading would go beyond Section 173 of the 1986 Tax Code - the law that the rule seeks to implement.
Implementing rules and regulations cannot amend a law for they are intended to carry out, not supplant
or modify, the law.31 To allow Regulations No. 26 to extend the liability for DST to persons who are not
even mentioned in the relevant provisions of any of our Tax Codes, particularly the 1986 Tax Code (the
relevant law at the time of the subject transactions) would be a clear breach of the rule that a statute
must always be superior to its implementing regulations.
This expansive interpretation of Regulations No. 26 becomes even more untenable when we look at the
difference between the way our law has been phrased and the way the Internal Revenue Law of the
United States (US) identified the persons liable for its stamp tax. We also note that despite the
subsequent amendments to our DST provisions, our Congress never saw it fit to phrase our laws using
the US phraseologies.
In Section 110 of our Internal Revenue Code of 1904, the persons liable for the stamp tax are the
"persons who shall make, sign or issue the same[.]" Although our 1904 Tax Code was patterned after
the then existing US Internal Revenue Code, also known as the Act of Congress of July 13, 1866,32 the
US provisions on the stamp tax provide for a wider set of taxpayers: Section 158 thereof places the
burden on "persons who shall make, sign or issue, or who shall cause to be made, signed or issued any
instrument, document, or paper of any kind or description whatsoever, or shall accept, negotiate or pay
or cause to be accepted, negotiated and paid, any bill of exchange, draft, or order, or promissory note for
the payment of money." It goes on further by extending the liability not only to the parties mentioned but
also to "any party having an interest therein." Another US law, the War Revenue Act of June 13, 1898,
provides in Section 6 thereof a more succinct phrase whose coverage is just as extensive: "any persons
or party who shall make, sign or issue the same, or for whose use or benefit the same shall be made,
signed or issued." These provisions have been adopted by various states such as Florida, South
Carolina, New Jersey and Pennsylvania.33
Under US laws, liability for the DST is placed on any person who has an interest in the transaction or
document and whoever may benefit from it. A person who would use it or benefit from it, including
parties who are not named in the instrument, would be liable for the tax. In comparison, our legislators
chose to limit the DST liability only to "persons who shall make, sign or issue [the document or
instrument]."
Notably, our revenue laws regarding persons liable for the DST have been repeatedly amended. In
subsequent amendments, the coverage of the liability for DST included persons who "accept" and
"transfer" the instrument, document or paper of the taxable transaction. Thereafter, we included the
proviso that should any of the parties be exempt, the other party to the transaction would become liable.
However, none of these amendments had ever extended the liability to persons who have any interest in
or who would benefit from the document or instrument subject to tax. Thus, we cannot allow Regulations
No. 26 to be interpreted in such a way as to extend the DST liability to persons who are not the parties
named in the taxable document or instrument and are merely using or benefiting from it, against the
clear intention of our legislature.
In our view, it makes more sense to include persons who benefit from or have an interest in the taxable
document, instrument or transaction. There appears no reason for distinguishing between the persons
who make, sign, issue, transfer or accept these documents and the persons who have an interest in
these and/or have caused them to be made, signed or issued. This also limits the opportunities for
avoiding tax. Moreover, there are cases when making all relevant parties taxable could help our
administrative officers collect tax more efficiently. In this case, the BIR could simply collect from the
financing companies, rather than go after each and every appliance buyer or appliance seller. However,
these are matters that are within the prerogatives of Congress so that any interference from the Court,
no matter how well-meaning, would constitute judicial legislation. At best, we can only air our views in
the hope that Congress would take notice.
Philacor is not liable for the DST on the assignment of promissory notes.
Philacor, as an assignee or transferee of the promissory notes, is not liable for the assignment or
transfer of promissory notes as this transaction is not taxed under the law.
The CIR argues that the DST is levied on the exercise of privileges through the execution of specific
instruments, or the privilege to enter into a transaction. Therefore, the DST should be imposed on every
exercise of the privilege to enter into a transaction.34 There is nothing in Section 180 of the 1986 Tax
Code that supports this argument; the argument is even contradicted by the way the provisions on DST
were drafted.
As Philacor correctly points out, there are provisions in the 1997 NIRC that specifically impose the DST
on the transfer and/or assignment of documents evidencing particular transactions. Section 176 imposes
a DST on the transfer of due bills, certificates of obligation, or shares or certificates of stock in a
corporation, apart from Section 175 which imposes the DST on the issuance of shares of stock in a
corporation. Section 178 imposes the DST on certificates of profits, or any certificate or memorandum
showing interest in a property or accumulations of any corporation, and on all transfers of such certificate
or memoranda. Section 198 imposes the DST on the assignment or transfer of any mortgage, lease or
policy of insurance, apart from Sections 183, 184, 185, 194 and 195 which impose it on the issuances of
mortgages, leases and policies of insurance. Indeed, the law has set a pattern of expressly providing for
the imposition of DST on the transfer and/or assignment of documents evidencing certain transactions.
Thus, we can safely conclude that where the law did not specify that such transfer and/or assignment is
to be taxed, there would be no basis to recognize an imposition.
A good illustrative example is Section 198 of the 1986 Tax Code which provides that:
Section 198. Stamp tax on assignments and renewals of certain instruments. - Upon each and every
assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance of
any agreement, contract, charter, or any evidence of obligation or indebtedness by altering or otherwise,
there shall be levied, collected and paid a documentary stamp tax, at the same rate as that imposed on
the original instrument.
If we look closely at this provision, we would find that an assignment or transfer becomes taxable only in
connection with mortgages, leases and policies of insurance. The list does not include the assignment or
transfer of evidences of indebtedness; rather, it is the renewal of these that is taxable. The present case
does not involve a renewal, but a mere transfer or assignment of the evidences of indebtedness or
promissory notes. A renewal would involve an increase in the amount of indebtedness or an extension of
a period, and not the mere change in person of the payee.35
In BIR Ruling No. 139-97 issued on December 29, 1997, then CIR Liwayway Vinzons-Chato pronounced
that the assignment of a loan that is not for a renewal or a continuance does not result in a liability for
DST. Revenue Regulations No. 13-2004, issued on December 23, 2004, states that "[t]he DST on all
debt instruments shall be imposed only on every original issue and the tax shall be based on the issue
price thereof. Hence, the sale of a debt instrument in the secondary market will not be subject to the
DST." Included in the enumeration of debt instruments is a promissory note.
The BIR Ruling and Revenue Regulation cited are still applicable to this case, even if they were issued
after the transactions in question had already taken place. They apply because they are issuances
interpreting the same rule imposing a DST on promissory notes. At the time BIR Ruling No. 139-97 was
issued, the law in effect was the 1986 Tax Code; the 1997 NIRC took effect only on January 1, 1998.
Moreover, the BIR Ruling referred to a transaction entered into in 1992, when the 1986 Tax Code had
been in effect. On the other hand, the BIR issued Revenue Regulations No. 13-2004 when Section 180
of the 1986 Tax Code had already been amended. Nevertheless, the rule would still apply to this case
because the pertinent part of Section 180 - the part dealing with promissory notes - remained the same;
it imposed the DST on the promissory notes' issuances and renewals, but not on their assignment or
transfer:
Section 180 of the 1986 Tax Code, as Section 180 of the 1997 NIRC, as
amended amended by Republic Act No. 9243
Section 180. Stamp tax on promissory Section 180. Stamp Tax on All Bonds,
notes, bills of exchange, drafts, certificates Loan Agreements, Promissory Notes,
of deposit, debt instruments used for Bills of Exchange, Drafts, Instruments
deposit substitutes and others not payable and Securities Issued by the
on sight or demand on all promissory notes, Government or Any of its whether negotiable or
nonnegotiable except Instrumentalities, Deposit
bank notes issued for circulation, and on Substitute Debt Instruments,
each renewal of any such note, there shall Certificates of Deposits Bearing
be collected a documentary stamp tax of Interest and Others Not Payable
twenty centavos on each two hundred pesos, on Sight or Demand.
or fractional part thereof, of the face value - On all bonds, loan agreements,
of any such bill of exchange, draft certificate including those signed abroad,
of deposit, debt instrument, or note. wherein the object of the contract
is located or used in the Philippines,
bills of exchange (between points
- On all bills of exchange (between points within the Philippines), drafts,
within the Philippines), drafts, or certificates instruments and securities issued by
of deposits, debt instruments used for the Government or any of its
deposit substitutes or orders for the instrumentalities, deposit substitute
payment of any sum of money otherwise debt instruments, certificates
than at sight or on demand, orders of deposits drawing interest,
for the payment of any sum of money
otherwise than at sight or on demand,
on all promissory notes, whether
negotiable or non-negotiable, except
bank notes issued for circulation, and
on each renewal of any such note,
there shall be collected a
documentary stamp tax of Thirty
centavos (P 0.30) on each Two
hundred pesos (P 200), or fractional
part thereof, of the face value of
any such agreement,bill of exchange,
draft, certificate of deposit, or note:
Provided,That only one documentary
stamp tax shall be imposed on
either loan agreement, or promissory
notes issued to secure such loan,
whichever will yield a higher tax.
Provided, however, That loan
agreements or promissory notes
the aggregate of which does not
exceed Two hundred fifty thousand
pesos (P 250,000) executed by
individual for his purchase on
installment for his personal use
or that of his family and not for
business resale, barter or hire of a
house, lot, motor vehicle, appliance
or furniture shall be exempt from
the payment of the documentary
stamp tax provided under this
Section.
The settled rule is that in case of doubt, tax laws must be construed strictly against the State and liberally
in favor of the taxpayer. The reason for this ruling is not hard to grasp taxes, as burdens which must be
endured by the taxpayer, should not be presumed to go beyond what the law expressly and clearly
declares. That such strict construction is necessary in this case is evidenced by the change in the
subject provision as presently worded, which now expressly levies the tax on shares of stock as against
the previlege of issuing certificates of stock as formerly provided.36
WHEREFORE, premises considered, we GRANT the petition. The September 23, 2005 Decision of the
Court of Tax Appeals en banc in C.T.A. E.B. No. 19 (C.T.A. Case No. 5674), ordering Philacor Credit
Corporation to pay a deficiency documentary stamp tax in connection with the issuances and transfers or
assignments of promissory notes for the fiscal year ended July 31, 1993, is SET ASIDE. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
MARIANO C. DEL CASTILLO
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
ESTELA M. PERLAS-BERNABE
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, it is
hereby certified that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P.A. SERENO
Chief Justice
Footnotes
1 Rollo. pp 31-51
2 Id. at 8-27: penned by Associate Justice Olga Palanca-Enriquez and concurred in by Associate Justice
Ernesto D. Acosta, Juanito C. Castaeda, Jr., Lovell R. Bautista, Erlinda P. Uy and Ceasar A.
Casanova.
3 Id. at 111-118.
4 Id. at 31, 39-40.
5 Id. at 64-65.
6 Id. at 65.
7 Ibid.
8 Id. at 66.
9 Amending for the Purpose Certain Provisions of the National Internal Revenue Code, as amended,
Allocating Funds for Specific Programs and for Other Purposes.
10 Id. at 67-68.
11 Id. at 68.
12 Id. at 122-143.
13 Id. at 148.
14 Id. at 163-166.
15 Supra note 3.
16 Rollo, pp. 88-109.
17 Supra note 2.
18 In 1993, the applicable law was the 1986 Tax Code, which has been subsequently amended by the
1997 National Internal Revenue Code (Republic Act No. 8424), also known as the "Tax Reform Act Of
1997," which became effective on January 1, 1998.
19 Section 42. Responsibility for payment of tax on promissory notes. - The person who signs or issues
a promissory note and any person transferring or using a promissory note can be held responsible for
the payment of the documentary stamp tax.
20 Issued on March 26, 1924, entitled "The Revised Documentary Stamp Tax Regulations."
21 Rollo, pp. 43-49.
22 Jose Campos Jr. & Maria Clara Lopez-Campos, "Notes and Selected Cases on Negotiable
Instruments Law," 1994 edition, p. 520.
23 Sec. 132. Acceptance; how made, by and so forth. - The acceptance of a bill is the signification by the
drawee of his assent to the order of the drawer. The acceptance must be in writing and signed by the
drawee. It must not express that the drawee will perform his promise by any other means than the
payment of money.
24 Supra note 22.
25 Jose Araas, "Annotations and Jurisprudence on the National Internal Revenue Code, as
amended," volume 3, 1963 edition, p. 2, citing BIR Ruling dated September 13, 1955 and the Quarterly
Bull., Vol. IV, No. 3.
26 Issued on November 22, 2000.
27 Rollo, p. 210.
28 Id. at 167.
29 Id. at 217.
30 Hector de Leon and Hector de Leon, Jr., "The National Internal Revenue Code Annotated, volume 2,
2003 ed., p. 288, citing US. v. Isham, 84 US 496 (1873); and Danville Building Ass'n v. Pickering (D. C.)
294 F. 117.
31 Commissioner of Internal Revenue v. Placer Dome Technical Services (Phils.), Inc., G.R. No. 164365,
June 8, 2007, 524 SCRA 271, 276.
32 Hector S. De Leon, "The National Internal Revenue Code Annotated," 1991 ed., p. 9.
33 See Choctawhatchee Electric Cooperative, Inc v. Green, 123 So. 2d 357 (1960); Loyola Federal
Savings and Loan Association v. South Carolina Tax Commission, 308 S.C. 211 (1992); Endler v. United
States, 110 F. Supp. 945 (1953); and Pennsylvania Company for Insurances on Lives and Granting
Annuities v. United States, 39 F. Supp 1019 (1941).
34 Rollo, p. 72.
35 State of Florida Department of Revenue v. Miami National Bank, 374 So. 2d 1 (1979).
36 Lincoln Philippine Life Insurance Corp. v CA. 354 Phil 896, 904 (1998).
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. A. D. GUERRERO,
Special Administrator, in substitution of NATHANIEL I. GUNN, as Administrator of
the Estate of the late PAUL I. GUNN, respondent.
1967-09-22 | G.R. No. L-20942
D E C I S I O N
FERNANDO, J.:
A novel question, one of importance and significance, is before this Court in this petition for the review of
a decision of the Court of Tax Appeals. For the first time, the Ordinance appended to the Constitution
calls for interpretation, having been invoked to justify a claim for refund of taxes by the estate of an
American national, who in his life-time was engaged in the air transportation business. More specifically,
the issue is whether or not Section 142 of the National Internal Revenue Code allowing Filipinos a refund
of 50 percentum of the specific tax paid on aviation oil, could be availed of by citizens of the United
States and all forms of business enterprises owned or controlled directly or indirectly by them in view of
their privilege under the Ordinance to operate public utilities "in the same manner as to, and under the
same conditions imposed upon, citizens of the Philippines or corporations or associations owned or
controlled by citizens of the Philippines." 1
The Commissioner of Internal Revenue, now petitioner before this Court, denied the claim for refund in
the sum of P2,441.93 filed by the administrator of the estate of Paul I. Gunn, thereafter substituted by the
present respondent A. D. Guerrero as special administrator under the above section of the National
Internal Revenue Code. 2 The deceased operated an air transportation business under the business
name and style of Philippine Aviation Development; his estate, it was claimed, "was entitled to the same
rights and privileges as Filipino citizens operating public utilities including privileges in the matter of
taxation." The Commissioner of Internal Revenue disagreed, ruling that such partial exemption from the
gasoline tax was not included under the terms of the Ordinance and that in accordance with the statute,
to be entitled to its benefits, there must be a showing that the United States of which the deceased was a
citizen granted a similar exemption to Filipinos. The refund as already noted was denied. The matter was
brought to the Court of Tax Appeals on a stipulation of facts, no additional evidence being introduced.
Viewing the Ordinance differently, it "ordered the petitioner to refund to the respondent the sum of
P2,441.93 representing 50% of the specific taxes paid on 61,048.19 liters of gasoline actually used in
aviation during the period from October 3, 1956 up to May 31, 1957." Not satisfied with the above
decision, petitioner appealed.
We sustain the Commissioner of Internal Revenue; accordingly, the Court of Tax Appeals is reversed.
To the extent that a refund is allowable, there is in reality a tax exemption. The rule applied with
undeviating rigidity in the Philippines is that for a tax exemption to exist, it must be so categorically
declared in words that admit of no doubt. No such language may be found in the Ordinance. It furnishes
no support, whether express or implied, to the claim of respondent Administrator for a refund.
From 1906, in Catholic Church vs. Hastings 3 to 1966, in Esso Standard Eastern, Inc. vs. Acting
Commissioner of Customs, 4 it has been the constant and uniform holding that exemption from taxation
is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer.
Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be
construed strictissimi juris. 5 The state of the law on the subject was aptly summarized in the Esso
Standard Eastern, Inc. by Justice Sanchez thus: "The drive of petitioner's argument is that marketing of
its gasoline product 'is corollary to or incidental to its industrial operations.' But this contention runs
smack against the familiar rules that exemption from taxation is not favored, and that exemptions in tax
statutes are never presumed. Which are but statements in adherence to the ancient rule that exemptions
from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority. Tested by this precept, we cannot indulge in expansive construction and write into the law an
exemption not therein set forth. Rather, we go by the reasonable assumption that where the State has
granted in express terms certain exemptions, those are the exemptions to be considered, and no more .
. . ."
In addition to Justice Tracey, who first spoke for this Court in the Hastings case in announcing "the
cardinal rule of American jurisprudence that exemption from taxation not being favored," and therefore
"must be strictly construed" against the taxpayer, two other noted American jurists, Moreland and Street,
who likewise served this Court with distinction, reiterated the doctrine in terms even more emphatic.
According to Justice Moreland: "Even though the complaint in this regard were well founded, it would
have little bearing on the result of the litigation when we take into consideration the universal rule that he
who claims an exemption from his share of the common burden of taxation must justify his claim by
showing that the Legislature intended to exempt him by words too plain to be mistaken." 6 From Justice
Street: "Exemptions from taxation are highly disfavored, so much so that they may almost be said to be
odious to the law. He who claims an exemption must be able to point to some positive provision of law
creating the right. It cannot be allowed to exist upon a vague implication such as is supposed to arise in
this case from the omission from Act No. 1654 of any reference to liability for tax. The books are full of
very strong expressions on this point." 7
At the time then when the Ordinance took effect in April, 1947, the strict rule against tax exemption was
undisputed and indisputable. Such being the case, it would be a plain departure from the terms of the
Ordinance to predicate a tax exemption where none was intended. Wellsettled is the principle ". . . that a
constitutional provision must be presumed to have been framed and adopted in the light and
understanding of prior and existing laws and with reference to them. 'Courts are bound to presume that
the people adopting a constitution are familiar with the previous and existing laws upon the subjects to
which its provisions relate, and upon which they express their judgment and opinion in its adoption'." 8
Respect for and deference to doctrines of such undeniable force and cogency preclude an affirmance of
the decision of the Court of Tax Appeals. This is not to say that the scope of the Ordinance is to be
restricted or confined. What it promises must be fulfilled. There must be recognition of the right of the
"citizens of the United States and to all forms of business enterprise owned or controlled, directly or
indirectly, by citizens of the United States" to operate public utilities "in the same manner as to, and
under the same conditions imposed upon, citizens of the Philippines or corporations or associations
owned or controlled by citizens of the Philippines."
If the language of the Ordinance applies to tax refund or exemption, then the Court of Tax Appeals
should be sustained. It does not, however. Its terms are clear. Standing alone, without any franchise to
supply that omission, it affords no warrant for the claim here made. While good faith, no less than
adherence to the categorical wording of the Ordinance, requires that all the rights and privileges thus
granted to Americans and business enterprises owned and controlled by them be respected, anything
further would not be warranted. Nothing less will suffice, but anything more is not justified.
This conclusion has reinforcement that comes to it from another avenue of approach, the historical
background of the Ordinance. In public law questions, history many a time holds the key that unlocks the
door to understanding. Justice Tuason would thus have courts "look to the history of the times, examine
the state of things existing when the Constitution was framed and adopted, . . . and interpret it in the light
of the law then in operation." 9 Justice Laurel earlier noted that while historical discussion is not decisive,
it is valuable. 10 A brief resume then of the events that led to its being appended to the Constitution will
not be inappropriate.
Early in 1945, liberation primarily through the efforts of the American forces under General MacArthur,
assisted by Filipino guerrillas, heralded the dawn, awaited so long and so anxiously, ending the dark
night of the Japanese Occupation, which was only partly mitigated by a show of cooperation on the part
of some Filipino leaders of stature and eminence. All throughout those years, the Japanese Army in the
Philippines enforced repressive measures, severe in character. What was even more regrettable, in the
last few weeks, the few remaining Japanese troops in Manila and suburbs made a suicidal stand. The
scorched earth policy was followed. Guerrilla suspects paid dearly for their imaginary sins. There were
recorded cases, not few in number, or the old and infirm, even those of tender years, not being spared.
The Americans shelled Japanese positions, unfortunately not always with precision, as would have been
unavoidable perhaps in any case. The lot of the helpless civilians, already suffering from acts born out of
desperation of a cornered prey, became even more unenviable. They were caught in the cross-fire.
The toll in the destruction of the property and the loss of lives was heavy; the price the Filipinos paid was
high. The feeling then, and even now for that matter, was that it was worth it. For life during the period of
the Japanese Occupation had become unbearable. There was an intolerable burden on the spirit and the
kind of man with all civil liberties wantonly disregarded. There was likewise a well-nigh insupportable
affliction on his health and physical well-being, with food, what there was of it, difficult to locate and
beyond the means of even the middle-income groups. Medicine was equally scarce, what was available
commanding prices unusually high. A considerable portion of the population were dressed in rags and
lived under the most pitiable conditions in houses that had seen much better days. Moreover in a
garrison state with the Japanese kempetai, 11 and the contemptible spies and informers, there was ever
present that fear of the morrow, the sense of living at the edge of an impending doom.
It was fortunate that the Japanese Occupation ended when it did. Liberation was hailed by all, but the
problems faced by the legitimate government were awesome in their immensity. The Philippine treasury
was bankrupt and her economy prostrate. There were no dollar-earning export crops to speak of;
commercial operations were paralyzed; and her industries were unable to produce with mills, factories
and plants either destroyed or their machineries obsolete or dismantled. It was a desolate and tragic
sight that greeted the victorious American and Filipino troops. Manila, particularly that portion south of
the Pasig, lay in ruins, its public edifices and business buildings lying in a heap of rubble and numberless
houses razed to the ground. It was in fact, next to Warsaw, the most devastated city in the expert opinion
of the then General Eisenhower. There was thus a clear need of help from the United States. American
aid was forthcoming but on terms proposed by her government and later on accepted by the Philippines.
One such condition expressly set forth in the Philippine Trade Act of 1946 passed by the Congress of the
United States was that: "The disposition, exploitation, development, and utilization of all agricultural,
timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces and sources of potential energy, and other natural resources of the Philippines, and the
operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all
forms of business enterprises owned or controlled directly or indirectly, by United States citizens.'' 12
The above was embodied in an Executive Agreement concluded on July 4, 1946, the agreement being
signed by the President of the Republic of the Philippines and the plenipotentiary of the President of the
United States. The Constitution being in the way, both the exploitation of natural resources and the
operation of public utilities having been reserved for Filipinos, there was a need for an amendment. Such
an amendment was only forthcoming. It took the form of the Ordinance now under consideration, which
took effect on April 9, 1947.
The Ordinance thus came into being at a time when the liberation of the Philippines had elicited a vast
reservoir of goodwill for the United States, one that has lasted to this day notwithstanding irritants that
mar ever so often the relationship even among the most friendly of nations. Her prestige was never so
high. The Philippines after hearing opposing views on the matter conceded parity rights. She adopted
the Ordinance. To that grant, she is committed. Its terms are to be respected. In view of the equally
fundamental postulate that legal concepts imperatively calling for application cannot be ignored, however,
it follows that tax exemption to Americans or to business owned or controlled directly or indirectly by
American citizens, based solely on the language of the Ordinance, cannot be allowed. There is nothing
in its history that calls for a different view. Had the parties been of a different mind, they would have
employed words indicative of such intention. What was not there included, whether by purpose or
inadvertence, cannot be judicially supplied.
One final consideration. The Ordinance is designed for a limited period to allow what the Constitution
prohibits; Americans may operate public utilities. During its effectivity, there should be no thought of
whittling down the grant thus freely made. Nonetheless, being of a limited duration, it should not be given
an interpretation that would trench further on the plain constitutional mandate to limit the operation of
public utilities to Filipino hands. That is to show fealty to the fundamental law, which, in the language of
Story "was not intended to provide merely for the exigencies of a few years" unlike the Ordinance "but
was to endure through a long lapse of ages, the events of which w ere locked up in the inscrutable
purposes of Providence." 13 This is merely to emphasize that the Constitution unlike an ordinance
appended to it, to borrow from Cardozo "states or ought to state not rules for the passing hour, but
principles for an expanding future.'' 14 That is transitory in character then should not be given an
interpretation at war with the plain and explicit command of what is to continue far into the future, unless
there be some other principle of acknowledged primacy that compels the contrary. 15
It would seem to follow from all the foregoing that the decision of the Court of Tax Appeals enlarged the
scope and operation of the Ordinance. It failed unfortunately to abide by what the controlling precedents
require, namely, that tax exemption is not to be presumed and that if granted, it is to be most strictly
construed. No such grant was apparent on the face of the Ordinance. No such grant could be implied
from its history, much less from its transitory character. The Court of Tax Appeals went too far. That
cannot be done.
WHEREFORE, the decision of the Court of Tax Appeals is reversed and the case is remanded to it, to
grant respondent Administrator the opportunity of proving whether the estate could claim the benefits of
Section 142 of the National Internal Revenue Code, allowing refund to citizens of foreign countries on a
showing of reciprocity. With costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro and
Angeles, JJ., concur.
Footnotes
1. The Ordinance appended to the Constitution reads as follows: "Notwithstanding the provisions of
section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the
effectivity of the Executive Agreement entered into by the President of the Philippines with the President
of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of
Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third
of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of
all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, and other natural resources of the Philippines, and the
operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all
forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States
in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or
corporations or associations owned or controlled by citizens of the Philippines."
2. Section 142 of the National Internal Revenue Code as amended reads as follows: "Section 14.
Specific tax on manufactured oils and others fuels. - On refined and manufactured mineral oils and motor
fuels, there shall be collected the following taxes: (a) . . . ; (b) . . . ; (c) Naphtha, gasoline, and all other
similar products of distillation, per liter of volume capacity, eight centavos; and (d) . . . Whenever any of
the oils mentioned above are, during the five years from June eighteen, nineteen hundred and fifty-two,
used in agriculture and aviation, fifty-percentum of the specific tax paid thereon shall be refunded by the
Collector of Internal Revenue upon the submission of the following: (1) . . . ; (2) . . . ; (3) In case of
aviation oils, a sworn certificate satisfactory to the Collector proving that the said oils were actually used
in aviation: Provided, That no such refunds shall be granted in respect to the oils used in aviation by
citizens and corporations of foreign countries which do not grant equivalent refunds or exemptions in
respect to similar oils used in aviation by citizens and corporations of the Philippines."
3. 5 Phil. 701.
4. L-21841, October 28, 1966. Some of the other cases follow: Govt. of the Phil. v. Monte de Piedad
(1916) 25 Phil. 42; Asiatic Petroleum v. Llanes (1926) 49 Phil. 466; House v. Posadas (1929) 53 Phil.
338; Phil. Tel. & Tel. Co. v. Collector (1933) 58 Phil. 639; Greenfield v. Meer (1946) 77 Phil. 394;
Collector of Internal Revenue v. Manila Jockey Club (1956) 98 Phil. 670; Phil. Guaranty Co. v.
Commissioner, L-22074, Sept. 6, 1965; Abad v. Court of Tax Appeals, L-20834, October 19 1966.
5. Philippine Guaranty Co. v. Commissioner, L-22074, September 6, 1965, per Bengzon, J.
6. Govt. of the Phil. v. Monte de Piedad (1916) 35 Phil. 42. 48.
7. Asiatic Petroleum Co. v. Llanes (1926) 49 Phil. 46G, 471-472. He added: "As was said by the
Supreme Court of Tenneesee in Memphis v. U. & P. Bank (91 Tenn., 546. 550), 'The right of taxation is
inherent in the State. It is a prerogative essential to the perpetuity of the government; and he who claims
an exemption from the common burden, must justify his claim by the clearest grant of organic or statute
law.' Other utterances equally or more emphatic come readily to hand from the highest authority. In Ohio
Life Ins. and Trust Co. v. Debolt (16 Howard, 416), it was said by Chief Justice Taney, that the right of
taxation will not be held to have been surrendered, 'unless the intention to surrender is manifested by
words too plain to be mistaken.' In the case of the Delaware Railroad Tax (18 Wallace, 206, 226), the
Supreme Court of the United States said that the surrender, when claimed, must be shown by clear,
unambiguous language, which will admit of no reasonable construction consistent with the reservation of
the power. If a doubt arises as to the intent of the legislature, that doubt must be solved in favor of the
State. In Erie Railway Company v. Commonwealth of Pennsylvania (21 Wallace, 492, 499), Mr. Justice
Hunt, speaking of exemptions, observed that a State cannot strip itself of the most essential power of
taxation by doubtful words. 'It cannot, by ambiguous language, be deprived of this highest attribute of
sovereignty.' " (At pp. 471-472).
8. Gold Creek Mining Corp. v. Rodriguez (1938) 66 Phil. 259, 265, per Abad Santos, J., citing Barry v.
Truax, 13 N.C. 131; 99 N.W., 769; 65 L.R.A.. 762.
9. De los Santos v. Mallare (1950) 87 Phil. 289, 295.
10. Schneckenburger v. Moran (1936) 63 Phil. 249, 266.
11. Japanese Military Secret Police.
12. Section 341, Philippine Trade Act of 1946.
13. Martin v. Hunter's Lessee (1816) 1 Wheat 304.
14. Cardozo, The Nature of Judicial Process (1921) 83.
15. What is permanent and enduring, as long as the Constitution remains what it is, is the stress, both
unmistakable and pronounced, on nationalism. So it has been declared repeatedly by this Court. We
start with Justice Laurel, himself one of the foremost architects of the Constitution, who authoritatively
noted the "nationalistic . . . traits" discoverable by "even a sudden dip into a variety of the provisions"
embodied in our charter framed under "an intense spirit of nationalism." (Gold Creek Mining Co. vs.
Rodriguez [1938] 66 Phil. 259, 270.) Justice Perfecto, another delegate, who gained deservedly a
reputation as a civil libertarian, would have the guarantees of due process and equal protection yield to
its nationalistic provisions, one of which "reserves to Filipino citizens the operation of public services or
utilities." (Co Chiong v. Cuaderno [1949] 83 Phil. 242, 251.) From still another former member of the
constitutional convention, who likewise sat on this Court, Justice Labrador: "It would do well to refer to
the nationalistic tendency manifested in various provisions of the Constitution. . . . The nationalization of
the retail trade is only a continuance of the nationalistic protective policy laid down as a primary objective
of the Constitution. Can it be said that a law imbued with the same purpose and spirit underlying many of
the provisions of the Constitution is unreasonable, invalid and unconstitutional?" (Ichong v. Hernandez
[1957] 101 Phil. 1155, 1186.)
APPLIED FOOD INGREDIENTS COMPANY, INC., Petitioner, vs. COMMISSIONER OF
INTERNAL REVENUE, Respondent.
2013-11-11 | G.R. No. 184266
FIRST DIVISION
DECISION
SERENO, CJ:
This is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure filed by
Applied Food Ingredients, Company, Inc. (petitioner). The Petition assails the DeCision2 dated 4 June
2008 and Resolution3 dated 26 August 2008 of the Court of Tax Appeals En Bane (CTA En Bane) in
C.TA. EB No. 359. The assailed Decision and Resolution affirmed the Decision4 dated 13 June 2007
and Resolution5 dated 16 January 2008 rendered by the CTA First Division in C.TA. Case No. 6513
which denied petitioner's claim for the issuance of a tax creditcertificate representing its alleged excess
input taxes attributable to zerorated sales for the period 1 April 2000 to 31 December 2000.
THE FACTS
Considering that there are no factual issues in this case, we adopt the findings of fact of the CTA En
Banc, as follows:
Petitioner is registered with the Regional District Office (RDO) No. 43 of the BIR in Pasig City (BIR-Pasig)
as, among others, a Value- Added Tax (VAT) taxpayer engaged in the importation and exportation
business, as a pure buy-sell trader.
Petitioner alleged that from September 1998 to December 31, 2000, it paid an aggregate sum of input
taxes of P9,528,565.85 for its importation of food ingredients, as reported in its Quarterly Vat Return.
Subsequently, these imported food ingredients were exported between the periods of April 1, 2000 to
December 31, 2000, from which the petitioner was able to generate export sales amounting to
P114,577,937.24. The proceeds thereof were inwardly remitted to petitioner's dollar accounts with
Equitable Bank Corporation and with Australia New Zealand Bank-Philippine Branch.
Petitioner further claimed that the aforestated export sales which transpired from April 1, 2000 to
December 31, 2000 were zero-rated sales, pursuant to Section 106(A (2)(a)(1) of the N1RC of 1997.
Petitioner alleged that the accumulated input taxes of P9,528,565.85 for the period of September 1, 1998
to December 31, 2000 have not been applied against any output tax.
On March 26, 2002 and June 28, 2002, petitioner filed two separate applications for the issuance of tax
credit certificates in the amounts of P5,385, 208.32 and P4,143,357.53, respectively.
On July 24, 2002, in view of respondent's inaction, petitioner elevated the case before this Court by way
of a Petition for Review, docketed as C.T.A. Case No. 6513.
In his Answer filed on August 28, 2002, respondent alleged by way of special and affirmative defenses
that the request for tax credit certificate is still under examination by respondent's examiners; that taxes
paid and collected are presumed to have been made in accordance with law and regulations, hence not
refundable; petitioner's allegation that it erroneously and excessively paid the tax during the year under
review does not ipso facto warrant the refund/credit or the issuance of a certificate thereto; petitioner
must prove that it has complied with the governing rules with reference to tax recovery or refund, which
are found in Sections 204(C) and 229 of the Tax Code, as amended.6
Trial ensued and the CTA First Division rendered a Decision on 13 June 2007. It denied petitioners
claim for failure to comply with the invoicing requirements prescribed under Section 113 in relation to
Section 237 of the National Internal Revenue Code (NIRC) of 1997 and Section 4.108-1 of Revenue
Regulations No. 7-95.
On appeal, the CTA En Banc likewise denied the claim of petitioner on the same ground and ruled that
the latters sales for the subject period could not qualify for VAT zero-rating, as the export sales invoices
did not bear the following: 1) the imprinted word zero-rated; 2) TIN-VAT; and 3) BIRs permit number,
all in violation of the invoicing requirements.
THE ISSUES
Petitioner raises this sole issue for the consideration of this Court:
WHETHER OR NOT THE PETITIONER IS ENTITLED TO THE ISSUANCE OF A TAX CREDIT
CERTIFICATE OR REFUND OF THE AMOUNT OF P9,528,565.85 REPRESENTING CREDITABLE INPUT
TAXES INCURRED FOR THE PERIOD OF SEPTEMBER 1, 1998 TO DECEMBER 31, 2000 WHICH ARE
ATTRIBUTABLE TO ZERO-RATED SALES FOR THE PERIOD OF APRIL 1, 2000 TO DECEMBER 31,
2000.7
THE COURTS RULING
The Petition has no merit.
Our VAT Law provides for a mechanism that would allow VAT registered persons to recover the excess
input taxes over the output taxes they had paid in relation to their sales.
In Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal
Revenue,8 this Court explained that the VAT is a tax on consumption, an indirect tax that the provider of
goods or services may pass on to his customers. Under the VAT method of taxation, which is
invoice-based, an entity can subtract from the VAT charged on its sales or outputs the VAT it paid on its
purchases, inputs and imports.
For zero-rated or effectively zero-rated sales, although the sellers in these transactions charge no output
tax, they can claim a refund of the VAT that their suppliers charged them.9
At the outset, bearing in mind that tax refunds or credits - just like tax exemptions - are strictly construed
against taxpayers,10 the latter have the burden to prove strict compliance with the conditions for the
grant of the tax refund or credit.
Section 112 of the NIRC of 1997 laid down the manner in which the refund or credit of input tax may be
made, to wit:
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.
x x x x
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may,
within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one
hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
This Court finds it appropriate to first determine the timeliness of petitioners claim in accordance with the
above provision.
Well-settled is the rule that the issue of jurisdiction over the subject matter may, at any time, be raised by
the parties or considered by the Court motu proprio.11 Therefore, the jurisdiction of the CTA over
petitioners appeal may still be considered and determined by this Court.
Although the ponente in this case expressed a different view on the mandatory application of the 120+30
day period as prescribed in the above provision, with the advent, however, of this Courts
pronouncement on the consolidated tax cases of Commissioner of Internal Revenue v. San Roque
Power Corporation, Taganito Mining Corporation v. Commissioner of Internal Revenue, and Philex
Mining Corporation v. Commissioner of Internal Revenue 12(hereby collectively referred as San Roque),
we are constrained to apply the dispositions therein to similar facts as those in the present case.
To begin with, Section 112(A) provides for a two-year prescriptive period after the close of the taxable
quarter when the sales were made, within which a VAT-registered person whose sales are zero-rated or
effectively zero-rated may apply for the issuance of a tax credit certificate or refund of creditable input tax.
In this case, petitioner claims that from April 2000 to December 2000 it had zero-rated sales to which it
attributed the accumulated input taxes it had incurred from September 1998 to December 2000.
Applying Section 112(A), petitioner had until 30 June 2002, 30 September 2002 and 31 December 2002
- or the close of the taxable quarter when the zero-rated sales were made - within which to file its
administrative claim for refund. Thus, we find sufficient compliance with the two-year prescriptive period
when petitioner filed its claim on 26 March 200213 and 28 June 200214 covering its zero-rated sales for
the period April to September 2000 and October to December 2000, respectively.
The Commissioner of Internal Revenue (CIR) had one hundred twenty (120) days from the date of
submission of complete documents in support of the application within which to decide on the
administrative claim.
In relation thereto, absent any evidence to the contrary and bearing in mind that the burden to prove
entitlement to a tax refund is on the taxpayer, it is presumed that in order to discharge its burden,
petitioner had attached complete supporting documents necessary to prove its entitlement to a refund in
its application filed on 26 March 2002 and 28 June 2002. Therefore, the CIRs 120-day period to decide
on petitioners administrative claim commenced to run on 26 March 2002 and 28 June 2002, respectively.
Counting 120 days from 26 March 2002, the CIR had until 24 July 2002 within which to decide on the
claim of petitioner for an input VAT refund attributable to the its zero-rated sales for the period April to
September 2000.
On the other hand, the CIR had until 26 October 2002 within which to decide on petitioners claim for
refund filed on 28 June 2002, or for the period covering October to December 2000.
Records, however, show that the judicial claim of petitioner was filed on 24 July 2002.15 Petitioner
clearly failed to observe the mandatory 120- day waiting period. Consequently, the premature filing of its
claim for refund/credit of input VAT before the CTA warranted a dismissal, inasmuch as no jurisdiction
was acquired by the CTA.16
In San Roque, this Court, held thus: Failure to comply with the 120- day waiting period violates a
mandatory provision of law. It violates the doctrine of exhaustion of administrative remedies and renders
the petition premature and thus without a cause of action, with the effect that the CTA does not acquire
jurisdiction over the taxpayers petition. Philippine jurisprudence is replete with cases upholding and
reiterating these doctrinal principles. 17
Furthermore, the CTA, being a court of special jurisdiction, can take cognizance only of matters that are
clearly within its jurisdiction.18 Section 7 of R.A. 1125,19 as amended by R.A. 9282,20 specifically
provides:
SEC. 7. Jurisdiction. The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code provides a specific period of action, in which case
the inaction shall be deemed a denial; x x x.(Emphases supplied)
Inaction by the CIR in cases involving the refund of creditable input tax, arises only after the lapse of
120 days. Thus, prior thereto and without a decision of the CIR, the CTA, as a court of special
jurisdiction, has no jurisdiction to entertain claims for the refund or credit of creditable input tax. The
charter of the CTA also expressly provides that if the Commissioner fails to decide within a specific
period required by law, such inaction shall be deemed a denial of the application for tax refund or
credit. It is the Commissioners decision, or inaction deemed a denial, that the taxpayer can take to the
CTA for review. Without a decision or an inaction x x x deemed a denial of the Commissioner, the CTA
has no jurisdiction over a petition for review.21
Considering further that the 30-day period to appeal to the CTA is dependent on the 120-day period,
both periods are hereby rendered jurisdictional. Failure to observe 120 days prior to the filing of a judicial
claim is not a mere non-exhaustion of administrative remedies, but is likewise considered jurisdictional.
The period of 120 days is a prerequisite for the commencement of the 30-day period to appeal to the
CTA. In both instances, whether the CIR renders a decision (which must be made within 120 days) or
there was inaction, the period of 120 days is material.
This Court further ruled:
The old rule that the taxpayer may file the judicial claim, without waiting for the Commissioners decision
if the two-year prescriptive period is about to expire, cannot apply because that rule was adopted before
the enactment of the 30-day period. The 30-day period was adopted precisely to do away with the old
rule, so that under the VAT System the taxpayer will always have 30 days to file the judicial claim even if
the Commissioner acts only on the 120th day, or does not act at all during the 120-day period. With the
30-day period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund
or credit of input VAT without waiting for the Commissioner to decide until the expiration of the 120-day
period.
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the
taxpayer. One of the conditions for a judicial claim of refund or credi under the VAT System is with the
120+ 30 day mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day periods
is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003
to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the 120+ 30 day
periods as mandatory and jurisdictional.22 (Emphasis supplied)
In accordance with San Roque, and considering that petitioner's judicial claim was filed on 24 July 2002,
when the 120+30 day mandatory periods were already in the law and BIR Ruling No. DA-489-03 had not
yet been issued, petitioner does not have an excuse for not observing the 120+ 30 day period. Failure of
petitioner to observe the mandatory 120-day period is fatal to its claim and rendered the CT A devoid of
jurisdiction over the judicial claim.
The Court finds, in view of the ab.sence of jurisdiction of the Court of the Tax Appeals over the judicial
claim of petitioner, that there is no need to discuss the other issues raised.
WHEREFORE, premises considered, the instant Petition IS DENIED.
SO ORDERED.
MARIA LOURDES P. A. SERENO
Chief Justice, Chairperson
WE CONCUR:
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
LUCAS P. BERSAMIN
Associate Justice
MARTIN S. VILLARAMA, JR.
Associate Justice
BIENVENIDO L. REYES
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court's
Division.
MARIA LOURDES P. A. SERENO
Chief Justice
__________________
Footnotes
1 Rollo, pp. 41-71.
2 ld. at 8-26; penned by Associate Justice Olga Palanca-Enriquez, and concurred in by Associate
Justices Juanito C. Castafieda Jr., Lovell R. Bautista, Erlinda P. Uy and Caesar A. Casanova, with
Presiding Justice Emesto D. Acosta dissenting.
3 Id. at 139-140.
4 Id. at 75-1 09; penned by Associate Justice Lovell R. Bautista, and concurred in by Associate Justice
Caesar A. Casanova, with Presiding Justice Ernesto D. Acosta dissenting.
5 Id. at 100-109.
6 Id. at 113-115.
7 Id. at 46.
8 G.R. No. 178090, 8 February, 2010, 612 SCRA 28, 33, citing Commissioner of Internal Revenue v.
Seagate Technology (Philippines), 491 Phil. 317, 332 (2005).
9 Id at 34.
10 Commissioner of Internal Revenue v. Bank of the Philippine Islands, G.R. No. 178490, 7 July 2009, 592
SCRA 219; Commissioner of Internal Revenue v. Rio Tuba Nickel Mining Corp., G.R. Nos. 83583-84, 25
March 1992, 207 SCRA 549; La Carlota Sugar Central v. Jimenez, 112 Phil. 232 (1961).
11 Namuhe v. Ombudsman, 358 Phil. 782 (1998), citing Section 1, Rule 9, 1997 Rules of Civil Procedure
(formerly Section 2, Rule 9); Fabian v. Desierto, 356 Phil. 787 (1998).
12 G.R. Nos. 187485, 196113, 197156, 12 February 2013.
13 CTA rollo, pp. 28-29, Annex H.
14 Id. at 31-32, Annex I.
15 Id. at 1-7, Petition for Review.
16 Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, 6 October
2010, 632 SCRA 422.
17 Supra note 11.
18 Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 168498, 24 April
2007, 522 SCRA 144, 150.
19 An Act Creating the Court of Tax Appeals.
20 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating Its Rank to the Level of a
Collegiate Court with Special Jurisdiction and Enlarging Its Membership, Amending for the Purpose Certain
Sections or Republic Act No. 1125, as amended, otherwise known as The Law Creating the Court of Tax
Appeals, and for other purposes.
21 Supra note 11.
22 ld.
PEOPLE OF THE PHILIPPINES, Appellee, versus BETH TEMPORADA, Appellant.
2008-12-17 | G.R. No. 173473
DECISION
YNARES-SANTIAGO, J.:
Before us for review is the February 24, 2006 Decision[1] of the Court of Appeals (CA), affirming with
modification the May 14, 2004 Decision[2] of the Regional Trial Court (RTC) of Manila, Branch 33,
convicting accused-appellant Beth Temporada of the crime of large scale illegal recruitment, or violation
of Article 38 of the Labor Code, as amended, and five (5) counts of estafa under Article 315, par. (2)(a)
of the Revised Penal Code (RPC).
The antecedents, as found by the appellate court, are as follows:
From September 2001 to January 2002, accused Rosemarie "Baby" Robles, Bernadette Miranda, Nenita
Catacotan and Jojo Resco and appellant Beth Temporada, all employees of the Alternative Travel and
Tours Corporation (ATTC), recruited and promised overseas employment, for a fee, to complainants
Rogelio Legaspi, Jr. as technician in Singapore, and Soledad Atle, Luz Minkay, Evelyn Estacio and
Dennis Dimaano as factory workers in Hongkong. The accused and appellant were then holding office at
Dela Rosa Street, Makati City but eventually transferred business to Discovery Plaza, Ermita, Manila.
After complainants had submitted all the requirements consisting of their respective application forms,
passports, NBI clearances and medical certificates, the accused and appellant, on different dates,
collected and received from them placement fees in various amounts, viz: a) from Rogelio Legaspi, Jr. -
57,600.00; b) from Dennis Dimaano - P66,520.00; c) from Evelyn Estacio - P88,520.00; d) from Soledad
Atle - P69,520.00 and e) from Luz Minkay - P69,520.00. As none of them was able to leave nor recover
the amounts they had paid, complainant lodged separate criminal complaints against accused and
appellant before the City Prosecutor of Manila. On November 29, 2002, Assistant City Prosecutor
Restituto Mangalindan, Jr. filed six (6) Informations against the accused and appellant, one for Illegal
Recruitment in Large Scale under Article 38 (a) of the Labor Code as amended, and the rest for five (5)
counts of estafa under Article 315 paragraph 2 (a) of the Revised Penal Code.
The Information for large scale illegal recruitment reads:
Criminal Case No. 02-208371:
"The undersigned accuses ROSEMARIE "BABY" ROBLES, BERNADETTE M. MIRANDA, BETH
TEMPORADA, NENITA CATACOTAN and JOJO RESCO x x x.
That in or about and during the period comprised between the months of September 2001 and
January 2002, inclusive, in the City of Manila, Philippines, the said accused, representing
themselves to have the power and capacity to contract, enlist and transport Filipino workers for
employment abroad, did then and there willfully, unlawfully for a fee, recruit and promise
employment to REGELIO A. LEGASPI, JR., DENNIS T. DIMAANO, EVELEYN V. ESTACIO,
SOLEDAD B. ATTE and LUZ MINKAY without first having secured the required license from the
Department of Labor and Employment as required by law, and charge or accept directly or
indirectly from said complainant[s] the amount of PH57,600.00, PH66,520.00, PH88,520.00,
PH69,520.00, PH69,520.00, respectively, as placement fees in consideration for their overseas
employment, which amounts are in excess of or greater than that specified in the scheduled of
allowable fees prescribed of the POEA and without reasons and without fault of the said
complainants, failed to actually deploy them and failed to reimburse them the expenses they
incurred in connection with the documentation and processing of their papers for purposes of their
deployment.
Contrary to law."
Except for the name of private complainant and the amount involved, the five (5) Informations for estafa
contain substantially identical averments as follows:
Criminal Case No. 02-208372:
"The undersigned accuses ROSEMARIE "BABY" ROBLES, BERNADETTE M. MIRANDA, BETH
TEMPORADA, NENITA CATACOTAN and JOJO RESCO x x x.
That in or about and during the period comprised between November 23, 2001 and January 12,
2002, inclusive, in the City of Manila, Philippines, the said accused, conspiring and confederating
together and helping one another, did then and there willfully, unlawfully and feloniously defraud
ROGELIO A. LEGASPI, JR., in the following manner, to wit: the said accused, by means of false
manifestations and fraudulent representations which they made to said ROGELIO A. LEGASPI,
JR., prior to and even simultaneous with the commission of the fraud, to the effect that they have
the power and capacity to recruit and employ ROGELIO A. LEGASPI, JR., as technician in
Singapore and could facilitate the processing of the pertinent papers if given the necessary
amount to meet the requirements thereof, induced and succeeded in inducing said ROGELIO A.
LEGASPI, JR., to give and deliver, as in fact he gave and delivered to said accused the amount of
P57,600.00 on the strength of said manifestations and representations said accused well knowing
that the same were false and fraudulent and were made solely for the purpose of obtaining, as in
fact they did obtain the amount of P57,600.00, which amount, once in their possession, with intend
to defraud, they willfully, unlawfully and feloniously misappropriated, misapplied and converted the
same to their own personal use and benefit, to the damage and prejudice of said ROGELIO A.
LEGASPI, JR. in the aforesaid amount of P57,000.00 Philippine Currency.
Contrary to law."
The other four (4) Informations for estafa involve the following complainants and amounts:
1. DENNIS T. DIMAANO P66,520.00
2. EVELYN V. ESTACIO P88,520.00
3. SOLEDAD B. ATLE P69,520.00
4. LUZ T. MINKAY P69,520.00[3]
Only appellant was apprehended and brought to trial, the other accused remained at large. Upon
arraignment, appellant pleaded not guilty and trial on the merits ensued. After joint trial, on May 14, 2004,
the RTC rendered judgment convicting appellant of all the charges:
WHEREFORE, the prosecution having established the GUILT of accused Beth Temporada
BEYOND REASONABLE DOUBT, judgment is hereby rendered CONVICTING the said accused,
as principal of the offenses charged and she is sentenced to suffer the penalty of LIFE
IMPRISONMENT and a fine of Five Hundred Thousand Pesos (P500,000.00) for illegal
recruitment; and the indeterminate penalty of four (4) years and two (2) months of prision
correctional as minimum, to nine (9) years and one (1) day of prision mayor, as maximum for the
estafa committed against complainant Rogelio A. Legaspi, Jr.; the indeterminate penalty of four (4)
years and two (2) months of prision correctional as minimum to ten (10) years and one day of
prision mayor as maximum each for the estafas committed against complainants, Dennis Dimaano,
Soledad B. Atte and Luz T. Minkay; and the indeterminate penalty of four (4) years and two (2)
months of prision correctional as minimum, to eleven (11) years and one (1) day of prision mayor
as maximum for the estafa committed against Evelyn Estacio.
The accused is also ordered to pay jointly and severally the complainants actual damages as
follows:
1. Rogelio A. Legaspi Jr. P57,600.00
2. Dennis T. Dimaano 66,520.00
3. Evelyn V. Estacio 88,520.00
4. Soledad B. Atte 66,520.00
5. Luz T. Minkay 69,520.00
SO ORDERED.[4]
In accordance with the Court's ruling in People v. Mateo,[5] this case was referred to the CA for
intermediate review. On February 24, 2006, the CA affirmed with modification the Decision of the RTC:
WHEREFORE, with MODIFICATION to the effect that in Criminal Cases Nos. 02-208373,
02-208375, & 02-208376, appellant is sentenced to suffer the indeterminate penalty of six (6)
years of prision correccional maximum, as minimum, to ten (10) years and one (1) day of prision
mayor maximum, as maximum; and in Criminal Case No. 02-208374, she is sentenced to suffer
the indeterminate penalty of eight (8) years and one (1) day of prision mayor medium, as minimum,
to twelve (12) years and one (1) day of reclusion temporal minimum, as maximum, the appealed
decision is AFFIRMED in all other respects.[6]
Before this Court, appellant ascribes the lone error that the trial court gravely erred in finding her guilty of
illegal recruitment and five (5) counts of estafa despite the insufficiency of the evidence for the
prosecution.
We affirm the Decision of the CA, except as to the indeterminate penalties imposed for the five (5)
counts of estafa.
Article 13(b) of the Labor Code defines recruitment and placement thusly:
ART. 13. Definitions. - x x x
(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring workers, and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not: Provided, That
any person or entity which, in any manner, offers or promises for a fee, employment to two or
more persons shall be deemed engaged in recruitment and placement.
To constitute illegal recruitment in large scale, three (3) elements must concur: (a) the offender has no
valid license or authority required by law to enable him to lawfully engage in recruitment and placement
of workers; (b) the offender undertakes any of the activities within the meaning of "recruitment and
placement" under Article 13(b) of the Labor Code, or any of the prohibited practices enumerated under
Article 34 of the said Code (now Section 6 of R.A. No. 8042); and, (c) the offender committed the same
against three (3) or more persons, individually or as a group.[7]
In the case at bar, the foregoing elements are present. Appellant, in conspiracy with her co-accused,
misrepresented to have the power, influence, authority and business to obtain overseas employment
upon payment of a placement fee which was duly collected from complainants Rogelio Legaspi, Dennis
Dimaano, Evelyn Estacio, Soledad Atle and Luz Minkay. Further, the certification[8] issued by the
Philippine Overseas Employment Administration (POEA) and the testimony of Ann Abastra Abas, a
representative of said government agency, established that appellant and her co-accused did not
possess any authority or license to recruit workers for overseas employment. And, since there were five
(5) victims, the trial court correctly found appellant liable for illegal recruitment in large scale.
Appellant insists that she was merely an employee of ATTC and was just "echoing the requirement of
her employer." She further argues that the prosecution failed to prove that she was aware of the latter's
illegal activities and that she actively participated therein. In essence, she controverts the factual findings
of the lower courts.
The contention is untenable.
An employee of a company or corporation engaged in illegal recruitment may be held liable as principal,
together with his employer, if it is shown that he actively and consciously participated in illegal
recruitment.[9] Appellant actively took part in the illegal recruitment of private complainants. Rogelio
Legaspi testified that after introducing herself as the General Manager of ATTC, appellant persuaded
him to apply as a technician in Singapore and assured him that there was a job market therefor. In
addition to the placement fee of P35,000.00 which he paid to accused Bernadette Miranda, he also
handed the amount of P10,000.00 to appellant who, in turn, issued him a receipt for the total amount of
P45,000.00. Upon the other hand, Soledad Atle and Luz Minkay, who applied as factory workers in
Hongkong through co-accused, Emily Salagonos, declared that it was appellant who briefed them on the
requirements for the processing of their application, and assured them and Dennis Dimaano of
immediate deployment for jobs abroad. For her part, Evelyn Estacio testified that aside from the
placement fee of P40,000.00 that she paid to co-accused "Baby" Robles in connection with her
purported overseas employment, she also gave appellant P10,000.00 for which she was issued a receipt
for the amount of P5,000.00.
The totality of the evidence, thus, established that appellant acted as an indispensable participant and
effective collaborator of her co-accused in the illegal recruitment of complainants. As aptly found by the
CA:
Without doubt, all the acts of appellant, consisting of introducing herself to complainants as
general manager of ATTC, interviewing and entertaining them, briefing them on the requirements
for deployment and assuring them that they could leave immediately if they paid the required
amounts, unerringly show unity of purpose with those of her co-accused in their scheme to defraud
private complainants through false promises of jobs abroad. There being conspiracy, appellant
shall be equally liable for the acts of her co-accused even if she herself did not personally reap the
fruits of their execution. We quote with approval the trial court's findings on the matter:
"xxx It is clear that said accused conspired with her co-accused Rosemarie "Baby" Robles,
Bernadette M. Miranda, Nenita Catacotan, and Jojo Resco in convincing complainants xxx to
apply for overseas jobs and giving complainants Soledad Atle, Luz Minkay and Dennis Dimaano
guarantee that they would be hired as factory workers in Hongkong, complainant Rogelio Legaspi,
as Technician in Singapore and Evelyn Estacio as quality controller in a factory in Hongkong,
despite the fact that the accused was not licensed to do so.
It should be noted that all the accused were connected with the Alternative Travel and Tours
Corporation (ATTC). Accused Beth Temporada introduced herself as ATTC's General Manager.
Saod accused was also the one who received the P10,000.00 given by complainant Rogelio
Legaspi, Jr. and the P10,000.00 given by complainant Evelyn Estacio as payment for their visa
and plane ticket, respectively."[10]
Consequently, the defense of appellant that she was not aware of the illegal nature of the activities of her
co-accused cannot be sustained. Besides, even assuming arguendo that appellant was indeed unaware
of the illegal nature of said activities, the same is hardly a defense in the prosecution for illegal
recruitment. Under The Migrant Workers and Overseas Filipinos Act of 1995, a special law, the crime of
illegal recruitment in large scale is malum prohibitum and not malum in se.[11] Thus, the criminal intent
of the accused is not necessary and the fact alone that the accused violated the law warrants her
conviction.[12]
In the instant case, we find no reason to depart from the rule that findings of fact of the trial court on the
credibility of witnesses and their testimonies are generally accorded great respect by an appellate court.
The assessment of credibility of witnesses is a matter best left to the trial court because it is in the
position to observe that elusive and incommunicable evidence of the witnesses' deportment on the stand
while testifying, which opportunity is denied to the appellate courts.[13] Further, there is no showing of
any ill-motive on the part of the prosecution witnesses in testifying against appellant. Absent such
improper motive, the presumption is that they were not so actuated and their testimony is entitled to full
weight and credit.
Section 7(b) of R.A. No. 8042 prescribes the penalty of life imprisonment and a fine of not less than
P500,000.00 nor more than P1,000,000.00 for the crime of illegal recruitment in large scale or by a
syndicate. The trial court, therefore, properly meted the penalty of life imprisonment and a fine of
P500,000.00 on the appellant.
Anent the conviction of appellant for five (5) counts of estafa, we, likewise, affirm the same. Well-settled
is the rule that a person convicted for illegal recruitment under the Labor Code may, for the same acts,
be separately convicted for estafa under Article 315, par. 2(a) of the RPC.[14] The elements of estafa
are: (1) the accused defrauded another by abuse of confidence or by means of deceit; and (2) the
offended party or a third party suffered damage or prejudice capable of pecuniary estimation.[15] The
same evidence proving appellant's criminal liability for illegal recruitment also established her liability for
estafa. As previously discussed, appellant together with her co-accused defrauded complainants into
believing that they had the authority and capability to send complainants for overseas employment.
Because of these assurances, complainants parted with their hard-earned money in exchange for the
promise of future work abroad. However, the promised overseas employment never materialized and
neither were the complainants able to recover their money.
While we affirm the conviction for the five (5) counts of estafa, we find, however, that the CA erroneously
computed the indeterminate penalties therefor. The CA deviated from the doctrine laid down in People v.
Gabres;[16] hence its decision should be reversed with respect to the indeterminate penalties it imposed.
The reversal of the appellate court's Decision on this point does not, however, wholly reinstate the
indeterminate penalties imposed by the trial court because the maximum terms, as determined by the
latter, were erroneously computed and must necessarily be rectified.
The prescribed penalty for estafa under Article 315, par. 2(d) of the RPC, when the amount defrauded
exceeds P22,000.00, is prision correccional maximum to prision mayor minimum. The minimum term is
taken from the penalty next lower or anywhere within prision correccional minimum and medium (i.e.,
from 6 months and 1 day to 4 years and 2 months). Consequently, the RTC correctly fixed the minimum
term for the five estafa cases at 4 years and 2 months of prision correccional since this is within the
range of prision correccional minimum and medium.
On the other hand, the maximum term is taken from the prescribed penalty of prision correccional
maximum to prision mayor minimum in its maximum period, adding 1 year of imprisonment for every
P10,000.00 in excess of P22,000.00, provided that the total penalty shall not exceed 20 years. However,
the maximum period of the prescribed penalty of prision correccional maximum to prision mayor
minimum is not prision mayor minimum as apparently assumed by the RTC. To compute the maximum
period of the prescribed penalty, prision correccional maximum to prision mayor minimum should be
divided into three equal portions of time each of which portion shall be deemed to form one period in
accordance with Article 65[17] of the RPC. Following this procedure, the maximum period of prision
correccional maximum to prision mayor minimum is from 6 years, 8 months and 21 days to 8 years.[18]
The incremental penalty, when proper, shall thus be added to anywhere from 6 years, 8 months and 21
days to 8 years, at the discretion
of the court.[19]
In computing the incremental penalty, the amount defrauded shall be subtracted by P22,000.00, and the
difference shall be divided by P10,000.00. Any fraction of a year shall be discarded as was done starting
with the case of People v. Pabalan[20] in consonance with the settled rule that penal laws shall be
construed liberally in favor of the accused. The doctrine enunciated in People v. Benemerito[21] insofar
as the fraction of a year was utilized in computing the total incremental penalty should, thus, be modified.
In accordance with the above procedure, the maximum term of the indeterminate sentences imposed by
the RTC should be as follows:
In Criminal Case No. 02-208372, where the amount defrauded was P57,600.00, the RTC sentenced the
accused to an indeterminate penalty of 4 years and 2 months of prision correccional as minimum, to 9
years and 1 day of prision mayor as maximum. Since the amount defrauded exceeds P22,000.00 by
P35,600.00, 3 years shall be added to the maximum period of the prescribed penalty (or added to
anywhere from 6 years, 8 months and 21 days to 8 years, at the discretion of the court). The lowest
maximum term, therefore, that can be validly imposed is 9 years, 8 months and 21 days of prision mayor,
and not 9 years and 1 day of prision mayor.
In Criminal Case Nos. 02-208373, 02-208375, and 02-208376, where the amounts defrauded were
P66,520.00, P69,520.00, and P69,520.00, respectively, the accused was sentenced to an indeterminate
penalty of 4 years and 2 months of prision correccional as minimum, to 10 years and 1 day of prision
mayor as maximum for each of the aforesaid three estafa cases. Since the amounts defrauded exceed
P22,000.00 by P44,520.00, P47,520.00, and P47,520.00, respectively, 4 years shall be added to the
maximum period of the prescribed penalty (or added to anywhere from 6 years, 8 months and 21 days to
8 years, at the discretion of the court). The lowest maximum term, therefore, that can be validly imposed
is 10 years, 8 months and 21 days of prision mayor, and not 10 years and 1 day of prision mayor.
Finally, in Criminal Case No. 02-208374, where the amount defrauded was P88,520.00, the accused
was sentenced to an indeterminate penalty of 4 years and 2 months of prision correccional as minimum,
to 11 years and 1 day of prision mayor as maximum. Since the amount defrauded exceeds P22,000.00
by P66,520.00, 6 years shall be added to the maximum period of the prescribed penalty (or added to
anywhere from 6 years, 8 months and 21 days to 8 years, at the discretion of the court). The lowest
maximum term, therefore, that can be validly imposed is 12 years, 8 months and 21 days of reclusion
temporal, and not 11 years and 1 day of prision mayor.
Response to the dissent.
In the computation of the indeterminate sentence for estafa under Article 315, par. 2(a) of the Revised
Penal Code (RPC), the Court has consistently followed the doctrine espoused in Pabalan and more fully
explained in Gabres. The dissent argues that Gabres should be reexamined and abandoned.
We sustain Gabres.
I. The formula proposed in the Dissenting Opinion of Mr. Justice Ruben T. Reyes, i.e., the maximum
term shall first be computed by applying the incremental penalty rule, and thereafter the minimum term
shall be determined by descending one degree down the scale of penalties from the maximum term, is a
novel but erroneous interpretation of the ISL in relation to Article 315, par. 2(a) of the RPC. Under this
interpretation, it is not clear how the maximum and minimum terms shall be computed. Moreover, the
legal justification therefor is not clear because the meaning of the terms "penalty," "prescribed penalty,"
"penalty actually imposed," "minimum term," "maximum term," "penalty next lower in degree," and "one
degree down the scale of penalties" are not properly set out and are, at times, used interchangeably,
loosely and erroneously.
For purposes of this discussion, it is necessary to first clarify the meaning of certain terms in the sense
that they will be used from here on. Later, these terms shall be aligned to what the dissent appears to be
proposing in order to clearly address the points raised by the dissent.
The RPC provides for an initial penalty as a general prescription for the felonies defined therein which
consists of a range of period of time. This is what is referred to as the "prescribed penalty." For instance,
under Article 249[22] of the RPC, the prescribed penalty for homicide is reclusion temporal which ranges
from 12 years and 1 day to 20 years of imprisonment. Further, the Code provides for attending or
modifying circumstances which when present in the commission of a felony affects the computation of
the penalty to be imposed on a convict. This penalty, as thus modified, is referred to as the "imposable
penalty." In the case of homicide which is committed with one ordinary aggravating circumstance and no
mitigating circumstances, the imposable penalty under the RPC shall be the prescribed penalty in its
maximum period. From this imposable penalty, the court chooses a single fixed penalty (also called a
straight penalty) which is the "penalty actually imposed" on a convict, i.e., the prison term he has to
serve.
Concretely, in U.S. v. Saadlucap,[23] a pre-ISL case, the accused was found guilty of homicide with a
prescribed penalty of reclusion temporal. Since there was one ordinary aggravating circumstance and no
mitigating circumstances in this case, the imposable penalty is reclusion temporal in its maximum period,
i.e., from 17 years, 4 months and 1 day to 20 years. The court then had the discretion to impose any
prison term provided it is within said period, so that the penalty actually imposed on the accused was set
at 17 years, 4 months and 1 day of reclusion temporal,[24] which is a single fixed penalty, with no
minimum or maximum term.
With the passage of the ISL, the law created a prison term which consists of a minimum and maximum
term called the indeterminate sentence.[25] Section 1 of the ISL provides -
SECTION 1. Hereafter, in imposing a prison sentence for an offense punished by the Revised
Penal Code, or its amendments, the court shall sentence the accused to an indeterminate
sentence the maximum term of which shall be that which, in view of the attending circumstances,
could be properly imposed under the rules of said Code, and the minimum which shall be within
the range of the penalty next lower to that prescribed by the Code for the offense; x x x.
Thus, the maximum term is that which, in view of the attending circumstances, could be properly
imposed under the RPC. In other words, the penalty actually imposed under the pre-ISL regime became
the maximum term under the ISL regime. Upon the other hand, the minimum term shall be within the
range of the penalty next lower to the prescribed penalty. To illustrate, if the case of Saadlucap was
decided under the ISL regime, then the maximum term would be 17 years, 4 months and 1 day of
reclusion temporal and the minimum term could be anywhere within the range of prision mayor (6 years
and 1 day to 12 years) which is the penalty next lower to reclusion temporal. Consequently, an
indeterminate sentence of 10 years of prision mayor as minimum to 17 years, 4 months and 1 day of
reclusion temporal as maximum could have possibly been imposed.
If we use the formula as proposed by the dissent, i.e., to compute the minimum term based on the
maximum term after the attending or modifying circumstances are considered, the basis for computing
the minimum term, under this interpretation, is the imposable penalty[26] as hereinabove defined. This
interpretation is at odds with Section 1 of the ISL which clearly states that the minimum of the
indeterminate sentence shall be "within the range of the penalty next lower to that prescribed by the
Code for the offense." Consequently, the basis for fixing the minimum term is the prescribed penalty,[27]
and not the imposable penalty.
In People v. Gonzales,[28] the Court held that the minimum term must be based on the penalty
prescribed by the Code for the offense "without regard to circumstances modifying criminal liability."[29]
The Gonzales' ruling that the minimum term must be based on the prescribed penalty "without regard to
circumstances modifying criminal liability" is only a restatement of Section 1 of the ISL that the minimum
term shall be taken from within the range of the penalty next lower to the prescribed penalty (and from
nowhere else).[30]
Further, the dissent proceeds from the erroneous premise that its so-called "regular formula" has
generally been followed in applying the ISL. To reiterate, according to the dissent, the "regular formula"
is accomplished by first determining the maximum term after considering all the attending circumstances;
thereafter, the minimum term is arrived at by going one degree down the scale from the maximum term.
As previously discussed, this essentially means, using the terms as earlier defined, that the minimum
term shall be taken from the penalty next lower to the imposable penalty (and not the prescribed
penalty.) In more concrete terms and using the previous example of homicide with one ordinary
aggravating circumstance, this would mean that the minimum term for homicide will no longer be based
on reclusion temporal (i.e., the prescribed penalty for homicide) but reclusion temporal in its maximum
period (i.e., the imposable penalty for homicide with one ordinary aggravating circumstance) so much so
that the minimum term shall be taken from reclusion temporal in its medium period (and no longer from
prision mayor) because this is the penalty next lower to reclusion temporal in its maximum period. The
penalty from which the minimum term is taken is, thus, significantly increased. From this example, it is
not difficult to discern why this interpretation radically departs from how the ISL has generally been
applied by this Court. The dissent's "regular formula" is, therefore, anything but regular.
In fine, the "regular formula" espoused by the dissent deviates from the ISL and established
jurisprudence and is, thus, tantamount to judicial legislation.
II. There is no absurdity or injustice in fixing or "stagnating" the minimum term within the range of prision
correccional minimum and medium (i.e., from 6 months and 1 day to 4 years and 2 months).
Preliminarily, it must be emphasized that the minimum term taken from the aforementioned range of
penalty need not be the same for every case of estafa when the amount defrauded exceeds P12,000.00.
In People v. Ducosin,[31] the Court provided some guidelines in imposing the minimum term from the
range of the penalty next lower to the prescribed penalty:
We come now to determine the "minimum imprisonment period" referred to in Act No. 4103.
Section 1 of said Act provides that this "minimum which shall not be less than the minimum
imprisonment period of the penalty next lower to that prescribed by said Code for the offense."[32]
We are here upon new ground. It is in determining the "minimum" penalty that Act No. 4103
confers upon the courts in the fixing of penalties the widest discretion that the courts have ever
had. The determination of the "minimum" penalty presents two aspects: first, the more or less
mechanical determination of the extreme limits of the minimum imprisonment period; and second,
the broad question of the factors and circumstances that should guide the discretion of the court in
fixing the minimum penalty within the ascertained limits.
x x x x
We come now to the second aspect of the determination of the minimum penalty, namely, the
considerations which should guide the court in fixing the term or duration of the minimum period of
imprisonment. Keeping in mind the basic purpose of the Indeterminate Sentence Law "to uplift and
redeem valuable human material, and prevent unnecessary and excessive deprivation of personal
liberty and economic usefulness" (Message of the Governor-General, Official Gazette No. 92, vol.
XXXI, August 3, 1933), it is necessary to consider the criminal, first, as an individual and, second,
as a member of society. This opens up an almost limitless field of investigation and study which it
is the duty of the court to explore in each case as far as is humanly possible, with the end in view
that penalties shall not be standardized but fitted as far as is possible to the individual, with due
regard to the imperative necessity of protecting the social order.
Considering the criminal as an individual, some of the factors that should be considered are: (1)
His age, especially with reference to extreme youth or old age; (2) his general health and physical
condition; (3) his mentality, heredity and personal habits; (4) his previous conduct, environment
and mode of life (and criminal record if any); (5) his previous education, both intellectual and moral;
(6) his proclivities and aptitudes for usefulness or injury to society; (7) his demeanor during trial
and his attitude with regard to the crime committed; (8) the manner and circumstances in which
the crime was committed; (9) the gravity of the offense (note that section 2 of Act No. 4103
excepts certain grave crimes - this should be kept in mind in assessing the minimum penalties for
analogous crimes).
In considering the criminal as a member of society, his relationship, first, toward his dependents,
family and associates and their relationship with him, and second, his relationship towards society
at large and the State are important factors. The State is concerned not only in the imperative
necessity of protecting the social organization against the criminal acts of destructive individuals
but also in redeeming the individual for economic usefulness and other social ends. In a word, the
Indeterminate Sentence Law aims to individualize the administration of our criminal law to a
degree not heretofore known in these Islands. With the foregoing principles in mind as guides, the
courts can give full effect to the beneficent intention of the Legislature.[33]
Admittedly, it is possible that the court, upon application of the guidelines in Ducosin, will impose the
same minimum term to one who commits an estafa involving P13,000.00 and another involving P130
million. In fact, to a lesser degree, this is what happened in the instant case where the trial court
sentenced the accused to the same minimum term of 4 years and 2 months of prision correccional in
Criminal Case Nos. 02-208372, 02-208373, 02-208375, 02-208376, and 02-208374 where the amounts
defrauded were P57,600.00, P66,520.00, P69,520.00, P69,520.00 and P88,520.00, respectively.
However, there is no absurdity and injustice for two reasons.
One, while it is possible that the minimum term imposed by a court would be the same, the maximum
term would be greater for the convict who committed estafa involving P130 million (which would be 20
years of reclusion temporal) than the convict who swindled P13,000.00 (which could be anywhere from
prision correccional maximum to prision mayor minimum or from 4 years, 2 months and 1 day to 8
years).[34] Assuming that both convicts qualify for parole after serving the same minimum term, the
convict sentenced to a higher maximum term would carry a greater "burden" with respect to the length of
parole surveillance which he may be placed under, and the prison term to be served in case he violates
his parole as provided for in Sections 6[35] and 8[36] of the ISL. Under Section 6, the convict shall be
placed under a period of surveillance equivalent to the remaining portion of the maximum sentence
imposed upon him or until final release and discharge by the Board of Pardon and Paroles. Further, the
convict with the higher maximum term would have to serve a longer period upon his re-commitment in
prison in case he violates his parole because he would have to serve the remaining portion of the
maximum term, unless the Board of Pardon and Paroles shall, in its discretion, grant a new parole to the
said convict as provided for in Section 8.
Although the differences in treatment are in the nature of potential liabilities, to this limited extent, the ISL
still preserves the greater degree of punishment in the RPC for a convict who commits estafa involving a
greater amount as compared to one who commits estafa involving a lesser amount. Whether these
differences in treatment are sufficient in substance and gravity involves a question of wisdom and
expediency of the ISL that this Court cannot delve into.
Two, the rule which provides that the minimum term is taken from the range of the penalty next lower to
the prescribed penalty is, likewise, applicable to other offenses punishable under the RPC. For instance,
the minimum term for an accused guilty of homicide with one generic mitigating circumstance vis-a-vis
an accused guilty of homicide with three ordinary aggravating circumstances would both be taken from
prision mayor - the penalty next lower to eclusion temporal. Evidently, the convict guilty of homicide with
three ordinary aggravating circumstances committed a more perverse form of the felony. Yet it is
possible that the court, after applying the guidelines in Ducosin, will impose upon the latter the same
minimum term as the accused guilty of homicide with one generic mitigating circumstance. This
reasoning can be applied mutatis mutandis to most of the other offenses punishable under the RPC.
Should we then conclude that the ISL creates absurd results for these offenses as well?
In fine, what is perceived as absurd and unjust is actually the intent of the legislature to be beneficial to
the convict in order to "uplift and redeem valuable human material, and prevent unnecessary and
excessive deprivation of personal liberty and economic usefulness."[37] By the legislature's deliberate
design, the range of penalty from which the minimum term is taken remains fixed and only the range of
penalty from which the maximum term is taken changes depending on the number and nature of the
attending circumstances. Again, the reason why the legislature elected this mode of beneficence to a
convict revolves on questions of wisdom and expediency which this Court has no power to review. The
balancing of the State's interests in deterrence and retributive justice vis-a -vis reformation and
reintegration of convicts to society through penal laws belongs to the exclusive domain of the legislature.
III. People v. Romero,[38] De Carlos v. Court of Appeals,[39] Salazar v. People,[40] People v.
Dinglasan[41] and, by analogy, People v. Dela Cruz[42] do not support the formula being proposed by
the dissent.
The instant case involves a violation of Article 315, par. 2(a) of the RPC.[43] The penalty for said
violation is-
ARTICLE 315. Swindling (Estafa). - Any person who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum
period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos, and if
such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its
maximum period, adding one year for each additional 10,000 pesos; but the total penalty which
may be imposed shall not exceed twenty years. In such cases, and in connection with the
accessory penalties which may be imposed and for the purpose of the other provisions of this
Code, the penalty shall be termed prision mayor or reclusion temporal, as the case may be. x x x
In contrast, Romero, De Carlos, and Salazar involved violations of Article 315 of the RPC as amended
by Presidential Decree (P.D.) No. 1689[44] because: (1) the funds defrauded were contributed by
stockholders or solicited by corporations/associations from the general public, (2) the amount defrauded
was greater than P100,000.00, and (3) the estafa was not committed by a syndicate. Section 1 of P.D.
No. 1689 provides-
Sec. 1. Any person or persons who shall commit estafa or other forms of swindling as defined in
Article 315 and 316 of the Revised Penal Code, as amended, shall be punished by life
imprisonment to death if the swindling (estafa) is committed by a syndicate consisting of five or
more persons formed with the intention of carrying out the unlawful or illegal act, transaction,
enterprise or scheme, and the defraudation results in the misappropriation of money contributed
by stockholders, or members of rural banks, cooperative, "samahang nayon(s)", or farmers
association, or of funds solicited by corporations/associations from the general public.
When not committed by a syndicate as above defined, the penalty imposable shall be reclusion
temporal to reclusion perpetua if the amount of the fraud exceeds 100,000 pesos. (Emphasis
supplied)
Since the prescribed penalty is reclusion temporal to reclusion perpetua, the minimum terms were taken
from prision mayor, which is the penalty next lower to the prescribed penalty.[45] As can be seen, these
cases involved a different penalty structure that does not make use of the incremental penalty rule due to
the amendatory law. Thus, the comparison of these cases with Gabres is improper.
Meanwhile, in Dinglasan, the felony committed was estafa through bouncing checks which is punishable
under Article 315 par. 2(d) of the RPC as amended by Republic Act (RA) No. 4885[46]-
Sec. 1. Section Two, Paragraph (d), Article Three hundred fifteen of Act Numbered Thirty-eight
hundred and fifteen is hereby amended to read as follows:
"Sec. 2. By means of any of the following false pretenses or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:
"(d) By postdating a check, or issuing a check in payment of an obligation when the offender had
no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the
check. The failure of the drawer of the check to deposit the amount necessary to cover his check
within three (3) days from receipt of notice from the bank and/or the payee or holder that said
check has been dishonored for lack or insufficiency of funds shall be prima facie evidence of
deceit constituting false pretense or fraudulent act."
and P.D. No. 818[47]-
Sec. 1. Any person who shall defraud another by means of false pretenses or fraudulent acts as
defined in paragraph 2(d) of Article 315 of the Revised Penal Code, as amended by Republic Act
No. 4885, shall be punished by:
1st. The penalty of reclusion temporal if the amount of the fraud is over 12,000 pesos but not
exceed 22,000 pesos, and if such amount exceeds the latter sum, the penalty provided in this
paragraph shall be imposed in its maximum period, adding one year for each additional 10,000
pesos but the total penalty which may be imposed shall in no case exceed thirty years. In such
cases, and in connection with the accessory penalties which may be imposed under the Revised
Penal Code, the penalty shall be termed reclusion perpetua; x x x (Emphasis supplied)
Here, the prescribed penalty of prision correccional maximum to prision mayor minimum was increased
to reclusion temporal by the amendatory law. Consequently, the penalty next lower to reclusio temporal
is prision mayor from which the minimum term was taken. This is the reason for the higher minimum
term in this case as compared to Gabres. In fact, Dinglasan is consistent with Gabres-
Since the face value of Check No. 029021, for which appellant is criminally liable for estafa,
exceeds P22,000, the penalty abovecited must be "imposed in its maximum period, adding 1 year
for each additional P10,000." Pursuant to People vs. Hernando, G.R. No. 125214, Oct. 28, 1999,
an indeterminate sentence shall be imposed on the accused, computed favorably to him. In this
case, the indeterminate sentence should be computed based on the maximum period of reclusion
temporal as maximum, which is from 17 years, 4 months, and 1 day to 20 years. The minimum
period of the sentence should be within the penalty next lower in degree as provided in the
Revised Penal Code, i.e., prision mayor, which is from 6 years and 1 day to 12 years
imprisonment. Considering that the excess of the fraud committed, counting from the base of
P22,000, is only P4,400, which is less than the P10,000 stated in P.D. 818, there is no need to add
one year to the maximum penalty abovecited.[48] (Emphasis supplied)
As in Gabres, the penalty next lower (i.e., prision mayor) was determined without considering in the
meantime the effect of the amount defrauded in excess of P22,000.00 on the prescribed penalty (i.e.,
reclusio temporal).
Finally, Dela Cruz involved a case for qualified theft. The prescribed penalty for qualified theft is two
degrees higher than simple theft. Incidentally, the penalty structure for simple theft[49] and estafa is
similar in that both felonies (1) requires that the prescribed penalty be imposed in its maximum period
when the value of the thing stolen or the amount defrauded, as the case may be, exceeds P22,000.00,
and (2) provides for an incremental penalty of 1 year imprisonment for every P10,000.00 in excess of
P22,000.00. It should be pointed out, however, that the prescribed penalty for simple theft is prision
mayor minimum and medium while in estafa it is lower at prision correccional maximum to prision mayor
minimum.
Being two degrees higher, the prescribed penalty for qualified theft is, thus, reclusion temporal medium
and maximum, while the minimum term is taken from the range of prision mayor maximum to reclusion
temporal minimum, which is the penalty next lower to reclusion temporal medium and maximum. The
penalty next lower to the prescribed penalty is determined without first considering the amount stolen in
excess of P22,000.00 consistent with Gabres. In fact, Dela Cruz expressly cites Gabres-
Applying the Indeterminate Sentence Law, the minimum of the indeterminate penalty shall be anywhere
within the range of the penalty next lower in degree to that prescribed for the offense, without first
considering any modifying circumstance attendant to the commission of the crime. Since the penalty
prescribed by law is reclusion temporal medium and maximum, the penalty next lower would be prision
mayor in its maximum period to reclusion temporal in its minimum period. Thus, the minimum of the
indeterminate sentence shall be anywhere within ten (10) years and one (1) day to fourteen (14) years
and eight (8) months.
The maximum of the indeterminate penalty is that which, taking into consideration the attending
circumstances, could be properly imposed under the Revised Penal Code. Since the amount involved in
the present case exceeds P22,000.00, this should be taken as analogous to modifying circumstances in
the imposition of the maximum term of the full indeterminate sentence, not in the initial determination of
the indeterminate penalty. (citing Gabres) Thus, the maximum term of the indeterminate penalty in this
case is the maximum period of reclusion temporal medium and maximum, which ranges from eighteen
(18) years, two (2) months, and twenty one (21) days to twenty (20) years, as computed pursuant to
Article 65, in relation to Article 64 of the Revised Penal Code.[50] (Emphasis supplied)
Clearly, none of these cases supports the Dissenting Opinion's thesis that the minimum term should be
computed based on the maximum term. Quite the contrary, Dinglasan and Dela Cruz are consistent with
Gabres.
IV. The argument that the incremental penalty rule should not be considered as analogous to a
modifying circumstance stems from the erroneous interpretation that the "attending circumstances"
mentioned in Section 1 of the ISL are limited to those modifying circumstances falling within the scope of
Articles 13 and 14 of the RPC. Section 1 of the ISL is again quoted below -
SECTION 1. Hereafter, in imposing a prison sentence for an offense punished by the Revised
Penal Code, or its amendments, the court shall sentence the accused to an indeterminate
sentence the maximum term of which shall be that which, in view of the attending circumstances,
could be properly imposed under the rules of said Code, and the minimum which shall be within
the range of the penalty next lower to that prescribed by the Code for the offense; x x x (Emphasis
supplied)
The plain terms of the ISL show that the legislature did not intend to limit "attending circumstances" as
referring to Articles 13 and 14 of the RPC. If the legislature intended that the "attending circumstances"
under the ISL be limited to Articles 13 and 14, then it could have simply so stated. The wording of the
law clearly permits other modifying circumstances outside of Articles 13 and 14 of the RPC to be treated
as "attending circumstances" for purposes of the application of the ISL, such as quasi-recidivism under
Article 160[51] of the RPC. Under this provision, "any person who shall commit a felony after having
been convicted by final judgment, before beginning to serve such sentence, or while serving the same,
shall be punished by the maximum period of the penalty prescribed by law for the new felony." This
circumstance has been interpreted by the Court as a special aggravating circumstance where the
penalty actually imposed is taken from the prescribed penalty in its maximum period without regard to
any generic mitigating circumstances.[52] Since quasi-recidivism is considered as merely a special
aggravating circumstance, the penalty next lower in degree is computed based on the prescribed penalty
without first considering said special aggravating circumstance as exemplified in People v. Manalo[53]
and People v. Balictar.[54]
The question whether the incremental penalty rule is covered within the letter and spirit of "attending
circumstances" under the ISL was answered in the affirmative by the Court in Gabres when it ruled
therein that the incremental penalty rule is analogous to a modifying circumstance.
Article 315 of the RPC pertinently provides -
ARTICLE 315. Swindling (Estafa). - Any person who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum
period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos, and if
such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its
maximum period, adding one year for each additional 10,000 pesos; but the total penalty which
may be imposed shall not exceed twenty years. In such cases, and in connection with the
accessory penalties which may be imposed and for the purpose of the other provisions of this
Code, the penalty shall be termed prision mayor or reclusion temporal, as the case may be. x x x
Under Gabres, prision correccional maximum to prision mayor minimum is the prescribed penalty[55] for
estafa when the amount defrauded exceeds P22,000.00. An amount defrauded in excess of P22,000.00
is effectively considered as a special aggravating circumstance in the sense that the penalty actually
imposed shall be taken from the prescribed penalty in its maximum period without regard to any generic
mitigating circumstances. Consequently, the penalty next lower in degree is still based on the prescribed
penalty without in the meantime considering the effect of the amount defrauded in excess of P22,000.00.
What is unique, however, with the afore-quoted provision is that when the amount defrauded is
P32,000.00 or more, the prescribed penalty is not only imposed in its maximum period but there is
imposed an incremental penalty of 1 year imprisonment for every P10,000.00 in excess of P22,000.00,
provided that the total penalty which may be imposed shall not exceed 20 years. This incremental
penalty rule is a special rule applicable to estafa and theft. In the case of estafa, the incremental penalty
is added to the maximum period of the prescribed penalty (or to anywhere from 6 years, 8 months and
21 days to 8 years) at the discretion of the court, in order to arrive at the penalty actually imposed (i.e.,
the maximum term, within the context of the ISL).
This unique characteristic of the incremental penalty rule does not pose any obstacle to interpreting it as
analogous to a modifying circumstance, and, hence, falling within the letter and spirit of "attending
circumstances" for purposes of the application of the ISL. Under the wording of the ISL, "attending
circumstances" may be reasonably interpreted as referring to such circumstances that are applied in
conjunction with certain rules in the Code in order to determine the penalty to be actually imposed based
on the prescribed penalty of the Code for the offense. The incremental penalty rule substantially meets
this standard. The circumstance is the amount defrauded in excess of P22,0000.00 and the incremental
penalty rule is utilized to fix the penalty actually imposed. At its core, the incremental penalty rule is
merely a mathematical formula for computing the penalty to be actually imposed using the prescribed
penalty as starting point. Thus, it serves the same function of determining the penalty
actually imposed as the modifying circumstances under Articles 13, 14, and 160 of the RPC, although
the manner by which the former accomplishes this function differs with the latter. For this reason, the
incremental penalty rule may be considered as merely analogous to modifying circumstances. Besides,
in case of doubt as to whether the incremental penalty rule falls within the scope of "attending
circumstances" under the ISL, the doubt should be resolved in favor of inclusion because this
interpretation is more favorable to the accused following the time-honored principle that penal statutes
are construed strictly against the State and liberally in favor of the accused.[56] Thus, even if the
Dissenting Opinion's interpretation is gratuitously conceded as plausible, as between Gabres and the
dissent's interpretation, Gabres should be sustained since it is the interpretation more favorable to the
accused.
V. The claim that the maximum term should only be one degree away from the minimum term does not
make sense within the meaning of "degrees" under the RPC because the minimum and maximum terms
consist of single fixed penalties. At any rate, the point seems to be that the penalty from which the
minimum term is taken should only be one degree away from the penalty from which the maximum term
is taken.
As a general rule, the application of modifying circumstances, the majority being generic mitigating and
ordinary aggravating circumstances, does not result to a maximum term fixed beyond the prescribed
penalty. At most, the maximum term is taken from the prescribed penalty in its maximum period. Since
the maximum term is taken from the prescribed penalty and the minimum term is taken from the next
lower penalty, then, in this limited sense, the difference would naturally be only one degree. Concretely,
in the case of homicide with one ordinary aggravating circumstance, the maximum term is taken from
reclusio temporal in its maximum period which is within the prescribed penalty of reclusion temporal,
while the minimum term is taken from prision mayor which is the penalty next lower to reclusion temporal;
hence, the one-degree difference observed by the dissent.
In comparison, under the incremental penalty rule, the maximum term can exceed the prescribed penalty.
Indeed, at its extreme, the maximum term can be as high as 20 years of reclusion temporal while the
prescribed penalty remains at prision correccional maximum to prision mayor minimum, hence, the
penalty next lower to the prescribed penalty from which the minimum term is taken remains at anywhere
within prision correccional minimum and medium, or from 6 months and 1 day to 4 years and 2 months.
In this sense, the incremental penalty rule deviates from the afore-stated general rule.[57]
However, it is one thing to say that, generally, the penalty from which the minimum term is taken is only
one degree away from the penalty from which the maximum term is taken, and completely another thing
to claim that the penalty from which the minimum term is taken should only be one degree away from the
penalty from which the maximum term is taken.
The one-degree difference is merely the result of a general observation from the application of generic
mitigating and ordinary aggravating circumstances in the RPC in relation to the ISL. Nowhere does the
ISL refer to the one-degree difference as an essential requisite of an "attending circumstance." If the
application of the incremental penalty rule deviates from the one-degree difference, this only means that
the law itself has provided for an exception thereto. Verily, the one-degree difference is a mere
consequence of the generic mitigating and ordinary aggravating circumstances created by the legislature.
The difficulty of the dissent with the deviation from its so-called one-degree difference rule seems to lie
with the inability to view these "attending circumstances" as mere artifacts or creations of the legislature.
It does not make sense to argue that the legislature cannot formulate "attending circumstances" that
operate differently than these generic mitigating and ordinary aggravating circumstances, and that,
expectedly, leads to a different result from the one-degree difference-for it would be to say that the
creator can only create one specie of creatures. Further, it should be reasonably assumed that the
legislature was aware of these special circumstances, like the incremental penalty rule or privileged
mitigating circumstances, at the time it enacted the ISL as well as the consequent effects of such special
circumstances on the application of said law. Thus, for as long as the incremental penalty rule is
consistent with the letter and spirit of "attending circumstances" under the ISL, there is no obstacle to its
treatment as such.
VI. Much has been said about the leniency, absurdity and unjustness of the result under Gabres; the
need to adjust the minimum term of the indeterminate penalty to make it commensurate to the gravity of
the estafa committed; the deterrence effect of a stiffer imposition of penalties; and a host of other similar
reasons to justify the reversal of Gabres. However, all these relate to policy considerations beyond the
wording of the ISL in relation to the RPC; considerations that if given effect essentially seek to rewrite the
law in order to conform to one notion (out of an infinite number of such notions) of wisdom and efficacy,
and, ultimately, of justice and mercy.
This Court is not the proper forum for this sort of debate. The Constitution forbids it, and the principle of
separation of powers abhors it. The Court applies the law as it finds it and not as how it thinks the law
should be. Not too long ago in the case of People v. Veneracion,[58] this Court spoke about the dangers
of allowing one's personal beliefs to interfere with the duty to uphold the Rule of Law which, over a
decade later, once again assumes much relevance in this case:
Obedience to the rule of law forms the bedrock of our system of justice. If judges, under the guise of
religious or political beliefs were allowed to roam unrestricted beyond boundaries within which they are
required by law to exercise the duties of their office, the law becomes meaningless. A government of
laws, not of men excludes the exercise of broad discretionary powers by those acting under its authority.
Under this system, judges are guided by the Rule of Law, and ought "to protect and enforce it without
fear or favor," resist encroachments by governments, political parties, or even the interference of their
own personal beliefs.[59]
VII. Mr. Justice Adolfo S. Azcuna proposes an interpretation of the incremental penalty rule based on the
phrases "shall be termed prision mayor or reclusion temporal, as the case may be" and "for the purpose
of the other provisions of this Code" found in the last sentence of said rule, viz:
ARTICLE 315. Swindling (Estafa). - Any person who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum
period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos, and if
such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its
maximum period, adding one year for each additional 10,000 pesos; but the total penalty which
may be imposed shall not exceed twenty years. In such cases, and in connection with the
accessory penalties which may be imposed and for the purpose of the other provisions of this
Code, the penalty shall be termed prisio mayor or recluson temporal, as the case may be. x x x
(Emphasis supplied)
While this interpretation is plausible, Gabres should still be sustained because in construing penal
statutes, as between two reasonable[60] but contradictory constructions, the one more favorable to the
accused should be upheld, which in this case is Gabres. The reason for this rule is elucidated in an
eminent treatise on statutory construction in this wise:
It is an ancient rule of statutory construction that penal statutes should be strictly construed against
the government or parties seeking to enforce statutory penalties and in favor of the persons on
whom penalties are sought to be imposed. This simply means that words are given their ordinary
meaning and that any reasonable doubt about the meaning is decided in favor of anyone
subjected to a criminal statute. This canon of interpretation has been accorded the status of a
constitutional rule under principles of due process, not subject to abrogation by statute.
The rule that penal statutes should be strictly construed has several justifications based on a
concern for the rights and freedoms of accused individuals. Strict construction can assure fairness
when courts understand it to mean that penal statutes must give a clear and unequivocal warning,
in language people generally understand, about actions that would result in liability and the nature
of potential penalties. A number of courts have said:
... the rule that penal statutes are to be strictly construed ... is a fundamental principle which
in our judgment will never be altered. Why? Because the lawmaking body owes the duty to
citizens and subjects of making unmistakably clear those acts for the commission of which
the citizen may lose his life or liberty. Therefore, all the canons of interpretation which apply
to civil statutes apply to criminal statutes, and in addition there exists the canon [of strict
construction] .... The burden lies on the lawmakers, and inasmuch as it is within their power,
it is their duty to relieve the situation of all doubts.
x x x x
Additionally, strict construction protects the individual against arbitrary discretion by officials
and judges. As one judge noted: "the courts should be particularly careful that the bulwarks
of liberty are not overthrown, in order to reach an offender who is, but perhaps ought not to
be, sheltered behind them."
But also, for a court to enforce a penalty where the legislature has not clearly and unequivocally
prescribed it could result in judicial usurpation of the legislative function. One court has noted that
the reason for the rule is "to guard against the creation, by judicial construction, of criminal
offenses not within the contemplation of the legislature." Thus the rule requires that before a
person can be punished his case must be plainly and unmistakably within the statute sought to be
applied. And, so, where a statute is open to more than one interpretation, it is strictly construed
against the state. Courts further rationalize this application of the rule of strict construction on the
ground that it was not the defendant in the criminal action who caused ambiguity in the statute.
Along these same lines, courts also assert that since the state makes the laws, they should be
most strongly construed against it.[61] (Emphasis supplied; citations omitted)
Thus, in one case, where the statute was ambiguous and permitted two reasonable interpretations, the
construction which would impose a less severe penalty was adopted.[62]
WHEREFORE, the Decision of the Court of Appeals is MODIFIED with respect to the indeterminate
penalties imposed on appellant for the five (5) counts of estafa, to wit:
(1) In Criminal Case No. 02-208372, the accused is sentenced to an indeterminate penalty of 4 years
and 2 months of prision correccional as minimum, to 9 years, 8 months and 21 days of prision mayor as
maximum.
(2) In Criminal Case Nos. 02-208373, 02-208375, and 02-208376, the accused is sentenced to an
indeterminate penalty of 4 years and 2 months of prisio correccional as minimum, to 10 years, 8 months
and 21 days of prision mayor as maximum for each of the aforesaid three estafa cases.
(3) In Criminal Case No. 02-208374, the accused is sentenced to an indeterminate penalty of 4 years
and 2 months of prision correccional as minimum, to 12 years, 8 months and 21 days of reclusion
temporal as maximum.
In all other respects, the Decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING
Associate Justice
ANTONIO T. CARPIO
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
RENATO C. CORONA
Associate Justice
CONCHITA CARPIO MORALES
Associate Justice
ADOLFO S. AZCUNA
Associate Justice
DANTE O. TINGA
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
ANTONIO EDUARDO B. NACHURA
Associate Justice
RUBEN T. REYES
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
ARTURO D. BRION
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the opinion of
the Court.
REYNATO S. PUNO
Chief Justice
[1] CA rollo, pp. 121-136. Penned by Associate Justice Rebecca de Guia-Salvador, with Associate
Justices Amelita G. Tolentino and Aurora Santiago-Lagman, concurring.
[2] Penned by Hon. Reynaldo G. Ros.
[3] CA rollo, pp. 121-124.
[4] Id. at 125-26.
[5] G.R. Nos. 147678-87, July 7, 2004, 433 SCRA 640.
[6] CA rollo, p. 135.
[7] People v. Gamboa, G.R. No. 135382, September 29, 2000, 341 SCRA 451, 458.
[8] Exhibits "A," "L," and "L-1."
[9] People v. Cabais, G.R. No. 129070, March 16, 2001, 354 SCRA 553, 561.
[10] CA rollo, pp. 9-10.
[11] Supra note 7 at 462.
[12] Id.
[13] People v. Guambor, G.R. No. 152183, January 22, 2004, 420 SCRA 677, 683.
[14] People v. Ballesteros, G.R. Nos. 116905-908, August 6, 2002, 386 SCRA 193, 212.
[15] Id. at 213.
[16] 335 Phil. 242 (1997).
[17] ARTICLE 65. Rule in Cases in Which the Penalty is Not Composed of Three Periods. - In cases in
which the penalty prescribed by law is not composed of three periods, the courts shall apply the rules
contained in the foregoing articles, dividing into three equal portions the time included in the penalty
prescribed, and forming one period of each of the three portions.
[18] People v. Saley, G.R. No. 121179, July 2, 1998, 291 SCRA 715, 753-754.
[19] Id. at 755.
[20] 331 Phil. 64 (1996).
[21] 332 Phil. 710, 730-731 (1996).
[22] ARTICLE 249. Homicide. - Any person who, not falling within the provisions of article 246 shall kill
another without the attendance of any of the circumstances enumerated in the next preceding article,
shall be deemed guilty of homicide and be punished by reclusion temporal.
[23] 3 Phil. 437 (1904).
[24] Id. at 440.
[25] The penalty is considered "indeterminate" because after the convict serves the minimum term, he or
she may become eligible for parole under the provisions of Act No. 4103, which leaves the period
between the minimum and maximum term indeterminate in the sense that he or she may, under the
conditions set out in said Act, be released from serving said period in whole or in part. (People v.
Ducosin, 59 Phil. 109, 114 [1933])
[26] In the other portions of the dissent though, there is also the impression that the basis is the penalty
actually imposed as hereinabove defined. Whether it is the imposable penalty or penalty actually
imposed, the dissent's interpretation contravenes the ISL because the minimum term should be fixed
based on the prescribed penalty.
[27] See Aquino and Grio-Aquino, The Revised Penal Code, Vol. 1, 1997 ed., pp. 772-773; Padilla,
Criminal Law: Revised Penal Code Annotated, 1988 ed., pp. 211-214.
[28] 73 Phil. 549 (1941).
[29] Id. at 552.
[30] The dissent cites several cases to establish that Gonzales has not been followed in cases outside of
estafa. An examination of these cases reveals that this assertion is inaccurate.
1. Sabang v. People, G.R. No. 168818, March 9, 2007, 518 SCRA 35; People v. Candaza, G.R. No.
170474, June 16, 2006, 491 SCRA 280; People v. Concepcion, G.R. No. 169060, February 6, 2007, 514
SCRA 660; People v. Hermocilla, G.R. No. 175830, July 10, 2007, 527 SCRA 296; People v. Abulon,
G.R. No. 174473, August 17, 2007, 530 SCRA 675.
Gonzales was applied in these cases.
2. People v. Miranda, G.R. No. 169078, March 10, 2006, 484 SCRA 555; Garces v. People, G.R. No.
173858, July 17, 2007, 527 SCRA 827-belongs to the class of cases involving accessories and
accomplices as well as the frustrated and attempted stages of a felony.
Strictly speaking, these cases do not deviate from Gonzales. Here, the prescribed penalty for the
principal and consummated stage, respectively, should be merely viewed as being lowered by the proper
number of degrees in order to arrive at the prescribed penalties for accomplices and accessories as well
as the frustrated and attempted stages of a felony. In turn, from these prescribed penalties, the minimum
term is determined without considering in the meantime the modifying circumstances, as in Gonzales.
3. Garces v. People, G.R. No. 173858, July 17, 2007, 527 SCRA 827-belongs to the class of cases
involving privileged mitigating circumstances.
These cases are, to a certain extent, an exception to the rule enunciated in Gonzales. Here, the
prescribed penalty is first reduced by the proper number of degrees due to the existence of a privileged
mitigating circumstance. As thus reduced, the penalty next lower in degree is determined from which the
minimum term is taken. To the extent that the privileged mitigating circumstance, as a modifying
circumstance, is first applied to the prescribed penalty before the penalty next lower in degree is
determined, these cases deviate from Gonzales. However, this interpretation is based on the special
nature of a privileged mitigating circumstance as well as the liberal construction of penal laws in favor of
the accused. If the privileged mitigating circumstance is not first applied to the prescribed penalty before
determining the penalty next lower in degree from which the minimum term is taken, it may happen that
the maximum term of the indeterminate sentence would be lower than the minimum term, or that the
minimum and maximum term would both be taken from the same range of penalty-absurdities that the
law could not have intended. These special considerations which justified a deviation from Gonzales are
not present in the instant case. As will be shown later, Gabres is a reasonable interpretation of the ISL in
relation to Article 315, par. 2(a) of the RPC, and any contrary interpretation would be unfavorable to the
accused.
[31] 59 Phil. 109 (1933).
[32] This wording of Act No. 4103 was later amended to the current wording "minimum which shall be
within the range of the penalty next lower to that prescribed by the Code for the offense" by Act No. 4225.
[33] Supra note 31 at 116-118.
[34] Similarly, in the instant case, the maximum term imposed on the accused increased as the amount
defrauded increased in the various criminal cases filed against her as a consequence of the incremental
penalty rule.
[35] Sec. 6. Every prisoner released from confinement on parole by virtue of this Act shall, at such times
and in such manner as may be required by the conditions of his parole, as may be designated by the
said Board for such purpose, report personally to such government officials or other parole officers
hereafter appointed by the Board of Indeterminate Sentence for a period of surveillance equivalent to the
remaining portion of the maximum sentence imposed upon him or until final release and discharge by
the Board of Indeterminate Sentence as herein provided. The officials so designated shall keep such
records and make such reports and perform such other duties hereunder as may be required by said
Board. The limits of residence of such paroled prisoner during his parole may be fixed and from time to
time changed by the said Board in its discretion. If during the period of surveillance such paroled
prisoner shall show himself to be a law-abiding citizen and shall not violate any of the laws of the
Philippine Islands, the Board of Indeterminate Sentence may issue a final certificate of release in his
favor, which shall entitle him to final release and discharge.
[36] Sec. 8. Whenever any prisoner released on parole by virtue of this Act shall, during the period of
surveillance, violate any of the conditions of his parole, the Board of Indeterminate Sentence may issue
an order for his re-arrest which may be served in any part of the Philippine Islands by any police officer.
In such case the prisoner so re-arrested shall serve the remaining unexpired portion of the maximum
sentence for which he was originally committed to prison, unless the Board of Indeterminate Sentence
shall, in its discretion, grant a new parole to the said prisoner.
[37] Supra note 31 at 117.
[38] G.R. No. 112985, April 21, 1999, 306 SCRA 90.
[39] G.R. No. 103065, August 16, 1999, 312 SCRA 397.
[40] G.R. No. 149472, October 15, 2002, 391 SCRA 162.
[41] G.R. No. 133645, September 17, 2002, 389 SCRA 71.
[42] 383 Phil. 213 (2000).
[43] Estafa committed by using fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions, or by means of other similar
deceits.
[44] Effective April 6, 1980.
[45] See Article 61 of the RPC.
[46] Effective June 17, 1967.
[47] Effective October 22, 1975.
[48] Supra note 41 at 80.
[49] ARTICLE 309. Penalties. - Any person guilty of theft shall be punished by:
1. The penalty of prision mayor in its minimum and medium periods, if the value of the thing stolen is
more than 12,000 pesos but does not exceed 22,000 pesos; but if the value of the thing stolen exceeds
the latter amount, the penalty shall be the maximum period of the one prescribed in this paragraph, and
one year for each additional ten thousand pesos, but the total of the penalty which may be imposed shall
not exceed twenty years. In such cases, and in connection with the accessory penalties which may be
imposed and for the purpose of the other provisions of this Code, the penalty shall be termed prision
mayor or reclusion temporal, as the case may be. x x x
[50] Supra note 42 at 227-228.
[51] ARTICLE 160. Commission of Another Crime During Service of Penalty Imposed for Another
Previous Offense - Penalty. - Besides the provisions of rule 5 of article 62, any person who shall commit
a felony after having been convicted by final judgment, before beginning to serve such sentence, or
while serving the same, shall be punished by the maximum period of the penalty prescribed by law for
the new felony.
Any convict of the class referred to in this article, who is not a habitual criminal, shall be pardoned at the
age of seventy years if he shall have already served out his original sentence, or when he shall complete
it after reaching said age, unless by reason of his conduct or other circumstances he shall not be worthy
of such clemency.
[52] See People v. Perete, 111 Phil. 943, 947 (1961).
[53] G.R. No. L-55177, February 27, 1987, 148 SCRA 98, 110.
[54] G.R. No. L-29994, July 20, 1979, 91 SCRA 500, 511.
The dissent argues that the use of quasi-recidivism as an example of an "attending circumstance" which
is outside the scope of Article 14 of the RPC is inappropriate because quasi-recidivism is sui generis.
The argument is off-tangent. The point is simply that quasi-recidivism is not found under Article 14 of the
RPC yet it is treated as an "attending circumstance" for purposes of the application of the ISL in relation
to the RPC. Hence, there are "attending circumstances" outside the scope of Articles 13 and 14 of the
RPC. For the same reason, the incremental penalty rule is a special rule outside of Article 14 which, as
will be discussed later on, serves the same function as modifying circumstances under Articles 13 and
14 of the RPC. See also Reyes, L.B., The Revised Penal Code, 14th ed., 1998, p. 766.
[55] The common thread in the RPC is to fix the prescribed penalty as the starting point for determining
the prison sentence to be finally imposed. From the prescribed penalty, the attending circumstances are
then considered in order to finally fix the penalty actually imposed. Further, the designation of a
prescribed penalty is made in individual articles, or prescribed penalties are individually designated in
separate paragraphs within a single article. Under Article 315, the penalty for estafa when the amount
defrauded is over P12,000.00 but does not exceed P22,000.00 and when such amount exceeds
P22,000.00 is lumped within the same paragraph. Thus, the penalty of prision correccional maximum to
prision mayor minimum may be reasonably considered as the starting point for the computation of the
penalty actually imposed, and hence, the prescribed penalty when the amount defrauded exceeds
P22,000.00. As will be discussed shortly, the amount defrauded in excess of P22,000.00 may then be
treated as a special
aggravating circumstance and the incremental penalty as analogous to a modifying circumstance in
order to arrive at the penalty actually imposed consistent with the letter and spirit of the ISL in relation to
the RPC.
[56] People v. Ladjaalam, 395 Phil. 1, 35 (2000).
[57] Cases involving privileged mitigating circumstances would, likewise, deviate from this general rule
since the maximum term would be taken from a penalty lower than the prescribed penalty. See note 13.
[58] G.R. Nos. 119987-88, October 12, 1995, 249 SCRA 244.
[59] Id. at 251.
[60] The aforesaid phrases are broad enough to justify Mr. Justice Azcuna's interpretation, however, they
are vague enough not to exclude the interpretation under Gabres. The said phrases may be so
construed without being inconsistent with Gabres. (See Articles 90 and 92 of the RPC)
[61] 3 Sutherland Statutory Construction 59:3 (6th ed.)
[62] Id. citing Buzzard v. Commonwealth, 134 Va. 641, 114 S.E. 664 (1992).
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. PEDRO
MANABA, defendant-appellant.
1933-10-31 | G.R. No. 38725
D E C I S I O N
VICKERS, J:
This is an appeal from a decision of Judge Eulalio Garcia in the Court of First Instance of Oriental
Negros in criminal case No. 1827 dated November 15, 1932, finding the defendant guilty of rape and
sentencing him to suffer seventeen years and four months of reclusion temporal, and the accessory
penalties of the law, to indemnify the offended party, Celestina Adapon, in the amount of P500, to
maintain the offspring, if any, at P5 a month until said offspring should become of age, and to pay the
costs.
The defendant appealed to this court, and his attorney de oficio now makes the following assignments of
error:
"1. El Juzgado a quo erro al no estimar en favor del acusado apelante la defensa de double jeopardy o
legal jeopardy que ha interpuesto.
"2. El Juzgado, a quo erro al no declarar insuficientes las pruebas de identificacion del acusado apelante.
"3. El Juzgado a quo tambien erro al pasar por alto las incoherencias de los testigos de la acusacion y al
no declarar que no se ha establecido fuera de toda duda la responsibilidad del apelante.
"4. El Juzgado a quo erro al condenar al acusado apelante por el delito de violacion y al no acceder a su
mocion de nueva vista."
It appears that on May 10, 1932, the chief of police of Dumaguete subscribed and swore to a criminal
complaint wherein he charged Pedro Manaba with the crime of rape, committed on the person of
Celestina Adapon. This complaint was filed with the justice of the peace of Dumaguete on June 1, 1932,
and in due course the case reached the Court of First Instance. The accused was tried and convicted,
but on motion of the attorney for the defendant the judgment was set aside and the case dismissed on
the ground that the court had no juris7diction over the person of the defendant or the subject matter of
the action, because the complaint had not been filed by the offended party, but by the chief of police
(criminal case No. 1801).
On August 17, 1932, the offended girl subscribed and swore to a complaint charging the defendant with
the crime of rape. This complaint was filed in the Court of First Instance (criminal case No. 1827), but
was referred to the justice of the peace of Dumaguete for preliminary investigation. The defendant
waived his right to the preliminary investigation, but asked for the dismissal of the complaint on the
ground that he had previously been placed in jeopardy for the same offense. This motion was denied by
the justice of the peace, and the case was remanded to the Court of First Instance, where the provincial
fiscal in an information charged the defendant with having committed the crime of rape as follows:
"Que en o hacia la noche del dia 9 de mayo de 1932, en el Municipio de Dumaguete, Provincia de
Negros Oriental, Islas Filipinas, y dentro de la jurisdiccion de este Juzgado, el referido acusado Pedro
Manaba, aprovechndose de la oscuridad de la noche y mediante fuerza, violencia e intimidacion,
voluntaria, ilegal y criminalmente yacio y tuvo acceso carnal con una nia llamada Celestina Adapon,
contra la voluntad de esta. El acusado Pedro Manaba ya ha sido convicto por Juzgado competente y en
sentencia firme por este mismo delito de violacion.
"Hecho cometido con infraccion de la ley."
The defendant renewed his motion for dismissal in the case on the ground of double jeopardy, but his
motion was denied; and upon the termination of the trial the defendant was found guilty and sentenced
as hereinabove stated.
Whether the defendant was placed in jeopardy for the second time or not when he was tried in the
present case depends on whether or not he was tried on a valid complaint in the first case. The offense
in question was committed on May 9, 1932, or subsequent to the date when the Revised Penal Code
became effective.
The third paragraph of article 344 of the Revised Penal Code, which relates to the prosecution of the
crimes of adultery, concubinage, seduction, abduction, rape and acts of lasciviousness reads as follows:
"The offenses of seduction, abduction, rape or acts of lasciviousness, shall not be prosecuted except
upon a complaint filed by the offended party or her parents, grandparents, or guardian, nor, in any case,
if the offender has been expressly pardoned by the above- named persons, as the case may be."
The Spanish text of this paragraph is as follows:
"Tampoco puede procederse por causa de estupro, rapto, violacion o abusos deshonestos, sino en
virtud de denuncia de la parte agraviada, o de sus padres, o abuelos o tutor, ni despues de haberse
otorgado al ofensor, perdon expreso por dichas partes, segn los casos."
It will be observed that the Spanish equivalent of the word "filed" is not found in the Spanish text, which
is controlling, as it was the Spanish text of the Revised Penal Code that was approved by the Legislature.
The first complaint filed against the defendant was signed and sworn to by the chief of police of
Dumaguete. As it was not the complaint of the offended party, it was not a valid complaint in accordance
with the law. The judgment of the court was therefore void for lack of jurisdiction over the subject matter,
and the defendant was never in jeopardy.
It might be observed in this connection that the judgment was set aside and the case dismissed on the
motion of defendant's attorney, who subsequently set up the plea of double jeopardy in the present case.
The other assignments of error relate to the sufficiency of the evidence, which in our opinion fully
sustains the findings of the trial judge.
The recommendation of the Solicitor-General is erroneous in several respects, chiefly due to the fact that
it is based on the decision of July 30, 1932 that was set aside, and not on the decision now under
consideration. The accused should not be ordered to acknowledge the offspring, if should there be any,
because the record shows that the accused is a married man.
It appears that the lower court should have taken into consideration the aggravating circumstance of
nocturnity. The defendant is therefore sentenced to suffer seventeen years, four months, and one day of
reclusion temporal, to indemnify the offended party, Celestina Adapon, in the sum of P500, and to
support the offspring, if any. As thus modified, the decision appealed from is affirmed, with the costs of
both instances against the appellant.
Street, Abad Santos, Imperial and Butte, JJ., concur.
HECTOR T. HIPE, Petitioner, versus COMMISSION ON ELECTIONS and MA.
CRISTINA L. VICENCIO, Respondents.
2009-10-02 | G.R. No. 181528
D E C I S I O N
VELASCO, JR., J.:
The Case
Before us is a Petition for Certiorari and Prohibition under Rule 64, in relation to Rule 65, of the Rules of
Court seeking to nullify and enjoin the implementation of the January 30, 2008 Resolution[1] issued by
the Commission on Elections (COMELEC) En Banc, which affirmed the July 11, 2007 Resolution[2]
issued by its Second Division.
The Facts
Petitioner Hector T. Hipe and respondent Ma. Cristina L. Vicencio were candidates for the mayoralty
post in Catubig, Northern Samar in the May 14, 2007 elections. During the canvass proceedings of the
Municipal Board of Canvassers of Catubig, Northern Samar (MBOC), Vicencio petitioned for the
exclusion of seven election returns of Precinct Nos. 0037B, 0052A, 0053A, 0058A, 0080A, 0081A and
0082A on the grounds that they were prepared under duress, threats, intimidation or coercion; and that
the election was marred by massive vote buying, widespread coercion, terrorism, threats, and
intimidation, preventing voters from voting, so that the said returns did not reflect the will of the
electorate.[3] In support of the said petition for exclusion, Vicencio presented affidavits of some of the
members of the Board of Election Inspectors, a sample ballot and an ISO Assessment.[4]
On May 19, 2007, the MBOC ruled in favor of Vicencio and excluded the seven election returns adverted
to. On the same day, petitioner Hipe filed a notice of appeal. Thereafter, on May 29, 2007, petitioner
Hipe filed his Verified Appeal with the COMELEC, docketed as SPC No. 07-206 entitled "In the Matter of
the Petitions to Exclude Election Returns, Hector T. Hipe vs. Ma. Cristina L. Vicencio," arguing that the
written petition to exclude the election returns was filed out of time, and that the grounds used to exclude
the questioned returns were not proper for a pre-proclamation controversy, were not supported by
credible evidence, and were beyond the jurisdiction of the MBOC.[5]
In a July 11, 2007 Resolution,[6] the Second Division of COMELEC dismissed the appeal for being filed
out of time. As stated in the dispositive portion of the said Resolution:
WHEREFORE, premises considered, the instant Verified Appeal is hereby dismissed for being filed out
of time.
SO ORDERED.[7]
Subsequently, on July 17, 2007, petitioner Hipe filed a Motion for Reconsideration.[8] On even date,
respondent Vicencio was proclaimed as the mayor.[9] On January 30, 2008, the COMELEC En Banc
resolved to deny petitioner Hipe's Motion for Reconsideration.[10]
In the challenged Resolution,[11] the COMELEC En Banc held that the ruling of the MBOC had already
attained finality considering that the filing of the Verified Appeal with the COMELEC was five days late. It
stated that the filing of the Verified Appeal should have been made within the inextendible period of five
days from the filing of the written and verified notice of appeal with the MBOC, with which petitioner Hipe
failed to comply. Further, the COMELEC En Banc held that it was already deprived of proper jurisdiction
to entertain the instant case since the case should no longer be considered as a pre-proclamation
controversy, but should rather be ventilated in an election protest. In addition, the COMELEC En Banc
stated that the ruling of the MBOC was amply supported by the affidavits of the Members of the Board of
Election Inspectors, and that the MBOC retained sufficient discretion to avail itself of all available means
to ascertain the results of the elections through witnesses, as well as through an examination of the
election returns themselves.
The dispositive portion of the January 30, 2008 Resolution reads:
WHEREFORE, premises considered, the Commission (En Banc) RESOLVED as it hereby RESOLVES,
to deny the instant Motion for Reconsideration filed by Appellant-Movant Hector Hipe. The questioned
Resolution dated July 11, 2007, issued by the Second Division of the Commission on Elections for the
exclusion of seven (7) election returns in favor of the appellee, Maria Cristina L. Vicencio, therefore,
stands and remains valid.
SO ORDERED.[12]
Aggrieved, Hipe filed this petition.
The Issue
Whether or not the COMELEC En Banc acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction in issuing its challenged Resolution dated January
30, 2008, which affirmed the Resolution dated July 11, 2007 issued by its Second Division dismissing
petitioner Hipe's appeal for being filed out of time.
Our Ruling
The petition is partly meritorious.
Appeal Should Be Given Due Course
In its En Banc Resolution, the COMELEC held that the ruling of the MBOC had already become final and
executory; and thus, its Second Division had not acquired appellate jurisdiction to act on Hipe's verified
appeal. In support of its ruling, the COMELEC En Banc relied on the Certification issued by Renato I.
Madronio, Acting Election Officer II, Catubig, Northern Samar, attesting that hard or printed copies of the
MBOC's ruling to exclude the seven contested election returns were received by Atty. V.B. Desales,
counsel for the KAMPI-Liberal Party Coalition, at 10:37 p.m. on May 19, 2007 at the provincial Election
Supervisor's Office.[13] On this basis, the COMELEC En Banc opined that when petitioner Hipe filed the
Verified Appeal on May 29, 2009, said filing was already five days late and should no longer be
entertained.
We disagree. Indeed, there is a disputable presumption that official duty has been regularly
performed;[14] and that, corollary thereto, it is presumed that in its disposition of the contested election
returns, the MBOC has regularly performed its official duty of issuing a written ruling on the prescribed
form, authenticated by the signatures of its members as required under Section 20(d) of Republic Act No.
7166.[15] In fact, the alleged issuance and service upon the supposed counsel of petitioner Hipe of the
written ruling of MBOC was even supported by the aforementioned Certification of the Chairperson of the
MBOC.
The records would, however, reveal that Atty. Venerando B. Desales, the counsel who was supposedly
furnished the alleged written ruling of the MBOC, has denied under oath that he ever received a copy of
the alleged written ruling.[16] He even categorically denied in his Affidavit that he was the counsel of
petitioner Hipe.[17]
Notably, nothing in the Status of Canvass Report[18] or in the Minutes of the Proceedings of the MBOC
on May 19, 2007[19] showed that a written ruling on the petition for exclusion has been rendered by the
MBOC or received by petitioner Hipe.
On the contrary, a perusal of the Minutes of the Proceedings of the MBOC on May 19, 2007 would
reveal that Election Officer Madronio even notified the counsels of petitioner Hipe that, as of that time,
the Municipal COMELEC Office still did not have the prescribed form of the ruling, and that they would
still have to get the prescribed forms in Catarman.[20] This militates against Madronio's statement in his
Certification that hard or printed copies of the ruling of the MBOC were furnished to Atty. Desales on that
same day.
When a plaintiff's case depends upon the establishment of a negative fact, and the means of proving the
fact are equally within the control of each party, then the burden of proof is upon the party averring the
negative fact.[21]
In the case at bar, petitioner Hipe asserted the negative fact, that is, that no copy of the written ruling of
the MBOC was sent to him or his counsel. Thus, petitioner Hipe has the burden of proof to show that he
was not furnished with a copy of the written ruling of the MBOC, which he was able to successfully prove
in the instant case. Be that as it may, it then becomes incumbent upon respondent Vicencio to prove
otherwise. This is because the burden of evidence is shifted if the party upon whom it is lodged was able
to adduce preponderant evidence to prove its claim.[22]
Significantly, other than Madronio's statement in his Certification that hard or printed copies of the ruling
of the MBOC were furnished to Atty. Desales on May 19, 2007, no other evidence was adduced by
respondent Vicencio to support her claim. If indeed such written ruling exists and was indeed furnished
to petitioner Hipe or his alleged counsel, it would have been very easy for respondent Vicencio to
produce a copy of the written ruling with the signature of petitioner Hipe or his counsel, which she failed
to do in the instant case.
Furthermore, the COMELEC has the discretion to construe its rules liberally and, at the same time,
suspend the rules or any of their portions in the interest of justice.[23] As aptly stated by Commissioner
Rene V. Sarmiento in his Dissenting Opinion:[24]
It is well settled that election laws should be reasonably and liberally construed to achieve their purpose -
to effectuate and safeguard the will of the electorate in the choice of their representatives. The courts
frown upon any interpretation that would hinder in any way not only the free and intelligent casting of
votes in any election but also the correct ascertainment of the results thereof.
Disputes in the outcome of elections involve public interest. Technicalities and procedural barriers should
not be allowed to stand if they constitute an obstacle to the determination of the true will of the electorate
in the choice of their elective officials. Laws governing such disputes must be liberally construed to the
end that the will of the people in the choice of public officials may not be defeated by mere technicalities.
Hence, it is submitted that there is a need to suspend the procedural rules and resolve the merits of the
case to promote justice and safeguard the will of the electorate of Catubig, Northern Samar.
Accordingly, the COMELEC should have not dismissed the appeal filed by petitioner Hipe on the ground
of belated filing.
The Exclusion of the Seven Election Returns
Was Amply Supported by Evidence
Nevertheless, even if we entertain petitioner Hipe's appeal from the decision of the MBOC on the
questioned election returns, the Court still rules in favor of respondent Vicencio.
Petitioner Hipe claims that no proof was presented nor was there any showing that the seven election
returns in question were defective.[25] Such contention is not persuasive.
The COMELEC, after a judicious evaluation of the documents on record, upheld the findings of the
MBOC to exclude the subject election returns on the basis of the affidavits of the members of the Board
of Election Inspectors. What exactly these documents and evidence are upon which the COMELEC
based its resolution, and how they have been appreciated in respect of their sufficiency, are beyond this
Court's scrutiny.[26] The rule that factual findings of administrative bodies will not be disturbed by courts
of justice except when there is absolutely no evidence or no substantial evidence in support of such
findings should be applied with greater force when it concerns the COMELEC, as the framers of the
Constitution intended to place the COMELEC-created and explicitly made independent by the
Constitution itself-on a level higher than statutory administrative organs.[27] The factual finding of the
COMELEC is, therefore, binding on the Court. As found by the COMELEC En Banc:
Besides, we do not agree that the exclusion of the seven (7) election returns in question were not
supported by any iota of evidence. This is amply supported by the affidavits of the Members of the Board
of Election Inspectors; they were all made in clear and unequivocal language by public officers who are
presumed to have performed such duties in the ordinary and regular execution thereof. A careful
re-examination of the evidence on record reveals that there is sufficient justification to uphold the MBOC
ruling to exclude the subject election returns. The MBOC retains sufficient discretion to avail itself of all
available means to ascertain the results of the elections through witnesses as well as examination of the
election returns themselves. Where there is no abuse of discretion the MBOC is presumed to have acted
within its powers and its decision should be treated with some amount of respect.[28]
This is especially true in the instant case considering that, as noted by the COMELEC En Banc in its
questioned Resolution, one of the witnesses petitioner Hipe previously presented later on recanted her
testimony and admitted that she had made her previous statement as to the regularity of the conduct of
the May 14, 1007 elections only out of fear due to threats upon her person.[29] As correctly observed by
the COMELEC En Banc:
We also note that even one of the witnesses presented by the appellant, Melanie Robion, Chairman of
the BEI for precinct No. 0037B, later on recanted her testimony. This spells doom to the appellant's
cause as it even impacts on the veracity and truthfulness of the other affidavits that the appellant
submitted. We are reminded of the legal principle that a falsity in one is a falsity in all, "Falsus in Onum,
Falsus in Omnibus" and would now be more inclined to believe the assertions made by the appellee
instead of those presented by the appellant, who has now been unmasked to have been less than
truthful at one time or another.[30]
Considering the foregoing discussion, there is ample evidence to support the findings of the COMELEC
that the seven election returns in question should be excluded. The contention of petitioner Hipe that
said election returns were excluded from the canvass merely on the basis of pure procedural
technicalities is, therefore, unfounded.
Respondent Vicencio Substantially Complied with the
Requirement that Objections Be Made in Writing
Petitioner Hipe contends that the written petition to exclude the election returns was filed beyond the
prescribed time or almost 24 hours after the oral petition to exclude was manifested by the counsels of
respondent Vicencio; hence, the latter's objections were raised out of time.[31]
This contention is without merit.
While the records reveal that respondent Vicencio manifested her oral objections on May 15, 2007 at
around 7:00 p.m.,[32] filed the written objections on May 16, 2007 at 6:40 p.m., and submitted the
documentary evidence in support of the protest at 2:45 p.m. only on the following day, the Court
nevertheless considers the foregoing acts of Vicencio as substantial compliance with the requirement
that objections be reduced into writing.
In Marabur v. COMELEC,[33] we held that while respondent failed to submit his written objections,
respondent's submission of his formal offer of evidence, including the evidence itself, within the
prescribed period constituted substantial compliance with the requirement that objections be reduced
into writing.
Notably, the relaxation of the rules becomes all the more necessary in the instant case, considering that
respondent Vicencio has even filed his written objections within the prescribed period; and soon
thereafter, the documentary evidence in support of the written objections.
Technicalities and procedural barriers should not be allowed to stand in the way if they constitute an
obstacle to the determination of the electorate's true will in the choice of its elective officials.[34]
It should be borne in mind that the object of the canvass is to determine the result of the elections based
on the official election returns. In order that the result of the canvass would reflect the true expression of
the people's will in the choice of their elective officials, the canvass must be based on true, genuine,
correct--nay, untampered--election returns.[35] It is in these proceedings that the COMELEC exercises
its supervisory and administrative power in the enforcement of laws relative to the conduct of elections,
by seeing to it that the canvass is based on the election returns as actually certified by the members of
the board of inspectors.[36]
Taking into consideration the findings of the COMELEC En Banc that there was ample evidence to
support the exclusion of the seven election returns in question based on the grounds raised by
respondent Vicencio, this should suffice in upholding the latter's proclamation, absent a finding of grave
abuse of discretion on the part of the COMELEC En Banc, in order not to frustrate the electorate's will.
WHEREFORE, the petition is PARTLY GRANTED. The January 30, 2008 COMELEC En Banc
Resolution and the July 11, 2007 COMELEC Second Division Resolution are hereby SET ASIDE insofar
as they dismissed petitioner Hipe's appeal. The January 30, 2008 COMELEC En Banc Resolution is,
however, AFFIRMED insofar as it declared the seven election returns of Precinct Nos. 0037B, 0052A,
0053A, 0058A, 0080A, 0081A and 0082A to be valid.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
(On official leave)
LEONARDO A. QUISUMBING
Associate Justice
CONSUELO YNARES-SANTIAGO
Associate Justice
(On official leave)
ANTONIO T. CARPIO
Associate Justice
RENATO C. CORONA
Associate Justice
CONCHITA CARPIO MORALES
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
ANTONIO EDUARDO B. NACHURA
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
(On leave)
ARTURO D. BRION
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
LUCAS P. BERSAMIN
Associate Justice
MARIANO C. DEL CASTILLO
Associate Justice
ROBERTO A. ABAD
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the opinion of
the Court.
REYNATO S. PUNO
Chief Justice
* On official leave.
** On leave.
[1] Rollo, pp. 36-47.
[2] Id. at 48-55.
[3] COMELEC records, pp. 16-36.
[4] Id. at 6-7.
[5] Id. at 1-11.
[6] Rollo, pp. 48-55.
[7] Id. at 51.
[8] Id. at 160-169.
[9] Id. at 42-43.
[10] Id. at 46-47.
[11] Id. at 36-47.
[12] Id. at 11-12.
[13] Id. at 38.
[14] See Rules of Court, Rule 131, Sec. 3(m).
[15] An Act Providing for Synchronized National and Local Elections and for Electoral Reforms,
Authorizing Appropriations Therefor, and for Other Purposes.
[16] COMELEC records, p. 146.
[17] Id.
[18] Id. at 147.
[19] Id. at 113-121.
[20] Id. at 119.
[21] Spouses Cheng v. Spouses Dailisan, G.R. No. 182485, July 3, 2009.
[22] Bank of the Philippine Islands v. Royeca, G.R. No. 176664, July 21, 2008, 559 SCRA 207; citing
Asian Transmission Corporation v. Canlubang Sugar Estates, G.R. No. 142383, August 29, 2003, 410
SCRA 202.
[23] Abainza v. Arellano, G.R. No. 181644, December 8, 2008, 573 SCRA 332, 340; citing Suliguin v.
COMELEC, G.R. No. 166046, March 23, 2006, 485 SCRA 227.
[24] Rollo, pp. 60-63.
[25] Id. at 23.
[26] Dagloc v. COMELEC, G.R. Nos. 154442-47, December 10, 2003, 417 SCRA 574, 594; citing Sison
v. COMELEC, G.R. No. 134096, March 3, 1999, 304 SCRA 170, 179.
[27] Dagloc, id.; citing Mastura v. COMELEC (Second Division), G.R. No. 124521, January 29, 1998,
285 SCRA 493, 499.
[28] Rollo, p. 45.
[29] COMELEC records, p. 79.
[30] Rollo, p. 45.
[31] Id. at 19-20.
[32] COMELEC records, pp. 109-110.
[33] G.R. No. 169513, February 26, 2007, 516 SCRA 696.
[34] Marabur v. COMELEC, G.R. No. 169513, February 26, 2007, 516 SCRA 696.
[35] Cauton v. COMELEC, No. L-25467, April 27, 1967, 19 SCRA 911.
[36] Id.
SERGIO G. AMORA, JR., Petitioner, vs. COMMISSION ON ELECTIONS and
ARNIELO S. OLANDRIA, Respondents.
2011-01-25 | G.R. No. 192280
EN BANC
D E C I S I O N
NACHURA, J.:
Before us is a petition for certiorari under Rule 64, in relation to Rule 65, of the Rules of Court, seeking to
annul and set aside the Resolutions dated April 29, 20101 and May 17, 2010,2 respectively, of the
Commission on Elections (COMELEC) in SPA No. 10-046 (DC).
First, the undisputed facts.
On December 1, 2009, petitioner Sergio G. Amora, Jr. (Amora) filed his Certificate of Candidacy (COC)
for Mayor of Candijay, Bohol. At that time, Amora was the incumbent Mayor of Candijay and had been
twice elected to the post, in the years 2004 and 2007.
To oppose Amora, the Nationalist Peoples Coalition (NPC) fielded Trygve L. Olaivar (Olaivar) for the
mayoralty post. Respondent Arnielo S. Olandria (Olandria) was one of the candidates for councilor of the
NPC in the same municipality.
On March 5, 2010, Olandria filed before the COMELEC a Petition for Disqualification against Amora.
Olandria alleged that Amoras COC was not properly sworn contrary to the requirements of the Omnibus
Election Code (OEC) and the 2004 Rules on Notarial Practice. Olandria pointed out that, in executing his
COC, Amora merely presented his Community Tax Certificate (CTC) to the notary public, Atty. Oriculo
Granada (Atty. Granada), instead of presenting competent evidence of his identity. Consequently,
Amoras COC had no force and effect and should be considered as not filed.
Amora traversed Olandrias allegations in his Answer cum Position Paper.3 He countered that:
1. The Petition for Disqualification is actually a Petition to Deny Due Course or cancel a certificate
of candidacy. Effectively, the petition of Olandria is filed out of time;
2. Olandrias claim does not constitute a proper ground for the cancellation of the COC;
3. The COC is valid and effective because he (Amora) is personally known to the notary public,
Atty. Granada, before whom he took his oath in filing the document;
4. Atty. Granada is, in fact, a close acquaintance since they have been members of the League of
Muncipal Mayors, Bohol Chapter, for several years; and
5. Ultimately, he (Amora) sufficiently complied with the requirement that the COC be under oath.
As previously adverted to, the Second Division of the COMELEC granted the petition and disqualified
Amora from running for Mayor of Candijay, Bohol.
Posthaste, Amora filed a Motion for Reconsideration4 before the COMELEC en banc. Amora reiterated
his previous arguments and emphasized the asseverations of the notary public, Atty. Granada, in the
latters affidavit,5 to wit:
1. The COMELECs (Second Divisions) ruling is contrary to the objectives and basic principles of
election laws which uphold the primacy of the popular will;
2. Atty. Granada states that while he normally requires the affiant to show competent evidence of
identity, in Amoras case, however, he accepted Amoras CTC since he personally knows him;
3. Apart from the fact that Amora and Atty. Granada were both members of the League of
Municipal Mayors, Bohol Chapter, the two consider each other as distant relatives because
Amoras mother is a Granada;
4. It is a matter of judicial notice that practically everybody knows the Mayor, most especially
lawyers and notaries public, who keep themselves abreast of developments in local politics and
have frequent dealings with the local government; and
5. In all, the COC filed by Amora does not lack the required formality of an oath, and thus, there is
no reason to nullify his COC.
Meanwhile, on May 10, 2010, national and local elections were held. Amora obtained 8,688 votes,
equivalent to 58.94% of the total votes cast, compared to Olaivars 6,053 votes, equivalent to only
41.06% thereof. Subsequently, the Muncipal Board of Canvassers of Candijay, Bohol, proclaimed Amora
as the winner for the position of Municipal Mayor of Candijay, Bohol.6
A week thereafter, or on May 17, 2010, in another turn of events, the COMELEC en banc denied
Amoras motion for reconsideration and affirmed the resolution of the COMELEC (Second Division).
Notably, three (3) of the seven (7) commissioners dissented from the majority ruling. Commissioner
Gregorio Larrazabal (Commissioner Larrazabal) wrote a dissenting opinion, which was concurred in by
then Chairman Jose A.R. Melo and Commissioner Rene V. Sarmiento.
In denying Amoras motion for reconsideration and upholding Olandrias petition for disqualification of
Amora, the COMELEC ratiocinated, thus:
[Amora] himself admitted in his Motion that the Second Division was correct in pointing out that the
CTC is no longer a competent evidence of identity for purposes of notarization.
The COC therefore is rendered invalid when [petitioner] only presented his CTC to the notary
public. His defense that he is personally known to the notary cannot be given recognition because
the best proof [of] his contention could have been the COC itself. However, careful examination of
the jurat portion of the COC reveals no assertion by the notary public that he personally knew the
affiant, [petitioner] herein. Belated production of an Affidavit by the Notary Public cannot be given
weight because such evidence could and should have been produced at the earliest possible
opportunity.
The rules are absolute. Section 73 of the Election Code states:
"Section 73. Certificate of Candidacy. No person shall be eligible for any elective public
office unless he files asworn certificate of candidacy within the period fixed herein."
Under the 2004 Rules on Notarial Practice of 2004 (Rules), the requirements of notarization of an
oath are:
"Section 2. Affirmation or Oath. The term Affirmation or Oath refers to an act in which an
individual on a single occasion:
(a) appears in person before the notary public;
(b) is personally known to the notary public or identified by the notary public through
competent evidence of identity as defined by these Rules; and
(c) avows under penalty of law to the whole truth of the contents of the instrument or
document."
The required form of identification is prescribed in [S]ection 12 of the same Rules, to wit:
"Section 12. Competent Evidence of Identity. The phrase competent evidence of identity
refers to the identification of an individual based on:
(a) at least one current identification document issued by an official agency bearing the
photograph and signature of the individual. x x x."
It is apparent that a CTC, which bears no photograph, is no longer a valid form of identification for
purposes of Notarization of Legal Documents. No less than the Supreme Court itself, when it
revoked the Notarial Commission of a member of the Bar in Baylon v. Almo, reiterated this when it
said:
"As a matter of fact, recognizing the established unreliability of a community tax certificate in
proving the identity of a person who wishes to have his document notarized, we did not
include it in the list of competent evidence of identity that notaries public should use in
ascertaining the identity of persons appearing before them to have their documents
notarized."
Seeking other remedies, [Amora] maintained that Section 78 of the Election Code governs the
Petition. Said section provides that:
"Sec. 78. Petition to deny due course to or cancel a certificate of candidacy. A verified
petition seeking to deny due course or to cancel a certificate of candidacy may be filed by
the person exclusively on the ground that any material representation contained therein as
required under Section 74 hereof is false. The petition may be filed atany time not later than
twenty-five days from the time of the filing of the certificate of candidacy and shall be
decided, after due notice and hearing, not later than fifteen days before the election."
[Amora] however failed to note that the Petition relies upon an entirely different ground. The
Petition has clearly stated that it was invoking Section 73 of the Election Code, which prescribes
the mandatory requirement of filing a sworn certificate of candidacy. As properly pointed out by
[Olandria], he filed a Petition to Disqualify for Possessing Some Grounds for Disqualification,
which, is governed by COMELEC Resolution No. 8696, to wit:
"B. PETITION TO DISQUALIFY A CANDIDATE PURSUANT TO SECTION 68 OF THE
OMNIBUS ELECTION CODE AND PETITION TO DISQUALIFY FOR LACK OF
QUALIFICATIONS OR POSSESSING SOME GROUNDS FOR DISQUALIFICATION
1. A verified petition to disqualify a candidate pursuant to Section 68 of the OEC and the
verified petition to disqualify a candidate for lack of qualifications or possessing some
grounds for disqualification may be filed on any day after the last day for filing of certificates
of candidacy but not later than the date of proclamation;
x x x x
3. The petition to disqualify a candidate for lack of qualification or possessing some grounds
for disqualification, shall be filed in ten (10) legible copies, personally or through a duly
authorized representative, by any person of voting age, or duly registered political party,
organization or coalition of political parties on the ground that the candidate does not
possess all the qualifications as provided for by the Constitution or by existing law or who
possesses some grounds for disqualification as provided for by the Constitution or by
existing law."
x x x x
Finally, we do not agree with [Amora] when he stated that the Second Divisions Resolution
"practically supplanted congress by adding another ground for disqualification, not provided in the
omnibus election code or the local government code. The constitution is very clear that it is
congress that shall prescribe the qualifications (and disqualifications) of candidates for local
government positions." These grounds for disqualification were laid down in both laws mentioned
by [Amora] and COMELEC Resolution 8696.7
Hence, this petition for certiorari imputing grave abuse of discretion to the COMELEC. On June 15, 2010,
we issued a Status Quo Ante Order and directed respondents to comment on the petition. As directed,
Olandria and the COMELEC filed their respective Comments8 which uniformly opposed the petition.
Thereafter, Amora filed his Reply.9
Amora insists that the Petition for Disqualification filed by Olandria is actually a Petition to Deny Due
Course since the purported ground for disqualification simply refers to the defective notarization of the
COC. Amora is adamant that Section 73 of the OEC pertains to the substantive qualifications of a
candidate or the lack thereof as grounds for disqualification, specifically, the qualifications and
disqualifications of elective local officials under the Local Government Code (LGC) and the OEC. Thus,
Olandrias petition was filed way beyond the reglementary period of twenty-five (25) days from the date
of the filing of the disputed COC.
Moreover, Amora maintains that his COC is properly notarized and not defective, and the presentation of
his CTC to the notary public to whom he was personally known sufficiently complied with the
requirement that the COC be under oath. Amora further alleges that: (1) Olaivar, his opponent in the
mayoralty post, and likewise a member of the NPC, is purportedly a fraternity brother and close
associate of Nicodemo T. Ferrer (Commissioner Ferrer), one of the commissioners of the COMELEC
who disqualified him; and (2) Olaivar served as Consultant for the COMELEC, assigned to the Office of
Commissioner Ferrer.
Olandria and the COMELEC reiterated the arguments contained in the COMELEC en banc resolution of
May 17, 2010.
Amoras petition is meritorious.
We find that the COMELEC ruling smacks of grave abuse of discretion, a capricious and whimsical
exercise of judgment equivalent to lack of jurisdiction. Certiorari lies where a court or any tribunal, board,
or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction or
with grave abuse of discretion.10
In this case, it was grave abuse of discretion to uphold Olandrias claim that an improperly sworn COC is
equivalent to possession of a ground for disqualification. Not by any stretch of the imagination can we
infer this as an additional ground for disqualification from the specific wording of the OEC in Section 68,
which reads:
SEC. 68. Disqualifications. Any candidate who, in an action or protest in which he is party is
declared by final decision of a competent court guilty of, or found by the Commission of having: (a)
given money or other material consideration to influence, induce or corrupt the voters or public
officials performing electoral functions; (b) committed acts of terrorism to enhance his candidacy;
(c) spent in his election campaign an amount in excess of that allowed by this Code; (d) solicited,
received or made any contribution prohibited under Sections 89, 95, 96, 97 and 104; or (e) violated
any of Sections 80, 83, 85, 86, and 261, paragraphs d, e, k, v, and cc, sub-paragraph 6, shall be
disqualified from continuing as a candidate, or if he has been elected, from holding the office. Any
person who is a permanent resident of or an immigrant to a foreign country shall not be qualified to
run for any elective office under this Code, unless said person has waived his status as a
permanent resident or immigrant of a foreign country in accordance with the residence
requirement provided for in the elections laws.
and of Section 40 of the LGC, which provides:
SEC. 40. Disqualifications. The following persons are disqualified from running for any elective
local position:
(a) Those sentenced by final judgment for an offense involving moral turpitude or for an offense
punishable by one (1) year or more of imprisonment, within two (2) years after serving sentence;
(b) Those removed from office as a result of an administrative case;
(c) Those convicted by final judgment for violating the oath of allegiance to the Republic;
(d) Those with dual citizenship;
(e) Fugitives from justice in criminal or nonpolitical cases here or abroad;
(f) Permanent residents in a foreign country or those who have acquired the right to reside abroad
and continue to avail of the same right after the effectivity of this Code; and
(g) The insane or feeble-minded.
It is quite obvious that the Olandria petition is not based on any of the grounds for disqualification as
enumerated in the foregoing statutory provisions. Nowhere therein does it specify that a defective
notarization is a ground for the disqualification of a candidate. Yet, the COMELEC would uphold that
petition upon the outlandish claim that it is a petition to disqualify a candidate "for lack of qualifications or
possessing some grounds for disqualification."
The proper characterization of a petition as one for disqualification under the pertinent provisions of laws
cannot be made dependent on the designation, correctly or incorrectly, of a petitioner. The absurd
interpretation of Olandria, respondent herein, is not controlling; the COMELEC should have dismissed
his petition outright.
A petition for disqualification relates to the declaration of a candidate as ineligible or lacking in quality or
accomplishment fit for the position of mayor. The distinction between a petition for disqualification and
the formal requirement in Section 73 of the OEC that a COC be under oath is not simply a question of
semantics as the statutes list the grounds for the disqualification of a candidate.
Recently, we have had occasion to distinguish the various petitions for disqualification and clarify the
grounds therefor as provided in the OEC and the LGC. We declared, thus:
To emphasize, a petition for disqualification on the one hand, can be premised on Section 12 or 68
of the OEC, or Section 40 of the LGC. On the other hand, a petition to deny due course to or
cancel a CoC can only be grounded on a statement of a material representation in the said
certificate that is false. The petitions also have different effects. While a person who is disqualified
under Section 68 is merely prohibited to continue as a candidate, the person whose certificate is
cancelled or denied due course under Section 78 is not treated as a candidate at all, as if he/she
never filed a CoC. Thus, in Miranda v. Abaya, this Court made the distinction that a candidate who
is disqualified under Section 68 can validly be substituted under Section 77 of the OEC because
he/she remains a candidate until disqualified; but a person whose CoC has been denied due
course or cancelled under Section 78 cannot be substituted because he/she is never considered a
candidate.11
Apart from the qualifications provided for in the Constitution, the power to prescribe additional
qualifications for elective office and grounds for disqualification therefrom, consistent with the
constitutional provisions, is vested in Congress.12 However, laws prescribing qualifications for and
disqualifications from office are liberally construed in favor of eligibility since the privilege of holding an
office is a valuable one.13 We cannot overemphasize the principle that where a candidate has received
popular mandate, all possible doubts should be resolved in favor of the candidates eligibility, for to rule
otherwise is to defeat the will of the people.14
In stark contrast to the foregoing, the COMELEC allowed and confirmed the disqualification of Amora
although the latter won, and was forthwith proclaimed, as Mayor of Candijay, Bohol.
Another red flag for the COMELEC to dismiss Olandrias petition is the fact that Amora claims to
personally know the notary public, Atty. Granada, before whom his COC was sworn. In this regard, the
dissenting opinion of Commissioner Larrazabal aptly disposes of the core issue:
With all due respect to the well-written Ponencia, I respectfully voice my dissent. The primary issue
herein is whether it is proper to disqualify a candidate who, in executing his Certificate of
Candidacy (COC), merely presented to the Notary Public his Community Tax Certificate.
The majority opinion strictly construed the 2004 Rules on Notarial Practice (the "2004 Notarial
Rules") when it provided that valid and competent evidence of identification must be presented to
render Sergio G. Amora, Jr.s [petitioners] COC valid. The very wording of the 2004 Notarial Rules
supports my view that the instant motion for reconsideration ought to be granted, to wit:
Section 2. Affirmation or Oath . The term "Affirmation" or "Oath" refers to an act in which
an individual on a single occasion:
(a) appears in person before the notary public;
(b) is personally known to the notary public or identified by the notary public through
competent evidence of identity as defined by these Rules; and
(c) avows under penalty of law to the whole truth of the contents of the instrument or
document.
As quoted supra, competent evidence of identity is not required in cases where the affiant is
personally known to the Notary Public, which is the case herein. The records reveal that [petitioner]
submitted to this Commission a sworn affidavit executed by Notary Public Oriculo A. Granada
(Granada), who notarized [petitioners] COC, affirming in his affidavit that he personally knows
[petitioner].
[Respondent], on the other hand, presented no evidence to counter Granadas declarations.
Hence, Granada[s] affidavit, which narrates in detail his personal relation with [petitioner], should
be deemed sufficient.
The purpose of election laws is to give effect to, rather than frustrate, the will of the voters. The
people of Candijay, Bohol has already exercised their right to suffrage on May 10, 2010 where
[petitioner] was one of the candidates for municipal mayor. To disqualify [petitioner] at this late
stage simply due to an overly strict reading of the 2004 Notarial Rules will effectively deprive the
people who voted for him their rights to vote.
The Supreme Courts declaration in Petronila S. Rulloda v. COMELEC et al. must not be taken
lightly:
Technicalities and procedural niceties in election cases should not be made to stand in the
way of the true will of the electorate. Laws governing election contests must be liberally
construed to the end that the will of the people in the choice of public officials may not be
defeated by mere technical objections.
Election contests involve public interest, and technicalities and procedural barriers must yield if
they constitute an obstacle to the determination of the true will of the electorate in the choice of
their elective officials. The Court frowns upon any interpretation of the law that would hinder in any
way not only the free and intelligent casting of the votes in an election but also the correct
ascertainment of the results.15
Our ruling herein does not do away with the formal requirement that a COC be sworn. In fact, we
emphasize that the filing of a COC is mandatory and must comply with the requirements set forth by
law.16
Section 2 of the 2004 Rules on Notarial Practice lists the act to which an affirmation or oath refers:
Sec. 2. Affirmation or Oath. The term "Affirmation" or "Oath" refers to an act in which an
individual on a single occasion:
(a) appears in person before the notary public;
(b) is personally known to the notary public or identified by the notary public through competent
evidence of identity as defined by these Rules; and
(c) avows under penalty of law to the whole truth of the contents of the instrument or document.
In this case, however, contrary to the declarations of the COMELEC, Amora complied with the
requirement of a sworn COC. He readily explained that he and Atty. Granada personally knew each
other; they were not just colleagues at the League of Municipal Mayors, Bohol Chapter, but they
consider each other as distant relatives. Thus, the alleged defect in the oath was not proven by Olandria
since the presentation of a CTC turned out to be sufficient in this instance. On the whole, the COMELEC
should not have brushed aside the affidavit of Atty. Granada and remained inflexible in the face of
Amoras victory and proclamation as Mayor of Candijay, Bohol.
WHEREFORE, the petition is GRANTED. The Resolutions of the Commission on Elections in SPA No.
10-046 (DC) dated April 29, 2010 and May 17, 2010, respectively, are ANULLED and SET ASIDE.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO
Associate Justice
CONCHITA CARPIO MORALES
Associate Justice
No part due to relationship to a party
PRESBITERO J. VELASCO, JR.
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
ARTURO D. BRION
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
(on leave)
LUCAS P. BERSAMIN*
Associate Justice
MARIANO C. DEL CASTILLO
Associate Justice
ROBERTO A. ABAD
Associate Justice
MARTIN S. VILLARAMA, JR.
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
JOSE CATRAL MENDOZA
Associate Justice
MA. LOURDES P.A. SERENO
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court.
RENATO C. CORONA
Chief Justice
Footnotes
* On leave.
1 Rollo, pp. 59-64.
2 Id. at 65-72.
3 Id. at 96-102.
4 Id. at 115-136.
5 Id. at 77-78.
6 Id. at 144.
7 Id. at 68-72.
8 Id. at 161-172, 180-190.
9 Id. at 204-227.
10 RULES OF COURT, Rule 65, Sec. 1 .
11 Fermin v. COMELEC, G.R. Nos. 179695 and 182369, December 18, 2008, 574 SCRA 782, 796.
12 Dumlao v. COMELEC, 184 Phil. 369 (1980).
13 Agpalo, Comments on the Omnibus Election Code (2004), p. 144.
14 OHara v. COMELEC, G.R. Nos. 148941-42, March 12, 2002, 379 SCRA 247.
15 Rollo, pp. 73-75.
16 Omnibus Election Code, Secs. 73-74.
SIMON DE LA CRUZ, plaintiff-appellee, vs. THE CAPITAL INSURANCE & SURETY
CO., INC., defendant-appellant.
1966-06-30 | G.R. No. L-21574
EN BANC
D E C I S I O N
BARRERA, J.:
This is an appeal by the Capital Insurance & Surety Company, Inc., from the decision of the court of First
Instance of Pangasinan (in Civ. Case No. U-265), ordering it to indemnify therein plaintiff Simon de la
Cruz for the death of the latter's son, to pay the burial expenses, and attorney's fees.
Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines, Inc. in Baguio, was the holder of
an accident insurance policy (No. ITO-BFE-170) underwritten by the Capital Insurance & Surety Co.,
Inc., for the period beginning November 13, 1956 to November 12, 1957. On January 1, 1957, in
connection with the celebration of the New Year, the Itogon-Suyoc Mines, Inc. sponsored a boxing
contest for general entertainment wherein the insured Eduardo de la Cruz, a non- professional boxer,
participated. In the course of his bout with another person, likewise a non-professional, of the same
height, weight, and size, Eduardo slipped and was hit by his opponent on the left part of the back of the
head, causing Eduardo to fall, with his head hitting the rope of the ring. He was brought to the Baguio
General Hospital unconscious, where the insured expired on the following day. The cause of death was
reported as hemorrhage, intracranial, left.
Simon de la Cruz, the father of the insured and who was named beneficiary under the policy, thereupon
filed a claim with the insurance company for payment of indemnity under the insurance policy. As the
claim was denied, De la Cruz instituted the action in the Court of First Instance of Pangasinan for
specific performance. Defendant insurer set up the defense that the death of the insured, caused by his
participation in a boxing contest, was not accidental and, therefore, not covered by insurance. After due
hearing, the court rendered the decision in favor of the plaintiff which is the subject of the present appeal.
It is not disputed that during the ring fight with another non- professional boxer, Eduardo slipped, which
was unintentional. At this opportunity, his opponent landed on Eduardo's head a blow, which sent the
latter to the ropes. That must have caused the cranial injury that led to his death. Eduardo was insured
"against death or disability caused by accidental means". Appellant insurer now contends that while the
death of the insured was due to head-injury, said injury was sustained because of his voluntary
participation in the contest. It is claimed that the participation in the boxing contest was the "means" that
produced the injury which, in turn, caused in caused the death of the insured. And, since his inclusion in
the boxing card was voluntary on the part of the insured, he cannot be considered to have met his death
by "accidental means".
The terms "accident" and "accidental", as used in insurance contracts, have not acquired any technical
meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms
have been taken to mean that which happen by chance or fortuitously, without intention and design, and
which is unexpected, unusual, and unforeseen. An accident is an event that takes place without one's
foresight or expectation - an event that proceeds from an unknown cause, or is an unusual effect of a
known cause and, therefore, not expected. 1
Appellant, however, would like to make a distinction between "accident or accidental" and "accidental
means", which is the term used in the insurance policy involved here. It is argued that to be considered
within the protection of the policy, what is required to be accidental is the means that caused or brought
the death and not the death itself. It may be mentioned in this connection, that the tendency of court
decisions in the United States in the recent years is to eliminate the fine distinction between the terms
"accidental" and "accidental means" and to consider them as legally synonymous. 2 But, even if we take
appellant's theory, the death of the insured in the case at bar would still be entitled to indemnification
under the policy. The generally accepted rule is that, death or injury does not result from accident or
accidental means within the terms of an accident-policy if it is the natural result of the insured's voluntary
act, unaccompanied by anything unforeseen except the death or injury. 3 There is no accident when a
deliberate act is performed unless some additional, unexpected, independent, and unforeseen
happening occurs which produces or brings about the result of injury or death. 4 In other words, where
the death or injury is not the natural or probable result of the insured's voluntary act which produces the
injury, the resulting death is within the protection of policies insuring against the death or injury from
accident.
In the present case, while the participation of the insured in the boxing contest is voluntary, the injury
was sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw him to
the ropes of the ring. Without this unfortunate incident, that is, the unintentional slipping of the deceased,
perhaps he could not have received that blow in the head and would not have died. The fact that boxing
is attended with some risks of external injuries does not make any injuries received in the course of the
game not accidental. In boxing, as in other equally physically rigorous sports, such as basketball or
baseball, death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death can
only be accidental or produced by some unforeseen happening or event as what occurred in this case.
Furthermore, the policy involved herein specifically excluded from its coverage -
"(e) Death or disablement consequent upon the Insured engaging in football, hunting, pigsticking,
steeplechasing, polo-playing, racing of any kind, mountaineering, or motorcycling."
Death or disablement resulting from engagement in boxing contests was not declared outside of the
protection of the insurance contract. Failure of the defendant insurance company to include death
resulting from a boxing match or other sports among the prohibitive risks leads inevitably to the
conclusion that it did not intend to limit or exempt itself from liability for such death. 5
WHEREFORE, in view of the foregoing considerations, the decision appealed from is hereby affirmed,
with costs against appellant. so ordered.
Concepcion, C.J., J.B.L. Reyes, Dizon, Regala, Makalintal, J.P. Bengzon, Zaldivar and Sanchez, JJ.,
concur.
Footnotes
1. 29 A Am. Jur. pp. 308-309, and cases cited therein.
2. Traveler's Protective Association v. Stephens, 185 Ark. 660, 49 S.W. (2d) 364; Equitable Life Assur. v.
Hemenover, 100 Colo. 231, 67 P. (2d) 80, 110 ALR 1270; see cases cited in 29 A Am. Jur. sec. 1166.
3. Landress v. Phoenix Mut. Life Ins. Co., 291 U.S. 291, 78 L. ed. 934, 54 S. Ct. 461, 90 ALR 1382;
Davis v. Jefferson Standard Life Ins. Co., 73 F (2d) 330, 96 ALR 599, and others.
4. Evans v. Metropolitan Life Ins. Co., 26 Wash. (2d) 594, 174 P. (2d) 961.
5. Brams v. New York Life Ins. Co., 299 Pa. 11, 148 Atl. 855; Jolley v. Jefferson Standard Life Ins. Co.,
95 Wash. 683, 294 Pac. 585.
QUA CHEE GAN, plaintiff-appellee, vs. LAW UNION AND ROCK INSURANCE CO.,
LTD., represented by its agent, WARNER, BARNES AND CO., LTD.,
defendant-appellant.
1955-12-17 | G.R. No. L-4611
EN BANC
D E C I S I O N
REYES, J. B. L., J.:
Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in the Court of First Instance of said
province, seeking to recover the proceeds of certain fire insurance policies totalling P370,000, issued by
the Law Union & Rock Insurance Co., Ltd., through its agent, Warner, Barnes & Co., Ltd., upon certain
bodegas and merchandise of the insured that were burned on June 21, 1940. The records of the original
case were destroyed during the liberation of the region, and were reconstituted in 1946. After a trial that
lasted several years, the Court of First Instance rendered a decision in favor of the plaintiff, the
dispositive part whereof reads as follows:
"Wherefore, judgment is rendered for the plaintiff and against the defendant condemning the latter to pay
the former -
(a) Under the first cause of action, the sum of P146,394.48;
(b) Under the second cause of action, the sum of P150,000;
(c ) Under the third cause of action, the sum of P5,000;
(d) Under the fourth cause of action, the sum of P15,000; and
(e) Under the fifth cause of action, the sum of P40,000;
all of which shall bear interest at the rate of 80% per annum in accordance with Section 91 (b) of the
Insurance Act from September 26, 1940, until each is paid, with costs against the defendant.
The complaint in intervention of the Philippine National Bank is dismissed without costs." (Record on
Appeal, 166-167.)
From the decision, the defendant Insurance Company appealed directly to this Court.
The record shows that before the last war, plaintiff-appellee owned four warehouses or bodegas
(designated as Bodegas nos. 1 to 4) in the municipality of Tabaco, Albay, used for the storage of stocks
of copra and of hemp, baled and loose, in which the appellee dealt extensively. They had been, with
their contents, insured with the defendant Company since 1937, and the lose made payable to the
Philippine National Bank as mortgage of the hemp and copra, to the extent of its interest. On June, 1940,
the insurance stood as follows:
Policy No.Property InsuredAmount2637164 (Exhibit "LL")Bodega No. 1 (Building)P15,000.002637165
(Exhibit "JJ")Bodega No. 2 (Building)10,000.00Bodega No. 3 (Building)25,000.00Bodega No. 4
(Building)10,000.00Hemp Press moved by steam engine5,000.002637345 (Exhibit "X")Merchandise
contents (copra and empty sacks of Bodega No. 1)150,000.002637346 (Exhibit "Y")Merchandise
contents (hemp) of Bodega No. 3150,000.002637067 (Exhibit "GG")Merchandise contents (loose hemp)
of Bodega No. 45,000.00Total
P370,000.00
Fire of undetermined origin that broke out in the early morning of July 21, 1940, and lasted almost one
week, gutted and completely destroyed Bodegas Nos. 1, 3 and 4, with the merchandise stored therein.
Plaintiff-appellee informed the insurer by telegram on the same date; and on the next day, the fire
adjusters engaged by appellant insurance company arrived and proceeded to examine and photograph
the premises, pored over the books of the insured and conducted an extensive investigation. The plaintiff
having submitted the corresponding fire claims, totalling P398,562.81 (but reduced to the full amount of
the insurance, P370,000), the Insurance Company resisted payment, claiming violation of warranties and
conditions, filing of fraudulent claims, and that the fire had been deliberately caused by the insured or by
other persons in connivance with him.
With counsel for the insurance company acting as private prosecutor, Qua Chee Gan, with his brother,
Qua Chee Pao, and some employees of his, were indicted and tried in 1940 for the crime of arson, it
being claimed that they had set fire to the destroyed warehouses to collect the insurance. They were,
however, acquitted by the trial court in a final decision dated July 9, 1941 (Exhibit WW). Thereafter, the
civil suit to collect the insurance money proceeded to its trial and termination in the Court below, with the
result noted at the start of this opinion. The Philippine National Bank's complaint in intervention was
dismissed because the appellee had managed to pay his indebtedness to the Bank during the pendency
of the suit, and despite the fire losses.
In its first assignment of error, the insurance company alleges that the trial Court should have held that
the policies were avoided for breach of warranty, specifically the one appearing on a rider pasted (with
other similar riders) on the face of the policies (Exhibits X, Y, JJ and LL). These riders were attached for
the first time in 1939, and the pertinent portions read as follows:
"Memo. of Warranty. - The undernoted Appliances for the extinction of fire being kept on the premises
insured hereby, and it being declared and understood that there is an ample end constant water supply
with sufficient pressure available at all seasons for the same, it is hereby warranted that the said
appliances shall be maintained in efficient working order during the currency of this policy, by reason
whereof a discount of 2 1/2 per cent is allowed on the premium chargeable under this policy.
Hydrants in the compound, not less in number than one for each 150 feet of external wall measurement
of buildings, protected, with not less than 100 feet of hose piping and nozzles for every two hydrants kept
under cover in convenient places, the hydrants being supplied with water pressure by a pumping engine,
or from some other source, capable of discharging at the rate of not less than 200 gallons of water per
minute into the upper story of the highest building protected, and a trained brigade of not less than 20
men to work the same.'"
It is argued that since the bodegas insured had an external wall perimeter of 500 meters or 1,640 feet,
the appellee should have eleven (11) fire hydrants in the compound, and that he actually had only two
(2), with a further pair nearby, belonging to the municipality of Tabaco.
We are in agreement with the trial Court that the appellant is barred by waiver (or rather estoppel) to
claim violation of the so- called fire hydrants warranty, for the reason that knowing fully all that the
number of hydrants demanded therein never existed from the very beginning, the appellant nevertheless
issued the policies in question subject to such warranty, and received the corresponding premiums. It
would be perilously close to conniving at fraud upon the insured to allow appellant to claims now as void
ab initio the policies that it had issued to the plaintiff without warning of their fatal defect, of which it was
informed, and after it had misled the defendant into believing that the policies were effective.
The insurance company was aware, even before the policies were issued, that in the premises insured
there were only two fire hydrants installed by Qua Chee Gan and two others nearby, owned by the
municipality of Tabaco, contrary to the requirements of the warranty in question. Such fact appears from
positive testimony for the insured that appellant's agents inspected the premises; and the simple denials
of appellant's representative (Jamiczon) can not overcome that proof. That such inspection was made is
moreover rendered probable by its being a prerequisite for the fixing of the discount on the premium to
which the insured was entitled, since the discount depended on the number of hydrants, and the fire
fighting equipment available (See "Scale of Allowances" to which the policies were expressly made
subject). The law, supported by a long line of cases, is expressed by American Jurisprudence (Vol. 29,
pp. 611-612) to be as follows:
"It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has
knowledge of existing facts which, if insisted on, would invalidate the contract from its very inception,
each knowledge constitutes a waiver of conditions in the contract inconsistent with the known facts, and
the insurer is stopped thereafter from asserting the breach of such conditions. The law is charitable
enough to assume, in the absence of any showing to the contrary, that an insurance company intends to
execute a valid contract in return for the premium received; and when the policy contains a condition
which renders it voidable at its inception, and this result is known to the insurer, it will be presumed to
have intended to waive the conditions and to execute a binding contract, rather than to have deceived
the insured into thinking he is insured when in fact he is not, and to have taken his money without
consideration." (29 Am. Jur., Insurance, section 807, at pp. 611-612.)
The reason for the rule is not difficult to find.
"The plain, human justice of this doctrine is perfectly apparent. To allow a company to accept one's
money for a policy of insurance which it then knows to be void and of no effect, though it knows as it
must, that the assured believes it to be valid and binding, is so contrary to the dictates of honesty and
fair dealing, and so closely related to positive fraud, as to be abhorrent to fairminded men. It would be to
allow the company to treat the policy as valid long enough to get the premium on it, and leave it at liberty
to repudiate it the next moment. This cannot be deemed to be the real intention of the parties. To hold
that a literal construction of the policy expressed the true intention of the company would be to indict it,
for fraudulent purposes and designs which we cannot believe it to be guilty of" (Wilson vs. Commercial
Union Assurance Co., 96 Atl. 540, 543-544).
The inequitableness of the conduct observed by the insurance company in this case is heightened by the
fact that after the insured had incurred the expense of installing the two hydrants, the company collected
the premiums and issued him a policy so worded that it gave the insured a discount much smaller than
that he was normally entitled to. According to the "Scale of Allowances," a policy subject to a warranty of
the existence of one fire hydrant for every 150 feet of external wall entitled the insured to a discount of 7
1/2 per cent of the premium; while the existence of "hydrants, in compound" (regardless of number)
reduced the allowance on the premium to a mere 2 1/2 per cent. This schedule was logical, since a
greater number of hydrants and fire fighting appliances reduced the risk of loss. But the appellant
company, in the particular case now before us, so worded the policies that while exacting the greater
number of fire hydrants and appliances, it kept the premium discount at the minimum of 2 1/2 per cent,
thereby giving the insurance company a double benefit. No reason is shown why appellant's premises,
that had been insured with appellant for several years past, suddenly should be regarded in 1939 as so
hazardous as to be accorded a treatment beyond the limits of appellant's own scale of allowances. Such
abnormal treatment of the insured strongly points at an abuse of the insurance company's selection of
the words and terms of the contract, over which it had absolute control.
These considerations lead us to regard the parol evidence rule, invoked by the appellant as not
applicable to the present case. It is not a question here whether or not the parties may vary a written
contract by oral evidence; but whether testimony is receivable so that a party may be, by reason of
inequitable conduct shown, estopped from enforcing forfeitures in its favor, in order to forestall fraud or
imposition on the insured.
"Receipt of Premiums or Assessments after Cause for Forfeiture Other than Nonpayment. - It is a well
settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in
force, receives and accepts a premium on the policy, estopped to take advantage of the forfeiture. It
cannot treat the policy as void for the purpose of defense to an action to recover for a loss thereafter
occurring and at the same time treat it as valid for the purpose of earning and collecting further
premiums." (29 Am. Jur., 653, p. 657.)
"It would be unconscionable to permit a company to issue a policy under circumstances which it knew
rendered the policy void and then to accept and retain premiums under such a void policy. Neither law
nor good morals would justify such conduct and the doctrine of equitable estoppel is peculiarly applicable
to the situation." (McGuire vs. Home Life Ins. Co. 94 Pa. Super Ct. 457.)
Moreover, taking into account the well known rule that ambiguities or obscurities must be strictly
interpreted against the party that caused them, 1 the "memo of warranty" invoked by appellant bars the
latter from questioning the existence of the appliances called for in the insured premises, since its initial
expression, "the undernoted appliances for the extinction of fire being kept on the premises insured
hereby, . . . it is hereby warranted . . . ", admits of interpretation as an admission of the existence of such
appliances which appellant cannot now contradict, should the parol evidence rule apply.
The alleged violation of the warranty of 100 feet of fire hose for every two hydrants, must be equally
rejected, since the appellant's argument thereon is based on the assumption that the insured was bound
to maintain no less than eleven hydrants (one per 150 feet of wall), which requirement appellant is
estopped from enforcing. The supposed breach of the water pressure condition is made to rest on the
testimony of witness Serra, that the water supply could fill a 5-gallon can in 3 seconds; appellant
thereupon inferring that the maximum quantity obtainable from the hydrants was 100 gallons a minute,
when the warranty called for 200 gallons a minute. The transcript shows, however, that Serra repeatedly
refused and professed inability to estimate the rate of discharge of the water, and only gave the "5-gallon
per 3-second" rate because the insistence of appellant's counsel forced the witness to hazard a guess.
Obviously, the testimony is worthless and insufficient to establish the violation claimed, specially since
the burden of its proof lay on appellant.
As to maintenance of a trained fire brigade of 20 men, the record is preponderant that the same was
organized, and drilled, from time to give, altho not maintained as a permanently separate unit, which the
warranty did not require. Anyway, it would be unreasonable to expect the insured to maintain for his
compound alone a fire fighting force that many municipalities in the Islands do not even possess. There
is no merit in appellant's claim that subordinate membership of the business manager (Co Cuan) in the
fire brigade, while its direction was entrusted to a minor employee, renders the testimony improbable. A
business manager is not necessarily adept at fire fighting, the qualities required being different for both
activities.
Under the second assignment of error, appellant insurance company avers that the insured violated the
"Hemp Warranty" provisions of Policy No. 2637165 (Exhibit JJ), against the storage of gasoline, since
appellee admitted that there were 36 cans (latas) of gasoline in the building designed as "Bodega No. 2"
that was a separate structure not affected by the fire. It is well to note that gasoline is not specifically
mentioned among the prohibited articles listed in the so- called "hemp warranty." The cause relied upon
by the insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid products having
a flash point below 300 Fahrenheit", and is decidedly ambiguous and uncertain; for in ordinary
parlance, "Oils" mean "lubricants" and not gasoline or kerosene. And how many insured, it may well be
wondered, are in a position to understand or determine "flash point below 003 Fahrenheit. Here,
again, by reason of the exclusive control of the insurance company over the terms and phraseology of
the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured,
specially to avoid a forfeiture (44 C. J. S., pp. 1166-1175; 29 Am. Jur. 180).
"Insurance is, in its nature, complex and difficult for the layman to understand. Policies are prepared by
experts who know and can anticipate the bearing and possible complications of every contingency. So
long as insurance companies insist upon the use of ambiguous, intricate and technical provisions, which
conceal rather than frankly disclose, their own intentions, the courts must, in fairness to those who
purchase insurance, construe every ambiguity in favor of the insured." (Algoe vs. Pacific Mut. L. Ins. Co.,
91 Wash. 324, LRA 1917A, 1237.)
"An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very
purpose for which the policy was procured" (Moore vs. Aetna Life Insurance Co., LRA 1915D, 264).
We see no reason why the prohibition of keeping gasoline in the premises could not be expressed
clearly and unmistakably, in the language and terms that the general public can readily understand,
without resort to obscure esoteric expression (now derisively termed "gobbledygook"). We reiterate the
rule stated in Bachrach vs. British American Assurance Co. (17 Phil. 555, 561):
"If the company intended to rely upon a condition of that character, it ought to have been plainly
expressed in the policy."
This rigid application of the rule on ambiguities has become necessary in view of current business
practices. The courts cannot ignore that nowadays monopolies, cartels and concentrations of capital,
endowed with overwhelming economic power, manage to impose upon parties dealing with them
cunningly prepared "agreements" that the weaker party may not change one whit, his participation in the
"agreement" being reduced to the alternative to take it or leave it" labelled since Raymond Baloilles
"contracts by adherence" (con tracts d'adhesion), in contrast to these entered into by parties bargaining
on an equal footing, such contracts (of which policies of insurance and international bills of lading are
prime examples) obviously call for greater strictness and vigilance on the part of courts of justice with a
view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the
unwarry (New Civil Code, Article 24; Sent. of Supreme Court of Spain, 13 Dec. 1934, 27 February 1942).
"Si pudiera estimarse que la condicion 18 de la poliza de seguro envolvia alguna oscuridad, habra de
ser tenido en cuenta que al seguro es, praticamente un contrato de los llamados de adhesion y por
consiguiente en caso de duda sobre la significacion de las clausulas generales de una poliza -
redactada por las compafiias sin la intervencion alguna de sus clientes - se ha de adoptar de acuerdo
con el articulo 1268 del Codigo Civil, la interpretacion mas favorable al asegurado, ya que la obscuridad
es imputable a la empresa aseguradora, que debia haberse explicado mas claramante." (Dec. Trib. Sup.
of Spain 13 Dec. 1934).
The contract of insurance is one of perfect good faith (ufferrimal fidei) not for the insured alone, but
equally so for the insurer; in fact, it is mere so for the latter, since its dominant bargaining position carries
with it stricter responsibility.
Another point that is in favor of the insured is that the gasoline kept in Bodega No. 2 was only incidental
to his business, being no more than a customary 2 day's supply for the five or six motor vehicles used for
transporting of the stored merchandise (t.s.n., pp. 1447-1448). "It is well settled that the keeping of
inflammable oils on the premises, though prohibited by the policy, does not void it if such keeping is
incidental to the business." Bachrach vs. British American Ass. Co., 17 Phil. 555, 560); and "according to
the weight of authority, even though there are printed prohibitions against keeping certain articles on the
insured premises the policy will not be avoided by a violation of these prohibitions, if the prohibited
articles are necessary or in customary use in carrying on the trade or business conducted on the
premises." (45 C. J. S., p. 311; also 4 Couch on Insurance, section 966b). It should also be noted that
the "Hemp Warranty" forbade storage only "in the building to which this insurance applies and/or in any
building communicating therewith", and it is undisputed that no gasoline was stored in the burned
bodegas, and that "Bodega No. 2" which was not burned and where the gasoline was found, stood
isolated from the other insured bodegas.
The charge that the insured failed or refused to submit to the examiners of the insurer the books,
vouchers, etc. demanded by them was found unsubstantiated by the trial Court, and no reason has been
shown to alter this finding. The insured gave the insurance examiner all the data he asked for (Exhibits
AA, BB, CCC and Z), and the examiner even kept and photographed some of the examined books in his
possession. What does appear to have been rejected by the insured was the demand that he should
submit "a list of all books, vouchers, receipts and other records" (Page 4, Exhibit 9-c); but the refusal of
the insured in this instance was well justified, since the demand for a list of all the vouchers (which were
not in use by the insured) and receipts was positively unreasonable, considering that such listing was
superfluous because the insurer was not denied access to the records, that the volume of Qua Chee
Gan's business ran into millions, and that the demand was made just after the fire when everything was
in turmoil. That the representatives of the insurance company were able to secure all the data they
needed is proved by the fact that the adjuster Alexander Stewart was able to prepare his own balance
sheet (Exhibit L of the criminal case) that did not differ from that submitted by the insured (Exhibit J)
except for the valuation of the merchandise, as expressly found by the Court in the criminal case for
arson. (Decision, Exhibit WW).
How valuations may differ honestly, without fraud being involved, was strikingly illustrated in the decision
of the arson case (Exhibit WW) acquitting Qua Choc Gan, appellee in the present proceedings. The
decision states (Exhibit WW, p. 11):
"Alexander D. Stewart declaro que ha examinado los libros de Qua Choc Gan en Tabaco asi como su
existencia de copra y abaca en las bodegas al tiempo del incendio durante el periodo comprendido
desde el 1.o de enero al 21 de junio de 1940 y ha encontrado que Qua Choc Gan ha sufrido una perdida
de P1,750.76 en su negocio en Tabaco. Segun Stewart al llegar a este conclusion el ha tenido en
cuenta el balance de comprobacion Exhibit `J' que le ha entregado el mismo acusado Que Choc Gan en
relacion con sus libros y lo ha encontrado correcto a excepcion de los precios de abaca y copra que alli
aparecen que no estan de acuerdo con los precios en el mercado. Esta comprobacion aparece en el
balance mercado exhibit J que fue preparado por al mismo testigo."
In view of the discrepancy in the valuations between the insured and the adjuster Stewart for the insurer,
the Court referred the controversy to a government auditor, Apolonio Ramos; but the latter reached a
different result from the other two. Not only that, but Ramos reported two different valuations that could
be reached according to the methods employed (Exhibit WW, p. 35):
"La ciencia de la contabilidad es buena, pues ha tenido sus muchos usos buenos para promover el
comercio y la finanza, pero en el caso presente ha resultado un tanto cumplicada y acomodaticia, como
lo prueba el resultado del examen hecho por los contadores Stewart y Ramos, pues el juzgado no
alcanza a ver como habiendo examinado las mismas partidas y los mismos libros dichos contadores
hayan de llegara dos conclusiones que difieron sustancialmente entre si. En otras palabras, no
solamente la comprobacion hecha por Stewart difiere de la comprobacion hecha por Ramos sino que,
segun este ultimo, su comprobacion ha dado lugar a dos resultados diferentes dependiendo del metodo
que se emplea."
Clearly then, the charge of fraudulent overvaluation cannot be seriously entertained. The insurer
attempted to bolster its case with alleged photographs of certain pages of the insurance book (destroyed
by the war) of insured Qua Chee Gan (Exhibits 26-A and 26-B) and allegedly showing abnormal
purchases of hemp and copra from June 11 to June 20, 1940. The Court below remained unconvinced
of the authenticity of those photographs, and rejected them, because they were not mentioned nor
introduced in the criminal case; and considering the evident importance of said exhibits in establishing
the motive of the insured in committing the arson charged, and the absence of adequate explanation for
their omission in the criminal case, we cannot say that their rejection in the civil case constituted
reversible error.
The next two defenses pleaded by the insurer, - that the insured connived at the loss and that he
fraudulently inflated the quantity of the insured stock in the burnt bodegas, - are closely related to each
other. Both defenses are predicted on the assumption that the insured was in financial difficulties and set
the fire to defraud the insurance company, presumably in order to pay off the Philippine National Bank,
to which most of the insured hemp and copra was pledged. Both defenses are fatally undermined by the
established fact that, notwithstanding the insurer's refusal to pay the value of the policies the extensive
resources of the insured (Exhibit WW) enabled him to pay off the National Bank in a short time; and if he
was able to do so, no motive appears for attempt to defraud the insurer. While the acquittal of the
insured in the arson case is not res judicata on the present civil action, the insurer's evidence, to judge
from the decision in the criminal case, is practically identical in both cases and must lead to the same
result, since the proof to establish the defense of connivance at the fire in order to defraud the insurer
"cannot be materially less convincing than that required in order to convict the insured of the crime of
arson" (Bachrach vs. British American Assurance Co., 17 Phil. 536).
As to the defense that the burned bodegas could not possibly have contained the quantities of copra and
hemp stated in the fire claims, the insurer's case rests almost exclusively on the estimates, inferences
and conclusions of its adjuster investigator, Alexander D. Stewart, who examined the premises during
and after the fire. His testimony, however, was based on inferences from the photographs and traces
found after the fire, and must yield to the contradictory testimony of engineer Andres Bolinas, and
specially of the then Chief of the Loan Department of the National Bank's Legaspi branch, Porfirio
Barrios, and of Bank Appraiser Loreto Samson, who actually saw the contents of the bodegas shortly
before the fire, while inspecting them for the mortgagee Bank. The lower Court was satisfied of the
veracity and accuracy of these witnesses, and the appellant insurer has failed to substantiate its charges
against their character. In fact, the insurer's repeated accusations that these witnesses were later
"suspended for fraudulent transactions" without giving any details, is a plain attempt to create prejudice
against them, without the least support in fact.
Stewart himself, in testifying that it is impossible to determine from the remains the quantity of hemp
burned (t. s. n., pp. 1468, 1470), rebutted appellant's attacks on the refusal of the Court below to accept
its inferences from the remains shown in the photographs of the burned premises. It appears, likewise,
that the adjuster's calculations of the maximum contents of the destroyed warehouses rested on the
assumption that all the copra and hemp were in sacks, and on the result of his experiments to determine
the space occupied by definite amounts of sacked copra. The error in the estimates thus arrived at
proceeds from the fact that a large amount of the insured's stocks were in loose form, occupying less
space than when kept in sacks; and from Stewart's obvious failure to give due allowance for the
compression of the material at the bottom of the piles (t. s. n., pp. 1964, 1967) due to the weight of the
overlying stock, as shown by engineer Bolinas. It is probable that the errors were due to inexperience
(Stewart himself admitted that this was the first copra fire he had investigated); but it is clear that such
errors render valueless Stewart's computations. These were in fact twice passed upon and twice
rejected by different judges (in the criminal and civil cases) and their concordant opinion is practically
conclusive.
The adjusters' reports, Exhibits 9-A and 9-B, were correctly disregarded by the Court below, since the
opinions stated therein were based on ex parte investigations made at the back of the insured; and the
appellant did not present at the trial the original testimony and documents from which the conclusions in
the report were drawn.
Appellant insurance company also contends that the claims filed by the insured contained false and
fraudulent statements that avoided the insurance policy. But the trial Court found that the discrepancies
were a result of the insured's erroneous interpretation of the provisions of the insurance policies and
claim forms, caused by his imperfect knowledge of English, and that the misstatements were innocently
made and without intent to defraud. Our review of the lengthy record fails to disclose reasons for
rejecting these conclusions of the Court below. For example, the occurrence of previous fires in the
premises insured in 1939, altho omitted in the claims, Exhibits EE and FF, were nevertheless revealed
by the insured in his claims Exhibits Q (filed simultaneously with them), KK and WW. Considering that all
these claims were submitted to the same agent, and that this same agent had paid the loss caused by
the 1939 fire, we find no error in the trial Court's acceptance of the insured's explanation that the
omission in Exhibits EE and FF was due to inadvertance, for the insured could hardly expect under such
circumstances, that the 1939 would pass unnoticed by the insurance agents. Similarly, the 20 per cent
overclaim on 70 per cent of the hemp stock, was explained by the insured as caused by his belief that he
was entitled to include in the claim his expected profit on the 70 per cent of the hemp, because the same
was already contracted for and sold to other parties before the fire occurred. Compared with other cases
of over-valuation recorded in our judicial annals, the 20 per cent excess in the case of the insured is not
by itself sufficient to establish fraudulent intent. Thus, in Yu Cua vs. South British Ins. Co., 41 Phil. 134,
the claim was fourteen (14) times (1,400 per cent) bigger than the actual loss; in Go Lu vs. Yorkshire
Insurance Co., 43 Phil., 633, eight (8) times (800 per cent); in Tuason vs. North China Ins. Co., 47 Phil.
14, six (6) times (600 per cent); in Tan It vs. Sun Insurance, 51 Phil. 212, the claim totalled P31,860.85
while the goods insured were inventoried at P13,113. Certainly, the insured's overclaim of 20 per cent in
the case at bar, duly explained by him to the Court a quo, appears puny by comparison, and can not be
regarded as "more than misstatement, more than inadvertence of mistake, more than a mere error in
opinion, more than a slight exaggeration" (Tan It vs. Sun Insurance Office, ante) that would entitle the
insurer to avoid the policy. It is well to note that the overcharge of 20 per cent was claimed only on a part
(70 per cent) of the hemp stock; had the insured acted with fraudulent intent, nothing prevented him from
increasing the value of all of his copra, hemp and buildings in the same proportion. This also applies to
the alleged fraudulent claim for burned empty sacks, that was likewise explained to our satisfaction and
that of the trial Court. The rule is that to avoid a policy, the false swearing must be willful and with intent
to defraud (29 Am. Jur., pp. 849-851) which was not the cause. Of course, the lack of fraudulent intent
would not authorize the collection of the expected profit under the terms of the policies, and the trial
Court correctly deducted the same from its award.
We find no reversible error in the judgment appealed from, wherefore the same is hereby affirmed. Costs
against the appellant. So ordered.
Paras, C. J., Padilla, Montemayor, Reyes, A., Jugo, Labrador and Concepcion, JJ., concur.
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Footnotes
1. Old Civil Code, Article 1288; New Civil Code, Article 1377; 44 C.J.S. 1169; 29 Am. Jur., p. 180,
section 186.